[Chickencha]

To me, market segmentation is different when it comes to software.

In your text editor example, the author can add an SFTP feature, but once it's coded it's coded. There's no extra cost to ship out all software with that feature after it's coded, except perhaps some extra support costs. (I imagine those would be pretty minimal.) At that point, I only see two reasons to segment the market from the users' perspective:

1) To not confuse your less advanced users with more features. This is a pretty weak reason, IMO. 2) To make sure that the people who actually wanted the feature are the ones paying for it. After the cost of development is paid for, this reason goes away.

Beyond these reasons (unless I'm missing something, which is entirely possible), releasing different grades of software just hurts your users. It makes you more money, though, so maybe that's enough justification.

[CodeMage]

I'm not sure how having different editions of the same software hurts users, but maybe I'm just applying a different grade of the same meaning to the word "hurt" ;)

I suppose that the author could let users drive new features by making a list of proposed features and having users donate money towards the implementation of those features. I'm pretty sure I've seen that somewhere. But the segmentation seems to be the easier way.

Going back to the editor example, suppose you have two editors from two different authors; one is cheaper, the other has SFTP feature. The author of the one with the SFTP features put a higher price on the overall development effort than the author of the cheaper one. And he's charging you more than the other author per every copy, even though he coded it only once. Why is this so drastically different from having two editions of the same product from the same author?

To take your logic a step further, why is the author charging money for every copy? Once he coded the whole product, it's done and there are no per-unit shipping or manufacturing costs. The alternative would be to somehow get the money, upfront, that would cover the development costs and net him some fixed profit for it. Who knows, maybe if we could switch to that business model piracy would no longer be an issue. But until then, as long as charging per unit of software is accepted practice, I don't see a difference between two editions of the same product and two products with different features. (And I'm not talking about unscrupulous feature crippling here, that's different)

[billswift]

It increases the price to the users of the "advanced" version, because by keeping 2 versions the seller has to collect AT LEAST enough extra to pay for the increased overhead costs of dealing with 2 versions.

[sdfx]

>There's no extra cost to ship out all software with that feature after it's coded

By this logic, Chipmaker should only sell their most powerful processors, because the actual manufacturing-cost is not really the reason for the price difference between a top of the line i7 processor and a different one with lower specs.

You can look at it from a different angle: Let's say you have a powerful program and you are charging 1000$ for it (e.g. Photoshop). Your market research has shown that a lot of "casual user" are looking for a product like the one you are selling, but are not willing to pay the 1000$. So you develop a version without the more advanced functions and sell it for 200$ (e.g. Photoshop Elements).

It's not really about "not confusing the user", but about offering another option. How does this hurt the consumer?

[shard]

I think that actual manufacturing costs are often the reason for price differences between a top of the line and one with lower specs. The processor dies are huge and costly, and throwing out non-perfect dies is undesirable. Due to the intricacies of silicon manufacturing, the same design can have different maximum speeds on different dies, and due to defects, the same design can have different operational sections on different dies. This leads to speed grading and the disabling of cores/caches, and hence a whole line of chips from one design.