Who's buying those $49 spreadsheets?

By collapsing the price of Quattro Pro 5.0 to $49 in late August, Borland raised an important question about price elasticity: Will bargain basement software prices generate enough new volume to make up for lower per-unit revenue? The answer, apparently, is that the pricevolume tradeoff actually works. Borland chairman Philippe Khan said he'd consider the promotion a success if he could sell 500,000 copies of Quattro Pro by January 15; Khan now claims that the "irresistible, limited-time" offer helped push Quattro Pro sales past the half-million mark in just six weeks (at a profit, no less).

But who are these new spreadsheet buyers? Bargain hunters don't always turn out to be good long-term customers, so Borland has been paying close attention to the demographic profile of its new Quattro users. In October the company hired Computer Intelligence, a leading market research firm, to interview 422 randomly-chosen Quattro Pro 5.0 customers about their buying patterns and spreadsheet usage. Borland vice president David Warkills, who oversaw the research project, recently gave us a peek at the survey results:

The offer definitely grew the-market: According to the Computer Intelligence survey, Quattro Pro was the first spreadsheet ever purchased by 41% of the people who responded to the $49 offer. Moreover, 52% of the new Quattro Pro buyers didn't "currently use" any spreadsheet, which means that a lot of these new buyers weren't even users of spreadsheets that their company bought. "The high percentage of new users was a pleasant surprise for us," says Watkins. "Our first estimate was that even getting 25% new buyers would be good."

There are still plenty of uncommitted buyers in all market segments: The Computer Intelligence data shows that about half of these first-time spreadsheet users bought Quattro Pro for "personal home use." But Watkins points out that the total sample of $49 buyers--which includes people who had previously owned other spreadsheets--included "a broad range of customers that reflects the mix of business users in general." The overall Quattro Pro buyer profile includes 60% who use Quattro Pro for business applications (17% for home business, 5% for work at home, and 38% for other non-residential business), compared to 40% who use the product primarily. for personal or home applications.

A lot of organizations still haven't established spreadsheet standards: Despite the strong penetration of Lotus 1-2-3 and Microsoft Excel in the corporate market at large, Computer Intelligence found that many new Quattro Pro buyers--73% of business users in the sample--work for organizations that hadn't yet established a company spreadsheet standard. (Within the organizations that have set such standards, 14% had picked Quattro, compared to 7% each for 1-2-3 and Excel.) Moreover, most of the new buyers work in organizations where Borland had little prior spreadsheet presence, so the offer established a beachhead for future sales: 82% of business users didn't know "other people who have also purchased" Quattro Pro within their companies; 79% say it will become their "primary spreadsheet."

Price alone doesn't drive the purchasing decision: When Computer Intelligence asked the new Quattro Pro buyers why they bought the product, "price" was the single most common reason. But most buyers also cited a variety of other reasons, including ease of use, good reviews, and product features. Watkins points out that Borland's ads and packaging strongly stressed an "easier to use than 1-2-3 or Excel" message that emerged from earlier focus group tests. "For $49 you're probably willing to take a risk, but not if the product's hard to use."

The trade press is a key source of product information: Although many of the new Quattro Pro buyers were spreadsheet neophytes, the Computer Intelligence study revealed that a high percentage said they heard about the product through ads, articles, and reviews in the computer trade press--an interesting result, considering how many trade magazines claim to reach only "corporate volume buyers" and other sophisticated customers. Various word-of-mouth recommendations played only a relatively modest role as sources of information (15 mentions); retailers and sales reps were even less influential (eight mentions).

New buyers are comfortable with direct sales relationships: Borland's magazine ads and direct mail invited customers to "see your dealer today or call" an 800 number. Almost all the orders went directly to Borland; only a handful of customers chose to deal with resellers or go through a company purchasing department. Though it's too early to tell about the long-term value of these buyers, the usual rule of thumb is that direct buyers spend more on upgrades and follow-on products than customers acquired through indirect channels. Since the data also shows that 62% of the Quattro Pro buyers were first-time Borland customers, Watkins says "we've grown our own customer base by at least a few hundred thousand more names."

David Watkins, vice president of product marketing and product management, Borland International, 1800 Green Hills Rd., Scotts Valley, Calif.; 408/438-8400. Dan Ness, senior analyst, Computer Intelligence InfoCorp, 3344 N. Torrey Pines Court, La Jolla, Calif. 92037; 619/450-1667.