What's the first thing that anyone has to do with an application? Install it. In some way, shape or form, they have to get it from the installation media to their hard drives. Now, you can run some applications from the installation media or a disk image, but after a while, that gets tedious. So you have to install the application.
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I have to say that I am, and have been for almost my entire career, amazed at how a company will put great care into the application, then make the installation almost an afterthought, or at worst, a nigh - torturous experience. I really don't understand this, as it's like creating a beautiful bit of hardware, then making you drink sour milk just to get it out of the packaging.
The installation is the first real experience a customer has with your application, so why would you want to make that experience anything but as painless as possible? Bad installers are even more surprising when you realize that it's not hard to make, if not a great installer, then at least a not bad one.
1) Use the simplest installer method you can.
If you can, use drag and drop. Customer mounts media, customer drags application to destination, customer uses application. That's the closest thing to a perfect installer you'll see. It's simple to use for one (or a thousand) users. It scales well, and it requires almost no technical ability. Firefox, and even Microsoft Office 2004 win here. So does Adobe Acrobat Professional.
2) Use the simplest packaging method you can.
Don't be like some vendors, (Epson, I'm looking at you here) and use a compressed, binhex'd installer that then installs the installer that will actually install the product.
If that sounds lame to read, it's far worse to use. On a Mac, all you need is a compressed disk image, and you're set. If you want something cross-platform, zip, or zipped tar is best. Yes, I know, Stuffit still exists, and it still works well, but its advantages are small at this point.
Zipped files are best if the application is a command line component. For things like source code, where you may have a complex file structure, a zipped tar file is a good idea. But if at all possible, on a Mac, just use a disk image. They compress well, and you can encrypt them if you wish.
Adobe both wins, (Acrobat Professional) and loses, (Adobe Reader 8) here. Reader Pro not only requires separate Intel and PPC installers, but if you don't know the magic URL, you download an installer that downloads the real installer. Even worse, if you decide to cancel the installer, too late, it's already installed. Not good.