Limiting Features to Increase Perceived Value Makes Revenue Not Suck.

Managing the perceived value of a company’s product is often instrumental in providing for a company’s success.  Controlling how customers perceive the value of your product can be tricky business and can even seem counterintuitive at times, but failure to do so can have dire consequence for a product and the company that produces said product. A great example of this is Twitter, they released a product that is absolutely free to users, with no limits and with no ads and now despite being one of the most visited sites on the web, the company is struggling to figure out how to become profitable. Perhaps an even greater example of this is the Newspaper industry as a whole, many newspapers were in a rush to get in on the internet and in their rush they did not create a long term plan for creating value in their online products, they essentially gave everything away for free. It was not long until the newspapers began seeing a decline in print subscriptions but not an equivalent rise in digital product revenues. What happened is that the readers lost their perception of value in the content produced from the news papers because it was free online and advertisers never developed a perception of value in the online ads (for various and sundry reasons).

One of the counterintuitive elements of producing perceived value is to make a lesser product or at least what may seem a lesser product at first glance.  Withholding features helps control how much value consumers place on each product release. A company may have a new product with all of the features a consumer could every want and if that product is released with all of those features it will be very difficult to make an even better future product. What was released first is perceived by the customer as the standard product, not the premium product. Since all of the features the company had in its pocket, were released in what is now perceived as the standard product a premium product will be difficult to produce.

To manage product value by withholding features, each release of a product should have the minimum number of features and greatest number of feature limitations that will produce compelling product release. This product becomes the standard by which future releases and product variants will be measured.  This allows limitations of features to be lessened/removed or features to be enhanced in order to make premium products, as well as allowing feature sets for future releases that are compelling by comparison.

Some great examples of products that do a good job of controlling perceived value:

iPhone: The first iPhone had just the fewest number of phone features required for a mobile phone and a new touch based interface. As a matter of fact there were fewer features on the first iPhone than most feature phones. Each release of the iPhone had just a few big features a number of little features and some feature enhancements.

Hulu: The free version of Hulu limits the numbers of shows in a season to the last 3, new shows are delayed by at least 12 hours, video quality is never better than standard definition. Hulu Plus only adds HD at 720P and all episodes of current seasons; they don’t include some networks in Hulu Plus. They still have room for bigger packages that give access to new shows when they show on broadcast, to add other networks, 1080P, etc…

Starting out with a good plan of how each feature will contribute to the consumers perception of value is a solid first step to planning the features and pricing of a product. Before making a feature free or unlimited consider the future monetization of that feature, even if it seems reasonable to give it away put reasonable limits on the feature, increasing the limit later will will engender good will from consumers, where taking away or charging for what the consumer perceives as free will only serve to do the opposite. Keeping these basic tenants in mind while planning a product will go a long way toward ensuring that customers will value your products and therefore be willing to part with their dollars for your products.