Tag Archives: software

What type of free trial should I offer for my software?

Once upon a time, the idea that you would allow people to try your software before they bought it was revolutionary. But now, thanks to the shareware movement and the ease with which software can be downloaded from the Internet, free trials are the norm for most types of off-the-shelf software. Prospective customers no longer have to rely on reviews of questionable independence or reading the packaging in a shop. They can try the software for themselves before making any commitment. This has been overwhelmingly a good thing for software users. It has also been a boon for vendors of good software.

When I surveyed 92 small software product vendors in 2009, 100% of them offered a free trial.

Eric Sink says:

Every small ISV today should give its customers an opportunity to try before they buy. It is officially now absurd to do otherwise. Customers will come to your Web site and expect to find a demo download.

And that was in 2004.

So, for most software products, the question isn’t – should I have a free trial? The questions is – what sort of free trial should I have? As with everything related to marketing, it depends. There are many different approaches. Below I describe some of the more common ones.

Time-limited

Typically this takes the form of a fixed number of contiguous days of free and unrestricted use. The software then stops working  and you need to buy a licence to continue using it. The time period is often 30 days. As you can see in the pie chart above, this was the most common type of trial in my survey.

The advantage of this approach is that it allows the user to try the full functionality of the software. But it does have a number of issues:

  • The trial might expire before they have finished their evaluation.
  • It isn’t suitable for software that might only be needed for a limited time. For example, a 30 day time-limited trial wouldn’t be a good idea for my wedding seating arrangement software as a wedding is a one-off event (we hope), and people could just start the trial 30 days before their wedding.
  • You have to find some way to hide the data about the date the trial starts.
  • It is relatively easy to circumvent. Even if you hide the install date well and check for changes to the system clock a potential customer can just keep reinstalling the software inside a new virtual machine each time the trial expires.
  • Cookie expiration is an problem. For example, Google Adwords conversion tracking cookies only last a maximum of 30 days. So Adwords conversion tracking won’t count a sale on day 31, which is probably where most of your sales will happen with a 30 day trial.
  • As most sales will only happen after your trial expires, you will have to wait longer to get your money.

I have sometimes downloaded software, started to evaluate it, got distracted and then returned only to find the trial has timed out. Very frustrating and unlikely to result in a sale. So I am generally not a fan of fixed duration trials. There are a couple of ways you can try to work around this issue:

  • Only limit the amount of time they are actually actively using the software. For example, allow them 8 hours of total active usage. This shouldn’t be too hard to program. For example, stop the timer if there hasn’t been a key press or mouse click event in 2 minutes.
  • Allow them to request an extension. Then at least you have got their email address and can follow them up.

Usage-limited

In this approach you limit the number of times a certain action can be performed. For example the number of pages they can print or the number of times they can start the software. This avoids the issue of a time-limited trial which expires before the user has finished their evaluation.

Feature-limited

In this approach the trial disables an important function of the software, for example printing or saving.  The problem is that a user won’t know if this feature works properly until they buy the full version. This may put some people off.

It has the advantage that you can ship a separate trial version with features missing completely from the executable, which makes life a little harder for crackers (note that they can still get hold of the non-trial version to crack if they want to, e.g. with a stolen credit card number). But it also makes life harder for customers, as they have to install the software a second time after purchase. Personally I care more about making life easy for my paying customers.

Capacity-limited

A capacity-limited trial restricts the amount of data that can be entered. For example, a password manager might only allow you to enter 50 passwords into the trial version. This approach can be problematic when performance is important. For example, if you limit a database trial to one thousand records, how can the user test whether the search performance is adequate for a database with a million records?

Output-limited

Many products exist purely to produce some form of physical or electronic output, for example image editors and label printers. Adding a watermark, or altering the output in some other way, can be an effective way to limit a trial. But you need to make sure that the modification to the output can’t easily be removed or worked around (e.g. using screen capture). You also need to be sure the user doesn’t think the modifications in the output are due to a bug in the software.

Nagware

Nagware allows you to use the software without restrictions, but ‘nags’ you periodically to pay for it. Usually this takes the form of a window that pops up when you start or exit the software. But I once used some software that also nagged you in audio. A woman’s voice with a heavy Scottish accent no less. It got uninstalled very quickly! Nagware isn’t very effective in my experience. I never did buy WinZip. Did you? After a while you just click the ‘continue’ button without thinking about it. Little tricks, like moving the ‘continue’ button or greying out for a few seconds are just annoying. And annoying people doesn’t seem like a great start to a business relationship.

No trial

Some software has no trial, just a money back guarantee. If your software is an enterprise system that takes significant effort to configure, then this is entirely understandable. But if it is off-the-shelf, downloadable software, what are you trying to hide? On the plus side it avoids the issue of people downloading software and then never getting around to trying it. My own stats show that only some 40% of people who start a download of my software actually install and run it. Also many people won’t ask for their money back even if they don’t like your product. So you might get sales to people who wouldn’t have purchased with a trial. But do you really want these people as customers? Personally I am unlikely to buy a software with no trial, unless there is no real alternative. I assume you won’t let me try your software because it isn’t very good. I’m sure many other people feel the same way.

Hybrid trial

Hybrids of the above approaches are also possible. For example, the trial of my wedding seating arrangement software doesn’t allow you to save, print or export plans with more than 30 guests – a hybrid of the capacity-limited and feature-limited approaches. I figure that 30 guests is enough to show what the product does, but not enough to be useful for most events. Also no-one is likely to pay for event planning software for an event with 30 or fewer guests.

Conclusion

A good trial is a balancing act. You need to give prospective customers enough to show them your software could solve their problem, but not enough to actually solve their problem. But if you are too restrictive they might go to a competitor with a more relaxed trial policy. It can be tough to get the balance right or to know whether a different approach would get better results.

Obviously, the best type of trial depends very much on your product. If it is a product that is likely to be used a lot and  is going to increase in value as it is used, then you might be best offering a generous time-limited or usage-limited trial. But if it is a product that is only needed for a one-off task or a limited period of time, then a feature-limited, capacity-limited or output-limited trial probably makes more sense.

For example, most consumers will (unless they are very unlucky) only want to use disk recovery software once. So it wouldn’t make sense to offer a 30 day free trial. It would probably make more sense to offer a feature-limited trial that allows them to see what data could be recovered, but not actually allow them to do the recovery until they pay up. But if you are selling to professional disk recoverers, then a time or usage-limited trial might be appropriate.

I asked  Craig Peterson of the Beyond Compare file comparison tool about their very generous trial policy (30 non-contiguous days of use) in an interview and he said:

That goes back to competing with all the other products out there.  If someone installs two programs to evaluate, and then doesn’t have a chance to really try them out until a month later, the one that works is more likely to get the sale.  It also makes it more likely that potential customers will learn the application and start relying on it, so when it does come time to pay they’re less likely to throw out that investment and switch to another tool.

Data comparing different types of trial is hard to come by:

  • My 2009 survey didn’t show any clear difference in mean conversion rate between time and feature-limited trials (there wasn’t enough data for usage-limited trials to be worth counting):

The nagware vs feature-limited result is fairly conclusive. But, apart from that, there doesn’t seem to be much hard data to go on. Even if there was more data, it wouldn’t necessarily apply for different products in different markets. So, unless you want to program multiple types of trial and run lots of split tests (trial and error?),  you are going to have to ‘go with your gut’. It is tempting to pick the same trial model as your competitors. But remember that part of successful marketing is being different.

So there are no easy answers. But don’t just choose a 30 day time-limited trial because that is what everyone else is doing. Have a think about what fits best with your product, market and customers. Be creative.

Product ideas wanted

Joannes Vermorel’s guest post ‘3 Low-Competition Niches In Retail Software’ got quite a lot of interest. I also have various ideas for software-based products and services that I am never likely to develop due to a lack of time, money, skills or interest. I’m sure many of you reading this do as well. It seems a shame to leave all these ideas gathering dust when there is someone out there just about to waste a huge amount of energy writing the 2,133th Twitter app (and counting) due to lack of a better idea.

So I am inviting you to email in promising but neglected software-based product and service ideas so that I can publish the best ones here. Maybe it is a tool you would like to use or something that you think might be a good business but, either way, you are never going to implement it. They can be ideas for: enterprise SAAS, Windows programming libraries, iPad games, development tools  – anything with a significant software component. It doesn’t have to be a radically new idea, it could be just a significantly different take on an existing idea. Hopefully some budding entrepreneurs will pick up some of these ideas and run with them. Note: By sending me your idea you are giving me permission to put it into the public domain for anyone to see.

Please email them to me at andy at oryxdigital at com with the subject line “product idea” by 12-Sep-11. They should be in plain text and conform to the following basic template:

——————————————————————————

Title:
A one sentence description of product.

Description:
A longer description of the product. Ideally 1 or 2 paragraphs.

Customer:
Who you think the typical customer would be.

Price point:
What you think the software would sell for.

Platform:
Windows, Mac, iPad, iPhone, web etc.

Competitors:
Closest competitors (URLs ideally).

Differentiation:
How your idea is different to the competitors.

Challenges:
Any particular challenges in creating or marketing this product.

Commercial potential:
What commercial potential does this product have? How many people do you think it could sustain full time?

Why not you?:
If it is such as great idea, why haven’t you created it?

Market research:
How much market research you have done. ‘None’ is an acceptable answer.

Contact:
(optional) Your contact details, if anyone wants to discuss the idea further. Can be an email, hyperlink, twitter account etc. It is also fine if you want to use a pseudonym or be anonymous.

——————————————————————————

For example:

Title:
Qt GUI checker.

Description:
Every time I create a new Windows using the Qt application framework I have to manually check all the controls have:

  • tooltips
  • non-conflicting keyboard shortcuts
  • the correct left-right and top-to-bottom tab order
  • correctly capitalised text
  • etc

It is quite tedious when you do a lot of GUI development.

Customer:
Qt developers.

Price point:
I’d pay $30.

Platform:
Windows, Mac, Linux and other Qt platforms.

Competitors:
None that I know of.

Differentiation:
QtDesigner lets you do these tasks manually, but I don’t know of any software that can do this automatically.

Challenges:
I don’t think it would be that difficult. You just need to parse the XML in a .ui file and present the results in a legible form.

Commercial potential:
Limited. Only of interest to Qt developers. Many people are using Qt for free, and people using free tools generally don’t like to pay for add-ons. It might make a good student or open source project though.

Why not you?:
I’ve got too much else on my plate! Also I am not convinced about the commercial potential.

Market research:
No formal research, but I’ve been using Qt for over 10 years.

Contact:
http://www.successfulsoftware.net .

Selling software vs selling eyeballs

Lets say I’ve written some downloadable software and I want to make some money from it (‘monetize it’  in the ghastly common parlance). Should I charge people for using the software or should I give them the software for free and make my money from ads?

Lets look at some numbers.

The typical conversion rate for downloadable software is around 1%. That means that about 1% of the people that visit your site will typically buy your software. So, for each $1 of your sale price you will make around $0.01 per unique visit. Downloadable software is often priced around $30, so lets say $0.30 per unique visitor. Some software sells for less than $30, and some for a lot more. Also I haven’t taken account of the lifetime value of a customer (e.g. upgrades) – which will increase the value per customer; or payment processing and advertising costs – which will reduce the value per customer. It is just a ball park figure.

How much money could I make from advertising if I give the software away instead? I have been doing some research for a while on this. Based on various data I have gleaned from the BOS forum and blogs, advertisers typically pay per $1-$2 per 1000 impressions (CPM). Some data points:

  • A well known ad network offered me a $2 CPM (-19% commission) to put ads on this blog.
  • Dating site plentyoffish.com reported making $10k/day from Adsense off 200 million pages per month in 2006, which is a CPM of $1.5
  • A sample of 8 Facebook app developers were averaging less than $1 CPM.
  • “If a site like Stack Overflow, which does almost a million pageviews a day, can’t make enough to cover even one person at half time using Google AdSense, how does anyone make a living with AdSense? Does it even work?” (Stackoverflow blog)
  • “Charging your end user isn’t the only way of pricing software. You can choose to give it away for free and then make money by, for example, charging for consulting, installation and training; or selling advertising. The latter, although a common model for web sites, is extremely hard to make work. CPM – the cost per thousand impressions – can be as low as a dollar. In other words, to generate one thousand dollars of revenue you might need to serve up as many as a million pages. To generate enough revenue to support a team of three or four people, that means having ten million page views per month. Most web applications simply aren’t going to attract that sort of traffic.” (p57 of “Don’t just roll the dice”)

So, taking a ballpark CPM of $1.5, I would be making $0.0015 per page impression.

Obviously I am comparing apples (unique visitors) and pears (impressions) here. How many impressions does 1 unique visitors equal? My own table planning software averages around 2 impressions per unique visitor (many visitors bounce out after reading 1 page, even those that buy might only visit the home, download and purchase pages). So, assuming this is typical, the product based site described above should be making around $0.15 per page impression. Based on these (admittedly rough) numbers an ad driven site needs approximately 100 times as many page impressions per day to make the same money as a product driven site. To make around $100k per year the product site would need about 900 visitors/1,800 impressions per day. To make the same amount the ad driven site would need around 90,000 visitors/180,000 impressions per day. But it is worse than that because the ad driven site is going to have significant hosting fees and potentially many more users to provide support for. I know which business model I prefer.

So why not get the best of both worlds – sell the software AND put ads on the site? Because then you are sending out all sorts of bad vibes (“this software isn’t good enough that they can make a living off it”) for a measly 1% extra income from the ads. I’m confident the presence of ads will lose you >1% in product sales.

An ad supported model is only viable when you have lots of traffic. Most downloadable software (or web apps) won’t be able to generate that sort of traffic, even if it is good and you give it away for free. If you really want to run an ad supported business, you are probably better off basing it around forums and user generated content than free software.

In the final analysis if you are creating software I think it makes more sense to create something of value, grow some balls and charge for it. Rather than giving it away and selling eyeballs in the hope that someone else will take their money and throw you some scraps. Think balls, not eyeballs.

Robo Print Job Manager

I recently did some consulting for Paul Roberts on his print estimation software, as usual concentrating on improving marketing and usability. He sent me some feedback at the end of the consulting and was kind enough to let me reproduce it here.

I got Andy to check out why my software was not selling as well as I expected. His approach was very thorough and covered the entire downloading experience, from Google to first impressions of the software. Some of the findings were very unexpected, and he found a considerable amount of room for improvement in various areas. Many suggestions were things I had never considered. I needed a brutally honest opinion with plenty of recommendations, and Andy (The Gordon Ramsay of the Software Development World – in a nice way) exceeded my expectations in his approach, his professional knowledge, and his knowledge on where I’m missing out on sales. Even though we were 13 hours apart in time zones, we covered a staggering amount of ground.

I’m still working on the changes he recommended (there were quite a few), but I am confident that I will recoup the consultation fee paid to Andy very quickly once these changes are in place. I would definitely recommend Andy’s services, as this was value for money, particularly for those who find their software is not doing as well as it should do and need to look at it from a completely different perspective.

Paul Roberts, www.roboprintjobmanager.com

I am quite tickled at being compared to talented chef and TV bad boy Gordon Ramsey (warning, lots of swearing). However, while I aspire to his level of passion, knowledge and commitment, I would like to point out that I don’t use the F word during consulting (unless perhaps I find out that you are paying Google $0.50 each time someone in China clicks on your ad for a $20 product).

A simple change that doubled sales

A while back I did a day of consulting for James Wang on his SQL Pretty Printer software. One of my many recommendations was that he displayed the name of the licensed user prominently in the software, to discourage casual license key sharing. He recently reported back to me that he had made this change and it had significantly increased the number of orders for multiple licenses. The average number of licenses per sale increased from 1.34 to 2.65 since he made the change in February 2011. That is a 98% increase in sales! And it only took a week to change the licensing system.

James commented:

Each time I have had an increase in sales, I found that it was mostly due to marketing related issues like changing the licensing system or paying for a link from a site which has a highly targeted audience for my software, not due to a new version release.

Of course it helps that James had a good product in the first place.

3 Low-Competition Niches In Retail Software

This is a guest post by Joannes Vermorel, founder of the Lokad Forecasting Service.

Software developers seem to be herd animals. They like to stay very close to each other. As a result, the marketplace ends up riddled with hundreds of ToDo lists while other segments are deserted, despite high financial stakes. During my routine browsing of software business forums, I have noticed that the most common answer to Why the heck are you producing yet another ToDo list? is the desperately annoying Because I can’t find a better idea.

This is desperately annoying because the world is full (saturated even) with problems so painful that people or companies would be very willing to pay to relieve the pain, even if only a little. A tiny fraction of these problems are addressed by the software industry (such as the need for ToDo lists), but most are just lacking any decent solution.

Hence, I detail below 3 low-competition software niches in retail. Indeed, after half a decade of running sales forecasting software company Lokad, I believe, despite the potential survivor bias, that I have acquired insights on a few B2B markets close to my own. Firstly I will address a few inevitable questions:

Q: If you have uncovered such profitable niches, why don’t you take over them yourself?
A: Mostly because running a growing business already takes about 100% of my management bandwidth.

Q: If these niches have little competition, entry barriers must be high?
A: Herding problems aside, I believe not.

Q: Now these niches have been disclosed, they will be swarmed over by competitors, right?
A: Odds are extremely low on that one. The herd instinct is just too strong.

Q. Do I have to pay you if I use one of your ideas?
A. No, I am releasing this into the public domain. I expect no payment if you get rich (unless you want to!) and accept no liability if you fail miserably. Execution is everything.  And don’t trust a random stranger on the Internet – do your own market research.

Before digging into the specifics of those niches, here are a couple of signs that I have noticed to be indicators of desperate lack of competition:

  • No one bothers about doing even basic SEO.
  • No prices on display.
  • No one offers self-signup – you have to go through a sales rep.
  • Little in the way of online documentation or screenshots are available.

However, lack of competition does not mean lack of competitors. It’s just not the sort of competition that keeps you up at night. Through private one-to-one discussions with clients of those solutions, here is the typical feedback I get:

  • Licenses are hideously expensive.
  • Setup takes months.
  • Upgrade takes months (and is hideously expensive).
  • Every single feature feels half-baked.

By way of anecdotal evidence – during a manufacturer integration with our forecasting technology a few months ago at Lokad, we discovered that the client had been charged $2,000 by its primary software provider in order to activate Remote Desktop on the Windows Server where the software was installed. Apparently, this was well within the norm of their usual fees for the inventory management system in place.

Granted, just being cheaper is usually not a good place to be in the market. Yet, when a competitor’s software is designed in such a way that it takes a small army of consultants to get it up and running, they can’t just lower their license fees to match yours – assuming that your design is not half-baked too. The competition would have to redesign their solution from scratch, and give up on their consultingware revenues. So you are in a great position to drive competition crazy.

With a market managing over two-thirds of the US gross domestic product, one would expected retail be saturated by fantastic software products. It turns out this is not the case. Not by a long shot – except eCommerce (e.g. online shopping carts) which attracts a zillion developers for no good reason.

Some salient aspects of the retail software market:

  1. Most retailers are already equipped in basic stuff such as point-of-sale, inventory management and order management systems. So you don’t have to deliver that yourself. On the contrary, you should rely on the assumption that such software is already in place.
  2. As far the Lokad experience goes with its online sales forecasting service, retailers are not unwilling to disclose their data to a 3rd party over the Internet. It takes trust and trust takes time. Interestingly enough, at Lokad we do sign NDAs, but rather infrequently. We are not unwilling, but most retailers (even top 100 worldwide ones) simply don’t even bother.
  3. Retailers have a LOT of data, and yet unlike banks, they have little talented manpower to deal with it. Many retail businesses are highly profitable though and could afford to pay for this kind of manpower, but as far I can tell, it’s just not part of the usual Western retail culture. Talents go to management, not to the trenches.

Niche 1: EOQ (Economic Order Quantity) calculator

Retailers know they need to keep their stocks as low as possible, while preserving their service levels (aka rate of non stock-outs), see this safety stock tutorial for more details. If the marginal ordering cost for replenishment was zero, then retailers would produce myriads of incremental replenishment orders, precisely matching their own sales. This is not the case. One century ago, F. W. Harris introduced the economic order quantity (EOQ) which represents the optimal quantity to be ordered at once by the retailer, when friction factors such as the shipping cost are taken into account. Obviously, the Wilson Formula (see Wikipedia for details) is an extremely early attempt at addressing the question. It’s not too hard to see that many factors are not accounted for, such as non-flat shipping costs, volume discounts, obsolescence risks …etc.

Picking the right quantity to order is obviously a fundamental question for each retailer performing an inventory replenishment operation. Yet, AFAIK, there is no satisfying solution available on the market. ERP systems just graciously let the retailer manually enter the EOQ along with other product settings. Naturally, this process is extremely tedious, firstly because of the sheer number of products, secondly because whenever a supply parameter is changing, the retailer has to go through all the relevant products all over again.

The EOQ calculator would typically come as multi-tenant web app. Main features being:

  • Product and supplier data import from any remotely reachable SQL database[1].
  • Web UI for entering / editing EOQ settings.
  • EOQ calculation engine.
  • Optional EOQ export back to the ERP.

Pricing guestimate: Charge by the number of products rather than by the number of users. I would suggest to start around $50/month for small shops and go up to $10k/month for large retail networks.

Gut feeling: EOQ seemingly involves a lot of expert knowledge (my take: acquiring this knowledge is a matter of months, not years). So there is an opportunity to position yourself as an expert here, which is a good place to be as it facilitates inbound marketing and PR with specialized press. Also, EOQ can be narrowed down to sub-verticals in retail (e.g. textiles) in case competition grows stronger.

Niche 2: Supplier scorecard manager

For a retailer, there are about 3 qualities that define a good supplier: lowest prices, shortest shipment delays, best availability levels (aka no items out-of-stock delaying the shipments). Better, sometime exclusive, suppliers give a strong competitive edge to a retailer. Setting aside payment terms and complicated discounts, comparing supplier prices is simple, yet, this is only the tip of the iceberg. If the cheapest supplier doesn’t deliver half of the time, “savings” will turn into very expensive lost sales. As far I can observe, beyond pricing, assessing quality of the suppliers is hard, and most retailers suffer an ongoing struggle with this issue.

An idea that frequently comes to the mind of retailers is to establish contracts with suppliers that involve financial penalties if delays or availability levels are not enforced. In practice, the idea is often impractical. Firstly, you need to be Walmart-strong to inflict any punitive damage on your suppliers without simply losing them. Secondly, shipping delays and availabilities needs to be accurately monitored, which is typically not the case.

A much better alternative, yet infrequently implemented outside the large retail networks, consists of establishing a supplier scorecard based on the precise measuring of both lead times (i.e. the duration between the initial order and the final delivery) and of the item availability. The scorecard is a synthetic, typically 1-page, document refreshed every week or every month that provides the overall performance of each supplier. The scorecard includes a synthetic score like A (10% best performing suppliers), B and C (10% worst performing suppliers). Scorecards are shared with the suppliers themselves.

Instead of punishing bad suppliers, the scorecard helps them in realizing there is a problem in the first place. Then, if the situation doesn’t improve after a couple of months, it helps the retailer itself to realize the need for switching to another supplier…

The scorecard manager web app would feature:

  • Import of both purchase orders and delivery receipts (this might be 2 distinct systems). [2]
  • Consolidation of per-supplier lead time and availability statistics.
  • One-page scorecard reports with 3rd party access offered to the suppliers.

Pricing guestimate: Charge based on the number of suppliers and the numbers of orders to be processed. Again, the number of users having access to the system might not be a reliable indicator. Starting at $50/month for small shops up to $10k/month for large retail networks.

Gut feeling: By positioning your company as intermediate between retailers and their suppliers, you benefit from a built-in viral marketing effect, which is rather unusual in B2B. On the other hand, there isn’t that much expert knowledge (real or assumed) in the software itself.

Niche 3: Dead simple sales analytics

Retail is a fast-paced business, and a retailer needs to keep a really close eye on its sales figures in order to stay clear of bankruptcy. Globally, the software market is swarming with hundreds of sales analytics tools, most of them being distant competitors of Business Objects acquired by SAP years ago. However, the business model of most retailers is extremely simple and straightforward, making all those Business Intelligence tools vast overkill for small and medium retail networks.

Concepts that matter in retail are: sales per product, product categories and points of sale. That’s about it. Hence, all it should take to have a powerful sales visualization tool setup for a retailer should be access to the 2 or 3 SQL tables of the ERP defining products and transactions; and the rest being hard-coded defaults.

Google Analytics would be an inspiring model. Indeed, Google does not offer to webmasters any flexibility whatsoever in the way the web traffic is reported; but in exchange, setting-up Google Analytics requires no more than merely cutting-and-pasting a block of JavaScript into your web page footer.

Naturally it would be a web app, with the main features being:

  • Product and sales data import from any remotely reachable SQL database.[2]
  • Aggregate sales per day/week/month.
  • Aggregate per product/product category/point-of-sales.
  • A Web UI ala Google Analytics, with a single time-series graph per page.

Pricing guestimate: Regular per-usage fee, a la Salesforce.com. Starting at $5/user/month basic features to $100/user/month for more fancy stuff.

Gut feeling: probably the weakest of the 3 niches, precisely because it has too much potential and is therefore doomed to attract significant attention later on. Also, achieving a wow effect on first contact with the product will probably be critical to turn prospects into clients.

Market entry points

Worldwide, there are plenty of competitors already for these niches. Yet, again, this does not mean much. Firstly because retail is so huge, secondly because it’s a heavily fragmented market anyway. First, there are big guys like SAP, JDA or RedPrairie, typically way too expensive for anything but large retail networks. Second, there are hundreds of mid-market ERPs, typically with a strong national (or even regional) focus. However, those ERPs don’t delve into fine-grained specifics of retail, as they are too busy already dealing with a myriad of feature requests for their +20 modules (accounting, billing, HR, payments, shipping … etc). Hence, there is a lot of space for razor-sharp web apps that focus on one, and only one, aspect of the retail business. Basically single-minded, uncompromising obsession with one thing, leaving aside all other stuff to either ERPs or other web apps.

In order to enter the market, the good news is that mid-size retailers are pretty much everywhere. So you can just use a tiny bit of networking to get in touch with a couple of neighbouring businesses, even if you don’t have that much of a network in the first place. Then, being razor-sharp in a market where very little online content is available, offers you a cheap opportunity at doing some basic SEO based on the very specific questions your software is addressing.

Q: I am interested, I have questions, can I ask you those questions?
A: Naturally, my rate is 200€/h (no just kidding). Yes, email me.

[1] Don’t even bother about providing a super-complicated setup wizard. Just offer a $2k to $5k setup package that includes the ad-hoc handful of SQL lines to match the existing data of the retailer. We are already using this approach at Lokad with Salescast. Alternatively, we also offer an intermediate SQL schema, if the retailer is willing to deal with the data formatting on its own.

[2] Again, I suggest an approach similar to the one of Salescast by Lokad: don’t even try to robotize data import, just design the software in such a way that adding a custom adapter is cheap.

Joannes Vermorel is the founder of Lokad, company motto “You send data, we return forecasts”. Lokad won the first Windows Azure award from Microsoft in 2010, out of 3000 companies applying worldwide. He has a personal blog that mostly deals with cloud computing matters.

15 criteria for evaluating software product ideas

Choosing the right product to develop is crucial. Great execution is also very important. But if you develop a product that no-one wants or no-one is prepared to pay for, then you are going to fail, no matter how well you execute it. You can often tweak a product or its marketing to make it more successful based on market feedback (‘pivot’) .  But the less pivoting you have to do, the better. Below I list some of the criteria I think are important for evaluating the potential of new commercial software products.

1. Are you solving a real problem?

Has your customer got a ‘bleeding neck’? Is your software solving a problem compelling enough that someone is going to download it, install it, evaluate it, buy it and then learn to use it, with the accompanying risks of credit card fraud and malware? It is hard to change people’s habits. They are going to keep doing what they are doing now (e.g. pen and paper or Excel) unless you can convince them your software offers them very significant advantages.

2. How much will people pay for this product?

This is a complex question and depends on many factors. You should be able to get a rough idea by looking at your closest potential competitors. But there are some types of software that people don’t expect to pay for, no matter how difficult or expensive it is to develop – for example web browsers and media players. There are some users who can’t pay – for example children and people in some developing countries. And there are some people who won’t pay – for example many Linux users. So good luck selling a media player aimed at teenage Linux users in China.

3. Is the market big enough?

Is the market big enough for you to make a living? How many people are looking for solutions to this sort of problem? This is less of a problem than most people think. Given the huge number of people with Internet access and credit cards it is possible for a small company to make a decent living from a market that appears very narrow. Narrowing your market also allows you to be much more focussed in your marketing.

4. Can you promote it cost effectively?

How are you going to reach customers: Adwords, SEO, partners, magazine ads, direct mail, social media, affiliates, resellers or other methods? Can you do it cost effectively? How much is each sale from Adwords going to cost you assuming a 1% conversion rate? If it costs you $31 in advertising for each sale of a $30 product, you aren’t going to be in business long. But if you can cross-sell it to customers you already have a relationship with, that is a huge plus.

5. How much competition is there?

If there are lots of established competitors, you may have a hard time getting noticed. Personally I wouldn’t want to go into any market where I didn’t have a reasonable shot of getting to the first page on Google for at least some of the important search terms. For example, I think it would be incredibly tough to succeed with yet another Twitter, RSS, todo list or backup application. Conversely, if there are no competitors, that means that there may be no market. Creating a new market is tough, especially for a small company. Ideally you want a market where there are competitors making a decent living, but you think you can do a better job than them, or at least be different to them in some important way.

6. How is your product different?

Many vendors try very hard to reach feature parity with their competitors. But successful marketing means being different to your competitors. How is your product going to be different? What is your positioning? Note that just being cheaper than your competitors is not enough.

7. How high is the barrier to entry?

How long will it take you to create a minimum sellable product? If the barrier to entry is too high, you may never have the time, cashflow and energy to reach v1.0. As a self-funded microISV I wouldn’t want to work on any product where I couldn’t deliver something sellable (a minimum viable product) within 6 months. Conversely if the barrier to entry is too low, then it will be easy for others to copy your idea if it is successful.

8. Can you reach critical mass?

Some types of applications need a certain number of users before they can take off (network effect). For example, a massively multi-player game, dating site or auction site isn’t going to be very interesting until the number of users reaches a certain threshold. Do you have the contacts and financial resources to reach this threshold?

9. Do you have the technical skills and domain knowledge to create this product?

If not, how long will it take to learn them? Different technologies suit different types of problems. Using an inappropriate technology, just because it is one you have experience in, is unlikely to end well.

10. Are you scratching your own itch?

If you can be your own customer, then this can be very helpful in coming up with a good solution. But be wary about assuming that your needs are the same as everyone elses.

11. What is the lifetime of the product?

Is the technology going to be obsolete, or will the market disappear within a couple of years?  Are customers likely to buy upgrades to new versions? The longer you can sell a product for, the more profitable it is likely to be.

12. Is a good domain available?

Can you get a good domain for your product? Domains that contain keywords that people are likely to search on will help with SEO.

13. What are the risk factors?

Every dependency is a risk factor. If the platform your products runs on dies, then your product dies.  If you are writing an add-on for another product, then you can be put out of business pretty much overnight if the core product dies or if the functionality of your add-on is incorporated into the core product. Can you get source code for third party libraries?

14. Is the passion there?

Good software takes a lot of time and effort. Don’t believe the hype about 4 hour work weeks. Is it going to be interesting and fun? Do you have the passion and commitment to still be working on this product in 10 years time?

15. Will it make the world a better place?

Software products can be an enormous force for good in the world, increasing productivity and allowing people to do things they couldn’t do otherwise. You don’t have to be the next Google to be doing something worthwhile. But creating a “me too” clone of an existing software package or a product that encourages anti-social behaviour (e.g. spamming) isn’t going to make the world a better place.

Making a decision

You need to look at all these criteria before you make a decision. For example, a short lifespan or a small market might be compensated for by a high ticket price. If you are evaluating several products, create a simple table with a row for each criteria and a column for each product and compare them side by side.

Al Harberg’s Software Marketing Glossary

Al Harberg (best known for his press release service for software vendors) has created a useful glossary of software marketing terms. Al knows a lot about marketing software. His glossary is 107 pages/53k words long and includes quotes, book review and feature articles. I particularly enjoyed some of the more tongue in cheek definitions e.g. “System requirements: A poorly cobbled statement of techie talk that software developers use to lose sales” and “Idiot customers: Clients who don’t understand every aspect of your software immediately”. If you don’t know what active voice,  AIDA, astroturfing, cloaking, CPM, fast follower or purchase order mean, now is your chance to find out.

Interview with a cracker

Through an unforeseen series of events, I have ended up corresponding with a cracker known only to me by a Hotmail address and the  pseudonym “CrackZ”. It quickly became clear that he knew what he was talking about, but was motivated by curiosity rather than criminality. Obviously crackers are a more diverse group than the criminal masterminds and script kiddies of popular imagination. To my surprise he agreed to be interviewed for this blog and I jumped at the chance to find out a bit more about the shadowy world of cracking.

*** I realize this is an emotive subject, but please read the whole interview before posting anything in the comments. ***

What is your background? How did you get into cracking software?

I graduated in software engineering about 10 years ago and started out seriously cracking software in my first year at University. It was the first time I’d had access to a fast, unmetered Internet connection and my interest became collecting software and then breaking it; most of my associates never proceeded much beyond the downloading lots of free software stage. Prior to this I’d really only ever had a casual knowledge of the piracy scene from owning a Spectrum, Commodore 64 and then an Amiga. Think tapes and copy disks being swapped in the playground and you wouldn’t be far wrong ;-). The first PC experiences I can recall were studying some very early Phrozen Crew cracks and the Quox virus that someone gave to me on a disk.

Do you also write software? Is your day job in the IT industry?

Yes and yes.

What is the motivation for cracking software?

Motivation for cracking really seems to vary. For me I think its always been mainly about the intellectual challenge, studying code, or ‘breaking the minds of protection authors’ as one correspondent so eloquently put it. For many there is also the ‘social aspect’ of being amongst a like-minded group of individuals (see some of the interviews with former members of famous groups e.g. PWA, DOD if you want to understand how powerful a *pull* the social element can be). Then there are also those who simply enjoy getting software for free or those who do it simply for ‘kicks’. Contrary to the various anti-piracy associations propaganda, very few of those I’ve ever been associated with have been motivated financially. That’s not a justification of course, but it might help if most authors realised that the person who cracked their software is more likely a bored 16 year old Chinese male than a future terrorist.

Is cracking an individual activity or is it organized?

The answer is both, but that is an oversimplification. Most of my cracking has been pretty much a lone-wolf occupation, although there have been times I have worked with others on group projects, expensive CAD/CAM applications for example. One only has to look at the scene to see that there are plenty of organized groups out there and some of the group infrastructures I’ve seen would rival small corporations in their sophistication. A lot of authors are often quite surprised to find their software on the cracking scene radar.

What is your attitude to intellectual property? Do you release cracks and keygens ‘into the wild’? What do you think of those that do?

I’ve actually gone full circle here; in my early years IP literally meant absolutely nothing to me, the value of the software didn’t matter and authors were inconsequential. I would happily release cracks and key generators under a variety of nicknames and scene groups and I didn’t lie awake at night thinking about the damage I might be causing to someone’s livelihood. Currently, I’m 100% in the ethical category (you can debate that). I haven’t been able to curb my interest in protection code, but have managed to channel my interest towards simply contacting the authors when I have broken their code. Sometimes I’ll even offer a little helpful advice; though I’m afraid that’s probably the ‘moral best’ I’m ever going to be. I don’t support those who release cracks and key generators. I’ve heard enough from authors to know how damaging it can be, but anyone who has ever experienced the scene can probably understand why it still happens and will continue.

I can understand the attraction of cracking as an intellectual challenge. But why do some crackers then release the cracks? What do they gain?

Respect amongst their peers and the ‘scene’ at large and dubious notoriety. I’ve known some who did so in order to get a job.

When people release cracks do they think about the effect they are having on the livelihoods of the people who write the software? Do they care?

My guess would be ‘probably not’ on both counts. I think this changes with age though and many get more considerate as they get older.

What is your opinion of people that add trojan horses and other malware to cracks?

I suppose I might be accused of some degree of hypocrisy ;-), but these really are the bottom-feeders and low-lifes of the world.

What types of software do you target?

Myself it has been pretty much exclusively Windows, with the occasional bit of *nix, but there is plenty of interest in virtually every platform out there, even groups dedicated solely to them. Nothing escapes attention these days.

What tools and techniques do you use for cracking?

My tools of choice are IDAPro (the best disassembler which also includes a debugger) and also a mixture of other debuggers depending on the target (e.g. OllyDbg, SoftICE, Syser and even WinDbg). And then there are other associated tools like a decent Hex Editor (Hiew, UltraEdit) and more specific utilities covering the various cracking fields. There are quite a few books out there on the subject of reverse engineering that list virtually all of the tools in most crackers toolsets.

How long does it take you to crack the protection on an average piece of software?

On average shareware protections I’d usually be able to break them in a matter of hours, although understanding their intricacies might take a good deal longer. I’ve had some fall in minutes and others take full days of analysis. Perhaps as a small comfort, I’d say that each year the average protection seems to be getting a little more difficult to crack.

How long are you prepared to spend to try to crack a piece of software? Do you ever come across software you can’t crack?

In the past I’d be prepared to invest most of the hours in a day in one piece of software. I’d make literally pages of notes on paper and in the disassembler, naming functions, variables, structures, commenting fields etc. For many crackers time is a commodity they have in spades. I’ve met several targets that I couldn’t crack and several I simply didn’t bother completing because others had beaten me to it. Of the few I couldn’t break I did understand the reasons why (some need specific server-side responses). In some cases, several years later, users sent me the necessary hardware / information to enable me to break those targets.

Are applications protected by commercial anti-piracy software harder to crack than applications with home grown protection?

This is a tricky one; commercial anti-piracy software is pretty much exclusively written by ex-members of the cracking community and by default is protected better than many authors own creations. However, once a protector gains what I’d best term as a ‘critical usage mass’, its attractiveness as a target becomes that much greater. Experienced crackers are drawn to it almost like moths to a flame, since breaking an entire ‘protector’ can yield a lot of targets. Some of the very best and worst of the protections I’ve seen have been of the home grown variety. A lot of authors (IMHO rightly) conclude that improving the attractiveness of their software to potential customers is a much more productive use of their time than writing the ultimate copy protection.

Is software that phones home harder to crack?

Software that simply ‘phones home’ presents more of a nuisance than any real barrier to cracking. I’ve seen some that implement server license checking (mIRC is a widely available example) and it hasn’t stopped the cracks appearing. Several other targets have required decryption keys to be fetched from the server and these also haven’t presented any real problem. Its worth remembering that a cracker will often have access to a legitimate license with which to perform his study. At some stage a true client/server protection model over the internet will be a real possibility (MS has some stuff already like this), where all of the code is actually executing on a server. This will most likely simply move the goalposts, but seeing as a lot of the software I have been asked to look into was leaked to me by company employees the server model might not be as secure as it suggests.

Do hardware solutions (e.g. dongles) make software significantly harder to crack?

Hardware keys and, more recently, smart cards do make software harder to crack, largely due to the fact there is usually an element of hardware encryption these devices perform that can’t be easily replicated without access to the original device. However, over the years, I’ve met literally hundreds of disgruntled end-users of these devices, many of whom have sent me their keys and risked their jobs just to be free of them. A few eastern European contacts of mine sell ‘dongle emulating’ solutions and have archives of probably more than 10,000 individual dongles.

Is any method of securing software 100% secure?

Absolutely not, and anyone who tells you otherwise is lying.

What are the commonest mistakes software developers make related to security?

In no particular order:

  1. Depending on commercial protection schemes for security.
  2. Directly comparing the license string entered with the correct one.
  3. Not using some sort of encryption/obfuscation (XOR isn’t *good* encryption).
  4. Using a single simplistic registration function that is easy to isolate.
  5. Displaying message boxes with helpful strings sending the cracker straight to the protection code.
  6. Not integrity checking against patching.
  7. Not updating the software once a crack is discovered in the wild.

Do you think software vendors should spend more time making their software harder to crack?

I’m pragmatic; I’d advise all software authors to invest time in a *reasonable* copy protection and keep abreast of whether cracks are out there, educating your potential customers can be worthwhile. Make your protection something custom and use some imagination by all means, but make it proportional to what you are protecting. There isn’t much point having a £million lock on a £100 product, you simply can’t defeat every single cracker out there.

Can you expand on “educating your customers can be worthwhile”?

‘Educating’ might be the wrong word, but appealing to peoples conscience can be quite effective. A few software authors have ‘crack catcher pages’ for the search engines that say things like “I work 60hrs per day on my software, please support me if you want me to continue adding features” etc. Its also worth pointing out that there are plenty of con-merchants and dodgy sites out there selling cracks that often do contain trojans/viruses. One could also appeal to the fact that ‘time is money’ for a lot of potential software buyers, so why invest several hours of their life looking for a crack if it’s more cost effective to buy?

Can you recommend any online resources for authors wanting to know how they can protect their software better?

There are several books and web resources on anti-debugging & protection advice, Google will find them ;-). There are also several mainstream books, Pavol Cerven’s springs to mind.

Success is always one feature away

In my consulting and various other dealings with aspiring microISVs, I notice certain recurring patterns. One of the most common is the belief that it is just one missing feature that is holding back a product from the commercial success it deserves. As soon as that feature is coded the sales are going to come pouring in! When they don’t, then maybe it was that other missing feature that our competitor has. It is a horizon that keeps receding until you run out of money or enthusiasm. But, in my experience, poor sales are almost always due to insufficient marketing. A fact that is borne out by these 13 case studies. It doesn’t matter how great your software is if no-one know about it, or if you can’t persuade them to try it when they do find out about it.

It isn’t surprising that microISVs fixate on features. MicroISVs tend to come from a programming background and learn marketing  on the job (I have yet to meet a microISV who started off in marketing and taught themself programming). Features and coding are what we like to do best and it feels like ‘real work’. But all too often the warm embrace of an IDE is just an excuse to stay in our comfort zone. Of course, features are important. No features = no product. But, if you have got low traffic to your website and/or you are doing a lousy job of communicating with people that arrive at your site, then adding more features really isn’t going to help much. If you are in a hole, stop digging. Successful marketing is about being different from your competitors. You can even make a virtue of your lack of features. If you are competing against more feature-rich competitors, then emphasize the simplicity and ease-of-use of your product instead. It certainly seems to work for 37Signals.

Marketing can seem like a very alien discipline for someone from a programming background. But you can learn it like any other skill. There is loads of great information out there, for example Eric Sink’s marketing for geeks. Also, some elements of online marketing are actually quite technical with plenty of opportunites for number crunching. Analytics, A/B testing and Adwords will give you more data than you know what to do with. This can give programmers a considerable advantage over people from a more traditional marketing background, many of whom don’t seem to be able to handle anything more complicated than a 2×2 matrix. You don’t have to be a marketing genius, you just need to be better than your competitors (in the same way that you don’t need to be able to run faster than a lion to survive a lion attack, you just need to be able to run faster than the next guy). Given that your competitors are likely to be other programmers (who are probably also not doing enough marketing) or people from a marketing background (who don’t really understand software and are probably more interested in long lunches) that may not be as hard as you think.