SoftwareCEO Exclusives |
© Copyright 2002-2003 SoftwareCEO Inc. |
by Bruce Hadley, SoftwareCEO
Say "shareware" to most executives at commercial software firms, and they think of adolescent programmers pushing free or $19 software — inconsequential, bug-ridden utilities or games — out to masses of consumers for fun and very little profit.
Well, we're here to tell you: It's time to rethink shareware.
Myth #1: Shareware isn't for serious software businesses.
First of all, when we say "shareware," we're talking about a marketing
method, not a business model. Lots of very commercial, very profitable, very
business-like software companies successfully use the shareware technique to
get their product into the hands of prospective users.
"There's a big misconception about what shareware is," says Dave Collins, CEO of U.K.-based software marketing firm SharewarePromotions Ltd. "It's simply any variation on the try-before-you-buy model.
"One of the big myths is that shareware is outdated — that's it's small scale. In my opinion, that couldn't be further from the truth. Some of the biggest firms use it — Symantec and Microsoft and WinZip, to name just a few. You won't find the word 'shareware' on their Web sites, but they have trial versions available, and this is precisely what the shareware model is."
"Nothing sells your software better than itself," says Sharon Housley, VP of marketing for software developer NotePage in Hanover, Mass. Housley's also on the board of directors of the Shareware Industry Awards Foundation (SIAF), the governing board for the annual Shareware Industry Conference (SIC).
"Shareware builds trust with your customer, in that you're willing to let them use it, try it." she says. "Besides, if you don't do it, your competitors will."
Myth #2: There's no money in shareware.
Again, shareware is a marketing method, not a giveaway scheme, and as a marketing
scheme there's plenty of evidence that it does work. In a nutshell, if you can
use shareware to convert leads into sales, there's tons of money to be made.
"I see two-person companies that are getting four million downloads a year," says Phil Schnyder, president of askSam Systems in Perry, Fla., who just returned from the SIC in Rochester, N.Y., an event attended by 400 people. "This one developer started out doing a game that they let people download over the 'Net, and now they're in Wal-Mart and getting big bucks."
Housley offers another example:
"Marshall Magee is one of the first to make over $1 million in a single year on the shareware model. In his SIC presentation, he said that he first stuck his Automenu program for DOS up there for free — this was back in the days of BBS — and someone offered him $20 for it.
"Marshall hesitated, and the customer asked if $20 was not enough. Marshall said, 'No that's plenty,' but asked for a check so that he could show his father that's there's money to be made in software. In his second year, Marshall's sales were $2.5 million. In year three, they were $10 million.
Myth #3: Shareware software is low-quality and often simplistic.
"Ours is complex software," Housley says. "It's high-end network
software. When you offer shareware, you create docs that are as easy to use
as possible, you create slide shows, you create Web demos. To say that yours
is too complex for shareware is just an excuse."
"To some, shareware has a negative connotation of low standards and amateurism," Collins says. "But you don't have to use the word to adopt the marketing method. The word 'shareware' has no relevance to the users. It has about as much relevance as knowing the make of the drill that the dentist uses in my mouth.
"In fact, companies using shareware model are much more responsive to the needs of their buyers. If there's a missing feature, evaluators point it out immediately, and small developers can implement those changes or additions relatively quickly."
Myth #4: Shareware only works for low-cost products.
"The price tag can be anything at all," Housley says. "Ours goes
up to $2,000." Schnyder says his average initial sale is around $500, "but
some of those come back and order 30 copies" — which is a perfect
example of the shareware model hitting on all cylinders.
It's probably true that if you offer only a $50,000 license, you'll have a harder time getting mileage out of shareware — but that's a comment on your sales model, not on software complexity nor price.
In short, if your sales model requires a sales rep to make an in-person call, you're likely to get less bang for your buck from any try-before-you-buy model, whether you call it shareware or pilot programs.
If, on the other hand, most of your sales process occurs over the phone or the Internet, shareware can expand your reach and increase your close ratio.
Within specific vertical niches, those close rates will make your head spin: Housley says that the industry average for purchases from shareware downloads is around 1 percent, but NotePage consistently closes 10 to 20 percent. And among those who call in to get an activation key code that unlocks new software features, 70 to 80 percent end up buying.
Keep in mind, NotePage is making those sales without a sales rep ever touching the deal.
OK, with those primary myths out of the way, let's get into tactics:
How can you make the shareware model sell for you?
Tip #1: Put a time limitation on your trials.
"The proper amount of time depends on product," Collins says. "If
it's complicated, say a network management application, the longer the better
— 60 days wouldn't be too long. If it's a consumer app, say a registry
cleaner, the standard is 30 days."
Schnyder offers a 30-day trial of his database product. "Some are moving to a 14-day, but I think it's app-specific," he says. "If the user has to put data in, then you need to go longer. But if it's something like a spam filter, then it's best to keep it shorter."
Tip #2: Limit the functionality of your trial version — with great
caution.
"The restricted features could be that users can't save files, or can't
output to a printer," Collins says. "The advantage to this is that
you're not giving too much away; your risk is lower. The negative is that there
are often workarounds. For example, the user takes a screen shot of your product,
imports into Paintshop Pro, and prints from there."
For most business applications, there's a much bigger risk than security: frustrated users. If your constrained trial doesn't show them what they need to see, they'll look elsewhere.
"It's a big mistake to limit the shareware version too much," Schnyder says. "You should really let people try the product. A trial version that's too constrained just annoys them — a lot of people are turned off by that; they really do want to use your software and try it out."
"It's very difficult to strike the right balance," Collins says. "If you take too much away, you might not dazzle the user."
Tip #3: If you limit functionality, make the full functionality always visible.
For example, in your trial version you show all the features and options, but
gray out the menu selections for those that are locked."
Many other limits are possible, of course: for example, the number of users, systems, or startups, or the size of database.
"One person at the SIC said he allows trial users to print, but puts a watermark on the output," Schnyder says. "Some people in the audience thought that made sense, others didn't. I think it depends on what feels right for you."
Tip #4: Don't combine the trial limits without an escape clause.
Generally speaking, it's a bad idea to limit functionality and time, but NotePage
offers a clever in-between: Anyone can download a trial version, but the functionality
is limited until they contact the company for a key code.
"We put a limitation in the software that allows the user to understand how it works," Housley says, "and we will give them a temporary key code makes it fully functional for 30 days — but the customer has to come to us for the key code."
This serves an obvious purpose: You can be liberal with your initial trial downloads, because all those who sign up with Mickey Mouse addresses can't get a fully functional version until they provide you with some reality-based information. But if you ask for too much at the outset, you'll scare away all the fence-sitters. The NotePage approach is a nice, non-invasive compromise.
Tip #5: Don't obsess over code crackers.
"I don't view the crackers as a lost sale," Collins says. "They
were never going to buy it anyway. In general, if someone is impressed with
your software, they'll buy it at a reasonable price. Crackers and hackers think
all software should be free.
"Your protection mechanism should provide a level of reasonable precaution. It shouldn't be too easy for someone to get it, but you have to accept that no matter what you put in place, it will be cracked if someone wants to crack it."
In the B2B world, Schnyder doesn't think it's worth worrying about. "If we find a key somewhere on a site, we'll try to remove it," he says. "But we sell mostly to business, and it just doesn't happen there. It's the guys selling game software that really have to worry about that."
Should you build or buy the license security scheme? Collins says you should build it yourself if you have the resources available, and if you have some experience building license control software. However, for most software companies those are two very big "ifs."
Our own opinion: Go to a third-party vendor, and look for one who charges only when you make a sale. Yes, over time this may cost you more than an upfront license, but you don't pay until someone else pays you. And it's a lot cheaper than trying to build and maintain code that's outside your area of expertise.
Tip #6: Let the initial downloads go without barriers.
One of the side effects of the proliferation of spam and attacks on privacy
in general is a stronger-than-ever distrust of invasive questionnaires. Just
a couple years ago, we counseled that it's OK to ask for name and e-mail address,
but risky to ask for phone number and address. Nowadays, asking for anything
at all can get you in trouble.
"We don't require that you fill out our questionnaire to get the download, and we do no validation," Schnyder says. "It's so easy to type in donald@duck.com, and I don't want to sift through those. Still, we get information from over half who download."
"I'm against getting an e-mail address — it's a bad idea," Collins says. "One of the big paranoias among all types of users is privacy —and it doesn't matter if you have a privacy statement on your site. An e-mail address is a commodity; if they have to provide it, they want to be paid.
"You want to push the download, and then let the download push the sale. Whoever gets in there first wins — and that's especially true for B2B software. The company that makes it painless and easy to get that software in the hands of the user will stand head and shoulders above the rest.
"The reality is, users are going to find something that does what they want, and if it isn't too difficult, they'll stick with that one — it's rare that they'll simultaneously research and compare and download four or five applications. RFPs are false; by the time that goes out, they already have a front-runner.
Tip #7: Don't over-develop.
"In this industry, sometimes good is good enough," Housley says. "22
percent of software buyers say that if the first thing they download does what
they want, they'll buy it."
"Developers tend to be terribly anal, and they're terrible marketers. They'll keep adding and adding and adding to a product, so that the functionality and ease of use is gone."
Tip #8: Offer immediate and easy signup extras.
The emphasis of the previous point is that you should make your initial download
experience as open an inviting as possible. Think of it as a trade show: Do
everything you can to get people into your booth, without any discrimination
or demands. Once they're in your booth, however, it's certainly OK to introduce
yourself, shake their hand, and read their name badge.
It's the same with shareware downloads: "Once they've downloaded — or are downloading — they are more receptive," Collins says. "If at that point you display an optional registration opportunity that's tied to some level of support, they will almost certainly go for it. Once they've crossed the first leap of faith, it's OK to ask for more, as long as you offer more."
Tip #9: Provide sample data.
Your trial version needs to quickly show your software in a real-world situation;
you can accomplish this through templates, data sets, and example reports.
"Give them sample data, so that customers don't have to create a database," Housley says. "Make part of the functionality a strong import feature. Include a sample data set and give them the possibility of creating their own. It shouldn't be an obstacle to using this model."
Tip #10: Crank up your documentation and help files.
A downloaded trial version that no one can figure out how to use does no one
any good, and may actually do you serious harm.
"Having really thorough documentation can really minimize tech support," Housley says. "We released a product before the docs were done, and got way more phone calls.
"Our business model is, to some extent, never talk to the customer. Nowadays we never release a product until the docs are really beefy."
NotePage also sponsors and moderates a user discussion forum, where people trade tips and tricks and solutions online. "To some extent, your users become your sales force," Housley says. "They provide tech support for other users; all you have to do is pay for the forum, and watch over it."
Tip #11: Nag them. Nicely.
"Nags" can take the form of reminder screens when your software starts,
pop-ups when certain features are accessed, or separate tips and tutorials and
offers sent via e-mail. All are acceptable, and can work well, if used correctly.
"Use tips and nag screens throughout the software experience to remind people to buy now," Housley says. "You may even want to randomize the sequence, so that where a screen pops up at one point, it will pop up at a different point next time."
"You've got to get the balance, and there isn't a general rule," Collins says. "If your software is open on the desktop or server everyday, you've got a lot more room to move, but if it is something I open four times a day for five minutes each time, you probably don't want to pop something up every time."
Reminder notices about the amount of time left in the trial are probably the safest, Collins says, but even those shouldn't appear more than once a day. If you have a feature blocked out, another nag on top of that isn't necessary.
How do you find the balance? The same way you (hopefully) built your software: market research and beta test. "Beta test the shareware as you beta test the software," Collins says. "It really, really depends on the market. What is reasonable for a home consumer user might be highly intrusive for a corporate user.
And, borrow like crazy: "It's very easy to get a massive number of shareware applications to see how others are doing it," Collins says. "In general, though, I think you can lean towards leniency; if the software does what they want it to, they will purchase."
Tip #12: Include "buy now" buttons in the software.
"Users should be able to buy directly from within the application,"
Housley says.
"The button brings them to a Web site where they can buy online, then get a password or activation code via e-mail. Or, after the purchase is confirmed you can direct them to another URL where they can download a registered version."
Tip #13: Provide a "buy now" link on your Web site.
"Sometimes when people market via shareware, they lose sight of the direct
purchases," Housley says. "You also have to provide a way to buy without
downloading the trial version. Don't swing too far the other way."
Tip #14: Follow up consistently and often.
"The danger you face with downloads is that they're simply forgotten,"
Collins says. "In general, telephone follow-up is an extremely good idea
for business apps. At a minimum, e-mail five days after the download with thanks,
then again in another five days with tips and tricks — once again, it's
all about finding the right balance."
"At the SIC, there were people with accounting systems and all kinds of business software," Schnyder says. "On those sales, the follow-up to the download is more important — my software falls in that category."
Schnyder sends out a series of three e-mails to all those who supplied an e-mail address when they downloaded. He gave us a Word-file that contains the askSam series of follow-up e-mails; SoftwareCEO Site Members can get a copy from the Marketing and PR section of our Downloads Library. The file name is "Post-download E-mail Campaign."
Tip #15: For complex products and/or bigger sales, do an online demo.
"Overall, we close more than 10 percent of our 1,500 downloads per month,"
Schnyder says. "But if we do a demo online we're getting a 38 percent close
rate.
"When we show them the product online and answer their questions, it's incredibly powerful," Schnyder says. "We've done 400 to 500 of these demos, so it's statistically significant."
Schnyder's product, askSam, doesn't do just one thing; lots of different users might download the full version — it's unlimited for 30 days — for lots of different things.
When choosing whom to target for a follow-up online demo, the askSam sales crew focuses on those who've checked off the need for any kind of site license or network version. "At one time I was doing it only for potential sales worth $1,000 or over, but I've since lowered it because the close rate is so high," Schnyder says.
The trick, Schnyder says, is making the demo relevant to the user. "It's difficult," he says. "My guys who are doing it know the product very well, and we can show them how askSam will work for what they're trying to do."
Tip #16: Focus on the conversion rate.
"Everyone who is successful nowadays with shareware follows up with a series
of e-mails, and perhaps even sales person," Schnyder says.
"Getting more downloads is more expensive than increasing your conversion rate. One guy at the SIC said raised his conversions from the range of 1 to 2 percent to 5 or 6 percent, and the result was that he quadrupled his revenues."
If you think about it from a sales manager's perspective, this only makes sense: Downloads are qualified leads, oftentimes downright hot leads. You'll get a lot more bang for you buck focusing on those that you will trying to drive the masses to your site.
Tip #17: Put marketing in a Web frame of mind.
Of course, the previous tip assumes you have an existing funnel — i.e.,
people who are already downloading your software.
Although shareware marketing costs are comparatively low, it isn't free. "You still have a need for marketing and search engine optimization, because you still need to be found," Housley says.
Tip #18: Clock your conversion rates, but only against yourself.
Conversion rates are crucial, but have little relevance outside your own company.
I.e., don't feel like a hero if you beat the 1 percent industry average we cited
above, and don't feel like a loser if you don't match NotePage's 10 to 20 percent.
"It depends on how you're pulling in your traffic," Collins says. "Are you going to a broad audience with banners, or a targeted group via direct mail? I've seen downloads as low as zero and as high as 5 to 6 percent.
"The conversion rate depends on the software, what it does, and the price, as well as your model for your trial version. Some people may download your software to use it one time, and have no intention of buying it.
"Also, the size of download matters: Small files that are quick and easy to download will see a lower conversion rate.
"A figure that's often thrown out there is 2 percent. In the vaguest of vague sense of accuracy, that's a reasonable rate for conversion. If you compare that to refund rates, it sounds appalling that only one in 50 are going to buy — or, in a retail sense, 98 percent of your people will ask for a refund.
"However, remember that lots of downloads are never installed on that system. Also, there's a very different mentality involved with shareware: You're making it as easy as possible to have people download it. There's no money involved to make the transaction more serious."
Tip #19: Follow-up on the non-converts, too.
"One of the slickest ways to do this is with an uninstall survey,"
Collins says. "When the user goes to uninstall, you present a quick survey:
'We're sorry to see you go; will you please tell us why?'
"Most will click right past that, but a small number will give you some feedback. The advice that I give is that you won't get a lot of quality information there, but you may well find one gem that will make a big difference in sales — something your software is missing, for example."
As valuable as this exercise is, however, you should let marketing or support handle it, not sales. "Chances are, by the end of the trial period, it's unlikely you're going to achieve much conversion by chasing them," Collins says. "It's likely that most of your efforts are going to be wasted as far as turning them into sales."
Tip #20: Network with other shareware pros.
"Don't be afraid to ask questions — people really are good about sharing
information," Housley says.
"Besides the SIC, there's the Association of Shareware Professionals. It has a closed forum that's available to members, but it's only $100 a year, and you won't get flamed there."
"There are a lot of relationships that form among shareware developers; most in the shareware community wear multiple hats. Lots of people start in shareware as a hobby, and if it works, quit their day jobs.
"But remember, everyone is a potential customer. You may be chatting with someone and think they're a nobody, and then find they're head of MIS at a large corporation that you're after, and this would be a huge buying opportunity for you.
"With the shareware model you need a Web site and you need bandwidth — that's it. Your product is going to sell itself. Compared to all the other things you're going to do to increase your sales, it's very inexpensive to offer shareware."