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Do more with less. That is the challenge for software marketers today: to get better results from their marketing programs on increasingly smaller budgets.

It's important for software marketers to analyze the effectiveness of their programs and determine their return on investment (ROI), because a careful look will reveal that some methods produce better returns than others.

One way to improve ROI is to find marketing vendors who are true business partners and not just hired guns who have no vested interest in a project's success. Pay-for-performance marketing is an emerging trend that helps software marketers minimize their risk while maximizing their partners' engagement.

Types of Software Demos

In software marketing, demos are vital to selling software. Several types of demos allow companies to showcase their products:

  • Software downloads from the company's website or partner sites
  • CDs or DVDs that are mailed to the customer
  • Live demos directed by a company representative
  • Online videos
  • Customer-driven live demos

Typically, software companies use one or more of those demos to showcase their products, gather leads, and obtain more-detailed information about prospects. Downloads, CDs or DVDs, and online demos are the most-common methods. Although each method can be effective, research has shown that some methods are more effective than others.

Downloadable demos are often outsourced to a hosting company. The software manufacturer typically pays the host a fee per download, depending on the file size and the volume downloaded. (High volumes typically mean a lower cost per download.) Although downloads are easy and convenient, the large size of enterprise software can make download times unrealistic, even on high-speed Internet connections.

CDs and DVDs provide one solution to the shortcomings of downloads; however, they're expensive to manufacture and mail, and they aren't timely.

In the two to three days between a customer request of a demo disc and its arrival, the customer could lose interest or misplace the disc once it arrives, or the disc could be lost in the mail. Another drawback of both downloads and CDs/DVDs is that some enterprise-level software can't be demonstrated by installing it on a solitary desktop PC.

Online demos address the drawbacks of downloads and discs at a much lower price. They enhance customer satisfaction and the customer's overall experience.

Two out of three software evaluators polled said online demos are "better" or "much better" than downloads or discs for providing a true feel for how the software works, according to a study from Osterman Research.

The study also showed that not only do online demos allow multiple testers in multiple locations (even on different continents) to try the software together in real time, but some three of four software evaluators surveyed said online demos are "better" or "much better" than downloads or discs for geographically separate groups.

In another study, real-world analysis of online-demo data from leading companies such as Microsoft, Corel, and Intuit revealed stunning results for conversion rates and ROI. CDs proved to be the worst overall value, costing $3.73 each to manufacture and ship while yielding only a 5% conversion rate and a 201% ROI. Next were online downloads, which cost $3.45 per download with an 8% conversion rate and 348% ROI.

However, what may surprise many marketers is the performance of online software demos. The newest of these three methods, online demos cost just $1.92 per demo. In addition, they outperformed CDs and downloads: They had a 14% conversion rate and yielded a stunning 1,096% ROI (see table, below).

Lower Costs With Cutting-Edge Techniques

Clearly, online software demos provide the most value for software companies (and the most convenience and overall satisfaction for potential customers):

What's more impressive is that a cutting-edge collaboration between software companies and their marketing vendors can yield even more value for the software company and, at the same time, reduce its risk and ensure that its marketing vendor puts forth its best effort.

It may sound too good to be true, but pay-for-performance, a hybrid approach to online-demo pricing that involves a base fee and a results-based incentive, is helping software companies and marketing vendors take their success to new heights. Pay-for-performance is a smart move for several reasons:

  • Software companies reduce their entry cost for online demos by sharing the risk with the marketing vendor. The company pays a small base fee and nothing else unless the online demo generates leads and conversions. If it doesn't, the company has no further financial commitment.
  • The marketing vendor is brought in as a partner in the company's success. For the vendor to maximize its profit, it must ensure that its product generates results. Also, vendors can maximize their payouts by structuring deals to increase their margins if the software company reaches certain sales goals.
  • Senior management is more likely to approve expenditures for online demos if the up-front cost is small and the marketing vendor is essentially providing a guarantee in the form of shared risk taking.

Across all industries, professionals such as CPAs, attorneys, and consultants are positioning themselves as partners to businesses, rather than just third parties who provide a service for a fee. Software marketers are no different. In uncertain times, marketers can cement long-term relationships by being trusted partners who have "skin in the game."

Understand Your Customer

Another important way for software marketers and their clients to improve ROI and conversion rates is to better understand their customers. That means determining how customers use software and how they interact with demos.

Demos are a key to the sales process. They expose prospects to the software, garner their interest, educate them on the features, and help encourage them to leave more-detailed contact information. And the bottom line is that people won't buy software that they can't try.

Therefore, the most successful software companies and marketers will spend more time reviewing the entire demo experience from the customers' perspective. That means generating a targeted message for each group of potential customers who may use the demo: new users, users of the competition's software, and upgraders.

Also, it requires creating different scenarios for their demos based on the users' needs and interests. For example, a photo-editing demo might walk basic users through a simple process such as bulk labeling of photos, while demonstrating a more sophisticated technique such as adjusting contrast and color saturation to more-advanced users.

Furthermore, it's important for software companies to track the traffic to their websites. Which marketing techniques result in the most visits—pay-per-click, email, or something else? It's also essential for companies to test their lead-capture process. By tweaking questions and making other adjustments in emails and other channels, companies may increase their traffic.

Real-World Results

Founded in 1994, Mamut Software Ltd. is a major European provider of software solutions for small and medium-sized businesses. Mamut used a typical marketing mix to generate leads and new sales, including direct mail, advertising, exhibitions, and seminars. However, the company's marketing executives felt they were not generating a sufficient number of leads for their efforts.

The search for a solution led Nathan Bray, marketing manager in Mamut's UK office, to partner with a leading online-software-demo vendor. After just six months of making its software titles available via online demo, Mamut's lead volume increased 200%—far more than Bray expected.

"I was hoping for maybe a 50% increase, so I was really pleasantly surprised and impressed," said Bray. "The feedback from the sales team has been that it is probably the single best thing that we have ever done marketing-wise—it has been above and beyond my expectations."

Get Smart!

The days of large marketing budgets that aren't results-oriented are long gone. So are the days of paying flat fees to marketing vendors who get paid regardless of the results of their services.

Today's business climate calls for partners who have a stake in the success of their clients' businesses and who are willing to share the risk involved. Smart software marketers engage vendors who can become trusted marketing partners and who are willing to be compensated based on their results and not just for their time or effort.

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Tim Keyes is CEO of Runaware, Inc. (, a provider of online demos and software marketing.