Versioning: What it Means, How it Works, Examples

What Is Versioning?

Versioning, also known as "quality discrimination," is a business practice in which a company produces different models of the same product and charges different prices for each model. By offering various options, the business aims to attract higher prices based on customer perceived value.

Key Takeaways

• Versioning involves producing different models of a product at different price points.
• Versioning is most effective when fixed costs are high and variable costs are low.
• Versioning is common in the auto industry, software suites, subscription services, and food products.

Versioning Explained

Versioning is typically used when a product has high fixed costs of production and low variable costs. For example, in software packages, features are added or removed to create different versions and price points. This allows for different options to cater to various consumer preferences and willingness to pay.

Versioning can be found in many industries. In consumer technology, tablets and smartphones are often released in different versions with varied storage capacities and other features. Higher-end versions may include additional features like high-resolution screens and advanced control options.

Versions often include a low-cost, basic model and a high-end luxury model with additional features and higher quality, priced at the top range.

Examples of Versioning

Software suites frequently offer versioning options, allowing customers to choose the features they want to pay for. For example, Microsoft sells different versions of its Office Suite for home, personal, and student use. The company also offers different tiers for business users, each with different software titles and services.

Subscription television providers also offer different versions of their services, typically in packages at different prices. Premium channels are often exclusive to the more expensive packages.

The auto industry applies versioning by offering optional features for their vehicles, such as premium sound systems, internet connectivity, and various seating options. Engine choices also contribute to faster models.