My guess is that $$ spent acquiring customers is directly related to software quality/desirability/market size.
For example, if you create an insanely great program and it takes off via viral channels there would be no need to spend a 70% on advertising. In addition, if these numbers apply to indie developers (its not clear to me that they do), then most don't pay themselves well or at all to begin with. This is a major cost and if the developer calculated all of the hours they spend at even $40 per hour, I'll bet the marketing cost as a percent would be much less. Being asked on a survey they probably just responded based on out-of-pocket cash outlays. Ignoring the developers unpaid salary what are the out-of-pocket expenses; server hosting, accounting/taxes, support purchases like icons, royalties, etc, and advertising. Its easy to see the numbers in this context. Finally, if the market for the application is only 50 units, then spending an infinite amount of money will never make sales go above 50. So how many of these companies are spending wisely? Being able to create software does not mean that a company has the marketing skill to spend marketing $$ wisely. Most go through, a perhaps endless, cycle of paying for a lot of things that don't work until they learn or go out of business. Some large companies never get this right, they just have more money to waste. For these numbers to mean anything the report would have to provide a detailed context. Maybe all of this is covered in the report. I did not download it. But, on the surface it does not take a cynic or thin air to explain the numbers, but I do fail to see the value without a properly analyzed context. Neil On Aug 31, 2010, at 8:48 AM, Martin Hairer wrote: >> You have to sign up for the TrialPay service. > > My understanding is that you just give your email address so they > can send you a personalised link. That's what happened to me and > I haven't received any "follow-up" email from TrialPay (yet?). On the > other hand, I am *very* surprised by the figures quoted in that report. > > According to them, software companies spend on average 39% of > their *revenue* on customer acquisition, with that ratio jumping to > 54% for companies with a revenue below 100k. I would have thought > that anything more than about 10% is way excessive, but maybe I am > just old-fashioned ;-) > > Anyway, my impression was that this is a number plucked out of thin > air that is designed to make us all feel bad about spending so much less > than "the average" on marketing. I hope I am just being a bit too cynical.... > > A less cynical explanation would be that some "companies" (maybe > some of the one or two-man shows or maybe some run by someone who > doesn't speak English natively) didn't really understand what figures > were being asked of them and gave the percentage of *expenses* that > they spend on customer acquisition. This would explain the insane > figures (four of them higher than 70% and one close to 95% according > to the graph on page 2), as well as the fact that the *median* figure seems > closer to 15%, which is already more plausible... Cheers, > > Martin
