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Does "Versioning" Increase Profits?

Is it worthwhile to offer various different versions of your same software?

Microsoft, Intuit, and others offer their software in different “feature” packages.  You can get the Standard version, Professional version, Home version, Small Business version, Enterprise version, Super-hero version, House-two-cars-and-a-white-picket-fence version, etc.  (you get the idea).

Now while consumers *love* choices, breaking up your software into such packages and price-points creates more maintenance.  Personally, when I review software and sieve through every feature detail and weigh its needs vs wants vs even understand what it does, my most ultimate decision is to go for the top-end version which has *everything*, and whether I use it or not, atleast it gives me the piece of mind that the feature is there if I need it.

Now there's the price point.  Standard, Professional, and Academic all sell for different prices, because they are for different people.  I doubt most people really even know the difference, let alone care.  One median price for a complete package simplifies things and makes life for the consumer and developer so much easier.  Why complicate a good thing.  Is it because the company has problems weighing the actual worth of their product and hence shoot out different versions to see which one sells most?
Or is there some deeper underlying psychological motive?

Is it worthwhile to offer various different versions of your same software?

sedwo
Monday, April 14, 2003

The offering of different configurations of the same product is a common marketing strategy called market segmentation.  Here's a link discussing the topic, including what benefits this strategy typically confers, how you might do it, and so on:  http://www.dssresearch.com/library/segment/understanding.asp

anon
Monday, April 14, 2003

Microsoft Academic licenses came about because students were pirating Office, and Microsoft hoped if it made it cheap enough it could get them to buy it. Also it wanted to get schoolchildren and their parents, who hadn't bought Office bundled with the PC, to find a way to buy it, as they obviously weren't going to pay the outrageous full retail prices.

In general the different versions are simply the same software with features disabled. Sometimes the crippling isn't done properly as happened with NT3.5, where the only thing that distinguished the workstation from the server was the existence of one registry key. When people found out about it they immediately changed the registry key and found that they magically had a version of NT Server, with the added advantage that as it was still technically a workstation they didn't need to pay client licenses either.

Stephen Jones
Monday, April 14, 2003

> In general the different versions are simply
> the same software with features disabled.

Actually, most academic versions of software are identical to the full version. The software company just hopes that students will get hooked on their sofware and eventually use it in the marketplace.

Benji Smith
Monday, April 14, 2003

Also, it's in the company's intereset to have lots of graduates who can use their software.

Ged Byrne
Monday, April 14, 2003

It's called "Price Discrimination".  Economics 101.  You make more money if you can charge close to the maximum that each person will pay without going over.

T. Norman
Monday, April 14, 2003

I wasn't referring to the Academi versions, which are simply a pricing point, but to the other versions.

So Office Standard is basically Office Professional without Access, XP Home is XP pro with certain features (domain log on, full NTFS security) disabled and so on.

Stephen Jones
Monday, April 14, 2003

T. Norman nailed it.  This is basic economics. 

If you look at a supply and demand curve and draw a horizontal line at the equilibrium price, you'll notice a large triangle of potential profits that exist above the line between what some people are willing to pay and the lower equilibrium price that the product actually sells at.  The idea with multiple versions of the same product is to tap into these profits by offering an expanded edition for the people who would be willing to pay more (or a limited version for people willing to pay less).

SomeBody
Monday, April 14, 2003

Yep. Large corporates can and will pay well for features they seriously want, so they get charged an "enterprise" price.

Normal folks won't pay that, so they get a "professional" or normal version. The marketing dudes strive to ensure there's something the large corporates do really want, but which isn't that important to other people.

Academic versions are bait for the future.


Monday, April 14, 2003

I think it's a good thing, when the differences are clear. WIth Office, you can look and clearly see what it contains. With Quickbooks (another package with a 'pro' version), there's a checklist of features in each, broken down. Some may be confused by the choices, but generally I think that people will understand that a word processor is not a spreadsheet (and if they don't, they should find out before slapping down $500+ on office).

Mike Swieton
Tuesday, April 15, 2003

Make sure you have one good, sellable product before you attempt another. Usually the versions become self-evident.

pb
Tuesday, April 15, 2003

I have to agree with the economics point. 

Certainly when buying at home I tend to go for a cheap option because I have other things to spend the money on.

Joe
Tuesday, April 15, 2003

A lot of industries do this too.

The more obvious example is airlines ... 1st vs Business vs Full Price Economy vs Cheap (no changes) tickets.

More locally, your pizza place probably has cheaper Monday to Thursday only prices.

tapiwa
Tuesday, April 15, 2003

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