NPD Group Blog » Diminishing Returns

Diminishing Returns

Friday, August 20th, 2010
By Stephen Baker, Vice President, Industry Analysis

NPD’s 2010 Security Software Topical uncovered some interesting trends this year, some of which we released in a press release today, but some of the other tidbits require a little more nuanced reading into the last 3 years of data.

The concept of the Tech Bench, the in-store service arm for major retailers, appears to have reached a plateau in terms of its awareness, usage, and ability to influence in-store software purchases. While retailer service offerings have clearly expanded over the past couple of years, as have ones offered by hardware brands and independent 3rd parties, the focus of this expansion has been away from the computer and towards more lifestyle service opportunities, hardware training and CE services. Consumers are still highly aware of the tech bench, with 46 percent awareness and 13 percent usage, but those numbers have barely budged from 2008, when usage was 11 percent and awareness was 45 percent. Although this may appear negative, at least some of this plateauing is the result of the demise of Circuit City and its Firedog brand, which stood as the major retail competitor to Best Buy’s Geek Squad. This leveling-off of the computer service opportunity has likely led the in-store service industry to seek opportunities elsewhere, as we mentioned above. But, this shift away from the PC has come with consequences for the software market, especially the security product segment, as share of tech bench interactions that involved a software purchase or installation fell from 2009 levels.

Traditionally security software has used the retail channel as a way to encourage brand switching. By using the box on the shelf and aggressive initial pricing targeted at potential switchers, many brands have been successful at stealing market share from competitors through off-the-shelf selling. With the advent of the tech bench, retailers became more of the partner for brands looking to move consumers away from their current security provider and into a new one and began to control that process more, making it increasingly difficult to use the box and the price to steal competitors’ customers or get them to upgrade to a more comprehensive, and expensive solution.

As we mentioned in our press release brands like Trend Micro, Webroot, and Kaspersky have seen strong growth in awareness through this type of partnership focused on basic security needs, although they remain challenged in turning trials and awareness into long-term installed base gains. And while installed base can take time to shift it can’t be a good sign that even consumers who use or are aware of tech benches are rapidly moving towards suite level protection, something that is not likely facilitated by the aggressive trial offers currently available through tech benches at retail.

Overall the real takeaways from this report show a continuing shift in how software publishers and retailers interact, how the value of the retail storefront continues to evolve for the software market, and how in-store services deliver a mixed set of results to the software market. While confusion and uncertainty are never good, undoubtedly the turmoil at retail and in the economy over the last 18 months has caused at least some of this dislocation. Tech benches remain a key way for software publishers to create demand for their products, and retail remains the best place to implement programs designed to take share from rivals. However, it is likely that the value of these opportunities has begun to diminish over its peak just a couple of years ago and both retailers and publishers continue to search for the best way to deliver profitable sales growth that satisfies the needs of both sides.

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