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Decisions in Add-on and Versioning Price Structures

Decisions in Add-on and Versioning Price Structures

Many times, core products can be enhanced with complementary products or additional features. In establishing price structures, companies must determine if the enhancements should be sold separately as add-on products or included in enhanced versions of the product. Informing the choice between add-on and versioning price structures are issues of not only cost structures, but also economic theory, market segmentation, consumer behavior, and neuroeconomics. Once a company chooses either an add-on or versioning structure, they must then set discounting and price promotion policies in light of key profit drivers.

Decisions in Add-on and Versioning Price Structures provides an in-depth analysis of the tradeoffs between selling enhancements in an add-on price structure versus a versioning price structure. It then expands these core issues by looking at profitable discounting and price promotion strategies within each. Case studies are drawn from consumer retailers, consumer branded goods manufactures, and industrial product and service providers.

Duration: 276 minutes

Attendees will learn:

  • Distinguish between add-on and versioning price structures and know which should be used in which situation

  • Identify situations where versioning price structures may improve profitability over add-on price structures, and vice versa, as well as means to combine the virtues of both

  • Construct economic models of the value of versioning in relationship to add-on pricing

  • Inform the relationship of accessory product pricing to the core product price in an add-on price structure under different market conditions

  • Examine the market effects to average price captured under different versioning discount price structures

  • Examine best-practices and influences to discounting policy for both add-on price structures and Versioning price structures

Tim Smith, Ph.D.

Managing Principal of Wiglaf Pricing

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