Software marketing is different from marketing traditional goods and services. Moreover, the software marketplace is dramatically different from even ten years ago, with new marketing behaviors, opportunities, channels, and challenges emerging.
Technology changes extremely fast
The pace of change and the scale of technological achievement in the IT and the software industry in particular can be staggering. These industries change faster than any other market sector. Although one may give an example of the fashion industry where things change every season, clothes are, well, clothes and the ideas for new designs and product life cycles for particular fashion items are mostly based on fashion, not technology (sure, with some exceptions). The short product life cycle of new kicks or a pullover is created artificially. New clothes don’t offer a radically new way of meeting customers needs. New technologies do. Software products are entirely based on technology advances.
The pace at which new software products emerge and then fade out becoming out of date by more modern underlying technology is faster than in any other industry. Amid various speculations that Moore’s law is already dead, for more than 50 years now, the famous principle has been valid:
"The amount of components storable on a given amount of silicon has roughly doubled every 18 months since the technology was invented, and will continue to do so."
The remarkable effect of the law is that every year and a half the processor power doubles at the same or lower cost. That is why new technology products are coming out at such a rapid pace. Moore’s law can be applied to disk space, storage density, RAM, network speed or other technologies. Even if the Moore’s Law has hit its upper limit, some technologies (based on molecular biology and nanotechnologies) could replace conventional semiconductors. At the end of the day semiconductors as technology has its lifecycle, but the progress goes on.
Another law says (Parkinson’s Law of Data):
"Data expands to fill the space available for storage."
In the beginning of 80s supercomputers had a maximum addressable memory of 640 KB. At that time, no one imagined application taking up that much memory. Today, 4GB of RAM is the standard for mass market laptops with 8GB recommended. Smartphones are now shipped with 4GB RAM and 128GB storage. Who could believe in that even a few years ago? The same rapid developments are true for other technologies.
Higher memory capacity, increasing performance and new technologies, such as new programming languages, libraries, and frameworks create new opportunities for software developers. Software developers are always pushing the limits of computer capability, urging computer makers to increase performance, thus creating a never-ending loop, ultimately making the software and technology life cycles short. The consequence of these short product life cycles is obvious: changing technologies change the market that renews itself approximately every one and a half years.
Software companies tend to be technology-driven, not solution-oriented
Because of the rapid development of technologies, software companies naturally focus on technologies themselves. However, technology should not be the goal. Just a small part of the market buys technology for technology’s sake as we will discover later. The absolute majority of a market buys solutions that solve real problems or satisfy wants and needs. Technology just makes the solution possible.
With the strong focus on technology and the imposed need to continually renew their products based on new technologies or updates of dependencies, software companies often forget why they are doing it in the first place. The goal should always be to create new market opportunities and offer better value than the competition.
Software developers are different from commercial people. I genuinely believe developers are the best problem solvers in the world and their bright ideas, creativity and passion help creating amazing solutions that change our daily lives. They think, talk and even look differently. They form their own communities where there is no place for suits, business etiquette, talks about financial results, etc. Quite often developers resist all money-related talks and considerations putting the importance of technology advances first. In some communities, it’s even believed that software must be free and open-source, rejecting and confronting anyone who thinks different and tries to sell anything. More often, than in any other industry, there is a wide gap between the ones that develop software and the sales guys. It is a marketing task to unite those different people within the same team or organization to reach the team/company goal and mission which is the reason for its existence.
From the way we communicate or transfer money and privacy and security solutions in large organizations to self-driving cars, trains and space vehicles, technology is everywhere, and it rules us. While it is understandable that software developers want to focus on technological advances and innovations, at the end of the day that’s not what sells a product. Selling products is about value, benefits, functionality and what it does for a customer. It is a marketing task to translate technology advantages into real solutions for a given group of potential customers.
The market buying behavior is different
There is a strange paradox noticeable in the software market. While the software industry produces a continuous stream of new and innovative products, the market shows a fundamentally conservative behavior. The market welcomes and asks for new solutions, but very few want to be the first to try them out. It is hard to reach a level of acceptance, but as soon this level is reached the masses will follow almost immediately.
There are a couple of reasons for this reluctance to be the first to accept new products or new technology. First of all, it is important to realize that software products are often just a small part of a complex solution. Changing one element in the system might jeopardize the overall stability. For enterprises, software has become a critical element in the business processes, and the IT managers stick to the principle that the IT environment should not be touched as long as it works. The stability of the system is the key responsibility of the IT manager, making him or her very conservative. IT products in the consumer market cannot be seen as isolated products either. The interchangeability of data, compatibility and the connectivity with peripherals and other systems or software should not be disturbed, unless it brings proven benefits.
A second important reason for the reluctance in the software market to be the first to buy new products is the fact that new software is often unreliable. Flawless software does not exist, it always comes with the host of various bugs, glitches and compatibility issues. The ‘time-to-market’ pressure, the attempt to be ahead of the competition often results in the release of products which are barely tested. When a new product hits the market, the first users of the product have to do without reliable product support. They are punished for being the first. There’s a marketing concept of the Chasm, coined and perfectly described by Geoffrey Moore in his “Crossing the Chasm” masterpiece. The concept suggests that all high-tech products have to cross the chasm between early adopters and the mainstream market. The cause of the chasm is the huge difference between the mindsets and core needs and wants of early adopters and mainstream buyers. Early adopters are actually willing to accept any inconveniences or hassles that can accompany being first to adopt a new product while the majority of the market requires stability and an utterly different set of benefits. The transition between these two markets can be rocky at best, with the majority of software products and firms never crossing the chasm. Many high-tech firms find it hard to abandon their “techie” roots and talk to the mainstream market in customer-friendly language and terms.
The software industry is still a wild west
Although software has changed the world and impacts our daily lives, the software industry is still relatively young and wild. New products and technologies emerge at an incredible pace and are tested in the market itself, without being based on customer demands or market study. However, the majority of people no longer just buy anything that comes out. They don’t want to jump from one solution to another or upgrade every other week (except techies). People are comparing benefits, and they demand solutions. It’s a marketing task to change the company’s focus from technology-driven to market-driven.
High competitive volatility
Competitive volatility refers to both intensity in the degree of change in the competitive landscape and uncertainty about competitors and their strategies. For instance, as different types of software or software based on different technologies begin to offer the same functionality - a situation known as convergence - new competition will be found in different product classes. Because new software when it’s released in the first public version often seems much less sophisticated than existing software available on the market, incumbent companies might underestimate these new competitors - or even disregard them - until it’s too late.
A key implication of competitive volatility for software companies is to avoid being myopic when it comes to evaluating competitive threats. Marketing myopia refers to the tendency of the company’s management to be narrow-minded in their views about their industry contexts and their business strategies. Companies suffer from three types of marketing myopia about sources of competition:
- “Our software (or underlying technology) is so new that we have no competition” - doesn’t accurately reflect the fact that customer needs are already being solved by other means.
- “New software product will not pose a large threat” - history shows many examples when young companies replace large incumbents easily, stealing their business in a matter of months.
- “That competitor is in a different industry” - It’s important to see the whole picture and understand that customer needs preexist everything else. Customer needs can be satisfied using different products and technologies that are not direct competitors. Remember famous saying popular among marketers?: “Railroads are not in the railroad business, they are in the transportation business.”
New channels and capabilities
The smartphones usage around the globe is growing, as well as the use of social media and other modern means of communication (Slack, WhatsApp, Telegram, Skype). With the rapid rise of e-commerce, internet on the go, we all experience digital transformation. Massive amounts of information and data about almost everything are now available to consumers and marketers alike. The old credo “information is power” is giving way to the new idea that “sharing information is power.” Consumers can use the Internet as an authoritative information and purchasing aid. From the home, office, or mobile phone, they can compare product prices and features, consult user reviews, and order goods online from anywhere in the world 24 hours a day. Because consumers and other constituents can, in fact, get almost any kind of company information, firms now realize that transparency in corporate words and actions is of paramount importance. Expanded information, communication, and mobility enable customers to make better choices and share their preferences and opinions with others around the world. Modern software companies involve consumers in product development with public bug trackers, where people can file their problems and feature requests, and also publicly discuss them. Early access, beta or private preview programs when a company offers the next version of its product or an entirely new product for review to a limited number of users. The product documentation and product-related content, which are crucial for software products are also affected by the new ways of interactions with consumers. Digital Ocean lets their users generate tons of useful content on their platform. They even pay those who contribute.
Social media is an explosive worldwide phenomenon. Companies now offer support and consulting on SM. Consumers can tap into social media to share opinions and express loyalty. Personal connections and user-generated content thrive on social media. Digital communication and distribution channels are prevailing for marketing software products. It’s tough to find examples of software which uses offline channels. So it’s vital for software marketers to master digital marketing and understand the implications of the digital transformation that is currently still on-going. New digital channels empower not only consumers but marketers as well. Marketers can:
- use the Internet as a powerful information and sales channel.
- collect fuller and richer information about markets, customers, prospects, and competitors. Marketers can conduct marketing research by using the Internet to arrange focus groups, send out questionnaires, and gather primary data in many ways.
- reach consumers quickly and efficiently via social media and mobile marketing, sending targeted ads, coupons, and information.
- improve purchasing, recruiting, training, and internal and external communications.
I hope this article helped you get an idea of what sets marketing software products apart from marketing traditional goods and services.