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Nine ways to boost upgrade skills.

NINE WAYS TO BOOST UPGRADE SALES As software markets become more competitive, says direct marketing consultant Bill Mirbach, "it's almost impossible to maintain real, broad-based product superiority consistently any more. There are times when you're at parity, and times when you're even a little behind. That's when a satisfied, well-served user base is a real comfort. They'll talk you up, buy your next upgrade, and, in general, tide you over until you get on top again."

And one of the best ways to build a loyal user base, Mirbach argues, is to launch a high-profile upgrade program. Upgrades do more than generate quick cash: They also play a strategic role in demonstrating a company's ongoing commitment to its products and customers.

That point is often missed by companies that rely heavily on the retail channel to attract a steady stream of new customers, Mirbach adds. Retailers may provide broad exposure and sales, but they do almost nothing to build "a lasting relationship with the user." Those relationships can't be developed through indirect marketing channels, says Mirbach; the best way to create loyal customers is through direct contacts between a company and its users.

Mirbach, a former Procter & Gamble brand manager who now creates direct mail campaigns for software companies, concedes that most software companies don't have much experience with direct marketing techniques. To help fill this gap, he's just written a comprehensive handbook on how to use direct marketing techniques to sell upgrades. The book is full of sharp insights as well as nitty-gritty details about printing, mailing, order processing, and other essentials; in fact, it's hard to imagine any important topic Mirbach has overlooked. Some examples of his advice:

* Keep your upgrade prices low. Typically, software companies charge "between one-third and one-half of the 'street price' for an upgrade," says Mirbach. Because response rates to upgrade offers tend to drop as the price goes up, a higher price rarely generates any extra revenue or profit. In the long run, he adds, attracting higher numbers of upgrade customers will also generate important future revenue: "It's a fact: someone who upgrades once is at least twice as likely to upgrade again."

* Don't discriminate. Many developers think it's unfair to charge customers who own the current version the same upgrade price as those who leapfrog from an earlier version. Mirbach disagrees. "Be generous," he says, because the real goal is to win back as many users as possible. ("This approach has an extra benefit," he adds: "It allows you to write a simple, straightforward order form"--which almost always increases overall sales.)

* Make the offer irresistible. "Simply announcing the availability of your wonderful new feature-laden upgrade is not enough," says Mirbach. The upgrade offer should stress "something your users want so much they cannot help themselves; they just have to upgrade right now." A useful technique: "The same underlying offer, when explained in terms of something extra, Free, is more appealing and gets a higher response."

* Write a long letter. The most effective format for selling an upgrade, says Mirbach, is the classic direct mail letter combined with a fact sheet or brochure. Don't hesitate to offer a full description of features and benefits in the letter--surprisingly, direct mail customers seem to like lots of text. "A well-written 4-page letter outpulls a well-written 2-page letter. When in doubt, keep writing."

* Offer an iron-clad guarantee. A no-questions-asked, money-back guarantee is "a very scary thing for a software company to do," Mirbach admits. But the payoff in response rates is likely to be dramatic. (Mirbach says he once tested two versions of an ad and found that the one with a guarantee actually pulled ten times more orders.)

* Don't confuse the customer. "The best way to really foul up an order form is to make it too complicated. For example, I tested an order form with and without an extra line for the buyer to write in their phone number. Just the addition of that one line reduced response 20%."

* Use First Class mail. First Class mail costs 8.5 more per piece than Bulk mail, but the Post Office doesn't forward Bulk mail to registered users who've moved. As a result, First Class mail typically reaches at least 10% more users--and generates substantially greater upgrade sales. Moreover, orders come back much faster. "Mail First Class on Monday, and the phone will ring with your first few orders as early as Wednesday of the same week. No kidding."

* Mail at least twice. The first mailing of an upgrade offer won't hook all potential customers, Mirbach points out, so a follow-up mailing--with perhaps just a "REMINDER" stamp on the envelope and letter--usually pays off. "Response dips way down on the second mailing," he says. "In fact, it is often no more than 20% of what the first one was. But it should still produce a positive contribution."

* Plan ahead for a rush of orders. As many as 50% of all upgrade customers will call in their orders, so it's important to keep the phone system from being choked. One solution is to spread the mailing over several weeks; another approach is to hire an outside telemarketing service. "Of course, you have the alternative of not accepting phone orders. In today's world, that's a mistake."
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Copyright 1990, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Date:Mar 5, 1990
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