I’ve spent a lot of time on this blog talking about different marketing techniques and for the most part, those essays or rants usually amount to “try doing this” or “please, stop doing that”. Today, I want to document something a little bit different.

Selling software commercially is something that prior to the last 2 years, I had almost no exposure to. I had worked in retail where we sold other peoples’ titles, shelving boxes of discs for anywhere from $0.99 jewel box bargains to hundreds of dollars for operating systems.

It was always interesting to me that people would walk into a store and buy a physical piece of merchandise in order to put it on their computers. Obviously, before bandwidth got fast and cheap, there wasn’t really the option of distributing yourself, but even still…LOTS of software gets sold on the shelves. Even funnier, there are now online places where you can buy boxes of software, have them MAILED to you, and then you can install them. 

Let’s pause and think about how silly that is. That’s right. Pretty silly.

The other exposure to selling software I had was as a service provider: writing code to spec, and then someone else reaped the benefits of that ongoing.

These days, working with the crew at IndyHall Labs, I’ve gotten exposure to something completely different: independent software development and distribution.

Much like the music industry is experiencing, the tools are cheaper and the resources are more readily available for individuals to create, market, sell, and distribute their product, be it a 12 track rock -n- roll album or a useful piece of software, without the overhead of “mastering”, the complication of customers losing license cards, the struggle of controlling your shelf price, and more.

This week, the Multiplex team and I are experiencing something new and exciting for us, and that’s the inclusion in a software bundle being promoted and sold through MacUpdate.com‘s promo property, MUPromo.com [ref link]. In short, 11 apps are sold over a 2 week period with buckets of blitz marketing, and each of the software developers get a small cut of the sales of each bundle. The remainder goes into covering MacUpdate’s expenses, and the rest is profit for them. 

Bundles like these are increasingly common, and some other notable ones besides MacUpdate include MacHeist and MacZot. “Bundleware” is an old concept, a technique was often used to move old inventory. I’ve often used the lewd (but accurate) “Porno 3-pack” model to describe how it worked in the past: the vendor puts two “dud” flicks alongside a headline title, with a total price reduced to less than the total value of all 3 movies. Even if you don’t end up watching the duds, they got sold for more than zero dollars in revenue for the vendor.

What’s interesting is how MacUpdate and the others have successfully turned the bundleware model on its head. Most importantly, the new dynamic here that’s important to recognize is that the cost-per-copy of software trends to zero, since the software production costs are already sunk into the design and coding of the app. Since no copies need to be “mastered”, the cost to “produce” additional copies for sale isn’t zero (web host costs, for example), but it’s getting there. The largest cost that increases based on an increased customer base is customer support, which usually scales slower relative to the app’s sales.

So, with no “inventory” to worry about, bundle-dynamics leap ahead into something new, different, and pretty exciting. I want to talk about 4 key functions that I think have made this bundle work, and why we decided to be a part of it.

Dynamic #1: The Headliner Not totally unlike the “Porno 3-pack” I mentioned before, most bundles end up with at least one headliner app. Many times, that headliner’s retail value is greater than the bundle cost itself, making the deal a no-brainer for most potential customers. What’s neat, though, is that the volume of high-quality independently produced apps available to bundle-designers means that there are often MULTIPLE headliners, where nearly every app has the chance to be a headliner for someone… allowing the bundle to cater to a wider audience.

In the case of MacUpdate, there was more than one headliner depending on who you are, what your interests are, and how you as a consumer perceive value. 

Working down the promo page, headliner #1 was the “two bonus apps” for early purchasers… initially the first 15,000 bundle customers, and then later the limit was bumped to the first 20,000. There’s been some discussion on the bundle forum that maybe MU shouldn’t have moved that threshold, as some early-adopter customers feel that it “cheapened” the bundle for them. While economically the bundle value didn’t change, the value perception did and that’s important for someone who’s motivated by bargains, early adoption, and exclusivity. In this case, the cost to MacUpdate for providing those apps to an additional 5000 customers was zero.

macupdate-promo-spring-bundle-a-great-bundle-at-a-great-price

Note: I’m not aware of the details of the deal between MacUpdate and the two “early bird special” apps, Jets n Guns Gold and CuteClips. It’s entirely possible that those titles only received a revenue share on bundles that included them, so they MAY have gained additional revenue with MacUpdate’s decision to move the bar. That’s pure and wild speculation, and a curiosity of my own.

The second headliner, that I believe many bought the bundle for, was the inclusion of two apps whose values individually exceed that of the bundle cost: Parallels and TechTool Pro are well known commercial use applications with extremely wide customer bases to begin with. Why would they lower their price-per-copy for this bundle?

macupdate-promo-spring-bundle-a-great-bundle-at-a-great-price-1

As I mentioned before, all software being sold online has a near-to-zero per-copy “cost”, this becomes a marketing and customer acquisition play for the manufacturers of the software. It’s blitz revenue and TONS of visibility. While that visibility may not be causing people to learn about their software for the first time, it IS reminding potential customers that they still exist, and that’s a marketing expense worth measuring against the cost sunk into selling copies for a fraction of the retail price. Beyond the financial capital gained, I think there’s also some social capital gained by the larger software manufacturers since the smaller shops, like ours, appreciate the fact that their headliner title is helping us make some money. Software development culture is funny in the fact that many development shops make it a point to get out there, chum around with other dev shops at conferences, meetups, and other social gatherings. Big dogs like Parallels coming to hang around and help by pulling some weight, at least in my mind, is a gesture that doesn’t go unrecognized by the independent producers.

The third type of headliner is the “special interest” headliner. There were a couple of “categories” of apps in the MacUpdate bundle, and based on your own interests, those bundles might be the headliner for you.

macupdate-promo-spring-bundle-a-great-bundle-at-a-great-price-2

Our app, Multiplex, was paired up with RipIt (also developed at IndyHall) and DVDRemasterPro as a trifecta of great tools for managing your movie collection with your Mac computer. Having been witness to the success of RipIt so far (and, we hope, the success to come for Multiplex), we know that there’s an audience of DVD collectors out there who want to do exactly the thing our apps were designed for: catalog their offline collection of DVDs, make it easy to recall and play on their media centers, as well as other devices they own that play video.

Given that Multiplex and RipIt alone are normally worth a total $53.99, that’s enough to make the bundle worth it. Toss in DVDRemasterPro, a $49.99 app, and you’ve got over a hundred dollars worth of software to help you with your DVD collection for half the price…and a bunch of other goodies as a bonus.

The point I’ve been trying to illustrate is that because all of these titles have a cost-per-copy approaching zero, there’s an incredible amount of flexibility in creating reasons for people to buy a bundle based on their own motivations. The bundle appears well rounded, but for enough people (over 20,000 at the time I’m writing this), there’s enough value generated for that person to justify the expense.

Dynamic #2: Urgency The MacUpdate bundle runs for 2 weeks. While not an extraordinarily short period of time, there are constraints. “While supplies last” is a fallacy, because again, it costs next to nothing to generate more supplies. In order to keep demand high, new constraints besides inventory need to be placed on the bundle sales.

2 weeks is a time constraint that, while artificial, informs the customer that “after these 2 weeks, the apps go back up to their normal price…so get ’em now while you still can!”.

The early bird special does this too, suggesting that if you’re one of the first batch of people to buy the bundle, you get extra stuff.

The MacUpdate bundle page does a good job of highlighting the number of bundles sold, and how long you have left to buy.

macupdate-promo-spring-bundle-a-great-bundle-at-a-great-price-3

Regardless of how high the bundles sold number climbs, I think that there is something about competitiveness built in human nature that makes us want to “beat the timer”, and get our purchase in before the other guy. It’s a counter-intuitive dynamic, but one that helps make bundle sales successful.

The other component to the “urgency” aspect is the timeframe in which us, as developers, make money. The important thing to remember is that we calculate success not just on the number of copies sold, but by the amount of cash in the bank.

Think of it this way. There are two paths to a million dollars: you can sell an app once for a million bucks, or you can sell it a million times for a dollar. Whichever has the shortest and most sustainable path to your million is the road you should take.

Dynamic #3: Self Promotion

Probably one of the most important components to bundle success is each individual bundle contributers’ own self interests: I’ve dropped the price of my app to the floor, so I want to promote the CRAP out of myself for doing so and get as many sales as possible, while also gaining brand recognition for when the bundle is over.

With 11 apps’ developers working that angle simultaneously, MacUpdate gains a massive sales team, but so does each individual developer! My own self interests benefit the other bundle contributors. Their self interests benefit me.

Furthermore, MacUpdate provides affiliate opportunities for developers and non-developers alike. This post, you may have noticed, is sprinkled with links to MUPromo.com that include our referral code. That’s because we make a couple extra bucks on each bundle sale that we actually refer. If you’ve found this article interesting and were considering buying the bundle anyway, please consider buying with our referral code and help some indie software developers make a buck.

See what I did there? That opportunity isn’t just available to me as a bundle contributor, but to the properties helping promote the bundle as well (like MacRumors, Smoking Apples, TUAW, and more).

And remember, at the end of the day, this is a promotional opportunity for MacUpdate. They not only make money on the bundles, but on ad-sales during the promo when more people are hammering MacUpdate.com to read more about the apps, their reviews, get their license keys, etc. 

Which brings me to my final point, and the real reason I wanted to put together this piece

Dynamic #4: Developer Relations In retail, there’s no usually relationship between the person selling to the customer, and the producer of the thing that the salesperson is hocking. At most, that sales person might get a kickback for selling one brand over another, but the sales person’s own brand loyalty and experience in what makes customers happy is usually what’s driving their sales suggestions.  

Bundles have gotten a bad wrap. Most notably, MacHeist.

I’m not going to get into the gory details of their indiscretions, but the record shows that they’ve had their shit called more than once for abusing the “value” they provide for their customers to line their own pockets instead of managing positive relationships with the developers that are giving them the opportunity to run the bundle in the first place. As long as 3 years ago, John Gruber was outlining the issues with how this “great deal” for consumers was selfishly benefiting the organizers while giving bundle app contributors a raw deal. It’s also worth noting that in december of 2006, MacHeist sold ~14,000 bundles and our (well, MacUpdate’s) bundle exceeded that quota within it’s first 48 hours. This most recent Holiday MacHeist bundle sold over 80,000 copies, but also took to some “extreme viral” (read: spammy) techniques for getting bundle purchasers to send links to their friends.

We pride ourselves in quality products, quality customer service, and both of those lead to quality relationships with our customers.

This is where I want to highlight the great job that’s being done by the team at MacUpdate, and why we decided to participate in this bundle.

I spent most of the bundle-prep time working with Nate Houle, who manages the MUPromo.com site. Nate was easygoing, straightforward with their interest and offer, and most importantly, I didn’t feel like I was being sold a line like I did when I spoke with other bundles’ representatives.

Nate was clearly interested in working with us instead of simply swapping licenses for a cut of the revenue. At some point in our IM conversations (yes, the entire MUPromo deal was done over IM), Nate said something that made me extremely confident in the success of this promotion:

  …we don’t bite the hands that feed us, without the indy developers none of us would have jobs…  

That kind of attitude goes a long way, and I think that genuine appreciation for the developers that support your bundle says a lot about Nate and his team.

Even when the initial bundle sales load crashed our licensing servers for the better part of the day, MacUpdate’s COO, Misha Sakellaropoulo, and their Lead Developer Chad Harrison were extremely calm, helpful, and supportive. I was on IM at various parts of the day during the first two days of the bundle running talking to Nate and Misha, and at each turn, they were as excited for us as we were. That “togetherness” is more ethereal than some of the other benefits of the bundle, but an important one for us, since it’s such a core value of how our apps get built in the first place.

One of the things on my to-do list for the next week is to continue the developer relations plan and reach out to the other developers who are participating in the bundle, introduce ourselves, and congratulate them as well. I hope that the other developers are planning on taking that time as well, as this is a great opportunity for us to celebrate the fun of being an indy mac developer together.

An honest and hearty “thank you” to the MacUpdate team for showing us that bundles don’t have to be evil, and helping me get my accelerated masters in “Bundle Dynamics”.

Final Shameless Self-Promo

Yes, we’re extremely excited about being a part of this bundle and it’s success so far. There’s still 12 and a half days to buy, so if you do, please consider using our referral link. If you could help even more by spreading the word and using the same link [http://tr.im/IHLabsMUPromo] or [http://mupromo.com/?ref=6602], we’d really really appreciate it.