A Simple Versioning Rule

Your product Plans/Pricing page lists multiple versions, most commonly 3 to 5 versions.  The vertical columns are well crafted, graphically stunning and neatly arranged with all the right visual nudges designed in.   Now the question,

What is the minimum number of  choice dimensions should the versions differ across?  (A choice dimension can be either a product attribute like number of users allowed or a non-product attribute like service/support etc)

a.  0
b. 1
c.  2
d. Versions must differ across all dimensions

The correct answer is 2. If you are versioning your product it must differ across at least two choice dimensions.

The first dimension is price.  If your versions do not differ in price, there is no point in creating the versions. The versions simply add to your costs and make it difficult for your customers to choose. If all you are doing is offering customers cars of any color and yogurts with different fruits – you are not versioning.

The second is the dimension that has the most incremental net value. Net value is the difference between the perceived value to the customer and the cost to deliver that value. It is not enough you pick the dimension that is valued differently by different customers, it must be possible for you to share in that value creation.  If your product is bits and not atoms, the cost component is zero and this dimension defaults to perceived value.

A striking example is Apple’s iPhone and iPad versions (iPad versions technically differ across three dimensions if you include the 3G). This is as simple as it can get – versions that differ across just 2 choice dimensions and are simple enough for the customers to understand.

Now the execution questions for your “bits” product:

1. What should the price points be for each version?
2. How can you find the dimension whose perceived value differs the most across segments?

You can answer these yourself if you follow the methods I set forth in a previous tutorial. Or if you would rather not spend your limited time on roll-your-own customer research and analytical modeling – Ask me about these.

Buzzword alert:
Lean Versioning: When your versions differ across minimal number of versioning dimensions. When versions differ across exactly 2 choice dimensions that is the “Minimally Versioned Product”