Introduction to the case-
Greg Miller (President and CEO) and Bill Tanner, (CFO) founded SaleSoft in June 1993 with the objective of marketing PROCEED, a Comprehensive Sales Automation System (CSAS). In the past 18 months PROCEED had received very favorable responses from prospects. However, converting interest to actual sales was taking a long time with only five PROCEED systems having been sold to-date.
In September 1995, Gregory Miller was faced with the question of whether or not to introduce a Trojan horse product. Trojan Horse (TH) could potentially distract SaleSoft from its primary objective of becoming a leader in the high end of the Sales Automation (SA) software industry. In ...view middle of the document...
4. SaleSoft promised its customers that it would release the remaining modules. SaleSoft also is one of the first movers in the CSAS field.
5. PROCEED is a high value item.
Points in favor of switching to TH-
1. Not a big customer base for PROCEED.
2. No need of consultants for selling TH.
3. TH is for Sales only. Thus the no. of people in buying cycle is reduced.
4. TH had a simpler selling process as its advantages could be quantified. Moreover the estimation of Miller that it could be sold in one third time of PROCEED.
5. TH needed minimal customization, which could have been done at a minimal cost of what PROCEED needed.
6. Many prospects were looking forward to TH, which included those who were not so enthusiastic about PROCEED.
Cost Analysis For PROCEED
Number of prospects: 20
Creating additional modules: $1 million
Time required to roll out additional five modules: 8 months
Current Installed user base: 300 users
Number of current customers: 5
Number of users per prospect: 200 to 600
Miller felt at least a quarter would buy PROCEED over next 12 to 15 months.
Typically 21-30 months required for complete implementation of CSAS solution.
Incurred expense to complete pending five modules: $1 million
Additional capital required to support the firm's expenses: $2 million
Revenue generated if a quarter of 20 prospects are converted (assuming 200 users per prospect): 200*2400*5
Optimistic targeted revenue if a quarter of 20 prospects are converted (assuming 400 users per prospect): 400*2400*5=$4.8 million
Cost Analysis For Trojan Horse
Time required for implementation of Trojan Horse approximately 7 to 10 months
Time required for development of Trojan Horse: 3 months
Cost involved in developing and fine-tuning Trojan Horse: $ 200,000($ 0.2 million)
Cost incurred in initial marketing strategy: $ 500,000($ 0.5 million)
Total Cost: $700,000
Number of users needed to breakeven when TH is priced at $ 400 = 1750 (1750/200 = conversion of approximately 9 prospects)
Number of users needed to breakeven when TH is priced at $ 1000 = 700(700/200= conversion of approximately 4 prospects)
Number of users needed to achieve $ 2.4 million revenue @400 per user = 2400000/400=6000 users
Assuming 200 users per prospect, the number of prospect conversion required would be 30.
Assuming 400 users per prospect, the number of prospect conversion required would be 15.
It is highly doubtful that SaleSoft would be able to achieve a target of 30 or 15 customers in a short time span with Big Players like Microsoft and Lotus in competition.
Considering the Cost Analysis and other factors, we are proposing that SaleSoft should stick to PROCEED instead of switching to Trojan Horse.
Buying Centres for SaleSoft Customers.
A group of employees, family members, or members of any type of organization responsible for finalizing major purchase decisions is known as a buying center. When...