Boosting Software Sales

Software publishers learn more about retail customers through grass-roots market research and dealer councils.

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Last June, a man in his early thirties, wearing a gray, summer-weight suit, entered the McGraw-Hill Book Store on Avenue of the Americas in New York City. The man quickly scanned the 500 or so software packages against the walls of the bookstore's computer department, then turned to the salesman.

"I own an Apple IIe, and I'm looking for software to generate a mailing list for my business," said the customer.

The salesman presented him with two choices: either Software Publishing Corp.'s PFS File, a software package for $125; or Apple Computer Inc.'s Quick File for $100. He added that PFS could handle more names but that Quick was easiertouse.

When Fred Gibbons left the bookstore that afternoon, he had mixed feelings. Gibbons, the 33-year-old founder and chief executive officer of Software Publishing, was pleased that the bookstore carried his word processing software and that the salesman recommended it. However, he was disturbed that Apple's product was considered easier to use, since ease of use was PFS's major selling point. Gibbons also guessed that none of his sales representatives had visited the store to convince salespeople of that message.

Such gumshoe market research is a matter of course for Gibbons, who visits local dealers whenever he is away from his Mountain View, Calif., office. Sometimes he identifies himself to dealers; other times he remains anonymous. But always he wants to find out what is going on in retail stores and in dealers' minds. Do they stock his product? Is it visible? Has a rep been in to train the dealer's salespeople? Do the salespeople recommend the product? If not, what do they recommend?

Getting a dealer's recommendation has grown increasingly difficult for software publishers. In 1980, Gibbons explains, "building a dealer base was simple if you had a quality product." But times have changed. Gibbons claims that since then, the tremendous infusion of venture capital into software start-ups has created a "glut of software products that has raised the ante for doing business." That situation translates into multimillion-dollar levels of spending for advertising and dealer promotion.

This year, Software Publishing is spending at the rate of 13% of its gross sales on advertising -- approximately $1 million -- and more than 25% of sales will be plowed back into other types of marketing. Most of those marketing dollars are spent catering to dealers through dealer training and support programs, special promotions, demonstration and trial-size disks, advertising, and "spiffs" -- contests to entice dealers' salespeople to try out and sell more of the company's products. For example, 1 out of 10 of Software Publishing's demonstration disks carries a message alerting a lucky salesperson that he or she has just won $100. The company's rationale: To win the prize, the salespeople must use the product. Once they have mastered it, they are in a better position to sell it to the customers.

Wooing dealers has become, in fact, as important to software publishers as the products themselves. Three years ago, most companies touted their technological edge; today they strain to become specialists in retail and consumer marketing Gibbons's staff now includes former retail imerchandisers, as well as one-time account executives for Clorox bleach, Hawaiian Punch, and Hidden Valley Ranch salad dressing.

While Software Publishing has so far relied primarily on old-fashioned, shoe-leather market research to keep abreast of what is going on in retail stores, other companies have chosen a more formal approach and appointed dealer advisory councils. While such councils have long been successfully used in other industries, the fledgling software industry is just beginning to recognize dealer groups as a valuable way to learn about the retail marketplace and to strengthen dealer relations.

One of the first companies to form a dealer advisory council was Microsoft Corp. of Bellevue, Wash. Last spring, the $70-million company, which publishes more than 20 software products, including the best-selling Multiplan, laid out the red carpet for its newly formed dealer group during Comdex, an industry trade show. From across the country, two dozen dealers, representing retail chains and independent companies, came to be wined and dined in an antebellum estate outside Atlanta with top executives from Microsoft.

The bill for the dinner topped $25,000. But Jim Spillars, vice-president of Microsoft's retail operations, says it was a small price to pay for the "tremendous amount of information that could be transmitted back to us from our dealer channel." It is the dealers, he says, "who have their fin gers on the pulse of the customers."

Keeping track of what the consumer is doing is not unlike a squash player trying to figure out which wall the ball will bounce off next. The customer is "fickle," says Rick Inatome, president of Microsoft's dealer council and owner of Inacomp, which owns Computer Mart, a retail chain of 13 stores based in Troy, Mich. Software can sell briskly for several weeks then languish on store shelves a month later. Unless a company hears quickly about a drop in demand, it continues to assume that it has a hot product. Then, says Inatome, inventory builds, distributors get fewer orders, and the company learns the truth. "When you have that lag in reaction time," Inatome notes, "it can cause financial hardships for the retailer, the distributor, and the manufacturer."

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