DEFINITION of 'Versioning'

A business practice in which a company produces different models of 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.


Also known as "quality discrimination".

BREAKING DOWN 'Versioning'

This 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. Having different options will accommodate different utilities of the consumers. It is based on the willingness to pay of the customer; a higher willingness to pay will result in the purchase of the higher quality product, and a lower willingness to pay will result in the purchase of the lower quality product.

RELATED TERMS
  1. Model Risk

    A type of risk that occurs when a financial model used to measure ...
  2. Stochastic Modeling

    A method of financial modeling in which one or more variables ...
  3. Perceived Value

    The worth that a product or service has in the mind of the consumer. ...
  4. Hull–White Model

    A single-factor interest model used to price derivatives. The ...
  5. Financial Modeling

    The process by which a firm constructs a financial representation ...
  6. Multistage Dividend Discount Model

    An equity valuation model that builds on the Gordon growth model ...
Related Articles
  1. Small Business

    What is a Business Model?

    Business model is the term for a company’s plan as to how it will earn revenue.
  2. Small Business

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  3. Small Business

    2 Key Tactics Retailers Use To Increase Sales

    Many companies use versioning and bundling to increase sales. These strategies can offer value to consumers, but they also mean higher costs.
  4. Small Business

    Calculating (Small) Company Credit Risk

    Determining creditworthiness of smaller and medium-sized corporations isn't as easy as for larger companies, but these tips can help.
  5. Investing

    Understanding Financial Models

    A financial model is a representation of some aspects of a firm or given security. It uses historical numbers to create calculations that inform financial recommendations or predict future financial ...
  6. Investing

    Financial Models You Can Create With Excel

    The relatively modest amount of time it takes to build these models can pay for itself by leading you to better investment decisions.
  7. Insights

    The Fed Model And Stock Valuation: What It Does And Does Not Tell Us

    Learn about this popular stock market valuation model and how accurate it has been over the years.
  8. Personal Finance

    DCF Vs. Comparables: Which One To Use

    DCF and Comparables models are widely used in equity valuation. We explain the pros and cons of each method.
  9. Trading

    Circumvent Limitations of Black-Scholes Model

    Mathematical or quantitative model-based trading continues to gain momentum, despite major failures like the financial crisis of 2008-09, which was attributed to the flawed use of trading models. ...
  10. Personal Finance

    The Best Financial Modeling Courses for Investment Bankers

    Obtain information, both general and comparative, about the best available financial modeling courses for individuals pursuing a career in investment banking.
RELATED FAQS
  1. What are some examples of different types of business models in major industries?

    Learn what types of business models are currently being used in the marketplace as well as examples of models that work for ... Read Answer >>
  2. What is the point of developing a business model?

    Learn some of the benefits of developing a business model and how business models are used. Consider an example of business ... Read Answer >>
  3. What do you need to know to create a business model?

    Learn what a business model is, its importance and the primary elements that are needed in order to create a successful business ... Read Answer >>
  4. What is the average return on equity for a company in the electronics sector?

    Learn about the Black-Scholes option pricing model and the binomial options model, and understand the advantages of the binomial ... Read Answer >>
  5. What is the difference between financial forecasting and financial modelling?

    Understand the difference between financial forecasting and financial modeling, and learn why a company should conduct both ... Read Answer >>
  6. Why are microeconomic models different in the short run than the long run

    Find out why short-run and long-run microeconomic models treat production, costs and variable change using different given ... Read Answer >>
Hot Definitions
  1. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  2. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  3. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  4. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  5. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  6. Four Percent Rule

    A rule of thumb used to determine the amount of funds to withdraw from a retirement account each year. The four percent rule ...
Trading Center