Carl Shapiro and
Hal R. Varian
Modified from the original by Anushri Kumar & Karthik L.
Why do we need versioning ?
Design menu of different versions
Sell as many number of the products you make
Different consumers have different needs
Target different market segments
Self Selection - Emphasizing customer
differences allows you to extract more value.
Quicken Example Revisited
Quicken for Windows at $20
Quicken Deluxe at $60
1 million wtp $60, 2 million wtp $20?
Example : Apple i-Pod
Apple sells the basic i-shuffle for $99
Sells ipod nano for $199 which has a
display and more memory.
The regular ipod is priced at $299 which
plays video and has even more memory
The music technology is essentially same
in all the three.
Traditional Information Goods
Publishers initially releases more expensive hardback
version of the latest book for impatient customers.
Later releases the book in paperback for less enthusiastic
Eg : Harry Potter Harry Potter Hardcover Boxed Set
v/s Harry Potter Paperback Boxed Set $28.66
Initially released in theaters for enthusiastic viewers.
Followed by the airline / hotel market
Months later for the home video market and libraries.
Eg : King Kong v/s Hitch
Dimensions to Use
Delay (Fed Ex, CNN Stock Quotes)
User Interface (Borland JBuilder)
Image Resolution (World View Images )
Speed of operation (IBM Laser Printer)
Features (Netscape Navigator)
Comprehensiveness (IEEE Explore)
Premium Class : delivery before 10am.
Next Day Service : delivery anytime next day (but
never before 10am).
CNN Stock Quotes http://money.cnn.com/
For only 14.95/month, you can access professional
quality real-time streaming quotes and analysis
Delayed quotes are free of cost. CNN is willing to
incur the cost of storing delayed quotes.
Speed of Operation Examples
Student Version : Has floating point co-processor
disabled slowing down mathematical calculations.
Wolfram had to incur additional cost to implement
IBM Laser Printer
Series E Printers 5 pages/min [ put additional chip
to insert wait states]
Standard Printers 10 pages/min
Kurzweil’s Effective Versioning
Vocabulary of 20,000 words
Vocabulary of 30,000 words
Vocabulary of 50,000 words
General office staff
Special Medical Vocabulary
Making Self-Selection Work
May need to cut price of high end
May need to cut quality at low end
May cost more to produce the low-quality version.
Unlike physical goods, with INFORMATION it costs
generally the same to distribute the fancy version
as the plain version
In design, make sure you can turn features
We need to have the ability to make distinct
versions in such a way that we discourage the
high-willingness-to-pay consumers from going
for the lower-end versions
Make sure users cant easily turn the low-end
version into high-end version
Windows NT workstation ($260) / Server($7301080)
10 simultaneous session v/s unlimited in server
Online and Offline
Quality differences (text/sound)
Wall Street Journal (Subscription)
Dyson Dictum: think of content as free
National Academy of Science Press
Focus on adding value to online version
Books online for browsing not printing
Printed copies is great for actual studying
Understand whether the online version
stimulates sales or steals them from the
How Many Versions
One is too few
Ten is (probably) too many
Supply side – cost of maintaining
several different products
Demand side – risk of user confusion
Two things to do
Analyze Your Market
Does it naturally subdivide into different
categories? E.g. (desktops/laptops)
Are their behaviors sufficiently
Example: Airline Industry
Tourists v. Business travelers
Analyze Your Product
Which dimension to use to version your
High and low end for each dimension
Design for high end, reduce quality for
Low end advertises for high end
Reposition in case of competition
What if you can’t figure out the
“natural” user classes
Default choice: 3 versions
Consumers normally try to avoid extreme
Small/large v/s small/large/jumbo
Microwave Oven Example
Bargain basement at $109, midrange at
High-end at $199 added
Midrange chosen 45% of time
Mid-range chosen 60% of time
Customizing the Browser
Collect behavior information
Personalize the web browser based on
the user's favorite contents
E.g. My Yahoo, My Msn, myODU
Bundling is a special form of versioning in
which two or more distinct products are
offered as a single package
90% market share
Packaged products guaranteed to work well
Discount one of the products
Option value: zero incremental price
Microsoft's per-processor license
Price separate or together?
Profits: With Bundling: $440 Without: $400
•Bundling increases revenues.
•Bundling reduces the dispersion in willingness to pay.
•Introduces new products to consumers
Magazines and newspapers
Variation in how much users will be willing to pay
for different articles.
Select your own music and make a CD.
In previous example sell first item for $120
Sell second item for $100
Example: MusicMaker (first - $1.20 , second - $1)
Sales, coupons, rebates (make it hard to
Only worthwhile if segment market
Credible signal of price sensitivity
Problem with software agents
Bargain Finder (searched online stores for best
price on music CD’s )
Stores did not want to compete on price alone but
also the value and service provided
What is the right way to find out how the
How do you make sure that making too many
versions will not confuse the customers?
US Automobile Industry
Do you prefer to buy products in bundles?
Discussion Questions(cont ..)
In view of customizable bundles, where
is the future of albums in the light of
iTunes providing single for a dollar –
your comments iTunes Article
Versioning in the automotive industry
which has led to the demise of a few
companies – your comments
THANK YOU !