===========================================================================
                                CHAPTER 10:
                       UNDERSTANDING YOUR COMPETITION

               "A practical guide to competitor intelligence"

The Business of Shareware
Eugene Mallay
Copyright 1996
All Rights Reserved
===========================================================================

     Dear Shareware Author:

     The following is a sample chapter from The Business of Shareware,
     my advanced-level book on effective product strategy for
     shareware professionals.

     This sample chapter may be freely distributed for non-commercial
     purposes so long as it is unaltered. If you have any questions
     about your usage of this document, please contact me at
     emallay@interlog.com. For more information about this book, 
     please visit my WWW site at: http://www.interlog.com/~emallay/ or
     inquire by any of the methods listed at the bottom of this 
     document.

     This chapter has been slightly modified from the actual chapter.
     Links to other chapters have been removed and minor formatting
     changes have been made.

     Enjoy the book.

     Eugene Mallay
     June 22, 1996

---------------------------------------------------------------------------

About This Chapter
------------------
This chapter discusses the need for analyzing your competitors. It outlines
the kinds of information you need and provides tips on obtaining them.

Contents:

   * Advantages of competitor analysis
   * Taking the blinders off...
   * Types of competitors
   * Competitor analysis
   * Competitor priorities
   * Information gathering techniques
   * What to gather
   * Establishing competitor profiles
   * Summary

---------------------------------------------------------------------------

                     Advantages of Competitor Analysis

---------------------------------------------------------------------------

How many competitors do you have?

Based on a recent survey, almost 80% of shareware authors believe they have
two or less serious competitors. Over 35% believe they have no real
competitors. Less than 15% recognize shelfware products as being
competitors. Only slightly over 5% give any consideration at all to the
many non-software alternatives available to users.

This suggests that most shareware authors have a less than ideal
understanding of their competitive environment. The number of businesses in
any industry that have no competitors can be counted on a single hand.

To understand your competition you need to perform a detailed competitor
analysis. Competitor analysis is the gathering, organizing, and
interpreting of information about existing and potential competitors.

Here are ten good reasons for studying the competition:

   * To identify your competitors
   * To classify them as direct, indirect, or potential competitors (see
     below), and adjust your strategy accordingly
   * To determine, anticipate, and possibly influence competitor responses
     to your actions
   * To predict competitor initiatives
   * To learn from your competitors so that you can adopt their best ideas
     while ignoring their worst ones
   * To determine their resolve and level of commitment
   * To learn the size, scope, and make-up of the competition
   * To force you to maintain a market-focus
   * To serve as the basis for your marketing strategy
   * To recognize competitive threats and opportunities, giving you time to
     prepare contingencies for either

Competitive analysis is an on-going process that should be an integral part
of your overall strategic planning. Throughout the process, constantly ask
yourself such questions as: "How can I minimize this competitor's
strengths?", "How can I maximize this competitor's weaknesses?", "What
could this competitor do to hurt me in the marketplace?", and "If I was
this competitor, what would I do?". The answers to these questions will
serve as the basis for your competitive tactics and marketing strategy.

You need to view the products of your competitors from the perspective of
your competitors. You'll be surprised at how differently the world seems
from someone else's point of view.

---------------------------------------------------------------------------

                         Taking the Blinders Off...

---------------------------------------------------------------------------

Effective competitor analysis provides you with powerful tools for your
overall competitive strategy. You can't succeed if you approach the
marketplace wearing blinders. You need to know who your competitors are,
what they're doing, and how they'll respond to your actions.

Competitor analysis isn't easy and it isn't fun. It's hard work. It's also
dangerously easy to put off or brush aside. After all, you could be
spending the time developing the next great "killer" application...

But wouldn't it be a shame for your killer application to die in obscurity,
buried in the marketplace by an inferior but better marketed product?

Couldn't happen, you say?

Okay, maybe the world really will beat a path to your door if you build a
better mousetrap. And quality always sells, doesn't it? Besides, shareware
is try-before-you-buy, so the best product will win, right?

Don't believe it. Smart marketing of an inferior product will outsell poor
marketing of a superior product nine times out of ten. There are thousands
of examples of superior products being demolished in the marketplace by
inferior products. Just ask the OS/2 product manager at IBM!

You can't market effectively if you don't know what's going on. Competitor
analysis, along with user analysis, is the foundation for almost everything
a successful publisher does. You can't create an effective product strategy
out of thin air. It must be based on solid competitor and market
information.

Before you write a single line of code for your next product you should
have a thorough understanding of the marketplace.

It may not be fun, but it works.

---------------------------------------------------------------------------

                            Types of Competitors

---------------------------------------------------------------------------

To understand the competition you need to be able to identify them. There
are three types of competitors - direct, indirect, and potential.

                          [Image: chapt10a.gif]

Direct Competitors
------------------
Direct competitors are applications serving a similar purpose to your own,
targeted to a similar audience. Your direct competitors are usually other
software applications. Don't forget shelfware programs when compiling your
list of direct competitors. Too many shareware publishers view only other
shareware products as competitors. You need to view the available options
the same way your users would. From that perspective, there are many, many
alternatives to shareware for most users.

For example, if you publish a high-end time management application your
direct competitors are other high-end time management applications. It
doesn't matter if they're shareware, shelfware, or freeware.

Indirect Competitors
--------------------
Indirect competitors are alternatives available to the user, other than
your direct competitors, that meet the same fundamental needs as does your
product. It's important to remember that your potential users are not
limited to choosing from among you and your direct competitors. Many
publishers think they only need to be better than their direct competitors
to earn the potential user's business. They view their market as a pie to
be divided by all the direct competitors. In reality, the pie itself can
shrink or grow.

Indirect competitors for your time management software include everything
from paper-based scheduling systems to users believing they don't even need
a time management system. Low-end time management applications are also
indirect competitors. User apathy/disinterest is itself a significant
competitor. You're competing against any alternative your prospective users
have, not just against other software publishers.

Potential Competitors
---------------------
Potential competitors are competitors which might appear at some point in
the future, either as direct or indirect competitors. Potential competitors
can take many forms, such as:

   * Upcoming products that might directly compete with existing products
   * Existing products that target a different market but which could be
     modified to target your market
   * Changes in user habits
   * New technology
   * Other factors that might cause an adjustment in the way users deal
     with the need your program is meant to address

Potential competitors are not merely abstract possibilities that have no
immediate effect on the current marketplace. That a new competitor might
appear, if taken seriously by users, can have significant implications for
existing competitors. Users might hold off or otherwise change their
purchase habits in anticipation of, or to be ready for, the competitor.
Many, many users, for example, make purchase decisions based largely on
what a certain publisher in Redmond, Washington might do.

Keep in mind that potential competitors don't necessarily represent an
actual product. Potential competitors can also be environmental changes,
such as a shift in the marketplace to a new operating system.

You need to look carefully to identify all of your competitors, not just
the obvious direct ones. For many product categories indirect competitors
are far more troublesome than are direct competitors. Your marketing
strategy must take into account all of them.

---------------------------------------------------------------------------

                            Competitor Analysis

---------------------------------------------------------------------------

A competitor analysis provides you with details about your competitors'
product strategies. This information is essential to the formulation of
your own strategy.

Your competitor analysis should answer the following questions:

   * Do their products address specific segments? How well do they reach
     their segments? How closely does their product match the description
     conveyed by the publisher's marketing efforts?
   * How big is their budget? How is it allocated?
   * What is their marketing mix? Sales policy? Distribution policy?
   * How will they respond to your actions?
   * How will their actions affect your growth rate, market share, and
     profitability?
   * How will your actions affect their growth rate, market share, and
     profitability?
   * How well are your competitors doing in terms of sales growth, market
     share, profit margins, net income, return on investment, etc.?
   * What are their strengths and weaknesses - product quality,
     positioning, distribution, marketing and selling ability, operational
     skills, financial ability and constraints, pricing, etc.? How
     sustainable are their advantages? How easily can their weaknesses be
     exploited?
   * What kind of personalities do your competitors' key people have?
   * What are the major obstacles for each of your competitors in gaining
     market share? What are your own major obstacles?
   * What stage of the life cycle are their products in?

Most of this information will be difficult to obtain. Your competitors,
obviously, aren't going to openly provide it. Instead, you're going to have
to acquire it through careful examination of their public actions and
statements. Study telltale cues. Examine their documentation, advertising
(if any), product descriptions, public commentary, and competitive actions.
Talk to users as well - both yours and theirs.

Make sure all the information you gather is relevant and usable. Don't fall
into the trap of collecting information just for the sake of collecting it.
The information should be precise enough to be of use, but not so precise
that the 'big picture' is lost. Concentrate on the trends, not the level of
detail. Being able to calculate your market share to the 5th decimal point
isn't as important as being able to recognize the trend reflected in the
data.

Keep your focus on the market as a whole and not just on a few key
competitors. One of the major benefits of market analysis is the ability to
spot new rivals and developing trends early on. For example, if a lot of
minor competitors are suddenly dropping out of the market, there's probably
something going on that you should be aware of - a contracting user base, a
change in technology, or some other sweeping change. The earlier you
recognize such changes, the better you'll be able to adapt.

---------------------------------------------------------------------------

                           Competitor Priorities

---------------------------------------------------------------------------

Every publisher and every product has priorities, though in the shareware
business these are often informal and unstated. Being able to identify the
priorities of your competitors can often provide you with insights into how
to competitively position yourself against them.

Common priorities include:

   * Sales growth
   * Market share
   * Net income
   * Return on investment
   * Cash flow
   * Publicity (for example, programming houses often release an
     application just to demonstrate their capabilities)
   * Personal satisfaction (hobbyists)

Many shareware publishers lack formal priorities. What priorities they do
have are usually simple, vague goals like "Make money". Even so, knowing
these vague priorities can often be a competitive advantage.

---------------------------------------------------------------------------

                      Information Gathering Techniques

---------------------------------------------------------------------------

Gathering information on your competitors is a difficult but not impossible
process. The details of market research are beyond the scope of this book
but the following are some basic techniques you can use:

Talk To Your Local Librarian
----------------------------
Most major libraries have reference librarians whose job it is to assist
patrons in performing high quality, complex searches. Most libraries will
do this for you at cost. For searches of fee-based databases, reference
librarians can save you money due to their considerable skill in quickly
locating information.

Make it a point to cultivate a relationship with your reference librarians.
They're a valuable and often under-used resource.

Inquire
-------
Call the company and simply request the information. You'll be surprised at
what people will tell you.

Look Around
-----------
Examine what your competitors are doing and extrapolate information from
that. Is the competitor suddenly running expensive display ads? Have they
hired a new receptionist or support person (phone calls can usually
determine this)? And so on.

Track Public Commentary
-----------------------
What are your competitors saying about themselves? Check Usenet postings,
interviews, etc. Don't forget to keep an eye out for press releases or
product reviews. These often contain a wealth of competitive information.

Examine Product Literature
--------------------------
For shareware publishers, examine the documentation provided with both the
shareware and registered versions of the program. Look for sales
information on other products. Which products are they pushing hardest?
Least? What announcements are they making? What information are they
sending their users?

Examine Promotional Tools
-------------------------
What are they saying in their advertising and other promotional tools?
Obtain their newsletters, read their sales letters, examine their order
forms, and so on.

Search The Internet
-------------------
If your competitor is active on the Internet, there is a good chance a
search will show you how. Regularly scan newsgroups, mailing lists, and the
WWW. There are a growing selection of powerful Internet search tools for
exactly this purpose. However, keep in mind that how a person uses the
Internet affects how likely they are to appear in newsgroups. Many people
are very active but not in ways that show up using the common search tools.

Search CD-ROM-Based Media Databases
-----------------------------------
There are a number of databases available on CD-ROM that contain the full
text of articles appearing in various newspapers, magazines, and trade
publications. Check the main reference library in your area to see what is
available.

For computer-related publications, try Computer-Select. This CD-ROM
contains the full text of a wide range of computer publications. It is
fully searchable and updated regularly. There are other CD-ROM's covering
mainstream and scientific media. Check these too, since smart publishers
focus a lot of their attention away from the computer press.

---------------------------------------------------------------------------

                               What To Gather

---------------------------------------------------------------------------

This section lists some of the information you might want to gather about
your competition.

Company Name
------------
Some publishers do not have a formal business, operating instead under
their own name. For these publishers, use the name of the author.

Key Personnel
-------------
Most shareware publishers consist of only the author. Shelfware publishers
and larger shareware publishers often have additional personnel. Where they
exist, the key people to identify are:

   * President (or owner)
   * Vice-President
   * Marketing Manager/Sales Manager
   * Product Development Manager
   * Customer Service Manager

Identify the name and title of each person. Try to learn everything you can
about their background, such as their education, industry experience,
marital status, hobbies, habits, etc. Knowledge can be your most important
competitive advantage -- don't underestimate the importance of
understanding the people who run your competitors. The tactics you use
against a competitor will be influenced by the personalities,
characteristics, and tendencies of these people.

One way to obtain all this information is to simply call and ask.
Surprisingly, most won't even ask why you are interested. If you get
executives that like to talk about their products, business plans, and so
forth -and many smaller publishers are quite willing to tell you all their
plans- well, let them talk! Show interest -you are interested, after all.
By the end of the conversation some publishers will have told you
everything except how much money they have in their bank account. Some will
even tell you that!

Date Established
----------------
In what month and year did the company begin operations? If they distribute
via shareware, have they done so since they started in business? If not,
since when?

This information can provide some indication of the commitment and general
business skills of the competitor. A competitor that has been around six or
seven years, especially in the shareware business, is obviously doing
something right and deserves close attention.

Full or Part-Time Business
--------------------------
Is the business a serious full-time endeavor or a part-time hobby? For most
shareware publishers, their business is a sideline and their commitment is
minimal. Even for many shelfware publishers, the business is only done
part-time. In such cases it can be a powerful advantage knowing that your
competitor is not willing to invest the same amount of time and effort as
you are. This means you'll probably move quicker and be more on top of
market developments than your competition. Likewise, they'll respond slowly
to initiatives on your part.

Objectives/Priorities
---------------------
What are the short and long-term objectives of the competitor - what is it
looking to get out of the business? Common objectives of shareware authors
include:

   * Provide primary source of income
   * Provide supplemental income
   * Showcase personal skills, knowledge, and capabilities to promote a
     paid service they want to provide (such as a programming house
     creating an application to show their programming skills)
   * Personal satisfaction, pride, ego, prestige

Larger publishers (shelfware and shareware) will have traditional corporate
objectives that are quantifiable and specific. For example, a larger
company's objectives might be to control 12.5% of the target market by the
end of the year, along with revenues of at least US$750,000 and
profitability of at least 8.0%.

Knowing the objectives of your competitors is a powerful weapon. By
understanding their objectives you can create competitive tactics that
directly attack their reason for being in business. The quickest way to
marginalize a competitor is to focus specifically on what matters to them
most.

Product Name, Version Number, Release Date & Release Schedule
-------------------------------------------------------------
Noting the version number and release date helps you track trends in the
publisher's update/release schedule. Significant changes may indicate a
modification in the publisher's goals or in its commitment to the product.

The release schedule also provides an indication of the publisher's
turn-around time. A slow turn-around time may be due to thinly spread
resources (such as trying to carry too many products at once) or to a lack
of long-term interest in the product. Hobbyist authors, for example, are
notorious for constantly updating a product early in its life, but with
much less frequency as they get bored and move on to other pet projects.

Take note of new product releases (even those that aren't competing with
you) as well as updates to existing products (those that are and aren't
competing with you). New product releases often give you some indication of
the long-term direction of the company. Likewise, if some products in a
competitor's product line are being updated more aggressively than others,
that tells you something about their priorities and their strategy.

Street Price
------------
The street price of a product is the actual price typically paid by a user,
not the price listed by the publisher. In the shareware industry, the
street price is usually the same as the registration fee. However, some
authors, especially those serving business markets, discount heavily.

For shelfware competitors, ignore the listed price entirely and call local
dealers to determine the street price. Try to get acquaintances in other
cities and countries to check the price in their areas, too, in case the
price varies depending upon location.

Publishers that primarily sell directly to the end user, usually by direct
mail, can be pinned down with a phone call. Of course, don't identify
yourself as a competitor. Just ask for pricing information and details
regarding any available discount offers. Most publishers will send the
information without further thought.

What are their policies or tendencies regarding pricing? For example, will
they always try to match your price? Are they trying to be 'the low cost
alternative'? Is their price consistent with the image they're trying to
convey?

Are their prices higher or lower than comparable products? Why have they
chosen their particular pricing strategy? How flexible are their prices?
What are their terms of sale (money back guarantees, delayed invoicing,
etc.)?

Promotional Activities
----------------------
What is the competitor doing to promote its products? Common promotional
activities include:

   * Product descriptions inside distribution archive (for shareware
     authors)
   * Public announcements (such as on Usenet, CompuServe, and so on)
   * Product reviews
   * Product endorsements
   * Generating 'word of mouth'
   * Publicity through news releases
   * Publicity through writing 'expert' articles
   * Direct mail
   * On-line product descriptions
   * World Wide Web pages
   * Self-run Internet mailing lists
   * Advertising
   * Cooperative promotions (bundling, etc.)
   * Contests
   * Publicity stunts

How much does the competitor spend on promotion relative to other
competitors? How effective is its promotion? How flexible is it? Is the
competitor willing and able to increase promotional expenditures if faced
by a serious competitive threat?

Reputation
----------
What is the reputation of the company and the product? Some publishers have
cultivated an image of responsiveness and commitment to their customers.
Others show a lack of interest, except when updates or new products are
being released. Many are complete unknowns.

The reputation of the competitor greatly affects your marketing since your
message has to be compatible with the perception already held by users. If
you wish for your marketing to change the perception of users, you must
first address the existing perception and slowly start moving the user
towards the desired perception. Trying to instantly portray your product
(or a competitor's product) in a way that significantly contradicts
existing perceptions will only result in your message being ignored or
mocked.

Competitor Commitment
---------------------
Not all competitors are equally committed to their products. Some
competitors, especially hobbyists, will abandon their product as soon as it
conflicts with their primary objectives. To determine competitor commitment
look at such factors as:

   * How important is the product to the company?
   * How committed are key employees?
   * How heavily have they invested in the product?
   * How much prestige and personal reputation is on the line?
   * What's the personality of management?
   * How have they reacted to prior challenges?
   * Have they been willing to cut their price (directly or through heavy
     discounting) in order to maintain or gain market share?
   * How regular are product upgrades?
   * How many complementary products have they developed?
   * How much are they investing in promotional activities?
   * How innovative is their research/development?

Target Market
-------------
To which market is the product targeted? You want to identify the nature
and characteristics of the users the publisher is pursuing. You can
determine this through a number of means, including:

   * Call the publisher and ask. Tell them you're researching industry
     trends and are interested in how their product is doing. Most authors,
     especially in the shareware industry, are thrilled to talk about their
     product and won't hesitate to tell you who their target market is
     (assuming they're sophisticated enough to even know who their target
     market is). They'll tell you how their product will win over that
     market and why it "can't fail". However, the more sophisticated the
     publisher, the less information you'll gather from a phone call.
   * Carefully read all public statements made by that publisher. As
     mentioned above, most authors don't hesitate to provide this
     information.
   * What are other publishers saying about the product? What have
     reviewers said? What are users saying (in Usenet newsgroups, for
     example)?
   * Examine the product. Many publishers explicitly state who their target
     market is. For others, examining the product's design, documentation
     (tone as well as content), price, registration incentives (if
     shareware), and enclosed literature (vendor.txt, order.txt, and so on
     for shareware, and comparable literature for shelfware) will provide
     hints as to the intended buyer of the program.
   * Check how it is being promoted. If the publisher has classified ads in
     PC Magazine, for example, its target market is probably different than
     if it had the same ads in the back of the National Enquirer. If the
     product is being promoted by the author's Internet signature, identify
     which newsgroups and mailing lists the author is trying to stay
     visible within.

How well does the product match up to its target market? Most products do
not reflect the way the publisher is trying to portray them. Recognizing
this, you can highlight it, directly or indirectly, in your own marketing
campaign.

This issue is covered in detail in Chapter 11, Positioning Analysis.

Type of Competitor
------------------
Are they a direct, indirect or potential competitor? If they are a
potential competitor, what is the probability that they will evolve into a
direct or indirect competitor?

Sales Volume & Market Share
---------------------------
Estimate the competitor's sales volume and market share. Accurately
determining sales volume is difficult. Often, the best you can do is come
up with a rough approximation. For your analytic purposes, that's all you
really need. It is the overall 'big picture' that you're interested in.

For clues about a competitor's sales volume, examine their public comments
(especially any interviews they've given), commentary by industry analysts,
and their level of marketing activity (any sustained marketing effort must
be generating enough sales to finance the effort). Keep in mind that you
are interested in all competitors, not just other shareware publishers.
Gathering sales information for shelfware firms is often easier than it is
for shareware publishers since industry analysts track and publish far more
data about shelfware firms than they do about shareware firms.

Distribution Channels
---------------------
How is the product being distributed? Identify each channel, such as
shareware, shelfware, direct mail, bundling, give-away, etc. While there
are obvious differences in distribution between shareware and shelfware
publishers, there are also differences among shareware publishers.

Not all shareware publishers rely exclusively upon shareware for their
distribution (and financially successful shareware publishers almost never
rely upon it exclusively). Likewise, shelfware publishers target different
parts of the retail channel - not all are concentrating on getting their
product into Egghead. Many publishers rely upon direct mail as their only
distribution channel.

How effectively is the competitor using its distribution channels? Many
shareware authors, for example, upload programs to the major Internet FTP
sites but don't take any actions to tell users the program is there - they
simply wait for the user to 'discover' it. If the author distributes
through retail stores, how wide a range of outlets carry the program? Is it
prominent on the shelves or buried beneath a dozen other applications? Does
the competitor have packaging and point-of-sale displays that are
eye-catching and effective?

Understanding the channel used by a competitor is important since each
channel has its advantages and weaknesses. Knowing the channel can tell you
a lot about the problems and opportunities faced by the publisher. This in
turn can provide you with insights into how actions on your part will
affect them, and how they will likely react.

Differentiation
---------------
Differentiation is the process of creating and conveying sustainable,
valued benefits for the user in order to build competitive advantages for
your firm. For example, WordPerfect for DOS provided printer drivers for
almost every printer in existence, something that other publishers were
unwilling or unable to emulate. This gave them an important, long-term
advantage that remained until users began moving to Windows, where printer
drivers are a non-issue (being Windows-specific rather than
application-specific).

Identifying a product's differentiation is trickier than it might first
seem. The hard part is eliminating your own bias and viewing the product
from the perspective of the publisher. What might look like a liability to
you could be seen as a key element of differentiation to them. Using
WordPerfect as an example again, they were famous for many years for the
quality and scope of their customer support. When calling for help you
weren't asked if you were a legal user. No registration number was
required. No charge was levied. And you weren't restricted to 90 days of
support. However, the cost of providing this support was astronomical. For
most companies, this cost would be an unacceptable disadvantage. For
WordPerfect, it was their primary form of differentiation (with printer
drivers almost as important). They weren't just known for good support.
They were famous for it.

Use your knowledge of the competitor's target market as a guide in
identifying their differentiation. By understanding their differentiation
you can better recognize their strategic objectives and tactical plans.
This means you are more likely to anticipate their actions in a given
situation.

Differentiation is covered in detail in Chapter 12, Differentiating Your
Products.

Sustainable Competitive Advantages
----------------------------------
What are the competitive strengths and weaknesses of the product? You're
only interested in factors that affect, or might affect, the competitive
balance between their product and others in the marketplace. For example,
if the product has several features that your product does not have, but
your research shows that those features are not highly valued by the target
market, then those features are not a strength. In fact, if those unvalued
features make the program more complex or otherwise difficult to use or
learn, the features could represent a competitive weakness, even though the
publisher probably thinks they are a strength. This is the value of market
research.

Some areas you might want to examine to determine competitive advantages
and disadvantages include:

   * Difficulty of duplicating features
   * Technical expertise
   * Financial resources
   * Managerial and marketing expertise
   * Geographic location
   * Switching costs
   * Government or legal restraints/aids
   * Scope and sustainability of differentiation
   * Organizational/logistical capacity
   * Support and services
   * Reputation

Sustainable advantages are those which you or other firms would have
difficulty in duplicating. It is sustainable advantages that represent a
publisher's long-term strength. These are an off-shoot of your
differentiation.

Market Reception & Perception
-----------------------------
How has the product been received by the marketplace? How has it been
reviewed? What commentary have users been making? How do they perceive the
product?

You can gather this information through several sources:

   * Product reviews in various publications
   * Formal surveys of users
   * Usenet commentary and other online discussions

Understanding how the market perceives the various products can assist you
when positioning your own products.

Complementary Products
----------------------
Complementary products are related products being sold by the same
publisher. The idea is to present a comprehensive product line where sales
of one product logically lead to increased sales of the related products.
Complementary products of a time management system, for example, might
include a time-and-expense billing application (as an add-on for
consultants, lawyers, accountants, etc.), pre-printed forms for reports, a
time management handbook, a monthly newsletter (tailored to the program, of
course), and so on. Each product would help sell the other products.

What complementary products are being sold by each competitor? How do they
support each other (what cross-selling tactics have been used)? How
effective are their complementary products? Is the publisher overly reliant
on one particular product driving sales for the entire product line
(leaving them vulnerable to a concerted attack on the primary product)?

Complementary products are discussed in detail in Chapter 7, Maximizing
Total Revenue.

Product Life Cycle Stage
------------------------
Where is the product in its life cycle? Product life cycle represents the
basic stages every product usually goes through during its existence. These
stages are:

   * Introduction
   * Growth
   * Maturity
   * Decline

While most products go through each of these stages, the time spent in each
stage and the results achieved during it vary from product to product. A
successful product might have a short introduction stage, a long growth
stage, an even longer maturity stage, and a modest decline. An unsuccessful
product might have a long introduction stage, a brief growth stage, almost
no maturity, and a rapid decline. However, some successful products,
especially in markets with a large number of indirect and potential
competitors, may have other life cycles, such as a very long introduction
stages, a short but exhilarating growth stage, a long maturity stage,
followed by a very rapid decline stage.

By identifying the current life cycle stage of a competing product you can
judge the competitive factors it will face. This can provide you with
competitive tactics to address the possible threat posed by that product.
Along with differentiation and positioning, an understanding of the
implications of the product life cycle is critical to the long-term
viability of your shareware business.

The product life cycle is discussed in more detail in Chapter 17, The
Product Life Cycle.

Customer Service Policies
-------------------------
What level of service does each competitor provide its customers? By what
methods does it provide support (if it provides support at all)? How would
you rate its service?

Common support methods include:

   * Electronic mail
   * Telephone
   * Surface mail
   * Online forums
   * Self-run mailing lists
   * Usenet newsgroups
   * Product FAQs (Frequently Asked Questions)
   * Interactive World Wide Web sites
   * Fax-back systems
   * Voice mail

Competitive Alliances
---------------------
What agreements, connections, partnerships, or other alliances does the
competitor (or the specific product) have that affects the competitive
balance between them and other competitors? Look for joint marketing
agreements, bundling arrangements, package deals, personal connections that
can help open important doors, and so forth.

You need to understand these alliances to know how to market against them.
If your competitor has an inside track for getting a message to your
potential users, you need to find a way to counter that message, either by
creating your own inside track, or by inhibiting the competitor's inside
track.

Alliances are discussed in Chapter 14, Strategic Alliances.

Business Overhead
-----------------
Try to determine what expenses each competitor is carrying. Many software
publishers have costly overhead that fails to generate appropriate revenue.
A high overhead by itself may not be a problem. The question is what return
they're getting for their expenditure. Where overhead is unproductive, the
publisher may be at a competitive disadvantage.

Typical warning signs include:

   * Large development staff
   * Long-term marketing, production, or development commitments
   * Large marketing budget
   * Multi-channel presence
   * Leading-edge technological development
   * Large-scale direct marketing activities
   * Expensive, luxurious offices
   * 1-800 numbers

As discussed in Chapter 9, Identifying Competitive Opportunities, these
expenses could as easily be advantages as disadvantages. The question is:
Are these expenses serving a productive purpose or are they wasted
overhead?

A publisher burdened by high overhead is vulnerable to a wide range of
competitive tactics. Against such a publisher, you could offer heavily
discounted competitive upgrades (thus stealing much of their critical
upgrade revenue) or similar promotional activities. In order to finance a
high overhead the publisher must generate a larger level of sales. Anything
you do to inhibit the publisher's sales makes the overhead increasingly
troublesome.

Market Focus
------------
Is the competitor inwardly or externally focused? Many publishers
concentrate on themselves and their products to the exclusion of the
marketplace. This inward focus blinds the publisher to many of the changing
realities of the marketplace, such as changes in user needs and
expectations, competitor actions, and other environmental influences. Such
publishers are always caught off guard by indirect and potential
competitors.

Feature Breakdown
-----------------
For each product, create a comprehensive product check list on which you
can classify each product. Each item in your check list should indicate the
status of that product for the given feature. The status could be 'yes'
(feature present), 'no' (feature not present), or 'partial' (feature only
partially available).

The following checklist gives an example of what such a chart would look
like:

                          [Image: chapt10b.gif]

Don't allow this kind of checklist to draw you into feature wars. While
feature wars may be necessary and effective in the marketing of a shelfware
product, they are not necessary in the shareware industry. A feature war is
necessary only when you need to convince the user that your product is
comprehensive. With a shareware product, you only need to persuade the user
to take a look on their own. They can verify for themselves whether the
product is comprehensive.

Remember, your initial marketing objective is to get the user to try the
product. A shelfware publisher's initial objective is to get the user to
purchase the product. Since your objectives are different, your strategies
will also be different.

Competitive History
-------------------
How has the competitor responded to competitive threats in the past? Do
they lead or follow the marketplace? Knowing how a competitor has responded
previously can be an important indicator of how they will respond to future
threats.

Marketing Mix
-------------
What's the marketing mix for each competitor? Greatly simplified, the
marketing mix consists of the mix of product, place, promotion, and price.
There are almost an infinite number of ways these four variables can be
mixed. Understanding them is essential to understanding the competitor.

Product is the application itself, along with any complementary products
and services that are available. If the application is a time management
program and the competitor also has special utilities and a time management
'tips' book available at added cost, all should be lumped together as the
'product'. The only exception to this is if you believe that the utilities
and book are legitimate products on their own. If they are intended to
leverage off of the primary product, they should be treated as one product
with a variable price.

Place is how a product gets into the hands of users. How is it sold?
Typical methods are:

   * Freely distributable (as with shareware)
   * Direct mail
   * Direct response (other than direct mail)
   * Through retail stores
   * Bundling
   * Give-away

You can have more than one "place" for a given product. For example, you
could distribute by direct mail as well as by shareware.

Promotion is those activities by the competitor designed to draw attention
to the product. This includes advertising, publicity, contests, etc.

Price is the amount charged for the product and any discounts, special
offers, guarantees, and so on offered.

While all of these issues are mentioned individually elsewhere in this
chapter, they also need to be considered as a mix. How does the product's
design and characteristics match with its price? Is the promotion
appropriate for the distribution? Asking these kinds of questions will
often reveal inconsistencies in the competitor's activities that can
provide you with tactical opportunities. For shareware publishers, the most
common inconsistency is having a product designed and positioned as
shelfware but marketed as shareware. Over 90% of shareware products fail to
even remotely address the nature of shareware in their design.

Other Information
-----------------
The above topics represent only a fraction of the types of information you
can gather. Give a lot of thought to the information that matter most to
your business.

While it is important to track and analyze a wide range of information,
don't get caught in the trap of collecting information just for the sake of
collecting it. Each item tracked should have a specific, clearly defined
role. If you can't offer a detailed, unequivocal explanation for why you
are tracking an item, you probably don't need to track it. Don't become a
pack-rat for information. Collect what you need and nothing more.

---------------------------------------------------------------------------

                      Establishing Competitor Profiles

---------------------------------------------------------------------------

Competitor profiles are concise descriptions of each of your competitors.
Keep each profile to one to three pages in length, outlining in them most
of the topics covered in this handbook. Place the emphasis on what
distinguishes the competitor from others.

The purpose of competitor profiles is to provide a good summary of each
competitor for day to day reference when making tactical decisions. When
you need to quickly determine what makes that competitor 'special' it
should only take a casual glance over the profile. Don't try to maintain
all the profiles in your head. You'll miss an essential point just when you
need it most.

While you need a printed version of your profile, the essential information
should all be held in a 'competition database'. This database organizes all
the information you've gathered about your competitors, breaking it down
into as much detail as possible. This allows you to perform complex
searches through all of your data looking for interesting trends and
anomalies.

Whenever possible, structure the information so that it is represented
numerically. A little advance thought when designing the database and when
gathering your information can make this easy.

For example, you might record information on the reputation of each of your
competitors by ranking them as "Excellent", "Good", "Average", "Poor", or
"Terrible". Your database might track this as '5' for "Excellent" to '1'
for "Terrible". A second field in the database might contain notes or
keywords relating to the reputation.

Set boundary flags throughout your database to automatically warn you of
unusual results. While boundary flags help you catch errors, their main
purpose is to recognize interesting patterns or correlations.

Keep your database up to date. Competitor analysis isn't something you do
once a year. It's an on-going process requiring your constant attention.
Purge outdated information regularly and always question the assumptions
used in gathering the data.

---------------------------------------------------------------------------

                                  Summary

---------------------------------------------------------------------------

Spending hours upon hours analyzing your competition isn't anybody's idea
of a good time. However, it is an essential task. A thorough understanding
of your competition provides you with important competitive advantages. You
need the information if you are to have a usable product strategy.

It's easy to put off competitor analysis and you'll find yourself tempted
to do just that. Don't give in to the temptation. What you learn from the
analysis is simply too valuable.

         ---------------------------------------------------------

                 Should You Read The Business Of Shareware?
                 ==========================================

Here's what "The Father of Shareware" has to say about The Business of
Shareware:

     I cannot be lukewarm about this book. It is simply the best book
     ever written to help shareware authors. I wish I had 500 copies
     of the book - one to give to every puzzled shareware author who
     asks me what he should do next.

     Eugene... Where were you when I needed you? For 12 long years I
     stumbled through the shareware / software publishing wilderness
     without help. If only you or your book had been available to me,
     I might have avoided most of my biggest mistakes.

     Heck, I know I would have made a lot more money than I did.

     This book is easily worth 10 or 20 times its price!

     This book is like drinking pure knowledge from a fire hose. There
     is no fluff here. Read it all. Every line. Carefully apply it all
     to yourself. Mallay presents all sides of most issues. The
     practical experience to be gleaned from this book could be
     literally worth millions of dollars to you.

     The next time I am asked to give a talk or a presentation on the
     subject of shareware marketing, this book will be at the podium
     with me.

     Jim Knopf
     knopf@halcyon.com
     http://www.halcyon.com/knopf/jim

     (Jim Knopf -aka Jim Button- invented the shareware concept back in
     1982 with his top-selling program PC-File. He's one of the great
     success stories in shareware. If you haven't done so already,
     visit The Father of Shareware WWW Page - it's a great site! And
     be sure to read his story of how it all began.)

               ---------------------------------------------

Here's what you will learn from The Business of Shareware:

   * The five stages of the shareware sales process and how to design your
     program to take best advantage of them.
   * How to create an incentive mix that gets results -- one that maximizes
     profits, not just registrations.
   * Proven ways of generating additional revenue from users, even those
     who don't register.
   * How to target the right users -- those with the means and inclination
     to pay for your program.
   * What the product life cycle is, and what it means for your business.
   * How to recognize and take advantage of the 17 signs of competitive
     opportunity.
   * Effective techniques for designing "selling power" right into your
     application.
   * Ways to use strategic alliances to expand your market opportunities
     and reduce your operating expenses.
   * How to use differentiation and positioning to make your product stand
     out in the marketplace.
   * How to analyze the effectiveness of your strategic and marketing
     decisions.
   * And much, much more!

The Business of Shareware is available in ASCII and HTML formats (you get
both). Delivery can be by email or surface mail. And since I accept
purchase orders from most shareware authors, you can have your copy in a
matter of hours!

         ---------------------------------------------------------

                   No-Hassle 90-Day Money-Back Guarantee
                   =====================================

Your satisfaction is my top priority. If for any reason you are not
completely satisfied with The Business of Shareware, simply send me a
signed letter within 90 days stating you've destroyed all copies of the
book and I'll send you a full refund. No hassles. No fuss.

That's my commitment to you.

         ---------------------------------------------------------

                      Order Now For Immediate Delivery
                      ================================

     Get your copy of The Business of Shareware for just US$19.95!
     Order now using my WWW order form available at:

          http://www.interlog.com/~emallay/Shareware.html

     and you'll have your copy of The Business of Shareware in a 
     matter of hours!

          ===>>No credit card necessary -- I'll invoice you.<<===

     Company purchase orders are accepted from most shareware
     publishers (Terms: Net 30).

         ---------------------------------------------------------

You can also contact me by any of the methods listed below:

  Email:         emallay@interlog.com
  WWW:           http://www.interlog.com/~emallay/
  Surface Mail:  Eugene Mallay
                 27 Short Hills Drive
                 Hilton, NY, 14468 

International customers -- Payment must be in US currency, though it
may be made by regular check (cheque), drawn on your personal or 
business account. Simply make the check payable to 'Eugene Mallay' 
for US$19.95. For copies delivered on disk by surface mail, add 
US$3.00 for shipping and handling (total of US$22.95). 

        ==============================================
        = Thank you for reading this sample chapter! =
        ==============================================
      
