Consumer Software Buying Trends - Elastic Path Software Research Report


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Software publishers face the same threats that the music and media industry have been forced to accept, that consumers value their products but are no longer prepared to pay for them. Software publishers and retailers alike must find new ways of licensing their products that resonate with their consumers.

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Consumer Software Buying Trends - Elastic Path Software Research Report

  1. Consumer Software Buying TrendsA consumer research study commissionedby Elastic Path Software Inc. They [software publishers] face the samethreats that the music and media industry havebeen forced to accept, that consumers valuetheir products but are no longer prepared topay for them. Software publishers and retailersalike must nd new ways of licensing theirproducts that resonate with their consumers.
  2. Survey Background This online study, conducted by Vision Critical, polled 1,004 US adults over the age of 18 who have purchased software or downloaded free software online for their PC or laptop and/or purchased apps or downloaded free apps for a smartphone or iPad in the previous 12 months. Respondents had to have, either at home or at work, at least one of the following: a laptop, desktop, iPad, tablet, e-reader, or a smartphone. The survey was developed to examine the factors that in uence consumer purchase decisions towards software and the consumer experience when purchasing, upgrading, and renewing software. Executive Summary Ninety-nine percent of adult software consumers in the US have access to either a PC or laptop computer at home or work, 43% have a smartphone and 12% have an iPad or e-reader. These consumers are regularly downloading software or applications for these devices, but much of what they download is either free or costs less than $50. The maturity of open source software and the widespread availability of free smartphone applications have created choice for consumers who traditionally have paid for software. In fact, 46% of software owners have switched to a free version that they consider as good as their existing paid software when they were due to renew their subscription or pay for an upgrade. For software publishers this competition is making it more and more dif cult to sell to new consumers and retain existing customers. Software publishers must improve their tactics for selling online and ensure that they are offering an online experience that parallels the high expectations that today’s savvy online shoppers expect. They face the same threats that the music and media industry have been forced to accept, that consumers value their products but are no longer prepared to pay for them. Software publishers and retailers alike must nd new ways of licensing their products that resonate with their consumers.01 Consumer Software Buying Trends
  3. Key Findings Where have you purchased software in the past year? The online channel reigns for both Directly from the software publisher’s website research and purchases. (e.g., or 52% Among all software consumers there is a clear preference In a retail store ( gure 1) for purchasing software online either directly from the (e.g., Wal-Mart or Best Buy) 48% publisher’s website or from a retailer’s website, although 48% of From a retailer’s website software consumers have also purchased in retail outlets in the (e.g., or 37% past 12 months. The rapid adoption of smartphones and tablets From an app store among software consumers ( gure 2) has resulted in the rise (e.g., Apple App Store or Android Marketplace) 28% of online and on-device application stores such as Apple’s App Store. Other 8% 0% 10% 20% 30% 40% 50% 60% Base: 784 US adults who have paid for software [Figure 1] Do you have any of the following at home…? Laptop/Desktop computer 99% Smartphone (e.g., iPhone, BlackBerry etc.) 43% iPad, tablet or e-reader (Amazon Kindle, Nook, etc.) 12% 0% 20% 40% 60% 80% 100% [Figure 2]02 Consumer Software Buying Trends
  4. When considering a software purchase where do you start your research? Consumers may purchase more software online than of ine Search engine 49% because they start their research process online ( gure 3). Online product reviews 44% Forty-nine percent of software consumers start their search Friends/Family/Colleagues 38% for software on internet search engines, 44% rely on online On the software publisher’s website 31% customer product reviews, and 31% start their research on (e.g. or either the publisher’s or a retailer’s website. The price-conscious On a retailer’s website 31% (e.g. or consumer starts their research on online shopping price In a retail store 23% comparison sites, and 11% of consumers start their research Online marketplace (e.g. Apple App Store) 20% using social media sites. Shopping comparison site 19% Technology magazines 15% Social media (Facebook, Twitter, blogs) 11% Other 2% 0% 10% 20% 30% 40% 50% 60% [Figure 3]03 Consumer Software Buying Trends
  5. Games dominate software Which of the following types of software have you consumption, especially on purchased or downloaded for free in the past year mobile devices. …for your desktop/laptop computer(s)? System utilities such as anti-virus software dominate spend for home desktop and laptop computers, followed secondly Systems Utilities 59% by games ( gure 4). Spending for games dominate for mobile Games 42% devices such as smartphones, iPads, and e-readers. Educational software and games have signi cantly higher adoption rates Operating System 27% among the Gen-Y population (ages 18-34). Imaging and Imaging and Graphics 25% graphics apps for smartphones are particularly popular for Personal Productivity 23% the Gen-Y population. High income households (>$50k) buy more nancial software. Finance 18% Other 17% Education 12% 0% 10% 20% 30% 40% 50% 60% 70% Base: 996 US adults with a desktop or laptop at home or work [Figure 4a] …for your smartphone, iPad, or e-reader Games 59% Other 29% Imaging and Graphics 20% Personal Productivity 18% Education 14% Finance 14% Operating System 11% Systems Utilities 10% 0% 10% 20% 30% 40% 50% 60% 70% Base: 455 US adults with a smartphone, iPad, or e-reader at [Figure 4b] home or work04 Consumer Software Buying Trends
  6. Brand af nity and reputation are Which of the following in uenced your last strong emotional factors when software purchase or free software download? choosing software. Strong In uence Moderate In uence Minor In uence No In uence PC and Mac owners are long term users of popular software Already owned other software packages such as Microsoft Of ce, Norton AntiVirus, and Adobe products from the publisher 42% 32% 11% 16% Photoshop. The existing experience with these applications Brand reputation 39% 37% 12% 12% and the brand awareness of the publishers, are the in uencing Online product description and feature details 34% 40% 14% 13% factors for consumers deciding on a new software purchase or download ( gure 5). The publisher’s online content (product Online customer reviews and ratings 32% 34% 17% 17% information, demos, customer ratings, and online support Family, friend, or co-worker 28% 33% 16% 22% forums) weighs heavily as a purchase in uencer. Marketing Availability and quality of online support(tutorials, guides, user groups, forums, support) 25% 34% 20% 21% campaigns, social media, and the traditional box cover do Limited use trial 23% 28% 19% 30% not play much importance in the consumer’s Social media 10% 16% 22% 52% decision-making process. (Facebook, blogs, forums, Twitter) Marketing campaigns (email, magazine/newspaper ads) 9% 22% 31% 38% The box cover or online image 9% 19% 25% 47% 0% 100% [Figure 5] 05 Consumer Software Buying Trends
  7. How much have you spent on software for your desktop/laptop computers in the past year? Most consumers opt for free or …software for my desktop/laptop computers in the past year? cheaply-priced software. $501 to $1000, 2% Three out of four (desktop/laptop) software consumers spent $301 to $500, 2% More than less than $100 on software last year, and 22% opted for free $201 to $300, 6% $1000, 1% or open source software choices. Only a minority (11%) of $0, 22% software consumers spent more than $200. When it comes to $1 to $50, 30% applications for smartphones, iPads, and e-readers, consumers $0, 22% spend even less, with three out of four consumers spending less $51 to $100, 23% $101 to $200,14% than $50 in the past year. The widespread availability of quality, $101 to $200, 14% low-priced and free applications developed by individuals $201 to $300, 6% and small development rms dominate downloads. $51 to $100, 23% $1 to $50, 30% $301 to $500, 2% $501 to $1000, 2% More than $1000, 1% Base: 996 US adults with a desktop or laptop at home or work [Figure 6a] ...apps for my smartphone/iPad/e-reader in the past year? $201 to $300, 3% $301 to $500, 1% $101 to $200, 6% More than $1000, 1% $0, 32% $1 to $50, 44% $51 to $51 to $100, 14% $100, 14% $0, 32% $101 to $200, 6% $201 to $300, 3% $1 to $50, 44% $301 to $500, 1% More than $1000, 1% $501 to $1,000, 0% Base: 455 US adults with a smartphone, iPad, or e-reader at home or work [Figure 6b]06 Consumer Software Buying Trends
  8. Expensive brand software faces stiff How much do you agree or disagree competition from open source and with the following statements about software? budget competitors. Strongly Agree Moderately Agree Moderately Disagree Strongly Disagree Unsure Despite brand reputation having a strong in uence during the purchase decision, 89% of online adults agree that there areThere are software programs that I would like 62% 27% 6% 3 3 software programs they would like to buy, but they are too to buy, but they are too expensive expensive ( gure 7). Seventy-six percent of software consumers agree that free or open source software is as good or almost I would never use copies of paid software 38% 24% 19% 11% 9% I did not have a license for as good as the paid software they would have purchased. A signi cant number (30%) of software consumers admit they would consider using software for which they did not own a Free software is as good or almost as good as software I might otherwise pay for 27% 49% 17% 4 4 license and a further nine percent were unsure. Not surprisingly, Gen-Y consumers admitted a higher willingness to use unlicensed software than older adults. I would consider faking my location to avoid paying taxes on online software purchases 8% 8% 12% 63% 8% 0% 100% [Figure 7] 07 Consumer Software Buying Trends
  9. Please rate your satisfaction with the following when The online purchase experience purchasing software online or downloading free software has room for improvement. Very Satis ed Moderately Satis ed Software consumers are generally satis ed with the experience Not Very Satis ed Not at All Satis ed Not Applicable/Unsure of purchasing or downloading free software online, but both Payment methods available publishers and retailers have plenty of room for improvement(e.g., credit cards, debit cards, PayPal etc.) 53% 32% 3 1 11% for their online user experience. Half of software consumers Installation process 49% 42% 4 1 5% ( gure 8) were only moderately satis ed with the website Ease of software download after purchase 49% 39% 4 1 7% user experience, and 40% of software consumers were only moderately satis ed with the checkout process, online security, Ckeckout process 48% 38% 4 1 10% and license key delivery. Only 38% of consumers were very Software activation/registration 45% 41% 5 2 7% satis ed that the online price provided by the publisher was Security of personal/billing information 45% 41% 3 1 10% competitive. Delivery of license keys 39% 40% 5 1 15% Website user experience 38% 42% 7% 1 12% Competitiveness of online price 38% 48% 6% 1 7% 0% 100% [Figure 8] 08 Consumer Software Buying Trends
  10. How do you prefer to receive software purchases? Many consumers still want a physical backup copy of their software. Despite the fact that 80% of consumers prefer to buy software online either directly from the publisher’s website or Physical CD/DVD, 41% No preference, 22% Physical from a retailer, 41% ( gure 9) still prefer to receive a physical CD/DVD, 41% copy of their purchase on CD or DVD. Of the 38% who prefer to Digital download to my computer or device, 38% digitally download their purchase or had no preference, 40% No preference, 22% ( gure 10) would be prepared to pay extra for a backup copy Digital download on CD, and 30% would be prepared to pay for extended to my computer or device, 38% download insurance. Base: 978 US adults who have previously purchased software [Figure 9] Would you ever consider paying for any of the following at the time of purchasing a digital download of software to your computer or device? A physical backup copy of the software on CD/DVD 40% Add-ons 38% (templates, additional features) An extended license 38% (e.g., 3 years vs. 1 year)Download insurance (e.g., I can re-download 30% the software any time in the future) 25% None of the above 17% Related books or magazines (how to guides, tips etc) 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Base: 373 US adults who digitally download software purchases [Figure 10] 09 Consumer Software Buying Trends
  11. Do you ever use the same software on different devices? 44% 13% Desktop Computer (PC or Mac) This is likely due to the high ownership of multiple devices ( gure 11). Of the 1,004 software consumers surveyed, 69% 9% owned multiple devices and 80% of them have used the same Laptop Computer (PC or Mac) software or application on multiple device types. Consumers regularly change their hardware to keep up with technology 7% improvements, but this rate of hardware turnover is faster than the rate at which they upgrade or change their software. The Smartphone (e.g., iPhone, BlackBerry etc.) lifetime ownership of their software exceeds that of the devices 2% on which it is installed on, and, as such, consumers seek a secure copy of their original software purchase. This allows iPad, tablet, or e-reader them to re-install it as they change devices. (Amazon Kindle, Nook etc.) 2% 1% 1% Base: 689 US adults with at least 2 of these devices at home or work: a [Figure 11] desktop, laptop, smartphone, iPod, or e-reader10 Consumer Software Buying Trends
  12. When purchasing software, do you prefer to.... Alternative ownership choices would encourage many consumers to buy. Although some software, including antivirus and tax preparation, C, 24% Own your software outright but pay for typically only offer subscription models (ensuring access to upgrades with each major release, 48% A frequent incremental updates), 48% of consumers prefer to buy Pay an annual subscription to use the software A, 48% but receive all upgrades for free while and own their software outright ( gure 12) rather than paying B you maintain an active subscription, 27% an annual subscription to use a software package. However, B, 27% 64% of software consumers indicated a preference to buy Unsure, 24% C upgrade protection at the time of purchase ( gure 13) to protect themselves from expensive upgrades for a set period of time. When asked about alternative ownership models such as leasing (15%) and pay-as-you-go (14%) usage, software consumers said that this would in uence their decision for more expensive software. For lower income respondents (<$25k year household Base: 978 US adults who have previously purchased software [Figure 12] income), 18% stated a preference for leasing models. Forty-eight percent of consumers expressed an interest in the option to buy Which of the following, if available for more expensive software family or household licenses, enabling them to install software (over $100), would encourage you to purchase that software? across multiple machines in the household without having to purchase additional licenses. Try-before-you-buy options (either Upgrade protection (free upgrades to future version for the next 3 years) 64% 30-day trials or 30-day money back guarantees) strongly in uence the purchase decision of more expensive software, Try before you buy (30 day trial) 59% and, in fact, 52% of consumers who have used trial software pay to convert to the full version ( gure 15). 30-day money back guarantee 52%User-based license (one price for all your machines/devices or your whole family) 48% Monthly lease, with option to purchase outright 15% Pay-as-you-go usage (purchase block of hours) 14% None of the above 11% 0% 10% 20% 30% 40% 50% 60% 70% Base: 978 US adults who have previously purchased software [Figure 13] 11 Consumer Software Buying Trends
  13. When software is available both as an installable application for your Web-based software is popular computer or smartphone and as an online/web version for the with some consumers but is not same price (e.g., tax return) would you prefer to.... appropriate in many scenarios. Many software publishers have created web-based versions of their popular desktop products. These web or cloud-based Use the web services are popular for enterprise software companies with Download and install the software, 57% version, 21% many disparate users, but 57% of consumers say that they still prefer to download and install the desktop version where both No preference, 22% Download and install desktop and web versions are available for the same price. the software, 57% Use the web version, 21% No preference, 22% Software users are brand advocates. Keep them happy and they will tell others and buy again. As discussed earlier ( gure 3), social recommendations have [Figure 14] a strong in uence on the purchase decisions of software With regard to software have you ever done the following? consumers. But how many software users share their experiences with others? Sixty-four percent of software users Recommended the software to 64% have recommended applications to friends or colleagues. friends or colleagues Thirty-nine percent of software consumers have done at least Purchased an upgrade of the software 53% one of these social media activities: written online product reviews, shared their experiences on social network sites,Converted a free trial to the paid version 52% posted comments in online user forums, or blogged about Purchased other products offered their experience. The online software publishers and retailers by the same vendor 50% who offer these community tools to their customers will directly Wrote an online review 22% bene t from an increase in sales from new customers. Shared your experience on socialnetworking sites (Facebook, Twitter, etc.) 20% Posted in user forums 17% None of the above 13% Blogged about your experience 10% 0% 10% 20% 30% 40% 50% 60% 70% [Figure 15]12 Consumer Software Buying Trends
  14. Upgrades and renewals are the biggest How much do you agree or disagree with the following statements challenge for software publishers. about upgrading or renewing software licenses? Possibly the biggest challenge for software publishers is Strongly Agree Moderately Agree Moderately Disagree Strongly Disagree Unsure customer retention. As publishers release new versions or customers come to the end of their subscription term, I actively look for a better price when renewing or upgrading 45% 34% 13% 3 5 consumers have a choice to either upgrade/renew, continue using an older version, or switch to a free open source orI nd upgrading or renewing quick and easy 28% 47% 14% 5 6 competitive product. Seventy-nine percent of consumers actively I always know when my software has 24% 37% 24% 9% 6 look for a better price when upgrading than accept the price expired or a newer version is available offered by the vendor. This uncertainty that the vendor is offering I always know which version to upgrade to 22% 35% 26% 10% 7 the best deal leads them to look at other purchase channels I always purchase my upgrade (other online and of ine retailers) but also at competitive on the vendor’s website 21% 36% 20% 13% 10% products. Only 57% of consumers purchase their software I always opt-in to automatic renewal 12% 28% 27% 27% 6 upgrades directly on the software publisher’s website, with many or upgrade programs nding it cheaper to purchase an original (non-upgrade) version I am unclear about the bene ts of upgrading or renewing 8% 22% 30% 33% 7 and re-install the software on their computer(s). 0% 100% Only 28% of software consumers strongly agreed that the [Figure 16] upgrade and renewal process was easy, and only 22% strongly agreed that they knew which version they should upgrade to. How do you prefer to be noti ed that your software subscription Many consumers are confused with the array of options needs renewal or a new version (upgrade) is available? presented to them during the upgrade process, and that experience has plenty of room for optimization. Consumers Email 81% may be frustrated, in part, with the multi-step process: being noti ed in the software, purchasing online, and then being forced to re-install and activate the new version. Some vendors are Prompts in the software 55% attempting to streamline this process by embedding the renewal experience within the software application itself and allowing the software update to occur without requiring a re-install or Automatic renewal 13% device re-boot. Perhaps unsurprisingly 81% ( gure 17) of software consumers prefer to be noti ed by email when their software is due for SMS 7% upgrade or renewal, and very few (13%) of consumers prefer to sign up for an automatic renewal that is charged to their 0% 20% 40% 60% 80% 100% credit card. [Figure 17] 13 Consumer Software Buying Trends
  15. Bugs and free alternatives In the past, what has prompted you to change from one software package lead product attrition. to another (e.g., McAfee AntiVirus to Norton AntiVirus)? Dissatisfaction with the quality of existing software product Dissatisfaction with your current is the leading reason that software consumers start the process product (slow, buggy) 48% of looking for alternative products ( gure 18). Forty-six percent The availability of a free version that was 46% of consumers switched from paid software products to free or as good my existing software open source alternatives because they believed the free version Recommendations from friends, magazines, blogs, etc. 35% was as good as their existing software. One in four software consumers have tried alternative products as a result of I got a new computer or smartphone 27% successful marketing campaign offers and recommendationsA special offer to try an alternative product 26% from social peers. Online social sites are strong in uencers on consumers’ decisions to try alternatives. The availability of an online/web version of the software 21% New ‘must have’ features of a competitive product 20% I have never changed software packages 12% Other 5% 0% 10% 20% 30% 40% 50% [Figure 18] 14 Consumer Software Buying Trends
  16. Recommendations Software publishers, like their peers in the media and publishing although not suitable for everyone, would encourage some industry, are facing an increasing threat—their consumers are consumers to use best-in-class paid software rather than opting no longer prepared to pay for their products, at least not in the for cheaper or open source alternatives. A college student is traditional way. There are various ways publishers and their unlikely to pay $600 to buy Photoshop, but they may well be resellers can counteract this threat, and below are just some of the prepared to pay an affordable hourly or daily usage fee to allow recommendations for action based on the results of this research: them to complete a speci c design project. In today’s connected society there are no longer any technical barriers to developing and Offer upgrade protection as an implementing this ownership model. up-sell option. Productivity software, antivirus, and other regularly used software The survey highlighted that half of consumers still prefer to own packages are often installed on multiple devices within the home. their software outright. Much like servicing and insurance costs The proliferation of different devices means that consumers want to associated with owning a car, these software buyers object to have licensing options to allow them to use the same software on paying expensive upgrade costs to take advantage of new features. all their devices. Currently, multi-user licenses are more relevant to For years tax and antivirus publishers have offered extended small businesses than consumers. Offering family or multi-device ownership subscriptions (typically two or three year options), licenses would allow consumers to buy once and use anywhere allowing their customers to save over the long term via an up-sell including different versions for PC, Mac, and mobile devices. during the original purchase transaction. Publishers of productivity, imaging, nance, games, and operating systems can lock in their Intelligently up-sell to increase customers by offering term-based upgrade protection (e.g., all average order value. upgrades for three years) as a compelling up-sell. Although this strategy may affect future upgrade revenue margins, it will reduce Many software publishers try and encourage customers to buy the number of customers that switch to competitive or open source related products in the shopping cart but few are providing up-sells alternatives. that the customers really want. Almost all software publishers allow their customers to download a digital version of their products, but Provide alternative ownership models. few are taking advantage that consumers want and are willing to pay extra for purchase protection either in the form of a physical Certain types of software such as photo editing, tax, nance, backup copy or extended download insurance. Customers also and games are not always frequently used. Consumers of these want to purchase value-add products and services including user products would likely nd it more appealing to pay based on usage guides, and third party add-ons such as templates or functionality (hours or monthly) rather than having to invest heavily upfront in a enhancements but are usually forced to obtain these from other tool that will be infrequently used. This model has worked well for channels after their purchase. car co-ops that allow drivers to pay as they use. This model,15 Consumer Software Buying Trends
  17. About Elastic Path Elastic Path provides the industry’s most exible enterprise ecommerce platform and strategic ecommerce consulting. We help innovative enterprises sell more digital goods and services in a way that is frictionless, social, and everywhere. Major global brands such as Symantec, Time Inc, and Virgin Media rely on Elastic Path to innovate and grow. Web | Blog | Twitter Contact Us To nd out how Elastic Path’s ecommerce research and consulting services can help you succeed, please email or call 1.800.942.5282 (toll-free within North America) or +1.604.408.8078 (outside North America). Methodology From July 29 to August 7, 2010, Vision Critical conducted an online survey among a sample of 1,004 US adults over the age of 18 who have purchased software or downloaded free software online for their PC or laptop and/or purchased apps or downloaded free apps for a smartphone or iPad in the previous 12 months. Respondents had to have, either at home or at work, at least one of the following: a laptop, desktop, iPad, tablet, e-reader, or a smartphone. The full dataset has been statistically weighted according to the most current region, gender, age, and education Census data to ensure a representative sample. The margin of error is ±3.1%, 19 times out of 20. Discrepancies in or between totals are due to rounding. © Copyright 2011, Elastic Path Software Inc. All rights reserved. Elastic Path™ and the Elastic Path logo are trademarks or registered trademarks of Elastic Path Software Inc. All other trademarks are the property of their respective owners.Consumer Software Buying Trends