A couple of years ago, Software Publishing Corp. was just another hotshot personal computer software company in California. Then it began giving away its software for free.
Well, not exactly for free.
Ripping a page from the consumer marketing texts, Software Publishing became the first company to offer what it called "trial size" versions of its software -- much as household goods companies offer free samples of their soap and shampoo.
Software Publishing's trial software was good enough to sample but not complete enough for actual use. The promotion sparked thousands of sales and put the fledgling software industry on notice that the marketing of software could be even more important than the design of software.
Marketing and market positioning is Software Publishing's strength. With a tip of its floppy disks to Ivory Snow and Tide, the company unabashedly aspires to be "the Procter & Gamble of software," President Fred Gibbons said.
While the $35-million-a-year company is about $14 billion a year shy of that goal financially, it has won high marks and high profits with its packaged-goods approach to software marketing. By freely practicing the P&G style of aggressive brand management and innovative promotions, Software Publishing has turned its line of PFS software into a family of best sellers while turning itself into one of the fastest growing software companies in the industry.
"Freddie has the smartest growth strategy of any company in the field," said Tim Bajarin, a computer industry analyst with Creative Strategies. "Software Publishing also has the best controlled growth in an industry that's constantly in turmoil."
The core of Software Publishing's growth has been its family of low-cost dedicated application software for personal computers. Unlike Lotus Development Corp.'s popular 1-2-3 software package, which blends electronic spread sheet, graphics and data-base functions into a single integrated program, Software Publishing publishes single-function packages: PFS: FILE for data bases, PFS: WRITE for word processing, etc. There are seven packages in all.
Also unlike Lotus, Software Publishing has several best-selling programs. Most software companies rely heavily on one best-selling product. Software Publishing is one of the few multiproduct software companies in the personal computer industry.
The special trick to the PFS line is that all these packages are compatible with one another; a report written with PFS: WRITE can be stored easily in the PFS: FILE data base. Similarly, a PFS: PLAN spreadsheet can be converted into PFS: GRAPH graphics. Consequently, the computer owner only has to buy the one or two or three packages he thinks he will need.
"We choose to do the most with the fewest features that do the most," said Gibbons, who started Software Publishing six years ago with friends while at Hewlett-Packard Co. "Lotus opted for the most features with the most."
Software Publishing's programs are strictly meat-and-potatoes functional. "One of our design rules is 'Thou shalt eschew creeping technical elegance,' " said John Page, a cofounder of Software Publishing who directs the company's research and development efforts.
The software isn't crude -- it's purely for the mass market; for "the casual professional, not the power user," Gibbons said. We're the Hondas and the Toyotas of the business -- we're the high-volume/low-cost suppliers."
PFS: WRITE retails at $140 locally, compared with $350-plus for Microsoft's Word program and the original Wordstar, two more elaborate word-processing programs.
With competition intensifying, however, Software Publishing has recognized that it needs to explore new market opportunities. In its earliest days, the company expected that the home and education markets would be a major source of growth.
"The reality is that profits come from business productivity software," Gibbons said. "We've gotten zero from education software."
The company now spends an estimated 15-percent-plus of its revenue on software research and development, including a search for ways to modify existing software so that it can appeal to new kinds of users.
But perhaps the most important shift in Software Publishing's approach to marketing is the recognition that it can't grow just on its own.
"You need partners to open new markets," Gibbons said. "You can't control your own destiny in this business."
The company recently forged a number of strategic alliances to enter new markets. With MCI Communications Corp. and Bank of America, Software Publishing offers its PFS: ACCESS program so that it can participate in emerging electronic mail and home-banking-by-computer markets. Unquestionably the most important strategic partner, however, is International Business Machines Corp., which distributes the PFS line under its own name as the "Professional Assistant" series, which features the advertising campaign showing executives "lining up all their ducks in a row."
The IBM alliance means that Software Publishing has the world's largest and most successful computer company marketing its software into the large corporations -- an important complement to Software Publishing's existing retail distribution channel.
On the other hand, the relationship creates an uneasy dependence on IBM. Gibbons concedes that the alliance does limit Software Publishing's flexibility to market to large corporate customers, but he argues that, for the foreseeable future, IBM is committed to Software Publishing as its brand of personal computer software.
In addition to partnerships, SP is exploring direct mail as a new channel of distribution to handle special "accessory software" -- low-cost software that lacks broad appeal but might be of interest to the right 15,000 or 20,000 computer users. Software Publishing's Power Up! direct-mail catalogue already is generating more than $1 million a year in sales.
Despite this innovation in product and promotion, the new corporate alliances and the expanding channels of software distribution, Software Publishing still may be vulnerable.
Gibbons is counting on a continued growth in the sales of personal computers at a 35 percent annual rate over the next two to five years. If that rate isn't matched, Software Publishing faces a sharp drop in its own growth rate. In essence, the company is very dependent on the health of the personal computer industry at large.
Unlike most personal computer software companies, however, the question at Software Publishing really isn't one of continuing survival -- it's now continuing growth. Most analysts are willing to give Software Publishing the benefit of the doubt.
"They're the best-managed company in this business," said Esther Dyson, an industry analyst.
Whether good management and savvy marketing is enough to surmount entrenched and well-capitalized competition in a volatile market is a question that Gibbons can answer only optimistically.
But how Software Publishing copes with its current corporate transition is an important signal to other software companies that hope to survive the continuing shakeout in this industry.