MM6- 3. Product configuration and building.

Once you have segmented there are 2 core design decision to make. Product configuration[packaging] and bundling. Successful company get it right from the beginning.

PRODUCT CONFIGURATION DONE RIGHT.
Making the product with just the feature customer is willing to pay. Too many feature, feature shock especially if customer is not wild about them. If you didn’t provide the feature they are wild about, minivation. Feature for the customer won’t pay will lead to undead.

• core, product plus, logistic plus, best.

The key point here is that company put strong fences between the product. Company can offer low price because the value and coast are lower for base. Leaving out the feature from the product is extremely challanging for every company. But company must curb their instinct to please the customer by giving away value added functionality unless customer will pay for it. They must become familiar with giving their low price segment the basic feature only.

When a bank has 30 offering it looks good on paper but not on reality. It was hard to communicate. But when we made only 3, sales people articulate it easliy and customer could easily see which one best fit their need.

BUNDLING DONE RIGHT.
If done right, customer would end up buying more than what they would have, if you haven’t bundle. Mac-D value meal. They didn’t have to choose b/w A and B, they got both and generally less for what they had paid individually. And you can show it as discount. Pizza and breadstick. In case of Microsoft office, it even destroyed the individual comptition. And priced separately for bussiness and home user.

TWO KEY PRINCIPLE FOR BUNDLE AND PACKAGE.
1. Leader | filler | killer - start by separating must have by, nice to have. On their own nice to have will not convince customer to buy product.

Leader drive customer to buy product. Customer has high wtp for that. Filler has moderate importance, and killer will blow the deal if customer made to pay for it. Killer should avoid from the offering but should sold seperately to people who wants them. Each customer segment can value leader|killer|filler seperatly.

2. Creating good|better|best options - the classic approach to product building is to create the three tier model. Good|better|best, pro|bussiness|enterprise, good|better|best. No more than quarter of your customer should opt for good, 70% should go for better or best.

It works becasue you can steer customer to a choice based on whether they are price conscious, quality or in between. The fundamental is that people avoid extreme and choose the compromise option.

If you have just one option it is hard for the sales person but three he can switch from one to another.

The number of product configuration you decide should be aligned with number of distinct customer segments.

INSIGHT, TIPS, TRICKS.

• 1. Alig with segments.
• 2. Don’t make it too big. Once you go beyond the 9, you have cross the psychological threshold.
• 3. Make sure you and customer both benefits.
• 4. Don’t give too much on entry level.
• 5. Mixed bundling allow to buy one or bundle.
• 6. Individual price must be higher in bundle.
• 7. Don’t forget bundle price communication.
• 8. Bundle with integration value. 1+1=3.
• 9. Don’t Bundle just for the sake of it.
• 10. Exploit inverse correlation.

WHEN UNBUNDLING IS RIGHT OPTION.
Airline offering.customer pay more attention to base price.