Optimal Software Versioning Strategy Considering Customization and Consumer Deliberation Behavior

Abstract

This study investigates the optimal versioning problem when a monopoly software provider bears the deliberation cost to help reduce consumer uncertainty about SaaS customization. We develop stylized models based on different production strategies and deliberation support strategies. We consider customer deliberation behavior as a new perspective on the need for a free trial. Our results indicate that a short free trial leads to free riders while a long enough free trial eliminates free riders. This is because a long free trial means that consumers easily get accustomed to the product. We also find that the seller benefits from offering deliberation support. The optimal product strategy is dependent on the deliberation support cost. When the deliberation support cost is low, the seller should provide dual products; on the contrary, the single SaaS product strategy is better with a high deliberation cost.