Monetizing Innovation

Chapter 6When Designing Products, Configuration and Bundling is More Science Than Art

So you've segmented your customer base along the lines we laid out in Chapter 5: on their needs, the value of your offering, and their willingness to pay (WTP) for that value. Now you're ready to get down and dirty into the design of what you'll offer each customer segment—exactly what features and functions to deliver. There are two core design decisions you will need to make here. One is product configuration, and the other is bundling. This chapter will examine and illustrate these important design constructs.

But first, a clarification: Our definition of product configuration refers to the decision of which features and functionalities will be included in a product. In some industries, like software and tech, product configuration is also referred to by the term packaging. By bundling, we mean combining a product or service with other products and services.

Successful innovators get the product configuration and bundling decisions right from the start.

Product Configuration Done Right

Doing product configuration right means you design a product with the right features for a segment—that is, just the features customers are willing to pay for. This is a core tenet of designing new products that will succeed in the marketplace. Too many features lead to feature shock products, especially if your customers are not wild about those features. If they are wild about them and you didn't realize ...