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Versioning and Bundling

Versioning and Bundling. David Kleinman Lecture 5 January 22, 2002. How Many Versions. As any true economist will tell you it depends. One is too few because it does not segment the market. - Dell has almost an unlimited amount.

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Versioning and Bundling

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  1. Versioning and Bundling David Kleinman Lecture 5 January 22, 2002

  2. How Many Versions • As any true economist will tell you it depends. • One is too few because it does not segment the market. - Dell has almost an unlimited amount. • There are costs to maintaining several different versions. - supply side monetary costs, demand side user confusion. K-man Inc.

  3. How many versions Some people believe in two versions. • High end, low end. • Design high end product first and then remove for low end. Airlines • Goldilocks Pricing • If it can not be decided have three versions. • Standard, professional, and gold. • The middle version is usually priced towards the higher end. More people will buy the middle range product if there is a high range product added into the mix. • Most people do not like to choose too big, or too small they like just right. K-man Inc.

  4. Are there companies who have too much/little versioning in their product line? Are there examples of companies that we feel that have perfected the versioning process? Analyze the Market K-man Inc.

  5. Bundling • Bundling is a form of versioning in which two or more distinct products are offered as a package at a single price. • The main example that comes to mind is Microsoft office. • They combine a spreadsheet, word processor, a database and web design tool. • There are also other versioning tactics with this product. K-man Inc.

  6. Why is MS Office So successful • They have captured over 90% of the market of office suites. • The products are guaranteed to be compatible with each other. - You can cut from one program and paste in another. • The component parts use shared libraries so that the Office applications take up less disk space and work together more effectively than would be the case if you installed separate versions of the application. K-man Inc.

  7. Bundling Sales! • Total of the bundled product is usually less than that of the products bought separately. • You would likely offer a target discount on one product to customers who would purchase the other product anyway? • Look for the people that would only buy one of the two products in order to bundle the product. K-man Inc.

  8. More benefits of bundling Option Value is where you buy a product with the possibility of using it in the future. Bundling is often used to introduce new products to consumers. Information bundles, such as subscriptions to magazines, read some articles in some magazines. Customized Bundles, music is sold as bundles. Music Maker. Mass customization of information. Personalized Newspapers-Avant-Go. Create your own bundle of articles. K-man Inc.

  9. Bundling your thoughts Besides MS office what products work well bundling? What products do not work well bundling? Which products would you like to see bundled? K-man Inc.

  10. Promotional Pricing Limited time reduction in pricing, coupons, they all impose some inconvenience cost on the consumer. • Earlier example Amazon, please enter your coupon code. Dell has this also on their home page. • Lets congratulate Amazon, for after losing $3 billion they announced today that they made a profit for the 4th quarter of 1 cent a share. -Bargain finder-finds coupons, Deal-time, and My Simon. • Cost to consumers. For example coupons, first find coupons, then cut out coupon, and then remember to take it in, the value of time. Promotional pricing is valuable only if it segments the market. Grab customers early and make them feel comfortable with your product. • WSJ is doing this currently. Sharing arrangements. • Libraries pay more for journals than individuals. K-man Inc.

  11. Summary • Controlling the browser helps adjusts the way the information is shown. This will assist in versioning and pricing the product. • Bundling is also logical if it takes away the disparity in readiness for customers to make a purchase. - Joining complementary products will increase the revenue stream if it takes away the diversity across customers in their inclination to pay. • Different pricing can also be given to the customer to build his/her own product line. - Quantity discounts is an example that can increase usage and revenues together. • Design the promotions to get diverse reactions from various types of customers. K-man Inc.

  12. Questions?

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