by Anna O’Connell and Doug Houseman
Summer 1989 – Page 105
“The rollout is the product’s transition from vapor to reality.”
“One program shipped recently was written on Mac II’s and tested only on Pluses. The result was the makers didn’t know that the program didn’t run on the SE.”
“The size of your market and the status of your competition will determine sales for your product. If the competition is well established and has a full-featured product, you may be able to win a 10 to 15 percent market share on price alone.”
The success or failure of a product depends on its rollout, which is without question the most complex maneuver a company will ever perform. A rollout includes finishing the product, placing it for reviews, following up with reviewers, placing advertisements, planning for trade shows, training dealers, setting up distribution channels, getting the product to Apple field offices, building a demo for sales people, and so forth. In short, the rollout is the product’s transition from vapor to reality.
On average, a marketing specialist will work full time on a rollout three months prior to its beginning and six months after it starts. Advertising and review plans are finished first, and usually the plans developed during the business-plan writing stage are significantly revised. The product starts shipping at about six months into this cycle.
Failure to ship the product on time can seriously damage the company and its future. If the product is not updated with a bug fix before the reviews are final, reviews will show problems with your product in a glaring spotlight
Timing is everything
During a rollout, one person has to coordinate all your company’s efforts, and she must have up to date information on all aspects of the product.
You should prepare some documents in advance to reduce the chaos a rollout produces. These can be prepared in advance, updated regularly, and used by everyone concerned. They’ll take time, but the time they save during the rollout is amazing. They are:
- A marketing plan, to detail how the product should be marketed, including the distribution you expect and the revenue that the product should produce.
- An advertising plan, to detail target locations for advertising and the number of times each ad will be placed, and to provide an advertising budget.
- A review placement plan. For small companies, reviews can be the only way the product will ever be noticed by the public.
- A distribution and sales plan, to expand on the marketing plan by providing the names of distributors, the quantities that you want them to take, the discounts you will provide them and the sales regions you plan to target.
The marketing plan is the cornerstone of product development. If even your marketing specialist thinks it won’t sell, there is no reason to create the product or the company. A product must be commercially viable or the company supporting it will become a charity operation.
The marketing plan should focus on the product’s target market. What it is about the product that will excite that market? If your product addresses more than one segment of the market, keep track of the features for each segment separately. This allows the program manager to determine whether or not the product should diverge into two separate products.
Look carefully at your target market, since both its size and price sensitivity are very important to the marketing plan. (A small market with a low sensitivity to price is a good target for a high margin, low volume product. This is not the case for a larger, more price sensitive segment.)
The size of your market and the status of your competition will determine sales for your product. If the competition is well established and has a full-featured product, you may be able to win a 10 to 15 percent market share on price alone. If the competition is not established, or their product is missing significant features, you may be able to win up to 50 percent of the market by slightly undercutting their price .
Plan for a response to your product’s introduction from the competition. It will happen, and usually it will happen swiftly.
These questions are basic to your marketing plan:
- Who and how many are your potential buyers?
- What features should your product have?
- Who is your competition?
- What price should you set?
Your marketing plan can take weeks to develop. Do a piece at a time as you get the needed information. Remember, this plan will focus your development efforts. Refer to it every time a programmer asks, “Is that really necessary?”
The price and features sections of your marketing plan should be developed from focus groups you identify as early champions of your product. Members of your focus groups may be doctors in family practice or drafting specialists, or even government documentation specialists. Use these focus groups to draw out the important features of the product, the layout of the screens, the grouping of the menus, the proper language for the dialogue boxes and other significant features. Feed this back into the marketing plan, and from the plan to the program designers.
Your marketing plan should also focus on the type of beta testers you require. In short, it should contain all the good ideas about what you are trying to do, without actually specifying the product. It should be started before the actual business plan or the product specification.
Part of the information for your advertising plan will be derived from the marketing plan. That information will include the advertising budget (as a percent of projected sales), target audiences, type of advertising needed to reach your target market, and the quality they will expect from that advertising.
From this information, break down the advertising budget by publication, direct mail, catalog and other media. This document will include a budget for talking to User Groups and other associations in your targeted group, and it will look at the frequency of ad placement and direct mail.
The advertising plan must lay out a consistent theme. It should specify in-house tasks, and tasks to be farmed out to advertising agencies or mail houses. In most cases, farming out ad design and mail list development pays big dividends for small companies. Farming out the actual sending of direct mail may also make sense, depending on the availability of cheap clerical staff in your area. In short, the advertising plan should lay out your whole campaign. Again, it is a document that should be used daily, revised weekly and referred to often.
Trade shows are one of the first components of an advertising campaign. Macworld Expo, the Macintosh Business Forums and other trade shows make up this category. An average booth, 10 feet by 10 feet, fully outfitted and staffed, may cost your company in excess of $50,000 by the time you add up hotel and airfare and space and equipment and lost work. The $22 per square foot you pay for the floor space is just the tip of a very hefty iceberg. Sending a single person to a show costs about $4000 including airfare. Lights and electricity will cost another $500 or so. Carpet is an extra cost, as are tables and drapes and anything at all that you want in your booth. Design and construction of a booth like the one WingZ uses can cost over $100,000. A day laborer to do set-up and tear-down will run about $400 a day, and the unions usually will not let you do it yourself. Shows are expensive, but most companies think they are worth it, and that is why there are now three Macworld shows each year.
The next area you’ll tackle is that of computer magazines. Unless your audience is a highly specialized group with its own publications, you’ll end up advertising in two or three computer magazines, at least. Though the editorial and advertising departments at these publications are separate, many magazines respond better to review requests if you’re an advertiser. This is not the official policy of any magazine, but it is the reality for many of them. The number of products available for review in almost every category allows the magazine to pick and choose which products to cover.
Advertising in the thumbnail sections at the end of the magazine is OK, but won’t return your investment as effectively as the more costly “real” ads. For instance, an ad in MacWorld Magazine can exceed $20,000 for a single placement of a full color ad. The cost can also be under $2000 an issue for black and white in a size smaller then one-fourth of a page. MacWorld is the most expensive of the Macintosh magazines, but has the highest circulation in the market. (You pay for the ad in proportion to the circulation of the magazine.) No matter what your ad agency may tell you, radio and television ads just do not work for computer software. The market is too fragmented to reach at a reasonable cost.
If your market is a narrow, vertical market with an association, direct mail will get you the most play for your dollar. Direct mail to a moderately large target group costs about $1 per piece mailed, including postage, production, printing and mailing list rental fees. Shotgunning a direct mail piece to every Macintosh owner (or some other not-very-selective group) will result in a lower cost per piece, but it will also cost you over $250,000 each time. Buying a card in the MacUser card deck can be profitable, but just barely. Most real users of software throw the decks away unopened because they receive two or three decks each week.
If you are selling to lawyers who specialize in computer law or doctors who specialize in oncology, you have well defined lists to work from. Typically a Value Added Reseller (VAR) offering a total hardware and software solution does better in these markets then a company offering a software package only. Perhaps you should hook up with an experienced VAR or consider becoming one if your market is this focused.
On balance, direct mail to end users does not offer any real advantages. Nor does direct mail to the Apple-supplied list of user groups, which has not been verified in several years. This fact, combined with the volume of mail that user groups receive, yields a very high rate of File 13 deposits.
Direct mail to dealers requires a slick, full color ad listing reasons for the dealer to use your product. This would have to include things like spiffs (direct payments to the sales person who sold your product — they’re legal). It would also include special two-for-one pricing on the product, usually billed as “one for show and one to go.” These offers will interest the dealer in selling your product, but neither will get the end user to actually buy your product, and both cost you some money. Direct mail can be both a friend and a foe; use it with care.
You will also have to advertise for distributors, unless you want to sell your product directly. If you do sell directly, be ready to call about 2000 dealers each week for a few months. At 120 calls per day per person, you will have to hire a couple of people to do nothing but cold call dealers. Cold calls result in about 90 percent “no thanks” and 10 percent “send me more information, please.” Few cold calls result in actual sales.
Distributors come in all shapes and sizes, from Micro D and Softsel to Rhino and Americal. They range in sales from hundreds of millions of dollars a year to a million or two. The areas they cover range from a couple of states to international scope. You have to decide if one large distributor will give your product the marketing edge you need, like Claris did with MicroD, or if you need to sign a few more up. In any case, you have to get the distributors to sell your product — which usually means making a deal sweet enough for the distributors that you see only 35 percent retail price of your product.
A lot of thinking and planning must go into your advertising strategy. Advertising usually generates more revenue than it expends, but if you advertise too much you will end up broke. The key thing to remember about advertising is this: if the end user is asking the dealer for your product, the dealer will be calling you.
When you put together your ad budget, emphasize good design and production for your ads. Most Macintosh users are graphically very literate. (It’s hard not to be with articles on color separation, font selection, and layout in almost every Mac publication.) If your ads are poorly done or amateurish, you will end up with that kind of reputation in the market.
The most effective advertising is done for you by others, i.e. endorsements or reviews. Contrary to what you might think, good reviews don’t just happen. They are planned. Most review editors are extremely busy people. They have a hard enough time deciding which items to review in which issue, assigning products to impartial reviewers, and actually editing copy. If you want reviews that reflect the good features you have built into your product, make it easy for the editor and the reviewer to find them. In other words, plan your reviews. Be familiar with the type of review printed by each publication.
The plan should detail which publications you want reviews in, when you want the reviews to show up, reviewers you respect at each magazine, what you want out of the reviews, and the lead times for each publication. Reviews commonly include a standalone piece on a newly announced product, a brief mention of an upgrade or a narrowly focused product, or side-by-side comparisons with the competition.
Flesh out your plan by going through the mastheads of the various magazines for phone numbers, names of review editors, etc. Make contact with these people early and learn the policies of each publication. This will be critical in deciding which magazines you invite to beta test your products, and which see only the finished products. Put beta testing magazines under non-disclosure by having an officer of the publishing company sign the non-disclosure statement. This should help ensure that the competition does not find out about the features of your product early and blow your competitive advantage. If your product is in beta at a magazine, be ready to spend a few hours a day on the phone with the reviewers.
All this information should help you determine whether to withhold a finished product from the market to allow the reviews to appear close to release, or whether your reviews can be placed so as to correspond with the initially planned shipping dates. The importance of this cannot be over stressed. Reviews are your most potent sales tool, and they will make or kill your product. You can screw up the rest of the rollout and still have a successful product if your reviews are good. If your reviews are bad, you might be able to overcome them with an unusually good advertising and sales campaign. It is almost as bad, and is in some cases worse, to have no reviews than to have bad reviews.
Now let’s discuss the elements of the actual rollout. The first is the date the product is really going to be ready. “Ready” means the product and the manuals and the packaging are all available to be combined and shipped.
This is a key element of the rollout. If your ads say people can buy your product from a dealer and they appear three months before you ship, your credibility is completely out the window. Most publications require three to four month lead times for ads, so you need to know when your product actually will ship.
One way to be sure of accomplishing this is to finish the product before you start the rollout, in which case the product will ship about four months after you finished it. This is an extremely reliable practice for maintaining your credibility in the market. It is also quite expensive. Very few companies that can afford to sit on a finished product that long.
Allow at least eight weeks for testing and bug fixes from the time the programmers say the product will be finished until you actually plan to ship it, longer if the program is complex. Test the program on all the machines that it will be advertised as running on. One program shipped recently was written on Mac II’s and tested only on Pluses. The result was the makers didn’t know that the program didn’t run on the SE. Also be aware that there are two kinds of Mac Plus computers; those that shipped before the SE and the II and the newer ones available since. The old ones have the Apple beige case that the 512 and the 128 also used. And please, if you need a hard disk for the program to run well, say in your ads that one is required. That way you’ll cut your “I have two floppy drives and. . .” technical support problems out at the beginning. If the program will be advertised as able to run from floppies, test it that way.
Now that you know when the product is going to be ready to ship, how about the manual? If the manual has graphics and a color cover, allow four to five weeks to get the color and galleys right before shipping. Also plan for a good tech writer to average about three pages a day of finished copy. If you pay overtime, you can get about five pages of usable copy a day. If the writer tells you that the manual will be 50 pages when finished, add 50 percent to that for the total size of the manual. The writer will take at least a week to come up to speed on the program. You should plan to lose at least two programmer days to bring him or her along. Also plan on having the program revised by the programmers based on the input of the tech writer. In all, double your uninformed estimate for the manual and you will be in the ball park.
Program and manual are done. OK! Let’s ship it! But what about a box and cover art? Cover art is not cheap, and it takes a few weeks to get a good piece of art that will photograph correctly, and a few more to turn that into printing plates. Figure about eight weeks at a minimum to get a box, and you will have to pay some rush charges to get even that. Boxes are big business; witness the box for 4th Dimension or dBase IV.
The box has to look good on the dealer’s shelf and in your ads. It must look like the product that is in the box. If the product is an adventure game, give it a science fiction type cover. A database should look imposing and powerful. A graphics program may have a box that looks like it was designed by Paul Rand, who recently designed the NeXT cube symbol, or Clement Mok, designer of tasty Macintosh packaging. Like the advertising, the box will have to sell your product.
Once you have a handle on shipping dates, go after the reviewers. You selected the reviewers you want in your Review Plan and you’ve talked to editors about non-disclosure and beta testing policies. For beta testing magazines, get the non-disclosures out and get them back signed. Send a person to the magazine to install and train people on the product. If you merely send them a copy in the mail, you will end up with an uninformed report on the product. The developer must show the reviewer key points and features of the product. If you don’t, you will almost certainly be rewarded with an article that completely ignores the best points of your product while harping on your products’ few weaknesses. Remember that reviewers, like programmers, are busy people. You need to kick start the review process whenever possible. If you fail, the reviewer will get started whenever there is time. After all, your product is not normally scheduled for a review date until the reviewer reports that it is going to be a released product.
Stay in touch with the reviewers, see them at shows and call them at least once a week to get feedback on the product. Use this feedback to make changes in the product (if you haven’t completely frozen the version) and get that new copy to the reviewer ASAP. Reviewers need to feel that their input is valuable. Reviewers are human too, and they like to make suggestions that are actually used in the product. Don’t blindly abandon your product specifications, but if you can use a reviewer’s suggestion, do so. Make sure that you send the update to the reviewer.
Ads must be designed at least a month before placement, and magazine lead times mean ads are placed four to six months before they first appear. This means ads may become very outdated by the time they do appear. If your box cover will appear in your first ad, that box must be finished six months or more before your shipping date. If you use one, your design agency needs to be on board a month or two before you first need their services (for either packaging or ad design).
A big agency may give you access to some very good talent, but if you are placing only a single ad in a single magazine each month, look for a smaller one, where your business is welcome and you’re treated like your business counts.
Start looking for that agency nine months before you ship. The search will take a month of phone calls and portfolio reviews. Ask the agency to think of a theme for your advertising and to show it to you. The agency that gives you the best presentation on your product is the one you want to deal with further. See some of the work they’ve already done for other clients. If they don’t have any, stop the presses and go elsewhere. If all they have done is TV or radio ads, look elsewhere. If they’ve never done computer advertising, check their knowledge of the market in depth. The agency is going to make recommendations on ads that will either make or break your product. Give this decision all the attention it requires. You are picking a partner in the success or failure of your company.
Plan the ads carefully. The agency can be helpful in the design of the box and in the logo for your company (if you don’t already have an appropriate logo). Business card design and company colors are also within the purview of a good design agency. Good agencies aren’t cheap, and the ads they design are expensive to produce. Be aware of this, and be up front with your agency about your budget. Plan to allow at least as much money for the design of the ad as it will cost for one month’s run in the various magazines it will run in.
Advertising quality is important to your company, but you don’t have to mortgage your birthright. Two-color ads are ok , and so are all text black and white ads. If that is all you can afford, then do just that. Do not go out on a limb with advertising. You can start small if you must. Perhaps you can generate enough sales from a black and white ad in a user group news letter (BMUG’s maybe?) to bootstrap to the big magazines. There is no question that an ad in MacUser or Macworld (or MacTech Quarterly) will pull more overall response than one in the local user group newsletter, but the costs are also different by a few orders of magnitude.
Planning your ad placement will be important. Do not let the sales rep from one of the trade magazines sway you into placing all of your budget with them. The distribution of your advertising budget must be carefully planned. Try not to have advertisements that run before your product actually ships — know your shipping dates. The agency will be able to help you with ad placement, but be careful. The agency gets a percent of the fees for all the ads you place rebated from the magazines, and different magazines offer different placement incentives. Run any advertising placement plan through your reality filter before you sign on the dotted line.
An alternative advertising technique is to upload a demo version of your software to a BBS and let your customers try the program before they buy it. It’s a toss-up for many companies as to which eats more of the total revenue of the company —trade shows or advertising. Ads are great for generating interest, and demos at the shows help pull through sales.
Don’t make the mistake of thinking that your company must be represented at every trade show. Don’t even think that you have to be at every Macworld. In fact, small companies seem to get lost at Macworld these days, so it’s not a very good place to start unless you have enough bucks to make a pretty big bang. You have to decide to be there long in advance too. Booths at Macworld sell out about six months before the show.
A business forum, an engineering forum or even a user group sponsored show may be your best first bet, and space at these shows does not sell out until the week before. You can be very flexible on schedules and therefore on when you pay for your space. The standard trade show arrangement is that you pay when you sign up for the space, or very slightly after. With these smaller shows, you can decide to do the show a couple of weeks before it happens and still get in. If you try that with a MacWorld, you will be fed a quick dose of reality. Small shows normally cost less, too. The price per square foot is lower, the number of people you have to take to staff your booth is less and the hotels are normally cheaper, too. A booth that costs you $50,000 to build, set up and staff at MacWorld can be done for $15,000 at a Boston Computer Society show. You won’t get as many reporters at the smaller shows, but you also won’t have as many competing new product announcements.
If the product is the first for your company, do not schedule a trade show appearance before the product is shipping. Going to a show with only a vapor product will do two things. First, it will cost you two weeks of programming time to create a “show” version with all the options that still crash disabled. Second it will disrupt the overall business of the company. A too early appearance at a major show costs a company about a month of development time and schedule slip.
Every distributor wants to be your only distributor in an area, each one wants a sweetheart deal, and they all want terms that allow them to pay you next year. So what is fair? Distributors normally want to mark-up a product coming in the door about 12 points (points are percent of retail price). The retailers really want about 40-45 points off list price from the distributors, and need a minimum of 30 points to just stay in business. That means that you have to supply distributors at about 52-57 points off the retail price. The issue of adequate margin for each link in the distribution channel is critical when you are setting your prices.
Frequent price changes and updates will cause distributors to return unsold products to you. You need to control update releases (or bug fixes) and to set a price that you can live with for at least a year. That price should be both competitive and fair. Currently in the Macintosh market productivity packages start at about $295.00 and go up from there. Databases start at about $395 and go up from there. Custom applications from VARs can run upwards of $20,000 for just the software.
The best advice in obtaining good coverage and terms is to pick either Softsel, Bonsu, or MicroD, and use one of them. Then go after Businessland, Computerland, and the other large chains. With major chains you can ask and receive about 6 points more for your product than you get from a distributor. This means that if you sell to Bonsu at 52 points then you can sell to Businessland at 46 points. If you sign up one of these distributors and two of the major chains you are in good shape. Also, don’t ignore Egghead if you are a software company. Egghead is becoming a force in the Macintosh software market. In the Detroit Metro area (where we live), they have no competition in the sale of Macintosh software at all.
Have your distribution plans firmed up, and contracts negotiated and signed before you create your dealer mailing. The critical piece of info in that mailing is where dealers can get some of your product. You need that dealer mailing to go out at least three weeks before shipping, so count backwards from your shipping date to get your distributor sign-up deadline.
A creative rollout specialist will have a number of other ideas. You should talk to other companies that have rolled out a product, about what has and has not worked for them. If it did not work for them it may not work for you. You can never tell what the execution of that phase of a rollout will be like from the plans alone.
Always designate someone to be in charge of the rollout and to pay attention to the phases of the rollout. That person should not have additional responsibilities that do not pertain to your rollout. A rollout is a draining operation and most specialists do not do more than one rollout in a year. The rollout will last from about six months before shipping to about four months after shipping.
About the Authors
Doug Houseman is an engineer, project manager, and research manager. His graduate studies were in Naval Architecture, with a specialization in CAD/CAM applications. He resigned his commission in the Navy in 1987 to help start a Mac programmers and consultants consortium, and now works for Irwin Magnetics as the person responsible for that company’s Macintosh products.
Anna O’Connell is a specialist in the technologies associated with artificial intelligence and expert systems applications. She currently works as an independent engineering contractor for one of the Big Three auto makers. Her assignment is in the area of automated assembly and the use of information technologies to improve manufacturing productivity.