Consumer Software Buying Trends - Elastic Path Software Research Report

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Consumer SoftwareBuying Trends

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.

A consumer research study commissionedby Elastic Path Software Inc.

www.elasticpath.com01 Consumer Software Buying Trends

Survey BackgroundThis 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 SummaryNinety-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.


Key FindingsThe online channel reigns for bothresearch and purchases.Among all software consumers there is a clear preference (�gure 1) for purchasing software online either directly from the publisher’s website or from a retailer’s website, although 48% of software consumers have also purchased in retail outlets in the past 12 months. The rapid adoption of smartphones and tablets among software consumers (�gure 2) has resulted in the rise of online and on-device application stores such as Apple’s App Store.

0% 10% 20% 30% 40% 50% 60%

Other

Directly from the software publisher’s website(e.g., Adobe.com or Symantec.com)

From an app store(e.g., Apple App Store or Android Marketplace)

From a retailer’s website(e.g., Bestbuy.com or Amazon.com)

In a retail store(e.g., Wal-Mart or Best Buy)

Where have you purchased software in the past year?

48%

37%

28%

52%

8%

0% 20% 40% 60% 80% 100%

Laptop/Desktop computer

iPad, tablet or e-reader(Amazon Kindle, Nook, etc.)

Smartphone(e.g., iPhone, BlackBerry etc.)

Do you have any of the following at home…?

43%

12%

99%

[Figure 1]

[Figure 2]

Base: 784 US adults who have paid for software


Consumers may purchase more software online than of�ine because they start their research process online (�gure 3). Forty-nine percent of software consumers start their search for software on internet search engines, 44% rely on online customer product reviews, and 31% start their research on either the publisher’s or a retailer’s website. The price-conscious consumer starts their research on online shopping price comparison sites, and 11% of consumers start their research using social media sites.

0% 10% 20% 30% 40% 50% 60%

When considering a software purchasewhere do you start your research?

Other

Technology magazines

Social media(Facebook, Twitter, blogs)

Shopping comparison site

Search engine

Online product reviews

Online marketplace(e.g. Apple App Store)

On the software publisher’s website(e.g. Adobe.com or Symantec.com)

On a retailer’s website(e.g. Bestbuy.com or Amazon.com)

In a retail store

Friends/Family/Colleagues

49%

44%

38%

31%

31%

23%

20%

19%

15%

11%

[Figure 3]

2%


Games dominate software consumption, especially on mobile devices.System utilities such as anti-virus software dominate spend for home desktop and laptop computers, followed secondly by games (�gure 4). Spending for games dominate for mobile devices such as smartphones, iPads, and e-readers. Educational software and games have signi�cantly higher adoption rates among the Gen-Y population (ages 18-34). Imaging and graphics apps for smartphones are particularly popular for the Gen-Y population. High income households (>$50k) buy more �nancial software.

Which of the following types of software have youpurchased or downloaded for free in the past year

0% 10% 20% 30% 40% 50% 60% 70%

Other

Systems Utilities

Personal Productivity

Operating System

Imaging and Graphics

Games

Finance

Education

…for your desktop/laptop computer(s)?

12%

25%

17%

27%

59%

18%

23%

42%

0% 10% 20% 30% 40% 50% 60% 70%

Other

Systems Utilities

Personal Productivity

Operating System

Imaging and Graphics

Games

Finance

Education

…for your smartphone, iPad, or e-reader

10%

18%

11%

20%

59%

14%

14%

29%

[Figure 4b]

[Figure 4a]Base: 996 US adults with a desktop or laptop at home or work

Base: 455 US adults with a smartphone, iPad, or e-reader at

home or work


Brand af�nity and reputation are strong emotional factors when choosing software.PC and Mac owners are long term users of popular software packages such as Microsoft Of�ce, Norton AntiVirus, and Adobe Photoshop. The existing experience with these applications and the brand awareness of the publishers, are the in�uencing factors for consumers deciding on a new software purchase or download (�gure 5). The publisher’s online content (product information, demos, customer ratings, and online support forums) weighs heavily as a purchase in�uencer. Marketing campaigns, social media, and the traditional box cover do not play much importance in the consumer’s decision-making process.

Which of the following in�uenced your lastsoftware purchase or free software download?

0% 100%

No In�uenceMinor In�uenceModerate In�uenceStrong In�uence

The box cover or online image

Social media(Facebook, blogs, forums, Twitter)

Online product description and feature details

Online customer reviews and ratings

Marketing campaigns(email, magazine/newspaper ads)

Limited use trial

Family, friend, or co-worker

Brand reputation

Availability and quality of online support(tutorials, guides, user groups, forums, support)

Already owned other softwareproducts from the publisher 42% 16%11%32%

25% 21%20%34%

39% 12%12%37%

28% 22%16%33%

23% 30%19%28%

9% 38%31%22%

32% 17%17%34%

34% 13%14%40%

10% 52%22%16%

9% 47%25%19%

[Figure 5]


Most consumers opt for free or cheaply-priced software.Three out of four (desktop/laptop) software consumers spent less than $100 on software last year, and 22% opted for free or open source software choices. Only a minority (11%) of software consumers spent more than $200. When it comes to applications for smartphones, iPads, and e-readers, consumers spend even less, with three out of four consumers spending less than $50 in the past year. The widespread availability of quality, low-priced and free applications developed by individuals and small development �rms dominate downloads.$201 to $300, 6%

$301 to $500, 2%

$501 to $1000, 2%

More than $1000, 1%

$0, 22%

$1 to $50, 30%

$51 to $100, 23%

$101 to $200, 14%

$201 to $300, 6%

$301 to $500, 2%

$501 to $1000, 2%More than

$1000, 1%

$0, 22%

$1 to $50, 30%$51 to $100, 23%

$101 to $200,14%

How much have you spent on software for yourdesktop/laptop computers in the past year?

…software for my desktop/laptop computers in the past year?

$51 to $100, 14%

$1 to $50, 44%

$0, 32%

More than $1000, 1%

$501 to $1,000, 0%

$301 to $500, 1%

$201 to $300, 3%

$101 to $200, 6%

$51 to $100, 14%

$1 to $50, 44%

$0, 32%

More than $1000, 1%

$301 to $500, 1%$201 to $300, 3%

$101 to $200, 6%

...apps for my smartphone/iPad/e-reader in the past year?

[Figure 6a]

[Figure 6b]

Base: 996 US adults with a desktop or laptop at home or work

Base: 455 US adults with a smartphone, iPad, or e-reader at home or work


Expensive brand software faces stiff competition from open source and budget competitors.Despite brand reputation having a strong in�uence during the purchase decision, 89% of online adults agree that there are software programs they would like to buy, but they are too expensive (�gure 7). Seventy-six percent of software consumers agree that free or open source software is as good or almost 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 license and a further nine percent were unsure. Not surprisingly, Gen-Y consumers admitted a higher willingness to use unlicensed software than older adults.

How much do you agree or disagreewith the following statements about software?

0% 100%

There are software programs that I would liketo buy, but they are too expensive

I would never use copies of paid softwareI did not have a license for

I would consider faking my location to avoidpaying taxes on online software purchases

Free software is as good or almost as goodas software I might otherwise pay for 27% 49% 17% 4 4

8% 8% 12% 63% 8%

38% 24% 19% 11% 9%

62% 27% 6% 3 3

Strongly DisagreeModerately DisagreeModerately AgreeStrongly Agree Unsure

[Figure 7]


The online purchase experiencehas room for improvement.Software consumers are generally satis�ed with the experience of purchasing or downloading free software online, but both publishers and retailers have plenty of room for improvement for their online user experience. Half of software consumers (�gure 8) were only moderately satis�ed with the website user experience, and 40% of software consumers were only moderately satis�ed with the checkout process, online security, and license key delivery. Only 38% of consumers were very satis�ed that the online price provided by the publisher was competitive.

Please rate your satisfaction with the following whenpurchasing software online or downloading free software

0% 100%

Not Applicable/UnsureNot at All Satis�edNot Very Satis�edModerately Satis�edVery Satis�ed

Website user experience

Competitiveness of online price

Ckeckout process

Payment methods available(e.g., credit cards, debit cards, PayPal etc.)

Ease of software download after purchase

Delivery of license keys

Software activation/registration

Installation process

Security of personal/billing information 45% 3

3

41% 1 10%

49% 4

5

4

7%

6%

4

5

42%

45% 41%

39% 40%

49% 39%

53% 32%

48% 38%

38% 42%

38% 48%

1

1

1

1

1

1

1

2

5%

7%

15%

7%

11%

10%

12%

7%

[Figure 8]


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 from a retailer, 41% (�gure 9) still prefer to receive a physical copy of their purchase on CD or DVD. Of the 38% who prefer to digitally download their purchase or had no preference, 40% (�gure 10) would be prepared to pay extra for a backup copy on CD, and 30% would be prepared to pay for extended download insurance.

How do you prefer to receive software purchases?

Digital download tomy computer or device, 38%

Physical CD/DVD, 41%

No preference, 22% Digital download to my computer or device, 38%

PhysicalCD/DVD, 41%

No preference, 22%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

None of the above

Related books or magazines(how to guides, tips etc)

Download insurance (e.g., I can re-downloadthe software any time in the future)

An extended license(e.g., 3 years vs. 1 year)

Add-ons(templates, additional features)

A physical backup copy of thesoftware on CD/DVD

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?

40%

25%

17%

30%

38%

38%

This is likely due to the high ownership of multiple devices (�gure 11). Of the 1,004 software consumers surveyed, 69% owned multiple devices and 80% of them have used the same software or application on multiple device types. Consumers regularly change their hardware to keep up with technology improvements, but this rate of hardware turnover is faster than the rate at which they upgrade or change their software. The lifetime ownership of their software exceeds that of the devices on which it is installed on, and, as such, consumers seek a secure copy of their original software purchase. This allows them to re-install it as they change devices.

[Figure 9]

[Figure 10]

Base: 978 US adults who have previously purchased software

Base: 373 US adults who digitally download 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 from a retailer, 41% (�gure 9) still prefer to receive a physical copy of their purchase on CD or DVD. Of the 38% who prefer to digitally download their purchase or had no preference, 40% (�gure 10) would be prepared to pay extra for a backup copy on CD, and 30% would be prepared to pay for extended download insurance.

This is likely due to the high ownership of multiple devices (�gure 11). Of the 1,004 software consumers surveyed, 69% owned multiple devices and 80% of them have used the same software or application on multiple device types. Consumers regularly change their hardware to keep up with technology improvements, but this rate of hardware turnover is faster than the rate at which they upgrade or change their software. The lifetime ownership of their software exceeds that of the devices on which it is installed on, and, as such, consumers seek a secure copy of their original software purchase. This allows them to re-install it as they change devices.

[Figure 11]

44%

13%

9%

7%

2%

2%

1%

1%

Do you ever use the same softwareon different devices?

Desktop Computer (PC or Mac)

Laptop Computer (PC or Mac)

Smartphone (e.g., iPhone, BlackBerry etc.)

iPad, tablet, or e-reader (Amazon Kindle, Nook etc.)

Base: 689 US adults with at least 2 of these devices at home or work: a

desktop, laptop, smartphone, iPod, or e-reader


Alternative ownership choices would encourage many consumers to buy.Although some software, including antivirus and tax preparation, typically only offer subscription models (ensuring access to frequent incremental updates), 48% of consumers prefer to buy and own their software outright (�gure 12) rather than paying an annual subscription to use a software package. However, 64% of software consumers indicated a preference to buy 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 income), 18% stated a preference for leasing models. Forty-eight percent of consumers expressed an interest in the option to buy family or household licenses, enabling them to install software across multiple machines in the household without having to purchase additional licenses. Try-before-you-buy options (either 30-day trials or 30-day money back guarantees) strongly in�uence the purchase decision of more expensive software, and, in fact, 52% of consumers who have used trial software pay to convert to the full version (�gure 15).

Own your software outright but pay forupgrades with each major release, 48%

Pay an annual subscription to use the softwarebut receive all upgrades for free while

you maintain an active subscription, 27%

Unsure, 24%

A

B

C

A, 48%

B, 27%

C, 24%

When purchasing software, do you prefer to....

0% 10% 20% 30% 40% 50% 60% 70%

None of the above

User-based license (one price for all yourmachines/devices or your whole family)

Upgrade protection (free upgrades tofuture version for the next 3 years)

Try before you buy (30 day trial)

Pay-as-you-go usage(purchase block of hours)

Monthly lease,with option to purchase outright

30-day money back guarantee

Which of the following, if available for more expensive software(over $100), would encourage you to purchase that software?

52%

11%

48%

64%

59%

14%

15%

[Figure 13]

[Figure 12]Base: 978 US adults who have previously purchased software

Base: 978 US adults who have previously purchased software


Web-based software is popular with some consumers but is not appropriate in many scenarios.Many software publishers have created web-based versions of their popular desktop products. These web or cloud-based services are popular for enterprise software companies with many disparate users, but 57% of consumers say that they still prefer to download and install the desktop version where both desktop and web versions are available for the same price.

Download and install the software, 57%

Use the web version, 21%

No preference, 22%

When software is available both as an installable application for your computer or smartphone and as an online/web version for the same price (e.g., tax return) would you prefer to....

Download and install the software, 57%

Use the webversion, 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 a strong in�uence on the purchase decisions of software consumers. But how many software users share their experiences with others? Sixty-four percent of software users have recommended applications to friends or colleagues. Thirty-nine percent of software consumers have done at least one of these social media activities: written online product reviews, shared their experiences on social network sites, posted comments in online user forums, or blogged abouttheir experience. The online software publishers and retailers who offer these community tools to their customers will directly bene�t from an increase in sales from new customers.

0% 10% 20% 30% 40% 50% 60% 70%

None of the above

Wrote an online review

Shared your experience on socialnetworking sites (Facebook, Twitter, etc.)

Recommended the software tofriends or colleagues

Purchased other products offeredby the same vendor

Purchased an upgrade of the software

Posted in user forums

Converted a free trial to the paid version

Blogged about your experience

With regard to software have you ever done the following?

10%

52%

22%

20%

64%

50%

53%

17%

13%

[Figure 15]

[Figure 14]


Upgrades and renewals are the biggest challenge for software publishers.Possibly the biggest challenge for software publishers is customer retention. As publishers release new versions or customers come to the end of their subscription term, consumers have a choice to either upgrade/renew, continue using an older version, or switch to a free open source or competitive product. Seventy-nine percent of consumers actively look for a better price when upgrading than accept the price offered by the vendor. This uncertainty that the vendor is offering the best deal leads them to look at other purchase channels (other online and of�ine retailers) but also at competitive products. Only 57% of consumers purchase their software upgrades directly on the software publisher’s website, with many �nding it cheaper to purchase an original (non-upgrade) version and re-install the software on their computer(s).

Only 28% of software consumers strongly agreed that the upgrade and renewal process was easy, and only 22% strongly agreed that they knew which version they should upgrade to. Many consumers are confused with the array of options presented to them during the upgrade process, and that experience has plenty of room for optimization. Consumers 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 attempting to streamline this process by embedding the renewal experience within the software application itself and allowingthe software update to occur without requiring a re-install or device re-boot.

Perhaps unsurprisingly 81% (�gure 17) of software consumers prefer to be noti�ed by email when their software is due for upgrade or renewal, and very few (13%) of consumers prefer to sign up for an automatic renewal that is charged to their credit card.

How much do you agree or disagree with the following statementsabout upgrading or renewing software licenses?

0% 100%

UnsureStrongly DisagreeModerately Disagree Moderately AgreeStrongly Agree

I �nd upgrading or renewing quick and easy

I am unclear about the bene�ts ofupgrading or renewing

I always purchase my upgradeon the vendor’s website

I always opt-in to automatic renewalor upgrade programs

I always know which version to upgrade to

I always know when my software hasexpired or a newer version is available

I actively look for a better pricewhen renewing or upgrading 45% 34% 13% 3 5

24% 37% 24% 9% 6

22% 35% 26% 10% 7

12% 28% 27% 6

10%21% 36%

27%

20% 13%

8% 22% 30% 33% 7

28% 47% 14% 5 6

How do you prefer to be noti�ed that your software subscription needs renewal or a new version (upgrade) is available?

0% 20% 40% 60% 80% 100%

SMS

Prompts in the software

Email

Automatic renewal

7%

81%

55%

13%

[Figure 16]

[Figure 17]


[Figure 18]

Bugs and free alternativeslead product attrition.Dissatisfaction with the quality of existing software product is the leading reason that software consumers start the process of looking for alternative products (�gure 18). Forty-six percent of consumers switched from paid software products to free or open source alternatives because they believed the free version was as good as their existing software. One in four software consumers have tried alternative products as a result of successful marketing campaign offers and recommendations from social peers. Online social sites are strong in�uencers on consumers’ decisions to try alternatives.

Other

I have never changed software packages

The availability of an online/webversion of the software

The availability of a free version that wasas good my existing software

Recommendations from friends,magazines, blogs, etc.

New ‘must have’ features of acompetitive product

I got a new computer or smartphone

Dissatisfaction with your currentproduct (slow, buggy)

A special offer to try an alternative product

0% 10% 20% 30% 40% 50%

In the past, what has prompted you to change from one software packageto another (e.g., McAfee AntiVirus to Norton AntiVirus)?

5%

35%

26%

21%

27%

46%

20%

12%

48%


RecommendationsSoftware publishers, like their peers in the media and publishing industry, are facing an increasing threat—their consumers are no longer prepared to pay for their products, at least not in the traditional way. There are various ways publishers and their resellers can counteract this threat, and below are just some of the recommendations for action based on the results of this research:

Offer upgrade protection as an up-sell option.The survey highlighted that half of consumers still prefer to own their software outright. Much like servicing and insurance costs associated with owning a car, these software buyers object to paying expensive upgrade costs to take advantage of new features. For years tax and antivirus publishers have offered extended ownership subscriptions (typically two or three year options), allowing their customers to save over the long term via an up-sell during the original purchase transaction. Publishers of productivity, imaging, �nance, games, and operating systems can lock in their customers by offering term-based upgrade protection (e.g., all upgrades for three years) as a compelling up-sell. Although this strategy may affect future upgrade revenue margins, it will reduce the number of customers that switch to competitive or open source alternatives.

Provide alternative ownership models.Certain types of software such as photo editing, tax, �nance, and games are not always frequently used. Consumers of these products would likely �nd it more appealing to pay based on usage (hours or monthly) rather than having to invest heavily upfront in a tool that will be infrequently used. This model has worked well for car co-ops that allow drivers to pay as they use. This model,

although not suitable for everyone, would encourage some consumers to use best-in-class paid software rather than opting for cheaper or open source alternatives. A college student is unlikely to pay $600 to buy Photoshop, but they may well be prepared to pay an affordable hourly or daily usage fee to allow them to complete a speci�c design project. In today’s connected society there are no longer any technical barriers to developing and implementing this ownership model.

Productivity software, antivirus, and other regularly used software packages are often installed on multiple devices within the home. The proliferation of different devices means that consumers want to have licensing options to allow them to use the same software on all their devices. Currently, multi-user licenses are more relevant tosmall businesses than consumers. Offering family or multi-device licenses would allow consumers to buy once and use anywhere including different versions for PC, Mac, and mobile devices.

Intelligently up-sell to increase average order value.Many software publishers try and encourage customers to buy related products in the shopping cart but few are providing up-sells that the customers really want. Almost all software publishers allow their customers to download a digital version of their products, but few are taking advantage that consumers want and are willing to pay extra for purchase protection either in the form of a physical backup copy or extended download insurance. Customers also want to purchase value-add products and services including user guides, and third party add-ons such as templates or functionality enhancements but are usually forced to obtain these from other channels after their purchase.

www.elasticpath.comConsumer Software Buying Trends

About Elastic PathElastic 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 www.elasticpath.com | Blog www.getelastic.com | Twitter www.twitter.com/elasticpath

Contact UsTo �nd out how Elastic Path’s ecommerce research and consulting services can help you succeed, please email [email protected] 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.

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All other trademarks are the property of their respective owners.

Date post:	16-Jan-2015
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