130 ENTREPRENEURSHIP
Value Pricing. Value-pricing strategy is based on the fact that different people value
information to different degrees. What pricing strategy should we employ? If we are
able to differentiate our product, we can attempt to sell information to each customer
for a different price, depending on what the customer can bear. If we cannot differen-
tiate and our information has become a commodity, we can be aggressive but not greedy,
as the customer can likely get the same information elsewhere at a better price. We
must remember that the information is almost costless to duplicate, and results in large
economies of scale. We should also consider offering group sales, as the cost of selling
data or information to a group is probably the same as the cost of selling it to a single
individual. This strategy is the basis for site licenses for software products.Versioning. This strategy means producing information in many forms for the cus-
tomer. Some possibilities are:- Delay. Sell some information to customers who need it in a hurry and want fresh,
up-to-the minute reports (like stock quotes). Sell another version in another format
(e.g., a digest of monthly stock movements). Charge the most for the latest data. - Convenience. This is related to delay. Make it easier for some customers to use
the data, and charge them for this privilege. - Speed of operation. This is also related to delay. Make some information accessi-
ble quickly and charge for this service. Make some customers wait for their ver-
sions and give them a discount for doing so. - Image resolution. Some data can be displayed to ultimate effect through enhanced
graphics. Charge extra for an enhanced graphics version and offer a version with-
out enhanced graphics (like text only) at a discount. - Features and functions. Make some versions of the product available with search
capability, cross-referencing, and a full line of features and functions. Make other
versions with certain functions disabled, and charge less for these versions. Many
users will trade up for full functionality. Note that it costs the same to produce the
two versions; the firm simply offers less information to the price-conscious con-
sumer. For example, many students may purchase student versions of software such
as Windows Office Suite or Bizplan. The student versions are actually the same as
the full-feature versions, but with some functionality turned off.
Intellectual Property. Intellectual property strategy is intended to maximize the value
of the intellectual property. Many businesspeople think this strategy is the same as one
that maximizes the protection for the property. But this is not true. Indeed, carried to
its extreme, the maximum protection for the property is not to sell it at all! As we can
see from the controversial maximum-protection positions once taken by the film and
music industries, we can offend our customers with too much protection. Customers
sense that information wants to be free and shared, so we need a strategy that maximizes
value, not protection. Because digital technology lowers production and distribution
costs, we must be willing to pass these savings on to the consumer. How?- Give away free samples.
- Offer low-cost versions purchased one at a time.