salesoft ppt

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Logical Thinking

Creative Mind

Open Mind

Interpersonal Skill

Case Analysis on SaleSoft, Inc.

23rd Feb 2002

by Genius of “AND”

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Logical Thinking Interpersonal SkillCreative Mind Open Mind

Index

• General Information– Current Situation– Current Crisis

• Question 1– Our recommendation to choose one

• Question 2 – SaleSoft’s current approach

• Question 3 – Benefits of CSAS – Pricing of TH

• Q&A Session

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Logical Thinking

Creative Mind

Open Mind

Interpersonal Skill

General Information

• Current Situation- SaleSoft, Inc. - Market Trend

• Current Crisis

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Current Situation You are here > General Information > Current Situation

SaleSoft, Inc. • Establishment

– 1993. 6. Founded by Greg Miller to develop & market CSAS– Greg Miller : Chairman

engaged in application SW industry for 12 years• Products

– Main Products: PROCEED : unfinished• received good responses, Not converted to sales

– Alternative: TH : requires fine-tuning• Focused on sales (part of PROCEED)

Market Trend

• Projected the SA market size in year 1995 would be $ 1 billion

• Projected annual growth of 40% for 5 years– Reason: IT infrastructure = Better HW, SW, NW

• Situation:– Crowded with small firms with no absolute leader– Strong SW makers announced entry into CMS market.

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Current Crisis You are here > General Information > Current Crisis

Financial Situation

– 1993. Equity investment of $ 800,000 by Miller, Tanner (CFO) and others– 1994. Additional investment of $ 2 million by venture capitals– 1996. Needs to finance another $ 2 million for 1997– 1995. 9. Cost is almost same as projected, BUT revenue is far

below projection

Must make an Exclusive decision

Determine the ‘Going Concern’

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Logical Thinking

Creative Mind

Open Mind

Interpersonal Skill

QUESTION. 1

• What is your recommendation?• Would you continue trying to sell PROCEED of would you introduce

TH(Trojan Horse)?• Provide support for your recommendation.

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Short AnswersYou are here > Question 1 > Short Answers

• What is your recommendation? Would you continue trying to sell PROCEED or would you introduce TH(Trojan Horse)?

– I recommend to introduce TH as soon as possible.

• Provide supports for your recommendation.– I will suggest the reasons from the analyses on

• Resource and Capability, • Customer Needs, • Competitive Environment.

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Direction for Analyzing R&CYou are here > Question 1 > Analysis on R&C

• Financial Situation– “It costs a million dollars to develop and roll-out the remaining five over the

next 8 months.” (pg. 5)– “Developing and fine-tuning TH will take at least 3 months and cost about

$ 200,000. And Marketing costs SaleSoft, Inc. half a million dollars over the next 6 months.” (pg. 10)

• Human Resource– “We do not have the resource to have separate sales forces for the two

products.” (pg. 9)

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Analysis on Financial SituationYou are here > Question 1 > Analysis on R&C > Financial Situation

• SaleSoft, Inc. needs about 1 million dollars over the next 8 months

• But, SaleSoft, Inc. doesn’t have enough cash. – According the Exhibit. 10,

• Total current asset of SaleSoft, Inc. is expected to be as much as 1 million dollars by the end of 1995.

1995.9 1995. 12 1996. 6

ForPROCEED

For THDevelopmentMin 3 months

Marketing6~8 months

Development8 months

Ongoing marketing; marketing cost

Ongoing marketing; 1/3 of marketing cost for PROCEED

$ 200,000

$ 1,000,000

$ 500,000

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Analysis on Human Resource of SaleSoft, Inc.You are here > Question 1 > Analysis on R&C > Human Resource

• Desperate situation– 3 months left before the Sales Automation Conference– Within 8 months, SaleSoft has to make 5 remaining modules ready to keep

the commitments to the buyers of PROCEEDS

• HR requirements– TH requires less resources including HR than PROCEED

• Not enough personnel for development of either PROCEED or TH– But even to have TH ready for the upcoming Sales Automation Conference,

SaleSoft has to devote all the resources and efforts, not to mention PROCEED

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Analysis on Customer Needs for SAYou are here > Question 1 > Analysis on Customer Needs

• Vendors failed to satisfy the customers’ needs– “I know I need more than a CMS. I also know that I do not need CSAS.”

(pg. 8)– “I am not going to try to convince marketing and service about integrating

their functions with sales.” (pg. 8)

Targeted position of TH

Functions provided only by CSASbut not required by customers

Needs being met by CMS

UnmetNeeds

CustomerNeeds

CSASValue

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Direction for Analyzing Competitive EnvironmentYou are here > Question 1 > Analysis on Competitive Environment

• Merits in selecting TH– Quick Return– Easy to sell TH (similar to CMS)

• Analysis with BCG Matrix

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Merits in selecting TH You are here > Question 1 > Analysis on Competitive Environment > Merits in selecting TH

• TH gives cash flow to SaleSoft, Inc. in a relatively short time.– TH gives the easy way to get into customer account, gain quick sales,

generate much needed revenue. (pg. 1)– PROCEED has only generated interest.

• Converting interest to actual sales was taking a long time. (pg.1)• SaleSoft, Inc. needs enough money to survive immediately. • SaleSoft, Inc. does not have the resource to wait for the PROCEED

market to open up.

• Selling TH is similar to selling CMS– Tanner believed that selling TH would be more like selling CMS. (pg .9)– The Cost and the Time required to develop the TH product are not very high.

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Analysis on Competitive EnvironmentYou are here > Question 1 > Analysis on Competitive Environment > Movement on the BCG Matrix

• TH market is about to open up. • But, many companies are planning to

enter into this market.

DOGCASH COW

QUESTIONMARK

STAR

Market Share

Gro

wth

Rat

e

High

High

LowLow

CMS

PROCEED

Trojan Horse

• CSAS market is growing rapidly. • Owing to the development of IT infra-

structure, CSAS market is expanding.

• In the early 1990s, market share of CMS is up to 80%. (pg. 2)

• But, the market needs more integrated solution.

STAGE 1

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DOG

QUESTION MARK

Market Share LowPROCEED Trojan Horse

STAGE 2• TH’s market will grow with the decline of

PROCEED and CMS.

CMS

PROCEED

Trojan Horse

• The market share will fall down • Customers are very skeptical about

CSAS and the ability of CSAS vendors to survive in the long run.

• CMS will decline significantly owing to the weakness in technology.

STARHigh

Gro

wth

Rat

e

CASH COWLowHigh

CMS

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LowTrojan Horse

DOG

QUESTION MARK

• TH will become Cash Cow product. • With the growth, TH will gain more cash

flow, which will be converted to develop the PROCEED.

CMS

PROCEED

Trojan Horse

• With the support from the success of TH, PROCEED will be enhanced in technology and customization.

• CMS will sink to DOG because of its inferiority in every respect.

STARHigh

Gro

wth

Rat

e

CASH COWLowHigh Market Share

CMS PROCEED

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Logical Thinking

Creative Mind

Open Mind

Interpersonal Skill

QUESTION 2

• What is SaleSoft’s current approach to sell PROCEED?• How will process have to change to sell TH?

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Short AnswersYou are here > Question 2 > Short Answers

• What is SaleSoft’s current approach to sell PROCEED?– They are trying to develop their product with technology-oriented mind.

• How will process have to change to sell TH?– They need to stand as a marketer rather than as a engineer.

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Technology-oriented Approach (for PROCEED)You are here > Question 2 > Technology-oriented Approach (for PROCEED)

Realizationby Senior

Management

EvaluatePotential

Benefit

DetermineMethodology

DecideType of SA

Pilot test&

Customizing

ModifyingAfter feedback Roll out

1 2 3 4

5 6 7

Marketing Initiated by Consultants

Establishing SystemBy Vendors

• SaleSoft, Inc. does not pay attention to the relationship with Clients• Greg Miller is too confident on the technical quality

– (Miller said) “The benefits are so great that customers will be eager to adopt these systems at the earliest” (pg. 7)

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Direction for changing process to sell THYou are here > Question 2 > process change > direction

• TH as a patch of the Whole System

• Focusing on the Targeted Market

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Need for TH as a patchYou are here > Question 2 > process change > TH as a patch > Needs

• Customers might be favorable to patch product in this SA market

– In this market, the Completed good is very expensive and involves a high level of risk for Customers

– In this case, customers want to add modules over time without risking any loss in past investment

– Patch product such as TH provides the vendor with an opportunity to make some money relatively quickly.

– Patch product is an instrument for heightening a barrier by increasing the switching costs to the customer.

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Effects from the Patch ProductYou are here > Question 2 > process change > TH as a patch > Effect

• With introducing the patch version, SaleSoft, Inc. can maintain and enhance the sales volume.

Time

Sales

Time

Sales

TrojanHorse

New Patch Introduction

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Focusing on Target MarketYou are here > Question 2 > process change > Focusing on Target Market > Selecting

• TH does not provide the integrating function• SaleSoft, Inc. should focus on the industry which requires less

integration among Sales, Marketing & Service

0%5%

10%15%

20%25%30%

35%40%

45%50%

finance computer electronics others

Sales Reps Ratio ( # of Sales Reps / # of Employees)

44% 10% 7% 6%

Candidates

This figure is made with the data of Exhibit 2

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Focusing on Target MarketYou are here > Question 2 > process change > Focusing on Target Market > Selecting

• Number of Sales reps is key criteria.• Out of candidates chosen at the last sheet, Computer industry has

more sales reps than the others.

This figure is made with the data of Exhibit 2

0

100

200

300

400

500

600

700

finance computer electronics others

Average # of Sales Reps( # of Sales Reps / # of firms with 50+ sales reps)

624 510 299 275

Target Industry

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Implementation for attacking Target marketYou are here > Question 2 > process change > Focusing on Target Market > Implementation

• For efficient marketing, it is more desirable to re-arrange the Sales Division from regional standard to Industrial one.

President / CEO

Exec. VP/CFO VP Sales Director,Support Services

Director of Development VP Marketing

WashingtonDC

Boston, MA

Atlanta, GA

Columbus, OH

Admin. Assistant

Software Industry

Computer, Office Equipment

Electronics,Electrical Equipment

……….

Regional

Industry

From Exhibit 8

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Logical Thinking

Creative Mind

Open Mind

Interpersonal Skill

QUESTION 3

• What are the benefit of CSAS?• How does TH compare to PROCEED• Based on what you analyzed, how will you price TH?

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Benefits of CSAS – EXAMPLE of How to quantify the benefitsYou are here > Question 3 > What are the benefits of CSAS?

• Additional Sales due to Sales cycle reduction

• Additional Sales due to reduction in start-up time for a new sales representative

• Additional Sales due to reduction in sales rep turnover

Selling time reductionAvg. selling time

X ($ sales / year)=

Days reduced in Start-upNo. of days to start-up

X ($ sales / Rep / year)=

No. of days to start-upWork days / year

x X (No. of new representatives)

= (% reduction) x ( current turnover) x ( Sales / Rep.) x Days to start-upWorkdays / year

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Benefits of CSAS – EXAMPLE of how to quantify the benefitsYou are here > Question 3 > What are the benefits of CSAS?

• Cost reduction

• Total Gain: Add’l Sales + Reduced Selling Costs ---(1)

• Costs: HW + SA license fee + start-up + Training + Internal Costs ---(2)

• Benefit = (1) – (2)

New Value x % + commission on New Value

Orig.Value x %Selling Costs(at % of sales)

Orig.Value + Add’l sales = New ValueOrig. Value SalesWith PROCEED (million $)Without PROCEED

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Pricing of THYou are here > Question 3 > Price of TH > Concept

• Value based Pricing – How much Customers are willing to pay?

• Cost Base Pricing – R&D, Manufacturing cost and so on– SaleSoft needs to get at least as much as this cost.– SaleSoft also has to get some more to get through with its financial

crisisMin of Price

Customers are willing to pay based on the improvements that TH gives them

MAX of PriceBefore THEx> $ 100

After THEx> $ 200

Willingness to pay

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Pricing of THYou are here > Question 3 > Price of TH > Procedure

• Order of Pricing1) Basically, TH is the same as the present status of PROCEED.

( since only Sales System is completed in PROCEED)

2) So, we can use the Value-based pricing methods and the incremental value can be measured based on existing customers.- Customers have different potential for improvements according to

the industries they belong to.Price TH according to the industry (in such aspects as mark-up)

3) Identify potential of improvements in terms of reduction of days not related to performance, reduction of costs, increase of sales and so on.- if exact data are not available, use projection or estimate based

on statistics, related data or logics

4) With quantitative methods like those used before, evaluate potential improvements

Decide MAXIMUM

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Pricing of THYou are here > Question 3 > Price of TH > Procedure

• Order of Pricing5) Analyze its cost structure

Decide Minimum

6) Price High for companies in industries with high potential of improvements and vice versa.

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Creative Mind

Open Mind

Interpersonal Skill

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