Until now I have been extolling the virtues of versioining – finding the needs of different segments and targeting them with versions at prices they are willing to pay. I have written about
- The costs of versioning
- Ideal versioning
- Pricing the high and low versions
- Categorizing versions and
- Versioning tactics
Eclipsing all these topics is the overarching topic of when not to version, even when all (marketing) factors are in its favor.
Despite its advantages versioning should be avoided when presence of versions will dilute a business’ unique competitive advantage and its brand message. Versioning has to align with the vision and strategy and not just meet the short-term profitability goals.
Here is an illustration that comes from the 2008 book, Cadbury’s Purple Reign by John Bradley. At a pivotal moment in its business history, Cadbury’s choose to kill all six of its inferior versions even though they were generating considerable revenue and all it had to replace them was Cocoa Essence that hardly registered its presence in the market.
There was a market for these “adulterated versions” that were priced attractively (because most of the ingredients are fillers). The versions had been in place for valid reasons and were targeted at right customer segments. All other players in the market were doing it. Cadbury’s was making profitable revenue from these product lines and shutting these down would hand-over their market share to their competitors.
On the other hand, Cocoa Essence had to be priced much higher than adulterated versions (because of the large percentage of pure cocoa in it) and at that time there were not many customers who were willing to pay high prices for Cocoa, pure or not.
John Bradley writes,
They did not have to do it; it was not against the law to add wholesome foodstuffs to raw cocoa, as long as they were declared on the label.
Cadbury could easily have kept advertising Cocoa Essence as ‘Absolutely Pure, therefore Best’ while still promoting the cheaper cocoas to the lower end of the market.
Yet, Cadbury’s chose to go with just the Cocoa Essence, shutting down other versions, because:
[Continuing to support the previous versions] would have missed out on the huge benefit that was to come from the move: the building of the Cadbury brand reputation and that it would define how consumers should view the cocoa category
By giving up on adulterated Cocoa versions Cadbury’s stood to claim the sole ownership of the Cocoa category with a strong message that could not be easily assailed by the competition. The conversation shifted from, “we have the purest cocoa and also the not so pure versions”, to, “we have only the purest cocoa – Absolutely pure, therefore best!”
That’s competitive advantage from deliberate versioning. Every version you add must fit with your overarching brand message and competitive strengths. Conversely, versions that weaken your brand message must be pruned even if they are profitable.
A contemporary example is versioning SaaS offerings based on availability and security. It is true that not all customers want financial grade availability and security and not all want to pay the price premium for the highest grade security. Yet, does it make sense for your business to provide two versions, a super-security version at premium price and a lower priced version with lower grade security and availability characteristics?
Versioning has to be a strategic decision and strategy is about making tough choices. Versioning should align with your vision and long term goals, not just short term profitability.
What is your versioning strategy?