Versioning

Krizzel Ann V. Catalbas

BSBA MM3
 Learning Objectives:
At the end of this lesson my co-students must be able to:
 Learn what is versioning
 The importance of versioning
 Difference between discrimination and Versioning
 The benefits of the customers
 Versioning
Versioning (also known as “quality discrimination”) is a
business practice in which company produces different
models of essentially the same product and then charges
different prices for each model. Versioning a product gives
the consumer the option of purchasing a higher valued
model for more money or a lower-valued model for less
money. In this way, the business is attempting to attract
higher prices based on the value a customer perceives.
Versioning is usually done when a product has large fixed costs of
production and small variable costs. For example, in software
packages, features are added or taken away to give different versions
and price points, because generally speaking, having different options
will accommodate different utilities of consumers. This idea is based
on a customer's willingness to pay. A higher willingness to pay will
result in the purchase of a higher-quality product, and a lower
willingness to pay will result in the purchase of a lower-quality
product.
 Importance of versioning
A versioning marketing strategy allows you to offer your
customers more choices without having to develop new
products or add significantly to your production cost. Done
right, versioning can not only help you make more sales, but
also increase the average cost per sale.
 Discrimination vs. Versioning
Discrimination is selling products to different groups at various prices
based on the group’s willingness to pay. Many industries, such as the
airline industry, price discrimination strategies.
Examples of price discrimination include issuing coupons, applying
specific discounts (e.g., age discounts), and creating loyalty programs.
One example of price discrimination can be seen in the airline
industry. Consumers buying airline tickets several months in advance
typically pay less than consumers purchasing at the last minute.
When demand for a particular flight is high, airlines raise ticket prices
in response the arts/entertainment industry, and the pharmaceutical
industry, use.
• Versioning is creating different versions of the same product
to sell to different groups. An example of versioning is found in
the airline industry. Airline companies usually provide two or
three levels of seats, such as economy class seats, business
class seats, and first-class seats. The first-class tickets are the
most expensive and they offer customers the highest quality
service.
 Benefits :
The customers benefit because versioning results in lower price
and makes it possible for many to gain access to products that they
might otherwise not be able to afford ( Shapiro and Varian 1998;
Varian 2000 ).
 Summary
• In versioning, different variations of similar product are sold simultaneously. Some
versions offer more features or benefits, while others offers fewer features or
benefits .
• Versioning strategies often allow a good-better-best progression.
• Versioning strategies have often been defended from a marginal cost standpoint. If
sum marginal cost of producing independent products is greater than marginal cost
of producing a product that delivers the same benefits, then the manufacturer will
achieve greater profit with a versioning strategy over an add-on strategy.
• Extremes aversion has been used to explain the tendency of customers to select the
middle option within a versioning offering.
Thank you!!!

Godbless