17. Retail

If you sell your software through a retailer (i.e. shops) the retailer will be doing the promotion for you. But big chains don’t want to talk to hundreds of software companies, so you will almost certainly have to go through a distributor such as Avanquest.

Distributors and retailers will take a very big bite out of the cherry before it gets to you. I once approached a publisher of prints and posters about selling some of my photographs. They told me that a photographer typically gets 2.5% of the retail price of a print. 2.5%! I don’t know how software retail royalties compare, but I get the impression that they aren’t vastly better. Maybe that is fair given the huge overheads of bricks and mortar shops, but its pretty dismal compared to what you get when you sell direct to the customer on the Internet. Be very wary of providing support at these sorts of margins.

But it gets worse. I have heard that a retailer can order thousands of units, not display them and then return them once the software is obsolete (e.g. a new version has been released). You have to pay to have the CD printed, pay to transport them and then pay to have them destroyed – and you never get a penny. Even when you do get paid, many of the big chains are notoriously late payers. A good distributor might shield you from some of this, but the more I find out about selling retail the worse it sounds. Obviously some products do very well in retail (e.g. popular games), but it is a very different world to selling direct, for example the packaging suddenly becomes a lot more important.

Pros: Retailers can shift huge volumes of popular titles.

Cons: Royalties per unit are pretty meagre. The retailer and distributor seem to hold all the cards.

Data point: I tried to interest a few big department store chains in selling PerfectTablePlan. One of them showed some interest but they wanted me to pay for shelf space and give them the lion’s share of the profits. I reckoned I would have been losing money on every copy they sold.

18. One day discounts promotions

A number of sites have appeared that offer a different software product each day at a deeply discounted price, for example www.bitsdujour.com . The site takes a percentage of these sales.

Pros: Some of the discount sites have quite a large following so you can potentially get a lot of exposure and quite a few additional sales.

Cons: Risks annoying customers who have just bought your software at the full price if they find out about the promotion. Could devalue your product in the eyes of some people.

Data point: I haven’t tried this approach (yet).

19. ebay

Vast amounts of buying and selling takes place on ebay, including software.

Pros: Vast numbers of potential buyers.

Cons: Ebayers want stuff cheap, very cheap. Selling on ‘fleabay’ might not be great for the image of your product.

Data point: I ran a couple of ads for PerfectTablePlan on ebay.co.uk as ‘buy nows’ at my standard price of £19.95. I thought I might get some clickthroughs to www.perfecttableplan.com even if I didn’t sell any through ebay. I got no sales and very few clickthroughs. I might have got better results by selling at less than the main website, but that would have undermined my standard price.

I have seen posts on forums by someone saying that ebay was the most effective sales channel for their low priced speed-reading software. Interestingly they said that fairly cheesy ads (I am paraphrasing from memory!) worked better for them than slicker ones.

20. Cross-selling/bundling

Cross-selling is where you offer your product, usually at a discount, to someone who has just bought a similar product. Bundling is where you offer 2 or more complimentary products together, usually at a discount from buying them individually. For example, if you buy Macro Scheduler at the moment you can get 25% off a copy off DirectAccess. As these are two different types of productivity tools it seems like a good match.

Pros: The other product is doing all the promotion for you. You have to buy something else to get the discount so it is less likely to devalue your product in the customer’s eyes.

Cons: It might not be easy to find a product that will be of interest to the same market, but doesn’t compete with your own.

Data point: It isn’t something I have tried yet. But if you have software (or a service) in the wedding or event market that you feel is complimentary to my seating arrangement software, feel free to email me.

Part 6 >>

13. Blogging

Blogging can be an effective way to let the world know about your software. Certainly it has been very effective for über bloggers such as Joel Spolsky of FogBugz. But it only makes sense if you can write (and keep writing) posts of interest to the sort of people who might buy your software – Joel writes very well on software development and his customers are software developers.

Pros: Free. Can be very effective if you are a talented writer.

Cons: Requires a lot of time and dedication. Blog posts tend to have a fairly short useful lifetime. Not all software products lend themselves to blogging.

Data point: There is only so much you can say about seating plans and I have already endeavoured to say it on my seating plan hints page.

14. Bloggers

Other people blogging about your software can also give you useful exposure. The ‘blogosphere’ tends to be fairly incestuous, so its easier to get written about if you have your own blog. But you can just approach bloggers who are influential in your market and ask them if they would like to review your software.

There are some services around that allow you to pay bloggers for writing reviews. Personally I wouldn’t trust any review if I knew it was paid for and I would consider it immoral to review a product without declaring any inducements received – so I am not going to dignify them with a link. Some attempts to bribe influential bloggers have misfired badly.

Pros: It doesn’t cost you anything to offer a blogger a complimentary licence (except a CD+postage perhaps).

Cons: Rather hit and miss, with no control over the end results. Blog posts tend to have a fairly short useful lifetime.

Data point: I have sent a few complimentary review copies of my software to people who blog about weddings and events and it has resulted in a small, but useful, amount of additional exposure.

My software was mentioned on a Danish blog in 2005 (I didn’t approach them). I still get an occasional sale from people clicking on the link in this post. I can’t read Danish so have no idea what the post says, but I assume that it is complimentary.

15. Affiliates

Affiliates are sites that send traffic to you and take a percentage of any resulting sales. You need to set up your payment processing so you can track affiliate commission. Many of the payment processing companies can do this for you, there are also third parties such as www.shareasale.com.

From discussion on various forums it seems that very few products do well enough at affiliate sales to justify the effort involved. If you do decide to have an affiliate program make it as automated as possible.

Pros: You only pay for visitors that purchase your software.

Cons: An affiliate program can be a lot of hassle to set-up and administer for little (if any) return. Less scrupulous affiliates might make inaccurate claims about your software or send out spam promoting your product. You may also end up bidding against your own affiliates on Google Adwords.

Data point: I have dabbled with affiliates The majority of affiliates have never sold a single copy. Those that have still haven’t made enough sales to justify the effort involved.

16. Resellers

Resellers buy from you (usually at a discount) and then resell to their customers (usually at recommended retail price). Resellers will generally only be interested in software that is high price or high volume or can be sold with other services (e.g. consulting).

NB/ Under UK law you can’t tell a reseller what price to sell your product at – this is considered ‘price fixing’.

If you sell through resellers, make sure you have a solid agreement that defines who provides support and who gets any upgrade fees. Be extremely wary of any sort of exclusivity – if things don’t work out you could be left high and dry.

Some large companies will only buy software through approved resellers.

Pros: Good resellers can sell large volumes of software, give you good feedback, take some of the support burden and get you into markets that might be difficult to reach otherwise, e.g. foreign language markets.

Cons: For every good reseller you may encounter quite a few time-wasters. Unfortunately it isn’t always easy to tell which is which early on.

Data point: I have a few resellers that have sold useful amounts of licences. I have also spent quite a lot of time talking about resale deals that never amounted to anything.

Part 5 >>

9. Print ads

Despite the explosion in the importance of online media, people still prefer to read dead trees. A few points to bear in mind:

• Never pay what is says on their rate card, try to get at least 25% off. You may also be able to negotiate some editorial (and you thought it was all written by the staff – pah!).
• The more ads you book, the better the rate you get.
• As soon as you advertise in one magazine, all their competitors will ring you up and try to sell you advertising.
• You can try to track the success or otherwise by using different urls, ‘where did you find out about us’ surveys or coupon codes. None of these are very reliable as customers will:
  • type the product name in Google instead of typing the URL
  • not answer the survey or forget where they heard about you
  • forget to use the coupon

‘Advertising executives’ will tell you that someone has to see your ad 7 times before they buy your product. How very convenient for their commissions! No-one has ever been able to give me a reference to support this widely cited ‘fact’. If you have a reference, please put it in a comment at the end of the blog.

Pros: Can give a lot of exposure and some credibility. Can be reasonably targeted with a good choice of magazine.

Cons: Very expensive. Difficult to measure the effectiveness. It is easier to click on a link in a web ad than to put your magazine down, start the computer and type the URL into a web browser.

Data point: I have spent several thousand pounds advertising PerfectTablePlan in UK and US wedding and event magazines. I ran everything from small classified ads in big circulation wedding glossies to quarter page ads in lower circulation event planning magazines. I used different URLs for each ad and ‘where did you hear about us’ surveys to try to measure the results. As far as I can tell the results ranged from disappointing to dismal.

A magazine for gay women recently contacted me to ask if I wanted to run an ad in their pull-out section on ‘civil partnerships’ (the new legal partnership for gay people in the UK). I kept saying no until they offered me a quarter page ad, editorial and space to announce a competition for £60+VAT. How could I lose money on that? In the competition I offered free licences to the first 10 people to email in with the magazine name and claim them. Number of clickthroughs to site: negligible. Number of sales through published ad URL: 0. Number of emails claiming one of the 10 free copies: 0!

I think it is very tough to make print ads pay when your software is a niche app selling at only £20/$35. The economics may be very different if your software sells in huge volumes (e.g. best selling games) or has a much higher ticket price. I have also found the accounts departments of magazines to be a huge pain in the backside to deal with.

10. Forums

This is a form of guerrilla marketing where you hang out in forums that your potential customers frequent and answer relevant questions with a subtle plug for your product. Exactly what is considered acceptable varies from forum to forum. Having your product URL in your signature is usually OK. Pointing people at a relevant answer on your site may also be acceptable. Starting a thread telling everyone how great your software is is unlikely to be welcome anywhere. Using fake personas to plug your own product (sock puppet marketing) is dishonest and likely to be seen straight through by forum regulars – don’t do it.

Pros: Free. Can be very targeted and can give you a lot of useful background information about your market.

Cons: Time consuming.

Data point: I know far more about wedding receptions than any man should.

11. Free ‘lite’ versions

You can give away a free, reduced-functionality version of your software as an enticement to buy the full version.

Pros: Free advertising for your product every time someone uses the lite version.

Cons: If the lite version is useful, people won’t need to buy the full version. If the lite version isn’t very useful, people won’t want to buy the full version. Catch-22. Its a fine balancing act. Also a lite version can undermine the perceived value of the full version.

Data point: This form of promotion doesn’t appeal to me. I have a ‘crippled’ functionality trial, but that isn’t the same thing.

12. Cold calling

Cold calling is phoning people without their consent to try and sell to them. Usually done by people with written scripts and rhinoceros thick skins.

Pros: I guess there must be some or people wouldn’t do it.

Cons: Time consuming (if you are doing it yourself) or expensive (if you are paying someone to do it). In the UK you can be heavily fined for calling people who have registered with the the Telephone Preference Service.

Data point: I did a bit of cold calling of event businesses in the early days of PerfectTablePlan. I hated it and quickly decided it wasn’t worth the cost to my self-esteem. I never sold a single licence this way.

Part 4 >>

5. Press releases

A press release is where you announce something newsworthy related to your product in the hope that it will be mentioned in the media (online or print). Be warned that anything along the lines of “XYZ corporation is proud to announce version 1.23 of Widgetware” is not interesting to anyone apart from you, and will be filed straight in the bin. You need to come up with something interesting, original and/or newsworthy.

You can hire a PR company to do this for you, but these people are expensive and often have the cheek to expect a monthly retainer. But all they are going to do is call up or write to magazine editors, which you could do yourself. Furthermore they know nothing about your product and probably very little about your market. I have been deeply underwhelmed with some of the press releases I have seen written by professional PR people. A PR company working for a reseller of PerfectTablePlan even managed to get a valid licence key printed in a wedding magazine! The sooner we send all the PR people off on a B-Ark to Golgafrincham the better.

Don’t expect magazines to tell you they gave you a mention. They probably won’t.

Pros: Very cheap, if you are doing it yourself. Readers pay a lot more attention to reviews and editorials than they do to ads.

Cons: Quite hit and miss and it can be hard to come up with something newsworthy.

Data point: I have done 2 press releases through prweb.com (here and here). According to prweb stats these online releases have been accessed 110,000 and 70,000 times and were syndicated by quite a few news sites. I have no idea how accurate these stats are, but I have had a few sales from links on these press release pages.

I accompanied the online press releases with sending out CDs and press kits to relevant magazines and managed to get some mentions in event magazines and even a glowing review in PC Pro magazine. But it appears that nothing gets a free mention in wedding magazines – it’s a cutthroat business!

6. Trade shows

Even the most obscure markets appear to have tradeshows. Its hardly surprising when you get to charge exhibitors $1000+ per day for a few square metres of carpet and a trestle table. If there isn’t a tradeshow relevant to your market you had better start worrying if there really is a market.

Pros: A good chance to talk to a lot of prospective customers face-to-face and see what the competition is doing. Useful for establishing credibility.

Cons: Expensive and time consuming to prepare for and requires quite a bit of forward planning. If you try to hawk your wares at a tradeshow where you haven’t paid for floor space, you may get thrown out.

Data point: I have attended a few wedding and event planning shows as a punter to talk to people and find out what is happening. I didn’t feel I could justify the cost of a stall when I would have to sell over 100-200 additional licences just to break even on costs.

7. Email marketing

Only email people if they have given you permission to do so or you have got their addresses from a legitimate opted-in mailing list. Sending out unsolicited and untargeted email is spam and can get you on spam blacklists and in trouble with your ISP. It may also be illegal, depending on where you live. You will also pay for it by having demons shoving red hot pokers up your bottom for all eternity (if there is any justice).

Pros: Cheap if you don’t have to pay for the mailing list.

Cons: Conversion rates are generally very low.

Data point: I got a legitimate opt-in list of over a thousand prospective brides and sent them an email about PerfectTablePlan. As far as I can tell I didn’t make a single sale. Zip. Zero. Zilch. I did get a few rude emails back saying I had got their name wrong (the creator of the list had managed to get the name and email columns misaligned for some records).

8. Direct mail

Direct mail is sending stuff to people/businesses via the post/mail to entice them to buy your software. In other words, junk mail. There are list brokers who can sell you mailing lists and various online services that can mail out letters or post cards to prospects. I understand that a 1% conversion rate for direct mail is considered very good.

Pros: May allow you to reach people who can’t be easily reached by online means. Mailing lists are readily available for the right money.

Cons: Expensive. Kills trees. People who can’t be reached by online means probably aren’t great buyers of software.

Data point: My software is $35. To make money from direct mail I either have to get my conversion rate above 1% or my cost per recipient below $0.35. Neither seem likely, so I haven’t bothered.

Part3 >>

Promotion is an essential part of successful software – hearing about something is an essential first step to trying it. Without promotion your software is the proverbial tree falling in the forest with no-one to hear it. In this series of articles I am going to talk about some of the ways you can promote your software, and the pros and cons of each. I will also discuss how effective these various methods have been for my own £20/$35 seating planner software. Obviously this is only one data point and may not be very relevant if you are selling to a completely different market.

1. Search engine
I use ‘search engine’ in the singular deliberately, because Google is pretty much the only game in town at present. Some 80% of the search engine traffic to my site (not including paid ads) is from Google.

A constant stream of targeted prospects for free is (or should be) every marketer’s dream. All you need to do is get onto that first page of Google for your key search terms. Except that everyone else is trying to do the same and nobody really knows how Google ranks pages (except Google). SEO (search engine optimisation) is a whole separate topic. For now it suffices to say:

• Google seems to penalise new sites, so get that domain up and registered with Google ASAP
• the key to achieving a good ranking is to provide lots of relevant content
• ‘black hat’ techniques may get you penalised or even banned
• don’t believe anyone who guarantees they can get you onto the first page for a fee

Pros: Can provide large amounts of highly targeted traffic for free.

Cons: There are no guarantees on where you will end up ranked or how much traffic you will get and it can take quite a while to achieve reasonable volumes of traffic. Even if you are doing very nicely that could change next time Google change their algorithm.

Data point: PerfectTablePlan ranks pretty highly for most of the key search terms, but it is a highly focused application in quite a small niche. It took the best part of a year to start getting a reasonable amount of search engine traffic.

2. Pay per click ads
Pay per click ads are the stroke of genius that have made the founders of Google rich beyond the dreams of avarice. Again Google is nearly the only game in town, with Yahoo and Microsoft struggling to get any traction.

Pros: A very flexible and fast way to get targeted traffic. You can also get an incredible amount of feedback on what customers respond to. This is marketing gold-dust and can really help you with SEO and copywriting.

Cons: Google Adwords has quite a steep learning curve and requires constant tinkering to keep profitable. If you aren’t careful you can lose a lot of money quite quickly. Google also seems to be continually increasing minimum bid values in an attempt to squeeze more money out of advertisers. Click fraud looms large.

Data point: I tried Yahoo Overture (as it was called then) but I found the user interface painful and I lost money. Consequently I dropped Overture and concentrated my efforts on Google Adwords. Google Adwords was a very significant source of revenue in my first year, but the percentage has fallen as my unpaid search results have improved. Absolute numbers of conversion have also fallen somewhat as the market and Google force up the price of clicks. I don’t know how many hours I have spent fiddling with my Google Adwords campaign. A lot.

3. Banner ads
Banner ads are the large image ads, often animated and usually placed prominently at the tops of web pages. They are generally used to promote brands, rather than selling a particular product.

Pros: If placed on popular websites they can get seen by a lot of people. More eye catching than a text ad.

Cons: When is the last time you clicked on a banner ad? You usually have to pay even if no-one clicks your ad.

Data point: The closest I have got is running some image ads through Google Adwords. they were hardly ever clicked on and when they were the conversion rate was poor.

4. Download sites
Download sites are vast catalogues of (usually low price) software. These were an important resource for people looking for software in years gone by. However their usefulness has been gradually eroded by improved search engines and the fact that even the smallest software company can now afford their own website. The big names, such as Tucows, seem to be struggling to adapt to changing market forces.

Most download sites now accept a description of your software in PAD format. This is a blessing in that it allows you to fairly easily submit your software to lots of download sites. But it is a curse in that lots of sites have appeared using PAD file content in dubious ways to sell advertising.

If you place your PAD file in the ASP PAD database it will be picked up by many download sites. There are also services such as Robosoft that can submit your software to hundreds of download sites for you.

If your software fits into one of the standard categories and appeals to the sort of people who visit download sites (e.g. young male geeks), then download sites could be an important source of targeted traffic. Otherwise don’t expect too much. You can increase your exposure on these sites with various forms of paid promotions, such as pay per download.

It should be noted that there are a lot less Mac download sites than Windows ones, but they tend to be of a much higher quality. Some Mac developers seem to use the Mac download sites as their major form of promotion.

Pros: Free (unless you opt for various upgrade options) and all those links to your site are likely to improve your search engine ranking. As download sites tend to SEO on terms such as “crack” and “keygen” they can also make it very difficult for would-be pirates to find any real cracks that are out there.

Cons: Download sites make money selling advertising, not selling your software. There are a lot of very dodgy download sites out there.

Data point: Download sites don’t work very well for me as my software doesn’t fit into any of the standard categories. Also, most of the people who buy my software have never heard of tucows.com or download.com. But I usually submit a PAD file to the ASP database when I do a release as it only takes a few minutes. I have tried the download.com pay per download promotion and the tuwcows.com pay per click promotion – the results weren’t very impressive.

Part 2 >>

I would guess that the majority of the software that I have written in my career has never been used. Or, at least, not used enough to justify the long hours I and my colleagues lavished on it. I am sure that I am far from unique in this. I flatter myself that the software was intuitive, well documented and robust, but we never managed to convince enough people that the software solved a real problem for them. Creating high quality software is hard, but it just isn’t enough. The software also has to be marketed effectively.

Effective marketing means:

• identifying a problem that people will pay you adequately to solve
• letting these people know about your solution
• convincing them that your solution solves their problem, at least enough to try it
• doing all the above cost effectively

This is no easy task in a complex and constantly changing world, bursting at the seams with billions of people and millions of other products.

Crucially, decisions you make about marketing can (and should) have a big effect on the end product. So you need to make key marketing decisions before you develop the product. This may sound like stating the obvious, but even a casual inspection of developer forums shows that many software developers spend hundreds or thousands of hours developing a product without thinking about how they are going to market it, or even whether there is a market for it. If you are writing software as a hobby or to scratch your own itch, that’s fine. Knock yourself out. But if you are writing commercial software you need to have a very clear idea of your market and you need to develop the product with that market very much in mind.

To the developer, safe in their world of beautiful abstractions, marketing seems a rather grubby business. It smacks of deception, manipulation and impure motives. I remember a business studies lecture I attended as part of my physics degree as a brief respite from partial difference equations and thermodynamics, where the lecturer asked a room full of engineers and scientists how we would market a sonic mouse repeller. “Does it actually work?” asked a sceptic. “Does that matter?” asked the lecturer. There was a profound silence as the awful implications of his reply sunk in.

But, if you have a good product, you shouldn’t have to lie to your customers. Good marketing should be about communication, not deception. Like coding, it is easy to do badly, and difficult to do well. If we want our software to reach its full potential we need to either place our trust fully in someone else or we need to get involved. Personally, I find it hard to entrust the success of my hard work 100% to someone else. Especially someone from marketing!

Here are 10 questions I think every developer should ask themselves (or their marketing department) before starting to develop a software product in earnest.

1. What is your ’10 second elevator pitch’?

You should be able to describe the benefits of your software to potential customers in one sentence (two at a stretch). This is the ‘strapline’ that will go at the top of your web page. If it is difficult to describe, it is going to be difficult to market – difficult to create web pages for, difficult to do search engine optimisation for and difficult to write ads for. If you are struggling with this one, maybe you need to focus the product on a narrower problem.

2. Who is going to buy/use the software?

The software needs to be tailored to the intended user. Technical users will be interested in powerful functionality, whereas non-technical users will be more interested in a simple user interface. Graphics designers will care a lot about visual aesthetics. Emergency services will care a lot about reliability.

If you are selling to organisations the buyer may not be the same person as the user. Tailor the marketing to the buyer. What issues are they most worried about, what sort of license will they prefer (lease or purchase), what budget do they have? Business customers will usually be less price sensitive than consumers.

3. Who are your competitors?

In an efficient market you would expect the level of competition to be directly proportional to the size of the market. But the market isn’t completely efficient, so some niches may be more lucrative than others. Find out who your competitors are. What features do they have, how are they priced? Don’t take too long over it though – if you can’t find a competitor in a few hours of searching, then neither will many customers. Note that some of your competition might not even be software – for example there are a couple magnetic/Velcro based products that are competitors to my own seating planner software.

Be wary of entering a market with lots of established competitors, unless you are sure that you are offering something compelling that they aren’t. It is easy to think “This market is $1 billion dollars per year, I reckon I can get 1% of the market, that’s $10 million/year”. Dream on. The competition in such a market will be ferocious with the top 2 or 3 vendors taking a huge proportion of the market, with marketing and development budgets to match. You would probably be better to aim at a small niche in such a market, you can always grow into other niches from there. Good luck if you decide to compete head on with Microsoft, Yahoo or Google – you’ll need it. For every company that gets bought out by this unholy trinity countless other get crushed.

Be wary of entering a market with no competition. There is a tiny chance that you are a genius who has spotted a new market. It is much more likely that there are no competitors because is there is no market. Others may have steered clear for good reasons or tried and failed. Even if there is an opportunity you will have to create a new market and that can be very expensive.

4. How will your product be positioned?

What aspect of your software are you going to emphasize to make it more attractive than the competition? For example you can position based on ease of use, additional features, higher performance, better support, more flexible licensing etc. Positioning your product purely on price (e.g. ‘cheaper than X’) is rarely the best strategy.

5. How will your customers find out about it?

Before anyone can buy your software they need to know it exists. How are you going to get the message out: search engine optimisation, download sites, pay per click ads, print ads, trade shows, mailshots, viral marketing, resellers, distributors, affiliates, a free ‘lite’ version, blogging, competitions, press releases? What budget do you have? What works best will vary depending on your market and what you can afford.

6. Will you have a trial version?

The ‘try before you buy’ model is now commonplace for software sold on the Internet. Are you going to offer a trial version? Will it be feature-limited or time-limited?

7. How will you license it?

Are you going to license the software per machine, per named person, per site or per organisation? Will the license be transferable? What sort of licensing protection will you use (if any)?

8. What price will it sell at?

How much will you charge? How valuable is your software to the customer? How much money does the customer have to spend? Will you sell different versions at different price points? Are you going to charge a one-time fee + upgrade fees or a subscription?

9. How will your customers buy the software?

Are your customers going to buy the software from your website, from a retail store or are you going to have to send a salesman to their office?

10. What is the smallest amount worth delivering for version 1.0?

Getting to market fast has two main advantages:

• you start getting sales sooner, which is good for your cash flow
• you start getting feedback, which helps to guide further development

Get v1.0 to market fast by cutting back brutally on the features, not the quality. Many developers will feel that they can’t release v1.0 until it does at least as much as competitors, but this is usually a mistake. Many customers may not be interested in features X, Y and Z. In fact, they might even prefer a simpler product without these features. The sooner you get a product ‘out there’ the sooner you will find out. If you don’t get any sales or feedback, that is also telling you something very important.

Many of your initial marketing decisions will be based on guesses and gut feel. Thats OK. The only people with a good understanding of your market are your competitors, and they aren’t likely to tell you much. The best you can do is to make educated guesses and evolve your marketing as you get feedback on what works and what doesn’t. Note also that many of these decisions are coupled. If you are charging $30 for a license it is unlikely that you will need or be able to afford salesmen. If you are selling large enterprise solutions ‘try before you buy’ may not be appropriate.Once you have got your basic marketing plan, test it. Go and find some people who you think are potential customers and ask them “If I make this product, will you buy it?” (don’t expect friends and family to give you an honest answer – they are more interested in not hurting your feelings). The more you can make them think they are making a commitment, the more likely they are to give you a truthful answer. If the answer is a resounding “no”, or you can’t find any potential customers or they can’t find the time to talk to you – it is time to reconsider. Having your killer idea shot down in flames is painful, but its a lot less painful than investing thousands of hours in something that is never going to sell. Trust me – I only wear my marketing hat some of the time. Further reading/listening:

• Eric Sink – Marketing is not a Post-Processing Step
• Joel Spolsky – Camels and rubber duckies

From time to time people appear on the Business of Software discussion forum and ask “How much money will I make if I create a software product and sell it from a website?”. There are so many factors at play it is very difficult predict, but it isn’t entirely hopeless. We can look for inspiration to the astronomer Frank Drake.

Frank Drake wanted to know many alien civilisations there are currently in our galaxy that we could potentially talk to. That’s a pretty BIG question. But Drake broke it down into a number of smaller questions in his famous Drake equation :

N = R x Fp x Ne x Fl x Fi x Fc L

Where:

• N is the number of civilizations in our galaxy with which we might expect to be able to communicate at any given time
• R is the rate of star formation in our galaxy
• Fp is the fraction of those stars that have planets
• Ne is the average number of planets that can potentially support life per star that has planets
• Fl is the fraction of the above that actually go on to develop life
• Fi is the fraction of the above that actually go on to develop intelligent life
• Fc is the fraction of the above that are willing and able to communicate
• L is the expected lifetime of such a civilization for the period that it can communicate across interstellar space

These are still tough questions to answer. We know that the final value is >= 1 (assuming the success of reality TV doesn’t exclude us from being classified as intelligent) but many of the factors are highly uncertain. In particular there is huge uncertainty over the civilisation lifetime factor L. The equation was first derived at the height of the cold war, when many scientists understandably took a very pessimistic view over whether technological civilisations could avoid blowing themselves up. The more optimistic thought that advanced civilisations would disappear inside Dyson spheres after a few millenia. But at least astrophysicists and xenobiologists can have much more meaningful debates over these individual factors than they can by just arguing about the final estimates. Drake himself came up with a value of N=10.

In the same vein, here is my equation for how much software you will sell in any given month:

S = P x N x Ft x Fb

Where:

• S is the sales per month in units of currency
• P is the price of a licence (in the same units as S)
• N is the number of unique visitors to your website per month
• Ft is the fraction of visitors who try your software
• Fb is the fraction of visitors who buy the software after trying it

This obviously assumes that the Internet is your main sales medium, you don’t have to give many refunds, people will always download and try the software before buying and a raft of other assumptions. But it’s a start. We could break it down into a lot more factors, e.g. to include the fraction of potential customers who didn’t use a crack, but the advantage of the above factors is that they are simple and relatively easy to measure.

Drake only had one data point to work from for most of his factors – our own earth. Similarly a we don’t have a lot of data to work from, as software vendors tend to be rather coy about their sales data. As a data point the stats from my own table planning software site show that approximately 10% of visitors download the software and approximately 10% of these go on to buy a licence. This means that only around 1% of visitors to the site buy a licence. This percentage (Ft x Fb) is known in the jargon as the ‘conversion ratio’. 1% seems really low, but I understand from various sources that 1% is actually quite respectable. Afterall it includes all the people who ended up on my site while searching for “diy picnic table plans” or “multiplication table printing” (if you only include visitors that visited the home page the conversion rate goes up to a more respectable 4%).

So now you can plug in your own numbers and get a rough idea of what your sales might be. Or, perhaps more helpfully, you can re-arrange the equation to find out how many visitors you need per month:

N = S / ( P x Ft x Fb )

If we plug in: S = $10,000/mo, P = $100, Ft = 10% and Fb=10%, we get N= 10,000 unique visitors per month. You can then ask yourself if 10,000 unique visitors per month is achievable for your product.

Some points to note:

• The price will have an effect on the conversion percentage. But decreasing the price will not always increase the conversion percentage. Because price sends a signal about the quality of your product, it may even have the opposite effect. This is a complex topic and beyond the scope of this article.
• Not all visitors are equal. Highly targeted visitors going to a well designed web site with an excellent product might have conversion ratios as high as 5-10%. Poorly targeted visitors (e.g. coming from badly worded online ads or purchased from dubious ‘traffic programs’) will have conversion ratios barely discernible from 0%.
• Just like the Drake equation, if any of the factors are 0, the result will be zero, no matter how large the other factors are, i.e. it doesn’t matter how many visitors you get if the link to the purchase page is broken.

Feel free to leave a comment with your values for for P, N, Ft and/or Fb.

So what is my value for N? I’m not telling. But, I don’t think any of them are aliens.