Managing Multiple Versions Through Categorization

This is a screen-shot of multi-version pricing of Atlassian’s Jira, the agile project management tool. I am using this only for illustrative purposes:

There are about 4 distinct versions, a bundling dimension and 20 different possible prices. Segmentation and targeting each segment with its own version is great but it imposes a high cost on the customers – Customers incur considerable cognitive cost in evaluating multiple versions and picking the right version. (See 4 costs of versioning and Optimal versioning in SaaS.) These costs continue to linger in the minds of customers and lead  them to treat the buying experience as part of the product experience.

One way to reduce the cognitive cost to customers, even in the presence of multiple versions, is creating distinct categories. I her book The Art of Choosing, Ms. Sheena Iyengar, writes about how her research on reducing choice complexity to customers:

Categorization helps by providing an alternative to fewer versions by reducing the effects of “choice overload.” The mere presence of categories can assist consumers in visually parsing choice sets into more groupings, enhancing their perceptions of the variety among options. In other words, categorization could transform “too much choice” into just the right amount by better enabling consumers to obtain value from large versions set.

For Jira, I recommend three changes to their versioning  (without changes to software):

  1. Hosted Vs. On-Site: There are two major categorizations – hosted and on-site. Instead of listing them together in one price list they should start with this choice  question to the customer and send them to two different pages (or tabs) with their own versions. This is similar to what Mozy does with  their Home vs. Pro versions. In case of Jira, while there is value on letting customers compare the pricing for hosted vs. on-site versions, that is offset by choice overload. Segregating the two categories does not mean they are not available for comparison if the customer wants to do so.
  2. Bundling: Make the bundling explicit and stand out. It is not clear from this page that they also offer GreenHopper at its own price. It is worth testing with their customers their preference for bundled offering over standalone versions. Bundled pricing should also signal the savings to the customers which is not clear from this page.
  3. More Granular Number of Users: Ideally, it would help to have three levels Small, Medium and Enterprise each with preset number of users.  Another option  is offer fewer levels based on number of users. I strongly recommend removing their 10 user version, it is priced very low compared to 25 users version and does not add to their bottom line. The 10 user $10 version is too tempting for those with higher willingness to pay.

[tweetmeme source=”pricingright”]Versioning is the right strategy for profit maximization but the costs it imposes on the marketer and the customers must be actively managed.