VERSIONING

INFORMATION GOODS
Versioning
• if a product line is offered with one product targeted for
professional users and one product for amateur users to
split a market, then this strategy is called "versioning",
means offering information product in different versions
for different market segments.

• Two basic principles for designing a product line of

information goods are as follows:

• Offer versions tailored to the needs of different customers.

A full line of information products will maximize the total
value of the information you are providing.
Contd..
Design these versions to accentuate the needs of
different groups of customers. Emphasizing
customer differences to extract more of the value
that has been created, as each customer select
the version that best meets his or her needs.
Economists call this as self selection.

Versioning is a common strategy for conventional

information goods. Books are issued first in
hardback and then in paperback; impatient, high-
value users buy the hardback, while others wait
for the paperback.
Types of Versioning
Delay
User interface
Convenience
Image resolution
Speed of operation
Flexibility of use
Capability
Features and functions
Comprehensiveness
Annoyance
Technical support
Delay
Information is like an oyster: it usually has the
greatest value when it is fresh. This is especially
true of "strategic" information, such as information
about stock market or interest-rate movement,
where individuals possessing the information
have a strategic advantage over those lacking it.
Those customers who want the latest information
will pay more for the fresh and timely delivery of
information. But consumers differ widely
according to how eager they are for various types
of information. This makes the common
versioning tactic of delay.
User Interface
Another possibility is to provide high-paying customers with
more powerful search capabilities i.e. offering different
search interfaces to experienced and inexperienced
users. In many cases, experienced users tend to be users
with high willingness to pay; they are the customers who
first signed on to purchase the information and generally
use it more intensively.
Convenience
A versioning strategy that is closely related to delay is
control of convenience by restricting the time or place at
which an information service is used. For example, Divx
offers DVDs that can be viewed only during a particular
forty-eight-hours period. Another example could be the
off-hour internet access and downloading features at a
much cheaper price than normal or busy hours.
Image Resolution
Visual resolution can also be used to discriminate
between users. For example, PhotoDisc has a
library of royalty-free stock photographs on the
Web. Professional users want high-resolution
images than can be printed in commercial
journals; non-professionals want medium- or low-
resolution images for newsletters. PhotoDisc sells
different size images for different prices; 600K
images (72 dots per inch resolution) for $19.95
and 10 Mb images (300 dots per inch) for $49.95.
Speed of Operation
When selling software, a common strategy is to sell
versions with different capabilities. The IBM Laser printer
Series E was functionally identical to the standard Laser
Printer, but printed at 5 pages per minute rather than 10.
The reason was the presence of a chip which induced
wait states.
Flexibility of Use
Another important dimension of information that can form
the basis for versioning is the ability to store, duplicate, or
print the information. Back in the days of copy-protected
software, some software companies (such as Borland)
sold two versions of their software- a low priced version
that could not be copied and a high-priced version without
the copy protection.
 Capability
Table summarizes the product line Description Price Product
of Kurzweil, a software producer
of voice recognition products.
The products are distinguished Vocabulary of 20,000 words 79 $ Voicepad
Pro
by the total size of the vocabulary
included and by the addition of Vocabulary of 30,000 words 295 Personal
vocabulary appropriate to
specific professions. Note the
dramatic differences in prices: Vocabulary of 50,000 words 595 Profession
al
the high-end version for
surgeons is a hundred times General Office Staff 795 Office Talk
more expensive than the entry-
level software! Kurzweil has
correctly recognized that Legal vocabulary 1195 Law Talk
different market segments have
different needs- and that the Medical Offices 6000 Voice Med
high-end will pay much more for
the enhanced capability.
Special purpose medical vocabulary 8000 Voice
Ortho
Features and Functions
Features of as product can also be used to
segment a market such as Intuit's versioning of
Quicken. The Quicken Deluxe version offers a
mutual fund finder, a mortgage calculator, an
insurance needs estimator, and other features
valued by high-powered users. The basic version
of the software offers only the core checkbook
software. Intuit has pursued the same strategy
with TurboTax, selling both a stripped-down and
a deluxe version
Comprehensiveness
In some cases, comprehensiveness is a crucial dimension:
some customers will pay a big premium for more
complete information. Information completeness varies a
great deal, depending on the context. Consider how
people use dialog. Public affairs specialist and journalists
like the fact that they can now search newspapers around
the country or the world. For marketing purposes,
managers often value information that is broken down by
customer or offers lots of details about historical
purchasing patterns. The difference between the
DialogWeb and DataStar rests partly on these
distinctions, which are a natural dimensions along which
any database provider can base different versions
Annoyance
A prime example of this is "nagware", a form of shareware
that is distributed freely but displays a screen at the start
or end of the session encouraging customers to pay a
registration. Public television stations use this strategy in
their fundraising drivers.
Support
The final dimension is a technical support. Netscape
originally made its browser available for free download
and for a price on a CD that come with a mutual and
access to technical support. By offering a downloadable
version for free, Netscape gets around the "experienced
good" problem, i.e. anyone can try the product with little or
no risk to see if they like it.
Product dimensions Susceptible to versioning
and
Their likely Users/ Uses
Likely Uses Likely Users Product Dimension

Impatient users Patient Delay

Experienced users Casual User Interface

Home users Business Convenience

Glossy uses Newsletter Image resolution

Professional Student Speed of operation

Printed users On-Screen Format

Specific uses General Capability

Frequent users Occasional Features

Professional users Lay Comprehensiveness

Low-time-value users High-time-value Annoyance

Intensive users Casual Support

Value-subtraction Versions
In selecting product line, the firm develops the
high-end version first and then degrades to obtain
lower quality versions. Information good vendors
usually adopt such a high-to-low or “value-
subtraction” versioning strategy to exploit the
cost savings in content, design, and code reuse.
For physical goods, it is usually more expensive to
produce an extra unit of the high-quality versions.
A nineteen-inch TV is more costly to build than a
fifteen-inch TV.
Avoiding pitfalls in versioning
One of the pitfalls in degrading the quality of the
information goods is that it discourages high-willingness-
to-pay consumers from purchasing it. To overcome this
problem is to offer the high-end product only, with a
premium price. In dealing with customer choice, the
cheaper versions will enhance consumer choice;
customers picking them are revealing that they value the
option to buy a low-end version of the product at a
discount.
The key issue in designing an information product line is to
pick the right dimensions on which to adjust the quality
and to make sure that the quality adjustment cannot be
undone by clever consumers or intermediaries.
Online and Off-Line Versions
Information is available both on online and offline version. In many
cases, offline information is actually more convenient to use. For
example, many readers feel that it is easier to read text book on
paper than on a screen.
In many ways, selling information online and offline is like selling
physical products through two separate channels of distribution. In
deciding which "channel" to promote, and how to price into each
channel, not only the costs associated with that channel and the
character of demand through it is considered, but also the extent of
channel split-lover or cannibalization
If an online version is a substitute for the offline version, its cost can be
recovered through fees or advertising, or versioning; not to compete
with the offline version. If it complements offline version, then
aggressive promotion is done by encouraging the sales of the offline
product.
Often, providing information online enables the suppliers to add value
in ways that would not be possible offline. This in turn creates
opportunities for new versions.
Goldilocks pricing
In “Goldilocks pricing” in the absence of any additional information
having three versions rather than two may be attractive due to
“extremeness aversion” on the part of consumers.

If there are business travelers and tourist travelers in the market, then it
makes sense to have two broad “versions” of airline tickets. But what
happens if there is no obvious market segmentation? What if the
number of “types” is huge? Are there any useful rules of thumb? A
common choice is to have two versions: a “standard” and an
“enhanced” version. However, some recent work in marketing suggests
that the optimal number of versions in this case is not two but three.
The reason is due to what psychologists call extremeness aversion: if
the only two sizes of drink that you offer are small and large, then some
consumers will be on the margin between choosing one extreme or the
other. Some of these consumers will choose the small version, thereby
reducing producer revenues. But suppose the producer adds a “jumbo”
version, and renamed the sizes “small,” “medium,” and “large,” with
the current medium being the same size as the previous large version.
In this case, the medium size serves as a focal point for the indecisive:
those who would have chosen small, end up compromising on medium,
thereby increasing revenues.
Customizing the Browser and
content
Consider a browser used to view on-line
newspaper articles. If the owner of the content
controls the browser, then it can choose the
features of the browser to enhance the quality of
consuming the content. For example, if the
consumer is viewing page 7 of the article, it is
likely that page 8 will be the next piece of content
he looks at, so the browser could download page
8 in the background. Controlling the browser
allows the seller of content to increase the quality
of what it is selling.
Bundling
Another very attractive form of price discrimination
is known as product bundling.
It to the practice of selling two or more distinct
goods together for a single price.
A special form of versioning in which two or more
distinct products are offered as a package at a
single price.
Bundling is the joint supply pf more than one
product to reduce the need for price
discrimination.