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Estd 4.22.2023
Direct Answer:
You decide to split a product into separate SKUs or modules when your product’s capabilities naturally segment into distinct value offerings that address different customer needs and justify separate pricing—and when testing confirms that these segments resonate with different buyer segments.
Supporting Details from Our Book, Price to Scale:
• In our book, we discuss two primary approaches to packaging your product: the Good-Better-Best model and a modular approach.
• The modular approach is particularly relevant when certain features or functions of your product represent high-value, expensive-to-deliver point products. If these individual modules provide added or differentiated value compared to the core product, it may make sense to price them separately.
• As mentioned around the discussion on modular packaging, the decision to split should be driven by a clear mapping between distinct feature sets and customer segments’ primary use cases and willingness-to-pay. Testing your initial packaging hypothesis against specific segments is crucial to ensure that the separate modules have true package-to-segment fit.
Context and Practical Application:
• Evaluate your product’s feature set: Identify whether there are capabilities that can be isolated into high-value offerings.
• Consider delivery costs and value perception: If certain features are costly to deliver and add significant value, they may justify a separate SKU with a premium price.
• Conduct market testing: Validate whether different customer segments respond better to a modular pricing strategy versus a unified offering.
• Look at competitive dynamics: Understand if publishing separate prices can enhance transparency and align your offerings with specific market needs.
Summary:
In short, split your product into separate SKUs or modules when distinct and high-value functionalities emerge, confirmed through customer research and testing, ensuring that each module aligns with a specific customer segment’s needs and price tolerance. This strategic modular approach, as outlined in our SaaS pricing book, Price to Scale, helps you capture maximum revenue while clearly communicating your product’s value.