Marketing strategies for product software
Encyclopedia
Marketing strategies for product software assist software firms to determine the type of market analysis
that is needed for decision-making. Two general strategies that are well known in the marketing discipline are:
"Marketing mix" is the typical strategy for traditional mass marketers of product software in competitive markets. Structured market research
, and agility in reacting to sales, are characteristic of their product development process (Alajoutsijarvi et al., 2000). An example would be Electronic Arts
, with their various home computer software games, which are advertised on television and sold in many electronic stores.
"Relationship marketing", (closely associated to CRM
), is used by product software companies who focus on long-term customer relationships (Alajoutsijarvi et al., 2000). An example of this is SAP
, which offers enterprise resource planning
systems, along with support (since the software is complicated to install). Maintaining customer relationships helps sell additional modules and future upgrades.
Broethers and van't Kruis explain two other strategies that are important to the growth of software firms:
Information about customer preferences, observations of customer reactions, and knowledge of past mistakes are important for the "service-based strategy". "Different marketing channels strategy" tries to discover non-traditional marketing channels to help increase distribution of software products to other target market
s that take advantage of positional differences. "Alliance-based strategies", on the other hand, are helpful at providing knowledge exchanges, opening previously inaccessible markets (such as export markets), and an overall larger market access (1997).
Besides helping with current strategies, market analysis can improve future planning and growth strategies that are helpful in product roadmapping decisions. It also helps discover areas where "complementary product development" and "diversification strategies" can be profitable. Complementary goods can be in the form of other software products, hardware
, or services, such as consultancy, user training, and customization (Rao & Klein, 1994). The development of these goods increases the opportunities for companies in the software market (Sengupta, 1998). Even complementary products from other vendors can lead to an increase in the value of the original product, while reducing the time to market (Messerschmitt & Szyperski, 2004).
The complementary product strategy adds value by showing innovation
, and creates a multiplier effect on the original product (Sengupta, 1998). Investing in other products and services aids in diversification, which can increase the overall customer base, and helps decrease the risks of being overly specialized (Rao & Klein, 1994). Diversification can, therefore, increase the financial health of the company. An example of this is Microsoft
, which has increased the sales of its primary operating system
software by offering products, such as word processing
, and media player software.
See also Marketing mix for product software
.
Market analysis
A market analysis studies the attractiveness and the dynamics of a special market within a special industry. It is part of the industry analysis and this in turn of the global environmental analysis. Through all these analyses the chances, strengths, weaknesses and risks of a company can be...
that is needed for decision-making. Two general strategies that are well known in the marketing discipline are:
- marketing mixMarketing mixThe term "marketing mix" was coined in 1953 by Neil Borden in his American Marketing Association presidential address. However, this was actually a reformulation of an earlier idea by his associate, James Culliton, who in 1948 described the role of the marketing manager as a "mixer of ingredients",...
; and - relationship marketingRelationship marketingRelationship marketing was first defined as a form of marketing developed from direct response marketing campaigns which emphasizes customer retention and satisfaction, rather than a dominant focus on sales transactions....
.
"Marketing mix" is the typical strategy for traditional mass marketers of product software in competitive markets. Structured market research
Market research
Market research is any organized effort to gather information about markets or customers. It is a very important component of business strategy...
, and agility in reacting to sales, are characteristic of their product development process (Alajoutsijarvi et al., 2000). An example would be Electronic Arts
Electronic Arts
Electronic Arts, Inc. is a major American developer, marketer, publisher and distributor of video games. Founded and incorporated on May 28, 1982 by Trip Hawkins, the company was a pioneer of the early home computer games industry and was notable for promoting the designers and programmers...
, with their various home computer software games, which are advertised on television and sold in many electronic stores.
"Relationship marketing", (closely associated to CRM
Customer relationship management
Customer relationship management is a widely implemented strategy for managing a company’s interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally sales activities, but also those for marketing,...
), is used by product software companies who focus on long-term customer relationships (Alajoutsijarvi et al., 2000). An example of this is SAP
SAP AG
SAP AG is a German software corporation that makes enterprise software to manage business operations and customer relations. Headquartered in Walldorf, Baden-Württemberg, with regional offices around the world, SAP is the market leader in enterprise application software...
, which offers enterprise resource planning
Enterprise resource planning
Enterprise resource planning systems integrate internal and external management information across an entire organization, embracing finance/accounting, manufacturing, sales and service, customer relationship management, etc. ERP systems automate this activity with an integrated software application...
systems, along with support (since the software is complicated to install). Maintaining customer relationships helps sell additional modules and future upgrades.
Broethers and van't Kruis explain two other strategies that are important to the growth of software firms:
- a service-based strategy; and
- a different marketing channelMarketing channelA marketing channel is a set of practices or activities necessary to transfer the ownership of goods, and to move goods, from the point of production to the point of consumption and, as such, which consists of all the institutions and all the marketing activities in the marketing process...
s strategy.
Information about customer preferences, observations of customer reactions, and knowledge of past mistakes are important for the "service-based strategy". "Different marketing channels strategy" tries to discover non-traditional marketing channels to help increase distribution of software products to other target market
Target market
A target market is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise. A well-defined target market is the first element to a marketing strategy...
s that take advantage of positional differences. "Alliance-based strategies", on the other hand, are helpful at providing knowledge exchanges, opening previously inaccessible markets (such as export markets), and an overall larger market access (1997).
Besides helping with current strategies, market analysis can improve future planning and growth strategies that are helpful in product roadmapping decisions. It also helps discover areas where "complementary product development" and "diversification strategies" can be profitable. Complementary goods can be in the form of other software products, hardware
Computer hardware
Personal computer hardware are component devices which are typically installed into or peripheral to a computer case to create a personal computer upon which system software is installed including a firmware interface such as a BIOS and an operating system which supports application software that...
, or services, such as consultancy, user training, and customization (Rao & Klein, 1994). The development of these goods increases the opportunities for companies in the software market (Sengupta, 1998). Even complementary products from other vendors can lead to an increase in the value of the original product, while reducing the time to market (Messerschmitt & Szyperski, 2004).
The complementary product strategy adds value by showing innovation
Innovation
Innovation is the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets, governments, and society...
, and creates a multiplier effect on the original product (Sengupta, 1998). Investing in other products and services aids in diversification, which can increase the overall customer base, and helps decrease the risks of being overly specialized (Rao & Klein, 1994). Diversification can, therefore, increase the financial health of the company. An example of this is Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...
, which has increased the sales of its primary operating system
Operating system
An operating system is a set of programs that manage computer hardware resources and provide common services for application software. The operating system is the most important type of system software in a computer system...
software by offering products, such as word processing
Word processing
Word processing is the creation of documents using a word processor. It can also refer to advanced shorthand techniques, sometimes used in specialized contexts with a specially modified typewriter.-External links:...
, and media player software.
See also Marketing mix for product software
Marketing mix for product software
The marketing mix for product software parallels the notion of marketing mix for general products and is likewise composed of the four controllable factors of marketing managers: price, promotion, product, and place...
.