Imagine a company giving its product away and then asking you to pay for it only if you liked the product and found it useful.

In a capitalist marketing approach that would leave Karl Marx scratching his head, a growing number of computer software developers are finding market niches for "shareware", software that performs standard functions but costs a fraction of the price of popular prestigious programs.The unusual idea has worked well enough that several shareware companies have reported annual revenues in the millions of dollars.

"It's a comment on the American public's value for honesty," said Jim Button, owner of Button Ware Inc., a Seattle shareware company that earned more than $2 million last year.

Here's how shareware works. A computer user gets a copy of the program from a friend, a computer bulletin board or by mail, usually for no more than a few dollars to cover the cost of the disks.

Included on the disks are the program's instructions--in computer parlance, the "documentation." A user puts the program through its paces to see if it meets his needs. If it doesn't work, he passes it on to a friend or sends it back.

But if someone likes the program, he is ethically obliged to become a registered user. Registration typically costs between $50 and $75--a fraction of the cost of similar but commercially marketed software--and includes a user manual, up-to-date copies of the program, telephone help lines, and free updates.

"If you become a serious user of the program you need to pay," Button said. "Many people think software is free. We've had a big hurdle to overcome."

People who don't register become "pirates." Although shareware developers say only about 20 percent of users ever register, they are more accepting of piracy than their conventional counterparts who try, often unsuccessfully, to stop illegal copying with complex programming safeguards.

"I don't mind these people (pirates) at all," said Bob Wallace, founder of the Quicksoft Inc., a Seattle shareware company. "I think of them as potential buyers. Piracy is really a pretty good thing."

Wallace embraced the philosophy of shareware in 1983 and used it to make his PC-Write one of the top 10 word processing software packages with 100,000 registered users. These users informally serve as PC-Write tutors and salesman.

He and other shareware developers accept pirates as the double edged sword of their marketing strategy.

"It's part of the cost of doing business," said Tom Smith of Datastorm Technologies Inc., a Columbia, Mo., company that markets ProComm, a top-rated IBM-compatible communications program used by 60,000 registered enthusiasts/

"We figure five to ten percent of the people using ProComm paid for it," Smith said. "But pirates are still part of the distribution and advertising."

The developers emphasize, however, that it is not the grass-roots approach that sells their products--it is the quality.

"You have to have a real outsanding shareware product, or it's going to die," said Button.

Button's PC-File--ranked third among data bases in a recent consumer survey, besting programs costing several times its $75 registration fee. In the same rating, Walace's PC-Write ranked fourth, after heavyweights such as WordPerfect, which sells for about $250.

PC-Write, PC-File+ and ProComm boast government agencies and colleges as registered users, including Dupont, Caterpillar, the U.S. Naval Academy and California state.

But Jeff Angus, test center director for the computer publication InfoWorld, said shareware does involve a tradeoff, mostly in "bells and whistles."

"It's the difference between a Pinto and a BMW," he said. "It's not fancy, but the Pinto will still get you there.

The very characteristics that make shareware attractive hurt its sales in some segments of the market, Angus said.

"It's an American disease--it can't be good unless you had to pay a lot for it," said Angus.

Nevertheless, Angus said the future is bright for shareware because the base of computer users is spreading rapidly as the cost of personal computers drops. Growing numbers of owners of small- and medium-sized businesses know they can't afford not to have computers.

"These people have less of the macho factor," he said. "They just want something that works and is economical."