HOW TO MAKE MONEY ON MAINTENANCE.

Software companies usually treat maintenance contracts as little more than an afterthought, but it's an afterthought that generates a lot of cash--typically, 15%-20% of total sales dollars. And those maintenance dollars tend to keep flowing: Over five or ten years of product ownership, customers can easily spend more on maintenance than they originally paid for the software itself.

At least that's the theory. In actual practice, maintenance contracts are often managed so haphazardly that renewal notices never go out, contact histories vanish, and customers end up getting little more than an occasional CD-ROM full of overdue bug fixes. "The average maintenance customer is treated so badly that even a modest improvement produces a 'Wow!' effect," says Intraware's Rich Kline. "And if 'Wow!' translates into 20%-30% higher renewal rates every year, the impact on long-term maintenance revenues can be phenomenal."

To help publishers generate more maintenance dollars, says Kline, Intraware recently launched a new suite of Web-based services that track maintenance contracts and distribute software patches online. We asked Kline what lessons he's learned about maintenance marketing:

Rich, is there one really easy tactic for getting renewal rates up?

"Believe it or not, a lot of customers fall through the cracks just because nobody remembered to ask them to renew. And that's usually because the only record of maintenance contracts is a spreadsheet somewhere. You need to keep track of who's up for renewal, and you should start the renewal sales process a full 90 days before a customer's contract is due to expire."

Trouble is, sales reps often don't like making these calls, because they have so little information about the customer. When all you have is an outdated contact name, selling a renewal is pretty much a cold call.

"You can pick up valuable clues about customers by analyzing Web reports that show who's actually downloading updates. That will help you find your early adopter segment, and you can build loyalty with them with a special thank-you note or a small gift. On the flip side, you want to identify customers who aren't updating the product and contacting them to find out why."

Does delivering more services and content help raise renewal rates?

"Not necessarily. The ultimate question customers ask at renewal time is, 'What have you done for me lately?' Instead of producing one annual upgrade, it's better to issue smaller, more manageable maintenance releases more often. Every time customers get a couple of new features, they'll be reminded about how you're continuously adding value to the product."

What about notifying customers about bugs they might not otherwise notice?

"You should absolutely send out alerts. And the moment you fix a bug, you should proactively distribute the patch electronically to your maintenance customers. The fastest way to lose customer faith is to make someone wait on hold with tech support to get a known issue resolved. Again, show your customers that you're dedicated to keeping them updated on software improvements."

Don't you run the risk of overloading customers with too many alerts?

"If that's a problem, one solution is to set up a personalized release archive on your Web site that automatically organizes updates and bug patches for each customer. You should customize these pages to include information on who their account manager is, and how to escalate a technical issue. It's also a good idea to let customers update their own profile information on the Web. Given the high level of turnover in IT departments, having five or six current contact names just may be the difference between getting an easy renewal and starting the sales process from the beginning."

Rich Kline, director of business development, Intraware, 2000 Powell St., Emeryville, Calif. 94608; 510/597-4696. E-mail: [e-mail].