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What Is Versioning?
Versioning (also known as "quality discrimination") is a business practice in which a company produces different models of essentially the same product and then charges different prices for each model. Versioning a product gives the consumer the option of purchasing a higher valued model for more money or a lower-valued model for less money. In this way, the business is attempting to attract higher prices based on the value a customer perceives.Key Takeaways
- Versioning involves the production of different models of the same product, which are each then sold at different price points.
- Different models or versions of a product are most compatible when there are high fixed costs but low variables costs with which to modify the product at different levels.
- Versioning is common practice in the auto industry as well as with software suites, subscription services, and food products.
Versioning Explained
Versioning is usually done when a product has large fixed costs of production and small variable costs. For example, in software packages, features are added or taken away to give different versions and price points, because generally speaking, having different options will accommodate different utilities of consumers. This idea is based on a customer's willingness to pay. A higher willingness to pay will result in the purchase of a higher-quality product, and a lower willingness to pay will result in the purchase of a lower-quality product.
Versioning can be found in a wide variety of industries. In the consumer technology market, tablets and smartphones often are released in different versions that may feature varied tiers of data storage capacity and other options. For instance, a higher-end version of a smartphone may include a higher resolution screen for playing back video as well as control features not found on the other phones in the product line. Often, versions will include a low-cost or budget model with no frills and only basic functionality as well as a high-end or luxury model with all the bells and whistles and higher quality trim, which comes at the highest price point.