Attn Software Companies: How to increase your revenue and customer base

[sphelan]

Attn Software Companies: How to increase your revenue and customer base

Firstly, let me say as a preamble that I am not an economics expert and that below is a layman's take on things!

Basically, I am a very happy customer of IK Multimedia. I've taken part (like others here on these forums) in the Group Mix Promotion this summer and have received to date 4 free plugs on the purchase of one T-RackS Single at a cost of €74.99. I feel I am a valued customer, especially as the original offer was 4 for the price of 1 and was then increased to 6 for 1 due to the phenomenal reaction. I feel I have been taken well care of by this music software company.

And this has put me thinking.

Companies are about making money. Naturally. But they also want to develop a solid customer base. And we are in times of economic crisis. So what a great way of creating economic returns for this quarter and enticing customers who otherwise may not have bought any of the products on offer. It's a model that other companies could pay heed to!

A quick flick of the calculator tells me that. at the time of writing, with the 1733 customers who have paid the €74.99 for a T-RackS Single, this has generated €129,957.67 of revenue for IK Multimedia.

If/when the target 2000 customers have purchases, the yield will be just short of €150,000 (€149,980).

I don't work in their financial department so I don't know what the cost of the promotion has been but I am sure they are quite happy with the returns! This looks like it has been a very effective campaign to create revenue.

So, what about other companies or even other IK Multimedia products?

What's to learn from this promotion?

How much revenue would the likes of Avid generate with a similar offer on AIR instruments? Or Native Instruments? Imagine buying Absynth, for example, and getting the likes of FM8 or Massive free. Or Rob Papen's Blue and Predator on buying Albino?

Yes, there are offers out there including those which combine some of these products in a pack. But look at this promotion and note the public reaction.

Software companies if you keep an eye on these forums, isn't there a lesson to be learnt here from this model?

Wouldn't it provide a welcome revenue boost and increase your customer base?

Wouldn't these customers be more likely to buy from you in the future?

[Hides-His-Eyes]

I don't know if any of you are familiar with Steam, the digital games distribution system, but they have ZERO 'per unit' cost (their DL servers are sponsored by nvidia) so could charge whatever they like for things. And in figures they published, in general, ANY short term promotion which cut a good product to half or quarter price led to far more than double or quadruple the sales; I think in one instance, something went on sale for 1/5 of the RRP (perhaps half or a third of what it would have cost before the promotion) and went on to sell thirty times as many copies for the duration of the promotion.

We don't all own studios, and we certaintly can't all afford to spend a lot on one or two plugins, however good they are. Getting less money out of people who can't afford it is better than getting no money.

What i wouldn't give to be able to buy an old version of FL studio or ableton or kontakt for cheap! The big studios would need all the new features and still upgrade, and your old tech is still perfectly useful to us home users.

[sureno]

Dev's just need to put the sureno seal of approval on their product, they will sell millions

[tehlord]

Originally Posted by sureno

Dev's just need to put the sureno seal of approval on their product, they will sell millions

Rob, Rob is that you?

[sphelan]

As per usual, it didn't take long to denigrate this thread!

[terminal3]

Indeed... and it's too bad because you've started us off with some good talking points.

I'd like to add that not all is 100% rosy in IK-land when it comes to customer satisfaction.

First - note that you'll never be able to transfer or sell your T-Racks plug-ins from this promo (they don't allow the transfer of any products obtained "free" for any reason).

Second, even when you ARE allowed to transfer a product it's pretty expensive, £40-ish after VAT I think? Which means with many products the transfer fee is worth as much or more than the software itself.

Third, there's a horrific authorisation problem with OSX right now on many of their products - they've only JUST gotten T-Racks and Amplitube X-Gear sorted, but every other plug-in "forgets" that it's been authorised and you have to request a new code and continue re-authorising everytime you reload your DAW - it will flip between two Digital IDs and aggravate the h*ll out of you. In any case, I know they're working on this, but I was really hoping for a faster fix. I've had to drop Ampeg SVX and CSR from a mix I was working on because I can't keep screwing around wasting time with it.
Interestingly, using a dongle would prevent this from occurring, but when IK did introduce dongles (Syncrosoft) a few years back there was customer outrage so they dropped them pretty promptly and went back to disk-based authorisation....

Fourth, they announced a product in 2004 (Studiophonik: read here - http://www.macmusic.org/news/view.php/lang/en/id/1645/) - that still has yet to see the light of day.

So, with all the hoopla surrounding the big group buy and the new mystery product they're announcing on Thursday, a lot of the darker details get overlooked.

Anyway, these are IK-specific gripes but there are lessons to be learned from all devs. Have a fair license transfer policy even if it means dealing with them case-by-case - that way you can weed out the profiteers. Consider lowering the fee to something a little more reasonable. iLok.com charges $25, that seems a BIT high still but I can tolerate it.

Don't announce vapourware. That just p*sses off end-users.

Stay on top of bugfixes and don't try to distract users with a fancy-ass teaser for a new product instead when they go to your website looking for a patch.

Price is a big deal in these modern, difficult times, but it's not everything!

[sphelan]

Top points there T3. I don't know about any of that as I am a new IK customer.

I was concentrating on the sales pitch and what I believe is the power of such a business model. Obviously, after-sales service is important with any product and customers want to know they have backup after parting with their cash.

As you say IK are dealing with some of that mentioned. I, as everyone else, hope for all users it gets sorted out sooner rather than later. I don't see myself having to worry about license transfers as I keep what I buy whether I continue using it or not.

Anyway, for me the relatively small outlay of cash has been well worth it and I'd like to see other companies taking a similar stance in regard to promoting their software.

[I_Am_Bic_Pentameter]

They did better than I expected. It's a difficult thing. Many have half the plug-ins on offer and they were only charging the difference that's normally there between the standard and deluxe. I do wonder how many people will not really use them. Anyway, with the deal being upped a bit then that's made it sweeter. One or two are worth the money so it's no bad thing. They get people all over their site during this promo. I think they won hands down with this one but the consumer hasn't lost either.

Speaking of transfers, I do have a thing with Cakewalk about older versions. Cakewalk don't allow re-selling. To me, there's money to be made by them and their customers and then to future upgrade customers. That aside, if you update, as lots do, even taking into account the cheaper upgrade price, you will, after a few versions, end up with one expensive DAW. Now things do get added but they bundled a major 'under the hood' improvement, which many users would want, with a lot of extra padding too. That stinks and I've told them so, many times. In fact, I point out this shortcoming at every opportunity.

I do stress on here that when sales are on - it's the time to buy. Don't wait. Not everything comes around again. The only thing to remember is to buy what you need and not because it's cheap or because Mr Big on a forum says it's a must have. Do always listen to their advice though as they know and it takes the guess work out of things.

[TrevCircleStudios]

Originally Posted by Hides-His-Eyes

[snip] in general, ANY short term promotion which cut a good product to half or quarter price led to far more than double or quadruple the sales;

Let's look at the company side of this for a moment. If they half the price and get double the customers they made exactly... no profit. What about quartering the price and quadrupling the sales? same again. No extra profit. Companies are mindful of this correlation. Occasionally however, the benefits of increasing brand awareness can outweigh short term profitability. What's the bet that IK's plan is that they use this offer to get more people to try their plugins over stock ones. Then, when their new line of products is released, there is better brand awareness and more registered users to receive mailings ...

[sureno]

Originally Posted by TrevCircleStudios

Let's look at the company side of this for a moment. If they half the price and get double the customers they made exactly... no profit. What about quartering the price and quadrupling the sales? same again. No extra profit. Companies are mindful of this correlation. Occasionally however, the benefits of increasing brand awareness can outweigh short term profitability. What's the bet that IK's plan is that they use this offer to get more people to try their plugins over stock ones. Then, when their new line of products is released, there is better brand awareness and more registered users to receive mailings ...

who's the daddy well said Trev

[sphelan]

Originally Posted by TrevCircleStudios

Let's look at the company side of this for a moment. If they half the price and get double the customers they made exactly... no profit. What about quartering the price and quadrupling the sales? same again. No extra profit. Companies are mindful of this correlation. Occasionally however, the benefits of increasing brand awareness can outweigh short term profitability. What's the bet that IK's plan is that they use this offer to get more people to try their plugins over stock ones. Then, when their new line of products is released, there is better brand awareness and more registered users to receive mailings ...

Yes, but if these were customers who wouldn't have bought anything? And it's not like they've had to invest in R&D or anything as the product is just sitting waiting to be downloaded. No physical product. No major outlay.

[TrevCircleStudios]

Originally Posted by sphelan

Yes, but if these were customers who wouldn't have bought anything? And it's not like they've had to invest in R&D or anything as the product is just sitting waiting to be downloaded. No physical product. No major outlay.

As I said, if they aren't making any more money because it is discounted then it's a zero sum game for them. That means the gain must come somewhere else otherwise they have not profited in any way from the discount. Simple Adam Smith economics dear boy.

[Hides-His-Eyes]

If the product is good and 4 times as many people are using it, that's 4 times as many people that might come back next time they need something.

Even if it's not; who wouldn't rather have four times as many people using what they spend all day working on for the same financial gain?

[Dave Boulden]

Originally Posted by Hides-His-Eyes

Even if it's not; who wouldn't rather have four times as many people using what they spend all day working on for the same financial gain?

Someone who'd want 4 times as many people using it for MORE than the same financial gain. Business is "business".

Selling something cheaper can have the opposite effect and weaken the brand perception by making it seem a bit more like "budget" software... it's a fine balance.

[terminal3]

In this industry especially (and others!) if you sell 4 times as many units but only make the same amount of profit as if you hadn't, your support costs fly way up too. Now you have 4 times as many people who will potentially be looking for help/assistance/troubleshooting, but you never made any extra money in the first place to finance that part of your operation.

Contrary to what a lot of people think, the software biz is not one of 100% margins.