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Characteristics of Digital Products
• High upfront production costs– Often sunk costs
• Low reproduction costs• Variable costs are almost nil
because they have no physical form
• Experience good• Price based upon customer
value
Reasons for Shareware/Freeware
• Marketing objectives that support offering free versions– To generate awareness
– To stimulate trial
– To sell follow-on products
– To build a network
– To attract eyeballs
– To gain market power/competitive advantage
• Digital product needs to be unique
Dimensions to Use in Designing Your Digital Product Line
• Delay • User Interface• Image Resolution • Speed of operation• Format• Capability• Support• Comprehensiveness• Convenience
How Many Versions?
• One is too few
• Ten is (probably) too many
• What is just right? – Analyze market– Analyze product
Analyze Your Market
• Does it naturally subdivide into different categories?
AND
• Are their behaviors sufficiently different?
• Example: Airlines– Tourists vs. business travelers
Analyze Your Product
• Dimensions to version– Have few versions if
• Subject to network effects
• Multiple versions creates user confusion
• High and low end for each dimension– Design for high end, reduce quality for low end– Low end advertises for high end
“Goldilocks Pricing”
• Pros of only two versions– Customer support is simple– Reduce risk of incompatibility between versions
• Risks of only two versions– Extremeness aversion– Example:
• 45% of people chose the $179 model when two versions were available ($109 and $179)
• 60% of people chose the $179 model when three versions were available ($109, $179 and $199)
Real-time marketing
• Changing the focus from time-to-market to time-to-acceptance– Include customers in development and
production cycle– Include information gathered from points of
access with customers
Choiceboard Model is Not For Every Firm
Could a choiceboard model help? Ask yourself:1. How much do you have to guess about demand?
2. How much do you give away in discounts?
3. What is your match ratio (% of what you sell that exactly matches your customers’ needs)
Requirements1. Products made of modular units
2. Proper supply-chain systems in place
3. Knowledgeable customers
Benefits of Choiceboards
• Empowers customers to design product/services to their own specifications– Impact of being a co-creator of a product: vested interest
• Creates opportunities for new approach to manufacturing and fulfillment that offers exceptions economics
• Eliminates finished goods inventories and markdowns
• Captures valuable real-time customer information
Chasm Crossing
As a company’s products become more mainstream (i.e., the product moves from appealing only to early adopters to the mass audience as well), desirable brand attributes evolve.