Versioning is a pricing strategy for information products where you create different versions of the product for different users. The version the users pick reveals the value they place on the information and what they are willing to pay for it—without alienating users by charging different prices. This is especially important for digital information products that can drive prices and margins down due to competition.
Types of versioning include:
- Delays e.g. stock quotes delayed by 20 minutes vs real-time, movie vs rental
- Convenience e.g. amount of session time vs unlimited
- Comprehensiveness e.g. deeper coverage, historical information like archives
- Manipulation e.g. download or print, exports
- Community e.g. LinkedIn direct messaging for access to members
- Annoyance e.g. ad free
- Speed e.g. faster calculations
- Data processing e.g. filling out tax forms vs audit features to highlight risks
- User interface e.g. simple UI for casual users, more featureful UI for power users
- Image resolution e.g. higher resolution images
- Support e.g. email vs premium phone support
The number of versions depends on the number of distinct user segments. Even with a small number of segments, businesses can benefit from having three tiers for the same product to move users from the lowest price into the middle price tier (Goldilocks bias).
Read ‘Versioning is the smart way to sell information’
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Pricing the Perceived Value Gap
Cost basis tends to get the most attention when it comes to pricing. I remember from business classes in college would spend endless hours on cost plus pricing, margins, and so on. However, perceived value—the difference between the price and what people think it’s worth—gets overlooked. If the perceived value is high relative to the price, it a no-brainer to buy.