by Al Harberg, the press release guy from DP Directory, Inc.

"There are two kinds of companies: The ones that change and the ones that disappear,"

Kotler knows marketing

Back in 1999 when this book was written, Kotler had sold more than three million copies of his textbooks. He's done marketing consulting work for AT&T, General Electric, Ford, IBM, and other Fortune 100 companies.

Earlier this year, Kotler On Marketing was the Educational Software Cooperative's (ESC's) Software Marketing Book Club selection. The discussion of Kotler's book brought up some ideas that help software developers sell more of their programs. The purpose of this article is to discuss some of the more interesting, money-making insights generated by the book's first chapter.

The changing marketplace

Kotler says, "Companies often fail to recognize that their marketplace changes every few years." He adds, "Last year's winning strategy may become today's losing strategy."

Rosemary West agrees.

"Certainly, this is a problem that plagues many independent software developers.

"There are many who started back in the 80s using the original or semi-original shareware model. Contrary to what many people think now, that marketing technique actually was quite successful for a lot of people.

"But the marketplace was very different then, both in terms of the technology available for distributing software, and in terms of customer demographics, attitudes and behavior. Some of the other changes that affect us are operating systems and available programming tools.

"Those who have remained successful, or who have become even more successful, are usually those who have adapted to change (whether or not the change suits their personal preferences).

"From time to time I hear from others who have been unable or unwilling to make the necessary changes, telling me that they are giving up being independent software developers. Some go into completely different lines of work. Some do something related, such as contract programming for other developers or developing specialized software that is used behind the scenes in business and industry, so that they don't have to market it directly to consumers. There is nothing wrong with changing course if that's what you want to do.

"But for those who would like to keep doing what they are doing and growing their current businesses, change is absolutely necessary."

In recent years, marketing has become more complicated. Kotler believes that technology and globalization are the two powerful forces that are influencing all of our marketing.

Kotler's 9 winning marketing practices

• Insist on high quality.

Few things in life are simple, and there are problems with this approach: Quality is such a hot topic that many companies are emphasizing it, and, in general, there are a lot of high quality products and services out there. Many customers are unwilling to pay for high quality. Kotler points out that opinions vary on what constitutes quality. He tells us that there is no "right way" to judge quality. In the software industry, for example, some people try before they buy, and rely on their own judgment. Others listen to experts (magazine and newspaper editors, bloggers, friends and relatives).

• Deliver better service (speed, cordiality, knowledge, problem-solving).
• Lower your prices.
• Increase your market share. New customers feel more comfortable buying from market leaders.
• Provide adaptation and customization.
• Continuously improve your product or service.
• Innovate. Kotler says that new product failure is around 80 percent for branded consumer packaged-goods.
• Enter high-growth markets.
• Exceed customer expectations. Kotler believes that simple differentiation isn't enough. You have to create a product or service that your competitors can't imitate easily.

Quality matters

Despite the wide range of marketing practices that Kotler mentions, most of the discussions in the ESC Software Marketing Book Club were about his initial point that we should insist on high quality.

Andrew Macdonald, the principal architect and developer at New York City-based Interfathom, agrees with Kotler's point that many prospects are unwilling to pay for high quality. Interfathom's flagship application is TaskMerlin, a project and task management tool.

"People make a cost/benefit assessment," Andrew says, "and retailers like McDonald's and Wal-Mart are often good enough. But to run with Kotler's point, I'd add that quality is an important factor to think about with internal business processes as well, and this is where companies like McDonald's and Wal-Mart excel.

"For a developer, that means thinking about the quality of build and test procedures, the system for tracking bugs and requests, and methods for managing one's time effectively. But tradeoffs apply there as well. If you're spending your time developing the highest quality product testing environment known to humankind, but aren't selling a lot of software, then perhaps that time would be better spent elsewhere."

Rosemary disagrees with Kotler's assertion that opinions vary on what constitutes quality. She believes that it's not that difficult to separate high quality software from low quality software:

"If you are comparing the flavors of Coke and Pepsi," Rosemary explains, "or the visual appeal of Frank Lloyd Wright vs. Frank Gehry, then opinions may vary about what constitutes quality.

"But I think there are some standards of quality that can be looked at objectively. Does my T-shirt fall apart the first time I wash it, or will I still be able to wear it two years from now? Does this omelet contain two eggs, or does it contain flour and yellow food coloring?

"If you want to use quality as a selling point and to build customer loyalty, then you need to define what quality is, and make it relevant to the customer. It's not relevant to me that my neighbor prefers Pepsi, if I think Coke tastes better. But it is relevant to me that the cheap T-shirts shrink and fall apart at the seams, thus costing me more money when I have to replace them, while the quality T-shirt is sturdy and doesn't shrink, helping me stay within my clothing budget.

"For software this could include all kinds of factors, such as the fact that your $40 program performs the functions that I'd have to buy two $25 programs to get elsewhere, or that your database can handle twice as many fields as most others, or that your customer service is available 24/7, while your closest competitor only takes phone calls three days a week."

I'm not so sure that quality can be so easily defined. There are certainly quality issues that most people would agree on - say, a program being stable, and not crashing users' computers.

But opinions vary widely regarding program design and functionality.

For me, the perfect application might be one that lets me quickly and efficiently rename a folder full of files. For others, "high quality" might mean a huge application that includes all of the functionality of Windows Explorer, plus dozens of file renaming options.

There have been many times when I've preferred a three-star program to a five-star program because I didn't want the overhead and learning-curve of the fuller-featured application.

Understanding your customers

Kotler asked his seminar attendees to describe their customers. Despite the fact that his students came from a widely diverse range of industries and locations, their responses sounded a lot like what you'd expect in the software development industry.

Seminar attendees' comments included:

• Customers are more sophisticated than before
• They're more price-sensitive.
• They don't have a lot of free time.
• Customers aren't willing to spend a lot of time shopping.
• They don't see a lot of distinction between various suppliers.
• Customers don't care as much about brands as they used to.
• And they're not as loyal to suppliers as in the past.

Are your marketing tools working?

Kotler then asked these same seminar attendees how their marketing tools are working. These marketing managers told him:

• My products aren't much different from competitive products.
• Dropping prices doesn't work because competitors respond in kind, and everybody loses.
• Advertising costs more and more, and is less effective.
• Profit margins are shrinking.
• Competition is increasing.
• And category-killers are taking market share.

Again, it sounds like the problems that mISVs experience in the software industry are the same challenges that affect many industries worldwide.

Neanderthal Marketing

Kotler believes that many companies are having these problems because of what he calls "Neanderthal Marketing."

Signs of Neanderthal Marketing include:

• Failing to distinguish between marketing and selling;
• Being concerned about how many new customers you get, versus spending time taking care of your customers;
• Measuring profit per transaction versus concentrating on the lifetime value of a customer;
• Pricing based on mark-up of costs, versus figuring out the value of the product to your customer;
• Planning each communication vehicle independently, versus creating a common marketing plan;
  Concentrating on selling what you sell, versus figuring out what customers want to buy.

Kotler believes that companies that market intelligently see stakeholders as partners, and not as the enemy.

Play well with others

In the software industry, many developers and vendors don't play well together.

I've found that the most successful developers have figured out that their eCommerce providers, file hosting companies, marketing consultants, and other vendors are the good guys, and not the bad guys. The longer I stay in this business, the more I'm convinced that mutually-beneficial business relationships are crucial to business success.

Rosemary takes a very pragmatic approach to the question of relationships between software developers and vendors. "As in any business, some are good, most are average, and some are bad. Good is preferable, average is often perfectly acceptable, but bad is just bad.

"If my host is unreliable, it makes me look bad when customers can't get to my website or can't download files. If my ecommerce provider changes things without telling me and breaks my order form, I lose sales and customers perceive the nonfunctioning web page as my fault. Or if, as has happened occasionally, they engage in business practices that either are unethical or that create an unethical impression, it makes customers lose trust in me.

"At the same time, customers who are impressed by my fast downloads and superb shopping cart will be more likely to buy again and to recommend me to their friends."

Rosemary and I agree that business relationships are crucial to business success, and that networking groups such as ASP and ESC are important. "We can help each other with recommendations to find good service providers," Rosemary says. "And we can reward those who have provided us with reliable service and good support by sending new customers their way."

Current customers matter. Lots!

Kotler believes that smart companies are concentrating on selling additional products to existing customers.

In our industry, for example, it's so much easier to sell software again to existing customers than to find new customers. Sell them other applications that you offer on an affiliate basis. Upgrade them from the standard to the pro version of your app. Sell family licenses to home users, and sell multi-user and site licenses to corporate users.

"Or just sell them yearly updates," Rosemary added. "It's amazing how many developers fail to do this. Sometimes I find out by chance that a program I am using at version 5 is now up to version 8. But I've never received an email, a postcard, or a hint in the program itself suggesting I check for updates. I am interested in updates and sometimes buy them so these guys are missing an opportunity."

Kotler tells us that smart companies are distinguishing between profitable customers and less-profitable ones. If he were talking to software developers, I think Kotler would urge mISVs to spend less time worrying about non-customers who think that you owe them freeware. Eliminate customers who require too much support time.

The bottom line:

As you can tell from this article, Kotler On Marketing contains wall-to-wall insights and ideas that can help developers sell more software. And all of the information discussed above was taken from Chapter 1 of the book.

If you can gather this much information from the first 16 pages of a marketing book, it's probably safe to say that you should buy the book and study it yourself. Or join ESC and read the hundreds of Software Marketing Book Club postings for this book, and for each business book that we've been studying for the last ten months.

Today's economy demands that we pay more attention to marketing our software and services. Don't get caught with the same old marketing ideas. Find a way to get a steady flow of fresh insights that can help you build your software business.

About the author

Since 1984, Al Harberg has been helping software developers write press releases and send them to the editors. You can visit him on www.dpdirectory.com or sign up for his free email newsletter by writing to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .