Market Size and Growth
Consumer productivity software is currently a $260
million market. It is growing at the fastest rate of any major software
category, +75% annually. This growth traces to the explosion in sales of
powerful computers (64K+ RAM) into homes. Homes now buy more 64K+ RAM
computers than businesses buy. They also buy consumer productivity
software: 3 of the top 10 best-selling software titles are consumer
Existing competitors are smaller companies such as
Arrays, Inc. who have not erected strong barriers to entry. No top ten
software company has a significant product in this market. The current
leaders lack in-house software development capability, which slows their
reaction time to competitive entries. Advertising levels are still low.
Consumers are dissatisfied with existing products, particularly in the
home finance area. Existing finance products, while technically
competent, miss the needs of most consumers.
We have applied our approach to the broadest area
where consumers use and record quantitative data: handling their finances.
Procter & Gamble type market research indicates
consumers want one benefit in this area above all others: saving time in
doing routine financial chores, such as paying bills.
We have developed a core of software that automates
financial transactions. It is the first personal computer software that
handles routine financial tasks faster than by hand. Test results
indicate that our software is 40% faster than hand and 50% faster than the
Our intuitive design process makes our software much
easier to learn and use. Tests indicate new users successfully produce
work with our software in as little as 5 minutes. That is 12 times faster
than the fastest time we’ve clocked for the market leader.
We are applying this technology in four related
mass market home finance software
very small business accounting software
sophisticated home finance software
We will enter the market with the help of joint
marketing with major companies. For example, we are close to an
agreement with a top 20 bank to market and distribute our products.
Establishing Barriers to Entry
After entry we will erect multiple barriers to
further entry. Examples are locking up bank distribution and planned
product improvements that enable us to extend product superiority.
Initial funding of $1,000,000 followed by an
additional $1,500,000 over eight months.
Target Company in Year Five
Intuit’s target size in five years is $58 million in
sales and $5.7 million in net income.
Consumer productivity software products help the mass
market of average people do useful work better. Examples include helping
consumers manage finances, execute transactions, handle paperwork, do
taxes, find information, and make decisions.
- Demand for consumer productivity software is
high. The best-selling consumer productivity software ships at the
rates of the very best selling business software, as shown below.
Top Ten Best-Selling Software Products
All Categories Except Games
Bank Street Writer (consumer)
Home Accountant (consumer)
Dollars & Sense (consumer)
Source: Computer Retail News composite poll
- The market is large due to the explosion in
shipments of truly powerful computers into the home. Homes now buy
more powerful (64K+) computers than any other group, including
corporations. Productivity software typically requires at least 64K of
This hardware creates a $1
billion dollar market for home software in 1984. The ‘home productivity/
home business’ segment is estimated at 26% of the total of $260 million in
1984. Sources: Creative Strategies International, Future Computing.
- The consumer productivity market is very fast
growing, even relative to other software markets. Consumer
productivity software and education software tie as the fastest growing
major software categories, growing at 75% per year.
This growth is forecast to
continue. For example, Future Computing forecasts home productivity
software for IBM-type machines to grow at a 105% annual rate through
1988. By 1988 home productivity software will outsell education and game
This market growth results
from fundamental economic and consumer trends.
- Consumers are dissatisfied with existing
consumer productivity software. While hundreds of products exist,
their usefulness for average consumers is questionable.
For example, interviews with
computer dealers indicate that well over half the buyers of consumer
finance software stop using it within two months of purchase. This is
corroborated by the results of survey research conducted among computer
industry executives. 70% of the executives have tried at least one brand
of finance software. Only 4% become regular users. The reason is that
existing products are technically competent but miss the needs of
Further evidence are the
comments of Don Estridge, the head of IBM’s PC division. Far from
extolling the benefits of computers for consumers, he publicly admits:
“For the average person, the
excitement of buying a PC evaporates very quickly. The same question
keeps coming up, like waves on a beach: What do I use it for?”
“My wife can’t think of any
reason at all she’d use a PC.”
“Our industry is
consumer-driven…that’s really hard when we can’t answer the question:
‘What do I use it for?’”
Intuit’s objective is to
dominate the consumer productivity software market. True mass market
consumer software requires:
We have applied this
approach in the broadest area in which consumers use and record
quantitative data: handling their finances. This includes writing checks,
bill paying, transaction recording and reconciling, and transaction
Our research indicates that
one benefit in this area is much more important than others to most
consumers: saving time and hassle doing routine financial chores, such as
paying bills. A product that saves time is useful to mass market
consumers. A product that takes more time is not.
We have developed a core of
software that saves time by automating the transaction process. Our first
product, named Quicken, is the first personal computer software that
handles routine financial transactions faster than by hand. Its intuitive
design makes it fast and easy to learn. Test results show 10-fold
advantages over major competitors. See below.
Measures of Ease of Use Quicken
Home Dollars & Sense
Percent testers successfully
work 100% 10% 50%
Learning time from start up
first work (min.)
5-25 60-90 40-70
Speed of Learning and Use
“We even paid $40 more and
bought the checks for the printer, but it was so slow and frustrating, we
only used it once of twice.”
Owner, Software Distributor, West Los Angeles
“I quit. It was more
trouble than it was worth. It took twice as long to input the data as to
write it longhand.”
Salesman, Computer Store, Burlingame
“It makes it too hard. I
don’t want to think, I just want to input the stuff and get out.”
Salesman, Computer Store, Mountain View
“I just don’t have any time
Owner, Software Store, Los Angeles
“It’s not worthwhile as I
have to double do everything.”
Editor, Software Magazine
“I took it home and tried it
and gave it up. It was faster to do it by hand.”
Owner, Computer Store, Northridge
Quicken User Comments
“It does exactly what I want
to and easily. It’s not a chore anymore.”
“Compared to the Home
Accountant, or something like that, it was really logical without being
“I was blown away by how
fast and easy it is. It’s wonderful. I’m sold."
“It’s so fast compared to
the old-fashioned way.”
Existing competitors are
smaller companies who have not erected the barriers to entry found in
other major software companies. There are no major software companies
with significant entries. The current leader lacks in-house development
expertise. Advertising levels are low. Consumers are dissatisfied.
- None of the top ten software companies have
significant entries in the consumer finance category:
- Ashton Tate
While any of these
companies could enter at any time, our press contacts know of no
significant entry about to be introduced. They can see 3-4 months ahead.
It appears likely that we will introduce without having to fight the large
software companies head on.
- The longtime market leader is The Home
Accountant by Continental Software, a division of Arrays, Inc. It
is by far their largest product. Another consumer finance product to
sell in volume is Dollars and Sense from Monogram, a division of Softsel.
Dollars and Sense began shipping in September, 1983 and has been on the
top ten since December, 1983. This is Monogram’s only product.
Monogram’s sister division, Tronix, publishes game software—none are
best sellers. Softsel is privately held. Little data on Monogram is
available. Softsel does carry other brands of home finance software.
At last count there were about 45 other entries in this category.
- Competitive advertising which can be a
significant barrier to entry is low in the consumer productivity
category. Advertising budgets in consumer productivity software are
only a tenth of those found in business software.
- In the consumer finance category, the major
entrants are publishers who can only react slowly, if at all, to new
competitors. Publishers buy the software from outside programmers
and, as such, do not have the in-depth understanding of the programs
needed to make major improvements rapidly. In contrast, companies
integrating both publishing and development are dominating business
productivity software because they are able to develop better products
and make necessary improvements.
The rapid rise of integrated
companies is dramatic. Two years ago publishers, like Visicorp, dominated
business productivity software. Today, integrated companies dominate.
Publishers have been forced out of leadership as was Visicorp.
- The biggest vulnerability in consumer finance
software is bad product. Over half the buyers of the best-selling
consumer finance software stop using it within two months of purchase.
Even computer industry executives don’t use the existing home finance
software. 70% have tried at least one brand. Only 4% become regular
Our plan is to expand our
software technology into a series of related markets. The first is the
mass-market home finance software market. This market is large and
currently unaddressed by competitors. This market also presents a ‘razor
and blades’ opportunity, the blades being continuous form checks.
Next, we will expand into
the related markets for dedicated home banking and very small business
accounting software. Home banking is large enough to support at least two
separate products. The last financial market we will attack is for
sophisticated home finance products, the most crowded market.
All products will require
several versions, one for each of the leading-selling 64K+ RAM machines.
Mass Market Home
largest-selling home finance software product
Opportunity: Fill void in
market—the largest segment of households want to save time with finances.
Existing products add power, but do not save time.
In productivity software,
simple and fast products outsell ‘power’ products. Bank Street Writer
outsells WordStar. PFS:File outsells dBase II. This concept has
delivered large volume in major software categories.
does all routine household financial tasks: writes checks to pay
bills, keeps and reconciles check register, tracks expenses
enables user to do these tasks faster than by hand
intuitively easy to use; looks and works like a checkbook
Customers: Owners of the
best-selling powerful (64K+) computers, who pay bills with checks.
Currently, those computers are IBM, Apple II, and Commodore 64. Also,
those with easy access to these computers at work.
Competitors: No existing
product addresses the mass market need. Two sophisticated home finance
software products are prominent: Home Accountant by Continental Software
and Dollars & Sense by Monogram. Ultimately, the paper check and
checkbook, that is, doing the work by hand.
Quicken is the first software product that does routine financial work
faster than by hand.
Home Accountant: +22% to do
routine finance vs. by hand
Dollars & Sense: +28%
Home Accountant: $150
software price, $.09 price per check
Dollars & Sense: $165
software price, $.09 price per check
Quicken: $99 software
price, $.05 price per check
We are emphasizing use of
well known, highly credible companies to introduce Quicken. These will
give Quicken awareness and credibility, reduce our introductory marketing
spending, and accelerate our volume build.
Joint marketing with banks will add distinctive credibility and
provide a source of volume. The uniqueness of having a bank endorse
Quicken will deliver additional press coverage. Bank endorsement also
adds credibility to Quicken that will cut through dealer and customer
skepticism and build distribution and sales.
We have been developing industry analyst and press relations for
the past year to assure good levels of publicity. This has generated
close relations with key editors in the computer and the general press as
well as with analysts. As a result, several others have offered to do
articles on Quicken when it is introduced. Despite having no products on
the market or announced, we have already been quoted in publications such
as Forbes and American Banker.
Our initial distribution efforts will be to achieve distribution
in computer retail chains via a special co-labeling agreement. This
special incentive can assist us in getting early retail chain attention
and acceptance. Along with this, we plan a major direct sales effort to
chain headquarters supplemented with telemarketing and direct mail
campaigns to retail stores. We will also utilize a distributor such as
Micro D or First Software to gain coverage of independent stores.
We plan a number of trial-oriented promotions to build sales.
For superior products, trial can be the most persuasive marketing device
available. Customers can see how the product can be of benefit to them,
increasing the likelihood of purchase. One promotion in our plan is a
free ‘trial’ disk ad campaign. The ‘trial’ disk will demonstrate all the
features of Quicken without being usable by eliminating its ability to
Advertising will be used in trade, computer and the general
press to build retailer awareness as well as consumer awareness. We
will use the proven technique of emphasizing a product’s benefit to build
Establishment of Competitive Barriers
We plan to erect a series
of barriers after entry to define our market position and minimize margin
pressure. Multiple barriers greatly reduce the risk of losing overall
advantage to competition. Multiple barriers also complement and reinforce
one another to strengthen the advantage over competition. We believe this
is less risky than relying on a single barrier, such as a technical edge.
Below are some of the types
of barriers we are erecting.
- Improve the product to help maintain
noticeable and advertisable product superiority over competition.
- Improve the marketing to better reach and
sell the target consumer than competition. Examples include developing
advertising with higher communication levels, enhanced advertising
credibility, and tighter media targeting.
- Shift the basis of competition to a more
protectable area. An example is Crest’s shift of the basis of
competition in toothpaste into cavity protection. Crest’s patents and
trade secrets forestalled competitive copies for five years. While
patents are rare in software, Intuit has applied for one patent and has
another application in process.
- Move the area of profit to more protectable
areas. Kodak has moved most of its consumer profit from the camera
business, which has dozens of entrants, into the film business, which
has only 3 entrants.
- Develop exclusive distribution channels.
MCI accomplishes this with their exclusive arrangement with American
Express to offer their telephone service in credit card statements.
- Maximize loyalty of non-exclusive channels.
Crisco does this through its trade promotion program that gets the trade
to move large volumes of Crisco as a loss leader. The trade benefits
through additional volume on other items.
- Segment. Understand the differing needs of
segments of consumers and, for each large segment, offer a specially
designed product to better meet their needs. Chrysler recently
identified a large segment of consumers who want something larger than a
station wagon but smaller than a van. This resulted in their successful
Dodge Caravan/ Plymouth Voyager.
We have developed a cost model for managing the
business based on the cost structures of other well run software
companies. In addition, we have broken out our check business because it
is a higher cost of goods business than software.
Cost of Goods
Products 20% 5%
Product Introductions 15%
Established Products 4%
New products 8%
(Source: Tom LeFevre)
History of Intuit-Microsoft Relationship
Microsoft and Intuit partner to market a promotional software
bundle that includes Microsoft Works and Quicken sold through retail
stores. Jeff Raikes from Microsoft approaches Scott Cook at a Software
Publishers Association meeting, asking if Intuit is interested in being
acquired by Microsoft. Cook is flattered by the inquiry, but Raikes later
calls to say that Microsoft instead needs to focus on developing Windows
3.0 and LAN Manager.
Microsoft approaches Intuit again, this time to ask
if they could license the Quicken brand name for a Windows financial
product. Intuit considers the offer, especially since the company has no
Windows expertise, but several detractors complain Microsoft is trying to
shut out Intuit of the Windows market. Mike Maples of Microsoft calls
Scott Cook to tell him that the talks are off, and that Microsoft will
introduce its own personal finance software product to compete against
Quicken on the Windows platform.
Intuit’s development SWAT team creates Quicken for
Windows in only seven months. Microsoft Money for Windows is introduced
in the fall, shortly followed by Quicken for Windows. Intuit successfully
fends off this competition by leveraging its existing customer base.
Intuit uses a rebate coupon in its upgrade mailing to drive customers to
retail stores, causing great demand and retailer support. Intuit also
prices Quicken for Windows aggressively. Quicken for Windows beats
Microsoft Money in head-to-head product reviews, and the press roots for
In 1991, Microsoft’s revenues hit $1.8 billion and
the company employs more than 8,200 people. In the same year, Intuit’s
revenues are $44 million with about 200 employees.
Intuit sends out free Quicken for Windows update
disks with new features to registered users. Intuit launches QuickBooks
bookkeeping software for small businesses. Both Quicken and Microsoft
Money introduce 2.0 upgrade versions in the fall. Quicken maintains a
70+% retail market share on the Windows platform, but Microsoft promotes
Money aggressively in the OEM channel pre-bundled with PCs.
Microsoft launches a Windows accounting product
called Profit to compete against QuickBooks. QuickBooks introduces a new
Windows version in addition to an upgrade of its DOS version. Both Money
and Quicken develop new upgrade versions that incorporate electronic
Microsoft withdraws its Profit accounting product
after one year on the market. Intuit acquires National Payments
Clearinghouse, Inc., an online billpay provider which counts Microsoft as
one of its clients. Merger talks between Microsoft and Intuit start anew
with an email from Bill Gates to Scott Cook that begins, ‘This really is
from Bill Gates.’ After months of discussion and negotiations, the
Intuit-Microsoft merger is announced in September. The companies plan to
sell the Money product to Novell. Two months later, the Justice
Department asks for more information to ensure no antitrust problems,
generating concern that the merger may be in trouble.
After almost nine months in merger limbo, the Justice
Department says it will sue to prevent the Intuit-Microsoft merger from
going through on antitrust grounds. Despite Scott Cook’s willingness to
fight against the DOJ, Bill Gates throws in the towel on the deal. At
about the same time the merger falls through in May, both companies become
more attuned to the Internet tidal wave and race to address the new
technology in their product strategies. Intuit integrates the Netscape
Navigator browser and ISP connectivity into its fall Quicken release, with
a direct link to the new Quicken Financial Network website.
Intuit purchases online insurance business Interactive
Insurance Services, which lets people comparison shop for life insurance
online. Intuit announces a distribution alliance with Excite, providing
finance channel functionality for the ISP. Microsoft launches its
Microsoft Investor website with a focus on investments and portfolio
Quicken.com launches, integrating functionality from
Quicken Financial Network, acquired mutual fund and investment companies,
and partnership content deals with CNNfn and others. Intuit introduces
QuickenMortgage.com to help people comparison shop for mortgages online.
Intuit and Microsoft work together to develop Open Financial Exchange, a
unified specification for the electronic exchange of financial data
between financial institutions, businesses and consumers via the Internet.
Intuit announces a five year deal with AOL, giving
Intuit prominent site listings in several areas on AOL and its subsidiary
CompuServe. Microsoft renames its Investor website Microsoft MoneyCentral,
adding tax and insurance content. Microsoft introduces Microsoft
HomeAdvisor to compete against QuickenMortgage.com. The QuickBooks
Payroll Service launches, offering online payroll. Intuit and Excite
announce the launch of TurboTax Online.
Microsoft introduces a tax preparation product called
TaxSaver, directly competitive to Intuit’s TurboTax program. However,
TaxSaver only launches a federal tax version, and no state versions.
The NASDAQ reaches an all-time high on March 10,
followed by a steep downslide in the stock market. Microsoft withdraws
TaxSaver from the market only a few months after its release. Instead
Microsoft announces it will focus on partnership promotions between its
Money program and MoneyCentral website and H&R Block’s TaxCut program. A
TaxSaver package is ceremoniously buried in an Intuit courtyard. Quicken
and TurboTax both have market shares over 70%.
Intuit decides to open up its QuickBooks code to
encourage outside developers to build products that work with the
QuickBooks product. Microsoft acquires Great Plains Software, Inc., to
provide accounting and business management software to small to mid-sized
companies. Microsoft acquires CNBC.com and integrates it into their
MoneyCentral channel, to compete against Quicken.com, AOL’s Personal
Finance channel and Yahoo! Finance. Quicken boasts 15 million customers.
Intuit’s ‘right for my business’ strategy is
launched, with vertical industry versions, products that extend beyond
accounting tasks, and a target market shift from small businesses to mid-sized
businesses up to 250 employees.
Microsoft announces it will invest $2 billion in the
next fiscal year to sell programs to small to mid-size companies with fewer than 500
workers. Microsoft estimates revenue from this market will increase
from about $300 million today to $10 billion by 2010. Intuit celebrates its 20th anniversary.