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Merchandising: higher visibility, higher sales.

Among direct mail marketers, any new promotional gimmick that boosts response rates a point or two becomes instant headline news. But for reasons we don't fully understand, software merchandisers seem much less enthusiastic about inventing better mousetraps. Despite an occasional breakthrough idea, the retail channel is filled with stale, copycat promotions that are almost certainly a waste of everyone's time and money.

If that sounds like a harsh judgment, consider how much energy and talent goes into merchandising in the rest of the consumer marketplace. Companies like Procter & Gamble know how dangerous it is to let products fade into the background, so they keep churning the market with jazzy promotions--discount coupons, sweepstakes, trial-size packages, rebates, "new and improved" ingredients, markdowns, special point-of-purchase offers, and the like.

Will this razzle-dazzle stuff work for software? There's a good deal of disagreement about this point, of course. But we've found three recent examples of simple merchandising ideas that have made a difference in the channel:

* The end-of-season markdown strategy: Rather than dump the 3.0 version of CorelDraw when version 4.0 shipped, Corel kept the older version on the shelf--but repriced it for entry-level buyers. The new Version 4 carries a list price of $595 and sells to high-end graphic artists; Version 3 now lists for $199 and is aimed at small office and home users. Marketing director Arlen Bartsch says Corel borrowed its markdown strategy from the microprocessor industry: "When Intel came out with the 486, they continued to produce the 386, but for a lower price. Now that the Pentium is here, prices on 486s have lowered."

So far, the markdown strategy has been even more successful than Corel expected. Since June, says Bartsch, the company has sold 75,000 units of Version 3, nearly four times the Version 4 unit volume. Overall revenue for the company jumped 50% in the last fiscal quarter, and Bartsch says there's little evidence that the markdown has cannibalized sales of the newer high-end version. "Customers who need as much power as they can get won't settle for less than the latest version of the product," he argues. The next step: a third configuration, priced at $795, that will include a Version 5.0 release of CorelDraw plus PhotoPaint, Chart, and Ventura Publisher. Arlen Bartsch, director of sales and marketing, Corel Corp., 1600 Carling Ave., Ottawa, Ontario; 613/728-8200.

* The Hawaiian-vacation-for-two strategy: The newest release of Symantec's C++ professional Edition (list price $499, competitive upgrade $199) comes with a fascinating extra: a pair of round-trip tickets to Hawaii. "It's a riveting offer," says executive vice president Gene Wang. "Everywhere I go people are blown away." Symantec also hands out a pair of tickets to every dealer who buys three copies of the software, Wang adds. The promotion helped kickstart Symantec's campaign against two highly-visible C++ competitors, Borland and Microsoft, and Wang says the promotion has been particularly useful in getting programmers to evaluate a product that wasn't as well known as its rivals.

What does the promotion cost Symantec? The tickets are "fairly expensive," he admits, "but not as outrageous as it sounds." (Symantec recovers some costs from commissions on hotel charges.) One surprise: The free tickets didn't help sales of the $129 Standard Edition. "People just wouldn't believe they'd get decent software at that price," says Wang. Gene Wang, executive vice president, Symantec Corp., 10201 Torre Ave., Cupertino, Calif. 95014-2132; 408/253-9600.

* The manufacturer's rebate coupon strategy: Short-term price promotions and competitive upgrade discounts are notoriously confusing to dealers, who often ignore the rules and sell every copy at the vendor's lowest price. Jacqueline Kayl, group product manager for Microsoft Publisher, has experimented with a simple solution that takes the dealer out of the loop: a manufacturer's rebate coupon that goes inside the box. To qualify for a $20 upgrade rebate on Publisher 2.0, she says, a customer now has to buy a full-price version (list price $199) and mail in proof of prior ownership. Similarly, Kayl used a rebate coupon for a two-month $139 introductory price offer. She points out that the coupon approach lets her phase in new pricing promotions without constantly swapping inventory or asking dealers to stock multiple SKUs. "This also cuts down on the problem of mass merchants who insist on carrying either the full-price version or the upgrade, rather than both," she points out. Again, a major benefit of the coupon promotion was quicker market penetration: Since its July rollout, says Kayl, Publisher 2.0 has sold more than 150,000 units. Microsoft now plans to adopt a similar rebate program for the next version of Microsoft Works, she adds.

Jacqueline Kayl, group product manager, Microsoft Corp., One Microsoft Way, Redmond, Wash. 98052; 206/882-8080.
COPYRIGHT 1993 Soft-letter
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:marketing techniques employed by Corel Corp., Symantec Corp. and Microsoft Corp.
Date:Nov 4, 1993
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