Just eight months into the word processing business after purchasing WordPerfect, Corel has begun to chip away at Microsoft's share in sales of word processing software. Behind Corel's success: stressing the product and its quality rather than brand image advertising as Microsoft does, increasing the ad budget, staging attention-getting promotions and lowering prices.
That multiprong approach has served Corel well and been instrumental in making its CorelDRAW application an international leader that commands 80% to 85% of the $180 million market for graphics and illustrations software.
The Canadian company invaded Microsoft's word processing territory last March when it acquired share-losing WordPerfect from Orem, Utah-based Novell Inc. in a deal worth about $124 million-about 85% less than what Novell had paid the founders of WordPerfect Corp. in 1994.
Microsoft Word and Microsoft Office dominate the sector internationally with as much as 85% to 90% of sales, but it wasn't always that way. Just four years ago, WordPerfect led the market with about two-thirds of retail word processing software sales, but its lead slipped when faced with a more aggressive Microsoft.
Now Corel is boasting that its Corel WordPerfect suite of office-oriented applications-including a file organizer, a graphics program, a spreadsheet and a word processor-has jumped to 50% of the $5 billion worldwide market from a peak of about 25% under former owner Novell. It hasn't hurt that Corel has nearly doubled its 1995 budget of $55 million to $100 million on advertising and sponsorship worldwide-or about one-third of its estimated total sales of $334 million in 1996. This year, Corel founder, president and CEO Michael Cowpland predicted that ad spending will increase "slightly" to $120 million, with more than half that spending in the U.S., the world's largest computer market.
And all this without an advertising agency. "We find that the technology is changing so rapidly that that's the easiest way to get it right," explained Mr. Cowpland. "That's hard for an agency." Instead Mr. Cowpland directs Corel's considerable international advertising, event marketing, sponsorships and aggressive pricing.
Competitor Microsoft, meanwhile, spent an estimated $400 million on worldwide ad spending last year, which works out to about 8% of sales, according to Advertising Age estimates.
Some software industry watchers have suggested Corel spends too much on advertising. But Mr. Cowpland scoffs at such a notion. "We have established an incredibly popular global brand" that's sold in more than 70 countries worldwide, he countered. "That means we can introduce new products, and they just fly off the shelves."
Last year, Corel ran print ads in about 250 magazines and newspapers worldwide, hitting major computer magazines, business publications and more general-interest outlets like USA Today, Time and Newsweek. That number was down from a total of 350 publications in 45 countries in 1995 after lesser-profile publications were dropped.
Thirty-second TV spots-likewise produced in-house-follow the same philosophy of the print creative. "All commercials are high energy with direct messages and a call to action" in the form of a toll-free phone number for customer orders, said Susan Moggridge, Corel's manager of product marketing. Commercials for the WordPerfect line tout the software's value, low price, technology and power against the competition. Mentions of major awards WordPerfect has won and quotes from reviews in leading industry publications bolster the claims. Television commercials accounted for roughly 40% of last year's ad spending.
Corel's in-house agency of about 70 people creates several hundred full-color ads a month, plus collateral materials and packaging. All are produced using Corel software. Working solo is faster and cheaper, Ms. Moggridge said.
An all-new package design, for instance, can be turned around in two days, while new ad creative can be designed and output ready for publication in just four hours. Producing camera-ready ads in-house instead of through an outside production house "pays for the whole department" and gives designers greater flexibility, Ms. Moggridge added. "By having a limited number of hands in the pot, we're finding that the creativity is wonderful," she said.
Few consumers would describe Corel's typical ads as slick, flashy or even particularly big-budget. But they're product-specific and often densely packed with copy that details program features.
Ad agencies "pretty much reprimand us" for the copy-heavy approach, Ms. Moggridge pointed out. But "that gives readers all the information they need to buy from the ad," she said. "We score one of the highest recall rates."
Microsoft, for its part, isn't impressed. "We make a lot more money than [Corel does] so we don't have to spend so much on advertising," said John Zagula, Microsoft's group marketing manager for desktop applications. "We are the clear leader in [office software] suites." And to be sure it stays in the top spot despite Corel's inroads, Microsoft will be spending "very heavily" to promote its newest upgrade to the widely used Microsoft Office and Office Professional suites. "We're going to put some weight behind it," Mr. Zagula said.
New creative to support Microsoft Office 97-expected to ship by March, according to Mr. Zagula-will emphasize how all the applications have been integrated to work together.
"Our advertising has evolved to recognize the family of Office as a whole," Mr. Zagula said. "We have invested huge development efforts in creating a family of products that live under the umbrella of Office." Wieden & Kennedy in Portland, Ore., handles advertising for Microsoft.
Beyond the retail sector, which accounts for 10% to 20% of total industry sales, another marketing battle looms: Corel's Mr. Cowpland is launching an "ultra-aggressive" effort to take on Microsoft-dominated markets for corporate business and preloaded software or applications that come installed on new computers.
Through a recent agreement between Corel and PC marketer Packard Bell in the U.S., WordPerfect is now standard issue on 6 million new computers. A similar deal with another marketer is expected this month to put the software on 10 million more computers, which Corel said will give it a 50% share of all preloaded word processing software. More difficult will be the corporate market, where Corel has little presence and Microsoft is entrenched. "This is new business for us," Mr. Cowpland said. "It's the toughest to get."
In an attempt, Corel has turned to one of the staples of marketing: aggressive pricing. For $1,500, companies can buy a single Corel Professional Office suite for their central computer server and then connect an unlimited number of users at no extra cost. That's a bargain when compared with Microsoft, which charges about $200 per user.
"There's a word I would use-it's value," responded Microsoft's Mr. Zagula. "It's great to cut price if you have a product that isn't a great value." He vowed that Microsoft will make sure software buyers find its office suite to be a better value than Corel's competing product, which last year was priced as much as $100 less.
"We will do whatever it takes to make that happen," Mr. Zagula said.
President and CEO Michael Cowpland calls it a "dynamic approach" to marketing the family of Corel products:
Sign on as worldwide presenting sponsor of the Women's Tennis Association Tour, which includes big-name events like the French Open, Wimbledon and the U.S. Open. Television audience: more than 1 billion viewers in more than 100 countries.
Sponsor the popular World Bobsleigh Championships circuit.
Host the Corel World Design Contest, now coming up on its eighth year, which has demonstrated the power of the CorelDRAW family of graphics software and helped make it a worldwide market leader. About 8,000 entries came from 60 countries last year, and $3 million in prizes were handed out in October in the Canadian capital of Ottawa, Ontario.
So popular is the contest that Corel last February unveiled a similar contest that allowed WordPerfect users to show off their office software skills for $1 million in prizes. "We see this as going from strength to strength," Mr. Cowpland said.