Below Bargain Basement: Software Freebies

When software maker Computer Associates International Inc. decided to jump into the market for personal-finance software last year, it knew it had an uphill battle. For a decade, owners of personal computers have been balancing their budgets, tracking investments, and paying bills with programs such as Managing Your Money or Quicken. And the Islandia (N.Y.) maker of mainframe programs was hardly a household word. How to overcome these hurdles? Make like a consumer-goods company and give the product away--like a free sample of toothpaste. Then, hope customers will come back and pay for more.

That's exactly what CA has done. When it introduced Simply Money in June, it promised to give the program away to the first 1 million customers who agreed to pay a $6.95 shipping charge. And while Marc Sokol, vice-president for product strategy, says the company long ago surpassed the million mark, the company is extending the offer because of the high demand. "We're still doing several thousand a day," he says.

IMITATORS. Will the giveaway program work? That won't be clear until CA goes back to selling upgrades and other products. But the strategy is already spawning imitators. Small companies such as MicroFrontier Inc. in Des Moines and Central Computer Products in Fillmore, Calif., have started similar promotions. In three years, MicroFrontier's Color It! imaging software has won many awards from trade magazines, yet the company claims only about 50,000 to 60,000 customers. "I would be happy to do a million [orders] in three months," says MicroFrontier President Keith P. Woodard.

So far, the big software makers are skeptical of the approach. "Name one company that has survived on giving away products," says Scott D. Cook, co-founder and president of Intuit Inc., maker of the market leader, Quicken. And he questions use of consumer-goods tactics in software: "Shampoo you can change, but once you get data into software, it's hell to change."

Even by Sokol's estimates, only 50% of those who ordered the program are still using it regularly. While that means only 500,000 customers compared with Intuit's 4.8 million, the offer has pushed CA past Microsoft, which has an estimated 300,000 customers for its Money program. "CA needed a way to get into the desktop market," says Chris Le Tocq, a director of market research for InfoCorp. "This was a good way for them to do it."

Now, the company is ready for another assault. On Oct. 27, CA plans to introduce the next product in its consumer-software line. Called Simply Tax, the program will offer expert advice and planning tips for preparing next year's complicated income-tax returns. Like its sister program, Simply Tax will be "given away" for a shipping-and-handling charge of $9.95. It will also be available through stores such as Office Depot Inc. and Staples Inc., at a price set by the retailers.

BACK FOR MORE? The goal, says Sokol, is to build a bank of subscribers to an expanding Simply line of software products. That's not a bad idea, since 20% of the revenue in personal-finance software comes from repeat customers, says Le Tocq.

But will they line up to buy? So far, it's hard to tell. Tom Testi, an Oklahoma City software engineer who gave up Quicken after trying the CA program, says he would probably buy any upgrade. "Paying for the upgrade will be worth it if the features are there," he says. CA plans to start selling a Simply Money upgrade in 1994--for an as yet undetermined price.

On the other hand, lots of consumers may hold out for more freebies. Gail Berniato, a teacher in Tolland, Conn., is one. She says she would pay for a Simply Money upgrade "only if they offer it real cheap."

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