| Upgrade
programs are a critical component to the profitability of software
publishers. Aggressive upgrade programs can be responsible for
35% (or more) of a software publishers bottom line, which represents
a significant amount of revenue and cash flow in any business
model.
Software upgrade efforts are basically renewal campaigns
with a twist - you can market to your buyers who have paid
for your product, users who have not paid, and even buyers
of competitive products. Let’s look at each of these cases.
The software upgrade effort to your buyers obviously involves
the use of your house file. Assuming that a functional database
and key coding system is in place, an effective upgrade program
will involve multiple mailings to the buyers within your house
file, flagging users as they respond. Flagging the respondents
will allow you to suppress them, re-mailing only those who
have not yet taken advantage of your special upgrade offer.
A common question asked is ‘how many times do I mail a renewal
offer to someone who has not yet responded?’ A seasoned direct
marketer will find no surprise in the answer: until it is
no longer profitable. Some of the magazine publishers find
it profitable to mail their renewal offers over ten times.
A good key coding program will allow you to track the performance
of each successive mailing, enabling you to halt your renewal
efforts as your response rates change from profitable to marginal.
Another technique that can be employed (also used by the
magazine publishers) to help initiate the call to action is
to lessen the premiums as you re-mail to those who have not
yet responded. For a software publisher, this might translate
into reducing the number of free add-on utilities bundled
with the upgrade, or even increasing the overall price of
the original offer. With this technique, the customer will
see that they are truly missing out on a good offer, helping
expedite their decision to upgrade their product.
What about those individuals who are using your product
without an actual purchase? Many software publishers have
been implementing an ‘Amnesty Upgrade Program’, which allows
a software user without the proper proof of purchase to take
advantage of the upgrade offer and become a registered buyer.
Who wants to refuse a customer ready and willing to give you
money! Consider the lifetime value of the customer -- such
a program will generate business and allow you to add new
buyers to your database that can be sold future upgrades in
the years to come.
How else can new buyers be added to your database? With
some minor adjustments, your same upgrade piece can be used
as a prospecting tool, mailing outside lists under the theme
of a ‘competitive upgrade.’ In this situation, you are soliciting
a call to action from users of competitive products.
Obviously you can’t directly rent your competitors list,
however, a knowledgeable broker in the software market should
be able to uncover list universes that will get you very close
the mark. For example, if you are implementing a competitive
upgrade program for a contact manager, a list targeting portable
computer users, such as Mobile Office, would be an excellent
test.
Again, it is critical to track and measure outside list
performance with your competitive
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upgrade offer. Profitable list universes should
be re-used after receiving list owner approval, until list performance
changes from profitable to marginal.
Another method for adding new buyers is increasing the capture
rate of names. Programs to capture your valid, yet unregistered
buyers, must be implemented at all customer contact points.
This includes your technical support group, customer service
group, bulletin board system, fax-response system, forums
on commercial networks and The Internet, user groups, etc.
How about an unbiased evaluation of your current registration
card? Make sure it is postage paid, since that is the very
first barrier that will affect your return rate.
Also, keep in mind that the response rate is inversely proportionate
with the number of questions asked. Capture the critical information
-- name and address data and machine platform. Business and
consumer demographic data, such as SIC code, age, income,
and more can all be determined via profiles and file enhancements.
Even a reduction by one or two questions can make a difference.
Many software publishers are finally treating their registration
cards as direct response mechanisms -- altering their look
and feel, enhancing layout and font selection, and adding
traditional direct mail push buttons such as ‘free’ and ‘act
now’.
How about a premium with the return of the registration
card? Remember, you must factor lifetime customer value. Some
software publishers offer a free quarterly newsletter upon
return of the registration card. Others offer participation
in a free monthly drawing for products.
Some firms seek out strategic partnerships with other software
companies who would offer a free limited edition of their
product upon registration. In this situation, both firms benefit
with the capture of the name with the firm offering the free
limited edition having an excellent upgrade prospect.
Electronic registration is also being explored by many software
publishers, since modems are a fairly standard feature on
new PC systems being sold today. They are also at a price
point of about $70, making them inexpensive add-ons for those
who have not yet jumped onto the electronic superhighway.
Many firms are incorporating programming within their installation
modules that will seek out a modem, ask a few questions, and
then electronically transfer the data via an 800 number to
a centralized system. This methodology for capturing names
is both fast and efficient.
An important point regarding your software upgrade efforts
- push the benefits of the new version. Understand, ahead
of time, what customers are looking for in their upgrades
Speed improvements, reduced system requirements (leaner and
meaner), and compatibility with new system software are important
in addition to easier use and new features. All of these items,
however, must be translated into customer benefits, showing
them how it will enhance the way they use their system and
accomplish certain tasks.
Well, you should be specifying new and useful features to
your software engineering group so you can take ‘new and improved
version 3.0’ from beta-release to golden master as soon as
possible! Just remember one final rule with your upgrade marketing
efforts -- it’s about building relationships with your customers,
and the stronger those relationships, the greater the profits
from your installed-base marketing activities.
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