Cuban Experiences

CUBAN EXPERIENCES IN THE MARKETING OF SOFTWARE PRODUCTS

Martha R. Morales
Beatriz Zanetti


In the last years and as a consequense of the development reached in computers and its associated technology, a new product has emerged with much strength in the worldwide market: software.

Up to date, this product has been monopolized by the more developed countries, such as the United States, Japan and the occidental europeans, that concentrate more than 90% of the demand and supply.

Nevertheless, the short terms estimated growths, in the market of developing countries, and, especially, of the Latinamericans, show that software production is a feasible alternative also for the less developed ones.

Statistical data of exhibitors and visitors of the New York PC EXPO in it last decade, clearly show the growth of participants in the software worldwide market .

From 120 exhibitors and 9600 visitors in 1983, in 1993, a total of 750 exhibitors and 81000 visitors was reached, which represents a 525% of increment for the first and a 743.7% for the seconds.1

Also, a projection of International Data Corporation about the growth of this market until 1996, mark the following behavior :

			1993		128%
			1994		105%
			1995		67.4%
			1996		44.2%
As can be observed, the biggests rates of growth are concentrated in this and the past year, and consequently the new producers should not miss this opportunity in order to be fully incorporated to the market.

Although the estimated rates of growth, from 1995 on, are lower than before, this doesn't mean that the market will not expand, but only that it will do it at a slower rhythm.

According to estimated figures, in 1994, the software market is expected to grow 138% compare to 1989 in developing countries.2 Besides, an analysis of the figures of losses caused by software piracy, introduced in this same work, are eloquent regarding the potential of the Latin American market; Mexico, Venezuela and Brazil outstand as the most favorable squares.

I. Brief description of the product. Conditions for its production.

In order that software can be, in developing countries, a competitive industry, in our opinion should exist, at least the following conditions: high qualified labor force, in the field of computer science as well as in other branches; updated tools and programs for software development, and a politic guided to estimulate the development of software products or the internal and external markets.

A crucial consideration, from our point of view, is the one regarding the selection of the software products that must be targetted to the external market.

With the goal of taking the maximal advantage of a high qualified and cheap labor force, it is helpfull to make a classification of the software, in order to recognize the best spheres for investment.

As a first approach, software can be divided in two big groups: general(horizontal) and application software(vertical).

The first one is the most abundant in the market and it is almost a patrimony of powerfull firms, such as Microsoft, Borland, Lotus, Claris, among others.

However, in the field of application software, that is the one that solves specific problems within a given field, the situation is different, since a highly monopolized market doesn´t exists and it is very much improbable that it will, because of the multifacetic nature of this kind of software.

From the above stated it results advisable the concentration of efforts in the development of application software as a exportable product.

To deepen the analysis in this kind of software, it is evident it could be classified also in several types, regarding the activity it is made for, education, engineering, medicine, agriculture, entertainment, personal, office, and as many others as activities or spheres exist.

Also, it can be classified as software of wide consumption and of specialized consumption. Within this first category would be included the software for education, entertainment, personal, office, and in the second the one for medicine, agriculture, engineering, and other specific spheres.

According to published data, an increment of around $200 millions dollars is estimated compared to 1992, in sales of PC systems for home and office markets.3 Regarding multimedia systems, rates of growth of the income from this kind of systems, are supposed to be more than 30% starting from 1993.4 Consequently, an expansion of the multimedia software market is expected.

The market for multimedia products is expected to grow from 530.8 thousands units in 1992 to a little more than 2 millions in 1995, with $1000 millions income.5 On the other hand, a $5500 millions investment in the educational sector is also expected in hardware and software products in 1993, facts that make this market a very atractive one.

The sales of Cuban software products in Latin America also show a great demand for educational products from schools and students, mainly from the Kindergarten to grade 12 group.

This facts point out that a good selection of products must be in relationship with softwares that could be use at home, in the office and in the educational sector, keeping in mind the development of products based on new technologies, such as Windows and multimedia in the present time.

An important factor that must not be forgotten is that software products for the office, home and the educational sector in Latin American countries is generally in English. This is one reason why Spanish titles can result attractive and advantageus for a practically virgin Spanish-speacking market.

Regarding the real possibilities of offer in Cuba, they could be considered limitless, since the country counts with a high qualified labor force capable of producing specialized software, mainly in the fields of education and health, as well as in others, such as engineering, automated design, construction, chemistry, and so forth.

II. Some marketing aspects

Once being clarified the possibilities of producing a competitive application software taking into account its quality, it is neccesary to consider other aspects that from out point of view are also critical and determinant for a successful marketing, such as:

The first issue is very important in the Latin American market, due to usual practices of copy and the poor or recent legislation refering to this question. That is, still it doesn´t exist, except maybe for exceptions, a culture or ethics against the illegal copy of software.

Data of 1992 about the software piracy in Latin America show the following output:6

 					% of piracy        loss in millions dollars

ARGENTINA				80		$38
CHILE					75		$28
COLOMBIA				85		$18
MEXICO					85		$206
VENEZUELA				85		$91
OTHER LATIN AMERICAN COUNTRIES	na	$72
All this indicates the need of an adequate protection against copy of the software products destined to these markets.

Another no less important question is the presentation. It must present quality, not only in the external aspect, but also in the internal one. By internal presentation we are referring to the user interface.7 This is a key issue for quality. This interface must be comprehensible, easy, friendly. Given that the type of software we are referring to is not destined for computer specialists, but for a broad market of different users that goes from students to housewives, this is a particularly important issue that must be considered for a succesful introduction in the market.

Softwares that present a well designed on-line help and an easy to read user´s manual are the most convenient for the market we are trying to reach.

On the other hand, Windows environment and multimedia technology should be considered now-a-day standards as platforms for developing new products, and all the advantages they offer for a broad market should be taken into consideration and exploited at maximum.

In the case of Cuban software production, this fact sometimes implies a radical transformation of a product, since in many occasions it was elaborated in order to solve some specific need not directly related with the market, and therefore, the user interface and the facilities of a well structured on-line help or the easyness of a user´s manual were not taken into consideration in the required manner.

In what respects to costs, software is a product whose fundamental cost is the labour force employed in its development. Regarding this issue, in salary terms we present some advantages in realtionship with the developed countries that are the biggests producers.

Regarding to prices, generally the saling price of software is structured as follows:

		production cost			25-30%
		promotion and publicity		10-15%
		distribution channels		25-30%
		revenue				25-40%
This means that royalties between 15-25% could be obtained in this market, always trying to get royalties that are near half of the revenue obtained in each product.

Sale procedures of software are multiples. In a first and quick approach they could be:

The first way, due to the present situation has been the most feasible one, because the second one implies an inmediate investment, as well as the need of searching or establishing distribution channels, with all the inconvenients derived from the actual embargo.

Marketing through foreign partners could be carried out fundamentally in two ways:

Another way could be direct sales through specific courses to interested users. This way is almost reserved for software products that are not destined for wide consumption, such as engineering products, agriculture software and so forth. This kind of sale can also drive to the finding of associates and specialized distribution channels, that in general, are able to give the technical support that these kinds of products need.

Given the heterogeneous characteristics of the applicaton software -specialized, goes to particular market segments, can be simple or of great complexity, could have a low or a high price- it doesn´t exist a unique way for its commercialization.

The way is going to rely on each product in specific. For example, a CAD product, surely requires of special contacts with interested firms or enterprices that work this field. However, a popular product destined to the training of children in the four arithmetic rules, could only require the allocation of the product in retail stores and of an adequate promotion in schools, newspapers, educational journals, and so forth.

III. Some problems encountered in the marketing of software

Until the present moment our enterprice has launched 22 software products in the Latin American market. These products come form Cuban universities.

The experienced acquired in this activity since it first started in 1992, allows to generalize some difficulties that have been encountered.

A first question is related to the characteristics of the products that we are selling. These products were mainly elaborated in order to solve some problems within the country or the institutions that developed them. That is, they were not produced for a market, and they obey to internal needs.

Generally speaking, software products that are being marketed have been designed and produced in order to satisfy market needs, so they have the advantage that they incorporate the necessities of the market they are directed to.

Another important factor is the so called meta market of these products. Our universities have produced a great number of specialized products of what we call vertical software, that is, products destined to solve specific problems in a certain field or branch of science and technology. Such is the case of engineering products, medicine, and so forth.

This kind of product is necessarily complex according to the problems it faces and generally requires technical support. In the software market, these kinds of products are offered by specialized enterprices. For example a company that offers design software, also offers the necessary training of the personell and the technical support. The sale of these products is carried out through salespersons that are thoroughly knowledgeable of the products they are selling and the promotion is carried out almost individually. That is, these products generally are not marketed by the same firms that market the software of wide consumption.

Up to now, our enterprise has relied on foreign partners that market wide consumption software, such as educational products and software for the home market. The publicity and promotion of these kinds of products can be carried out through newspapers, journals, and other mass media means. Besides, these softwares don´t require technical support or special training, and in most of the cases, they only need a few written pages with instructions for the user.

A thrid worth mentioning characteristic is the one related to the content of the products. Most of our softwares undertake only one topic, that is, their scope is limited according to todays´ market availability. The current software market offer products with multiple options. For example, a mathematical product of a determined level covers most of the themes of the level involved and not only one topic.

This phenomena of the enlargement of the scope of the software is highly influenced and determined by the characteristics of the available systems, that allow high storage capacities with enough memory and speed capabilities for confortably undertakde products with multiple objectives and options.

Another issue worth mentioning is the one related with prices. There is a tendency in the software market to decrease the price of the products, specially those targetted to the wide consumption market. For example, a product with 3200 cocktail recipes is offered in $34.95 dollars, another that gives information of the different parts of the human body facing a great quantity of varied issues is sold in $49.95, a Spanish-English translator is offered in $99.00.

The same thing occurs with the CD-ROM titles. These undertake huge amount of information with a very low price. The CD-ROM Encyclopedias cost around $50.00 dollars and entertainment titles can be found in a range from $15.00 to $35.00 dollars.

All this shows us that products targetted to the wide consumption market must have a competitive cost, mostly when our name is not still recognized in the market, so they must be offered at a rather low price in order to get a market share.

A very important element in the marketing of any product is the publicity and promotion. This issue has been estimated to cost 3 or 4 times the expenses incurred in the production of the software. Up to now, our publicity as well as the one of the foreign partners has been poor, fundamentally due to financial aspects. This is a question that must be highly improved, and all the circumstances that can help us in the promotion of our products must be taken into account.

Finally, it is neccesary to mention some questions regarding the quality of the presentation of the products. It is indispensable to work more in the user interfaces, that is, in the way the screens and the different options are presented to the user. This interface must be attractive, with an adequate color use, in graphic environment, introducing in them only the neccessary elements. Besides, numerous problems with the use of the language have been encountered. Sometimes the error messages are very difficult to understand or they simply don´t explain anything, just point out that an error has occured. The on-line help in some cases has the same difficulties pointed out above.

All the topics refered to must be improved in the software products that are to be offered to the market, so new product that are going to be shipped must very seriouly take all this elements into consideration.

IV. Some ideas about the development of products

It isn´t an easy task to determine which will be the proper products to develop in order to enter the current software market. However, based on the information and tendencies pointed out in this paper, it is feasible to make the following considerations:

Final Considerations

Bibliography

Herrera, Rene. Head of the Informatics Division. Ministry of Higher Education. Republic of Cuba. Interview.

Press, Laurance. Strategies for Software Export. Paper discussed in Informatica 92. Habana. Cuba.

Selling and merchandising. August 2,1993. P.12.

The Numbers Sheet. Computer Reseller News. June 7, 1993

The Numbers Sheet. Computer Reseller News. June 14, 1993

The Numbers Sheet. Computer Reseller News. June 28, 1993

The Numbers Sheet. Computer Reseller News. July 14, 1993

The Numbers Sheet. Computer Reseller News. July 19, 1993

1 The Numbers Sheet. Computer Reseller News. June 28/93 2 Press, Laurance. Strategies for Software Export. Paper discussed in Informática ´92. La Habana, Cuba 3 Selling and Mercandizing August 2, 1993 p.12 4 The Numbers Sheet. Computer Reseller News. June 7/1993 5 The Numbers Sheet. Computer Reseller News. June 14 1993 p.14 6 The Numbers Sheet. Computer Reseller News. July 19/1993 7 We consider as user interface the way that the software permits the interaction with it, including colours, options, questions, error treatment, and so forth. ??