Versioning is one of the simplest ways to capture more value from customers.
In its most basic form, versioning just means the creation of different types or versions of any given product, service or solution. As a result, the seller gives the buyer the opportunity to choose which option to proceed with.
Most frequently, companies opt for the 3-option approach, offering a lower-priced, medium-priced and higher-priced options. When dealing with more complex offerings, more options may be available.
What Is So Unique About It?
One advantage of this approach is to capture buyers at different price points. As a result, prospects that would not proceed at a given price point, will now opt for the lower-priced version and still convert into customers. Conversely, buyers with greater demands and higher budgets are more likely to opt for premium and improved versions, instead of settling for the more basic version.
Although this is very simple and intuitive, the adoption of versioning is not widespread enough, because companies underestimate the benefits. More often than not, I come across companies that quote one price to prospects with no other options in sight.
Now, it is self-understood that in order to have versions, you need to differentiate the offering, and that leads us to the other major advantage of versioning.
In order to differentiate, you need to dissect your product or service into attributes and features that can be either removed from lower-priced versions, or can be offered in more effective forms in the higher priced versions.
Testing different versions, then, helps you understand better how buyers value different attributes and how they make trade-offs between price and features/attributes.
Foundation For Growth
Understanding how buyers value features/attributes is also incredibly beneficial for customer segmentation. For example, if you identify that a certain buyer segment is likely to choose the lower-priced option, it pays to understand better what it would take to reduce the price-pressure and move this segment upwards.
For segments where demand for the higher-priced option is strong, it pays to discontinue or de-emphasize the lower-priced version and create an even higher-priced option, in order to capture the full market potential.
Although there are many more benefits of versioning, the ones listed above are enough to justify to most product and service providers that when a buyer inquires about pricing, or when a proposal is sent, it is never a good idea to provide a single price point.
A proper implementation of versioning allows one to convert more customers, while while maximizing revenues at the same time.
MarketPrax helps companies optimize pricing, features, products and services for each customer segment with conjoint analysis and segmentation. For a free consultation, or for more information, reach out to us at info @ marketprax.com. Join also our 17,000+ followers on LinkedIn for new content.