Consumer Software Is Expected To Be Next Fast-Growing Segment

WANT to sell the next great piece of computer software? Don't think CD-ROMs. Think cereal boxes. Think soap. Think ... cat food.

``I think there's a fundamental shift going on in the software business,'' says Kevin O'Leary, president of SoftKey International in Cambridge, Mass. ``It's not about technology anymore. It's about marketing, merchandising, brand management, and shelf space.... In the cat food business, that's all that matters. And in the software business, that's all that matters.''

Mr. O'Leary is leading a charge to capture what is expected to be the industry's fastest-growing segment in the next few years: consumer software. He is not alone. Many major players who made it big selling to the business customer are expanding their outlook to include the home.

The draw: Nearly one-third of American homes now have a computer, and the numbers are expected to rise quickly.

Microsoft Corporation has launched a consumer line, Microsoft Home brand. Two weeks ago, WordPerfect Corporation launched 19 titles of its new line of consumer software, WordPerfect Mainstreet. Yesterday, it announced a 40-city concert tour with Tony Bennett to promote the line. A concert tour?

``We and our competitors can learn a lot from the marketing strategies that have been adopted in other industries,'' explains Glen Mella, WordPerfect's vice president of marketing communications. ``We're really trying to reach a much broader mass market.''

Consumer software is a little hard to define. Companies know what it is not. Their marketers are fond of adapting the old Oldsmobile ads by saying, ``This is not your father's spreadsheet. It's also not as expensive.''

Mr. Mella says he plans to list its new Mainstreet products for $29 to $149 apiece, compared with the typical business software package that might sell for $300 to $495. Its hottest seller early on is WordPerfect InfoCentral, a $149 personal information manager that serves as a kind of computerized organizer of ideas and appointments.

This month, Microsoft introduced an upgraded version of its CD-ROM reference library, Microsoft Bookshelf, for $99. Users of the previous version can get a $30 rebate. And Intuit Inc., which sells the leading personal finance package, Quicken, has experimented with all kinds of pricing promotions to capture the market - from $9 to $70.

But the boldest vision of what the consumer software industry will look like comes from O'Leary, who started his marketing career selling Nabisco's Miss Mew cat food.

``You're going to see an economic model where software companies become giant incubators for good ideas,'' he says, likening it to the record business, which takes the creative product of an artist and markets it. SoftKey claims access to 15,000 stores. Although it is only about one-sixth the size of WordPerfect ($120 million in sales versus $700 million), it has far more products. Today, it sells 166 software titles - from the Sports Illustrated 1994 Multimedia Sport Almanac to the MasterCook II computerized cookbook to an educational mystery game, Moriarty's Return.

With so many titles, SoftKey can experiment. If a new title does not work in, say, two weeks, it can be replaced with something else. Last quarter, the company brought out 18 new software products. This quarter, it is aiming for 20.

If it succeeds, the push into consumer software could transform the industry. It will probably encourage new kinds of software aimed at the home computer, these executives say. It may well drag down software prices, which have already fallen substantially. The move also means software will start showing up in more kinds of stores.

``Nowadays, we're starting to do business with the K marts, Wal-Marts,'' Mella says.

The changed outlook could spin off new kinds of marketing companies. PC Week, a trade magazine, recently profiled Addie Swartz, whose Concord, Mass., company, BrightIdeas Inc., has started selling children's software door-to-door. It is the industry's ``Avon Calling'' approach to marketing new titles.

But will it be just like selling any old cat food? Some differences remain.

Software companies still have to market themselves to high-powered industry analysts and the trade media, Mella points out.

And cat food companies do not have to provide technical support for their products. ``The cat doesn't call up and say: `I don't like the flavor of this tuna,' '' O'Leary says.

But software companies, already struggling with how to finance the increasing load of technical support, are likely to face even greater challenges if they have to turn out more products at cheaper prices.