Case 15 SaleSoft, Inc. (A) Synopsis Greg Miller and Bill Tanner, Executive Vice President and CFO, founded SaleSoft in July 1993 with the objective of marketing PROCEED, a Comprehensive Sales Automation System (CSAS). While PROCEED had received very favorable responses from prospects, converting interest to actual sales was taking a long time with only five PROCEED systems having been sold to-date.
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In September 1995, with limited funds and the need to show performance before seeking additional venture capital, Gregory Miller, the president and CEO of SaleSoft, and William Tanner, the executive vice president and CFO, now need to decide the future course of action for their company. They are faced with the question of whether or not to introduce a Trojan Horse product. This product can be developed, with some work, using the existing modules of PROCEED’s Sales System that have already been developed.
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 addition, there is a risk that it might cannibalize sales from the PROCEED product that SaleSoft is currently marketing. Finally, TH can potentially prevent SaleSoft from forming relationships with consultants whose support is critical to the success of PROCEED. Yet, TH might offer an easy way for SaleSoft to get into new customer accounts, gain quick sales, and generate much needed revenues.
The situation is complicated by the fact that current PROCEED customers are expecting SaleSoft to deliver the complete PROCEED solution as soon as possible. Should Sale5oft complete the development of the PROCEED product and continue trying to sell PROCEED to select customers? or, should the firm make an all out effort to launch TH to a much larger customer base? This note was prepared by Professor Das Narayandas with the assistance of Research Associate Sara Frug for the sole purpose of aiding classroom instructors in the use of SaleSoft, Inc. A), HBS case No. 596-112. It provides analysis and questions that are intended to present alternative approaches to deepening students comprehension of business issues and energizing classroom discussion. Copyright @ 1998 by the President and Fellows of Harvard College. Used with permission. Positioning This case can be used to illustrate the challenges faced by suppliers with limited resources that operate in markets with long buying cycles. It can also be used to link buyer behavior, product design (bundling), and pricing issues.
The case is best taught in a business marketing, entrepreneurial marketing, or a high technology marketing course. It can also be used very effectively towards the end of a basic marketing strategy course. At HBS, this case is taught as the transition between the “Understanding the Customer” and “Managing the Value Proposition” modules in the second-year Business Marketing elective, and on the last day of the Business Marketing Module in the Strategic Marketing Management program for senior marketing executives. Objectives The teaching of this case involves the following objectives: 1.
Linking product policy and pricing issues with the customer acquisition and retention process. More specifically, • Understanding the role of a Trojan Horse product in developing a customer migration path that facilitates customer acquisition and enhances their retention. • Quantifying a product’s benefits or value to a customer, and integrating this value with other strategic and tactical issues to set price. 2. Understanding the complexity of a decision making unit (DMU) and the associated decision making process (DMP) in the purchase of complex, technological products.
More specifically: • Understanding the decision making process (DMP), its stages, time frame, and the people (the DMU composition) involved. • Understanding the link between a customer’s DMP (or buying cycle) and a vendor’s selling cycle. 3. Understanding sales and marketing issues faced by a start-up operating in an embryonic market by comparing/contrasting approaches required to sell products of varying complexity. 4. Exploring the role of a vendor’s organizational structure in defining its ability to implement marketing strategy. 5.
Understanding the role of automation in linking sales, marketing, and service functions in a firm. Recommended Readings • Major Sales: Who Really Does the Buying? – HBR-82305 • Automation to Boost Sales & Marketing – HBR 89105 Teaching Questions 1. What is your plan? Do you plan to continue with PROCEED or will you introduce the TH product? Provide support for your plan. 2. What is the buying cycle for PROCEED? Who are the people involved in the purchase of a CSAS solution? What is the role of consultants? 3. What is SaleSoft’s current approach to selling PROCEED? 4.
Quantity the benefits of CSAS to a customer using the information given in Exhibit 7. 5. What value does TH provide a customer? How is this different form the customer value delivered by PROCEED? 6. What is a Trojan Horse? How does it facilitate customer acquisition and retention? 7. How will you price TH? 8. How do you think SaleSoft’s organization structure will affect its ability to sell PROCEED or TH? Details of the Discussion Flow What is your plan? Do you plan to continue with PROCEED, or will you introduce the TH product? The various comments supporting going ahead with TH or PROCEED are as follows:
PROCEED vs. TH Continue with PROCEEDSell Trojan Horse |We have spent too much time on PROCEED to walk away from it now. |PROCEED has only generated interest– | |Tanner – We will lose our first mover advantage in the CSAS market if we |Selling TH is very much like selling CMS and there are so many | |divert our attention to TH. |success stories in the CMS market. Customers don’t need to be | | |educated on the benefits of TH. Most Sales VPs will grab it at | | |any price. |TH will prevent SaleSoft from partnering with consultants who are very |The cost involved and the time required to develop the TH product | |important to the firm. |are not very high. We can afford to do it. | |SaleSoft has committed to current customers that remaining modules of PROCEED |Tanner – We don’t need consultants to sell TH. | |will be read by June 1998. | | |Twenty Prospects for PROCEED want to see completed product before making any |Tanner – It’s a much bigger and broader market than the PROCEED | |purchase commitments. market. | |Miller knows what he is doing. He has shown that he can make it work – he was|TH is an easy way to get into customer accounts, gain quick sales,| |successful in bringing order to chaos in the MRP area. |generate much needed revenues (pg. 1). | |The competition is going to heat up very quickly in the TH market – Microsoft |Industry experts think it is unlikely that one vendor will be able| |and Lotus are planning to enter. All the CSAS competitors are small and like |to do it all (pg. ) | |SaleSoft – this is an easier battle for SaleSoft. | | |We don’t have the skills to mass market products – we don’t know how to sell |Customers are very skeptical about CSAS and the ability of CSAS | |TH. |vendors to survive in the long-run (pg. 2). | |Creating awareness for TH is very expensive – half a million dollars over the |It is easier to quantify the benefits of TH, and it needs no | |next six to eight months. customization (pg. 9). | |We just need to convert 6 of the 20 prospects to hit $5. 7 million in sales**. |TH is easy to sell – only the sales VP needs to get on-board. | |Given that there are just five players in CSAS and we are better than the |There are too many players involved in the purchase of PROCEED | |others, (using Exhibit 3) this is not difficult. |(pg. 9). | |(** – $2,400/seat * average of 400 seats per prospect |TH needs only 1/3rd the time taken for selling PROCEED (pg. 9) | |* 6 = 5. 6 million) | | | |Tanner – We will not relinquish the PROCEED market if we go after | | |TH (pg. 10) | Once some of these issues for and against have been brought up, the instructor can push the discussion to the next theme in the following manner: “It looks like both sides have legitimate reasons to support their action plan.
Those who are against PROCEED seem to be disturbed by the lack of sales in the last eighteen months. They also believe that TH will not have the same problems as PROCEED. Those who support it believe that more PROCEED sales are just around the corner and that selling TH is no different from selling PROCEED in terms of difficulty. In either case, it seems that understanding the purchase process for the PROCEED product will help us understand why some people think that PROCEED is the wrong product for SaleSoft and others think it is the right product.
Let’s understand the CSAS buying cycle as given on case page 4. ” What is the buying cycle for PROCEED? The buying cycle begins when the senior management realize that a CSAS might solve existing sales, marketing, and service problems. The case doesn’t provide any details about how long this stage takes. It is useful to ask the students what the catalyst is for this stage to happen. Typical responses here focus on the top management’s frustration with the inefficiencies that exist with current systems and their inability to control and improves sales, marketing, and service processes. Once top anagement have seen that they are able to bring order to the manufacturing, inventory, and materials handling functions, like Miller (pg. 7) they think that automation might provide answers to managing sales, marketing, and service issues. Some students might counter these comments by pointing out that automating sales and marketing functions is very different from MRP systems (see pg. 2 on the general belief that there was no standardized approach to sales order cycle). Next, the subsequent stages of the CSAS buying cycle can be captured in the following manner. In addition to text on pg. , there is a lot of information in Exhibits 4 and 5 on the issues raised by different members of the DMU, their concerns, and the benefits they seek from CSAS solutions. Using these three sources of information, the instructor needs to push the students to answer the following questions for each stage: What is this stage in the buying cycle all about? Who are the people involved in that stage? What are their roles? What do they want at this stage? Are they positive or negative about the CSAS product? (This format is what the students would have read in the assigned reading “Major Sales: Who Really Does the Buying? by Tom Bonoma. ). I have found that there is wide variance in the student analysis on who is involved in each stage and what are their motivations. Rather than trying to clarify these issues, I take them as they come. There is a lot of energy at this point and it doesn’t help to challenge students on their views. Invariably, this job is well done by other students who will object to comments with which they disagree. It is important that the instructor captures the following points: 1. Consultants get involved very quickly in the cycle and get more powerful over time. 2.
Senior management plays a bigger role in the beginning and in the end. However, in the middle stages they have a limited role to play. 3. Line managers are involved more in the intermediate stages that involve systems design. 4. Users might only be involved towards the end. This is not clearly spelled out in the case and students will debate this issue. Some will insist that users will be involved throughout. Others will quote the case and suggest that it is only with the pilot test that users get involved in the process.  Below, is an example of a table that came out of a class discussion in my Business Marketing Class.
SaleSoft Buying Cycle Stage Involvement Activity Timeframe (months) Need IdentificationCEO, CFO, VP Sales,Realization by senior 21-30 VP Marketing, VPmanagement that CSAS might Servicesolve existing problems Need ClarificationVP Sales, VP Mktg. , VPEvaluation of potential to 3-4 Service, VP MIS, SAautomate existing processes and Consultantsspecification of the order in which functions are to be automated Need Definition andVP MIS, IS Managers,Evaluation of how different 2-3 SpecificationSales, Managers,functions to be automated are Marketing Managers,related and how data is to be
SA Consultantscollected, stored, and analyzed Evaluation ofCEO, CFO, VP MIS, SADecision on which system (h/w &6-8 Software/hardwareConsultantss/w) to purchase, short-listing of And vendorvendors Alternatives Pilot Testing andSales Reps, SalesCustomization of CSAS and pilot3-4 CustomizationManagers, MIS dept. ,testing SA consultant, CSAS vendor Rollout 4-6 An important point for the instructor to point out here is that it is common for the DMU composition to change as we go from one stage to another. On a side board, the instructor can also separately capture the orientation of each DMU member towards CSAS. DMU |Orientation |Under- |Interest in |Reasons | |Member |to CSAS |standing of |Implementing | | | | |CSAS |CSAS | | |CEO |+/- |Low |+/- |+Would like more control and higher sales & marketing | | | | | |efficiency | | | | | | | | | | | |- Has other things to think about | | | | | | | |CFO |+ |Low |+/- |same as above | |VP Marketing |+/- |Low |+/- |+Wants more control | | | | | |-Fears that other will have access to data.
Erodes power | | | | | | | |VP Sales |+/- |Low |+/- |same as above | | | | | | | |VP Service |+/- |Low |+/- |same as above | | | | | | | |Sales Reps |-/+ |Low |-/+ |-Worried about sharing customer information—if everyone | | | | | |knows everything about my customer, what is my role? | | | | | |+This will make me more efficient | |Consultant | | | |+This is my livelihood |
What is the SaleSoft’s selling cycle for PROCEED? Students will be quick to point out that SaleSoft enters into the picture at the end of Stage 4 of a customer’s buying cycle, and that too only if it happens to be selected as a CSAS vendor. One way to run this part of the discussion is to draw a ladder on the board, with one vertical line for the customer’s buying cycle for PROCEED and the other for SaleSoft’s selling cycle, and build the rungs as links between the two vertical lines. In this case, the process highlights the fact that SaleSoft does not have an approach that maps onto the customer’s selling cycle. This is a very big learning point for students and is worth the drama.
I usually turn to the student who is giving me this information with a total look of bewilderment and disbelief saying something to the effect of “Is this firm out of its mind? Doesn’t it understand the process of selling? To the above figure, the instructor can then add the following information that highlights the role of consultants. The instructor can also use the point out how intermediaries can become powerful in buyer-seller transactions by getting in between the two sides very early in the process and keeping the two sides apart after that. An example that the instructor can use here is the important of getting the product specified in a customer’s RFQ (request for quotation).
In many high-tech business this is considered to be more than half the battle won.  In cases where a competitor’s product was specified, vendors should realize that there is a good chance that they have already lost the sale.  At the point, the instructor can say something like, “Well, clearly the selling approach is not right. What about the economics of a CSAS purchase? Does SaleSoft have a good story to tell the customer? How much value does a customer get from PROCEED? ” What are the benefits of CSAS? Case Exhibit 1 fleshes out the benefits of CSAS. Case Exhibit 7 provides more numbers that students can use to calculate these benefits.
There are three sources of benefits detailed out in Exhibit 7: sales cycle reduction, startup time reduction for new employees, and employee turnover reduction. For Company A (a financial services firm), this translates into $7. 5 million in additional sales. Selling time reduction x ($ sales/ year) Additional Sales due to Sales cycle reduction= Avg. selling time = 6 x $120m = $6 million / year 120 Additional Sales due to reduction in start-up time for a new sales rep = Days reduced in startup x ($ sales / rep / year) x Days to startup x (# of new reaps) # days to startup Workdays / year =14 x$120m x 60 x 24 = $1. 1 million / year 60 120 300 Additional sales due to reduction in sales rep turnover (% reduction) x (current turnover) x ($ sales / rep) x Days to startup Workdays / year = 0. 1 x 24 x ($1m) x 60 = $480,000 / year The total additional sales for Company A from using CSAS are = $7. 6 million w/o PROCEEDwith PROCEED Sales Costs (at 30$ of sales)$127. 6 million$127. 6 million Selling Costs (at 30$ of sales)$38. 28 million$36 million * + commissions on $7. 6 million = 36 + . 1 x 7. 6 = $36. 76 million Difference38. 28 – 36. 76 = $1. 52 million *-$120 million x . 30 = $36 million. Using PROCEED, cost of sales remains the same as it would be if sales volume were $120 million w / o PROCEED. We can also get to this number by working directly from the savings.
If we assume that selling costs don’t change, then the company saves 30 percent (row 3 of Exhibit 7) of the additional sales in costs less commissions of 10 percent. Thus, the firm gets $7. 6 x . 20 = $1. 52 million in the first year after implementing PROCEED. The Costs of implementing CSAS for Company A are: Initial Costs = H/w + PROCEED license fee + start up + Implementation & training costs + annual costs of internal resources = $1. 5 m + $600k + $200k + $180k + $150k = $2. 63 million Thus, the pay back time for the CSAS investment is around 1 ? years. For Company B, the results are even more dramatic and the pay back period is less than a year.
For company B that is in computer h/w, the analysis is as follows: Selling time reduction x ($ sales / year) Additional Sales due to Sales cycle reduction = Avg. selling time = 15 x $350m = $29. 16 million / year 180 Additional Sales due to reduction in start-up time for a new sales rep = Days reduced in startup x($ sales / rep / year) x Days to startup x (# new reaps) # days to startup Workdays / year = 20 x $350 x 90 x 88 = $8. 2 million / year 90 250 300 Additional sales due to reduction in sales rep turnover = (% reduction) x (current turnover) x ($ sales / rep) x Days to startup Workdays / year = 0. 15 x 88 x ($1. 4m) x 90 300
The total additional sales for Company B from using CSAS are = $42. 9 million w/o PROCEEDwith PROCEED Sales$392. 9 million$392. 9 million Selling Costs (at 35% of sales)$137. 5 million$122. 5 million + commissions on $42. 9 million = 122. 5 + . 04 x 42. 9 = $124. 2 million Difference137. 5 – 124. 2 = $13. 3 million We also get this by working directly from the savings: if we assume that selling costs don’t change, then the company saves 35 percent (row 3 of Exhibit 7) of the additional sales in costs less commissions of 4 percent. Thus, the firm gets $13. 3 million in the first year after implementing PROCEED. The Costs of implementing CSAS for Company B are:
Initial Costs = H/w + PROCEED license fee + start up + Implementaiton & training costs + annual costs of internal resources = $3. 6 m + $1. 44m + $450K + $430k + $350k = $6. 27 million Thus, the pay back time for the CSAS investment is less than half a year (. 47 years). Using the above information, the instructor can draw a stacked column of the benefits and call it the “value column” or the “value line. ” Executives are very likely to get in at this point with their own versions of bars, pies, stars, and other ways in which their firms represent customer value At this point, the instructor can push the class by saying something like, “I think that SaleSoft has a good selling story.
Not only is the firm going to get additional sales, it will have reduced sales rep turnover and higher sales rep morale. In addition, the investment pays for itself in less than 6 months for Company B. The economics and other benefits that we spoke about should make this an easy sell, shouldn’t it? ” There will be a skeptic who is primed to get into this discussion now (and there will always be one, don’t worry) saying that the value line is just a part of the selling story. Using Exhibit 5 (“Typical Concerns Regarding CSAS Solutions”) that provides a breakdown of specific concerns about the benefits of CSAS for each member of the DMU, this student will bring up everal issues highlighting the following: 1. The value of PROCEED needs to be sold at every level of the organization. Not every person in the DMU cares about the sources of benefits as defined by the value line. 2. The CEO and CFO need to be convinced that the system will work and that SaleSoft will not go out of business leaving them with no support. Further, there will be arguments that the three sources of benefits are very hard to measure and unrealistic. 3. The VP MIS needs to be convinced that the operation of the system will be as promised. 4. The Sales managers and VP Sales need to be assured that their salespeople will use the system well. . The Sales Reps need to be reassured that the system will benefit them. This sets the stage for the instructor to say something like, “So creating these value lines is not the end. We also need to take this value line and convert it into a legitimate selling story that our sales reps can take to their customers. ” At this point, the instructor can mention to the students that this is a potental area where things can break-down between marketing and sales. Marketing develops value propositions with all these benefits quantified. However, when they then toss it over to Sales to take it to their customers, Sales find it very difficult to manage.
The next thing you know, there is a breakdown in the initiative. I reiterate the fact that it is here the most large companies are facing problems in implementing their new strategic marketing initiatives. Marketing is so consumed by figuring out the process of where and how they create customer value that sometimes they don’t pay attention to what they need to do to help Sales develop a strategy to extract the value that they have created. Next, the instructor can move the discussion along by shifting the focus from PROCEED to TH. How does TH compare to PROCEED? Selling TH is different from PROCEED in several ways. First, unlike PROCEED, TH is focused only on sales.
This signficiantly reduces the number of people involved in the buying cycle as well as the need to build consensus between the traditionally diverse sales, marketing, and services departments of customer firms. TH delivers enormous value to Sales VPs of firms that are involved in selling big-ticket items with long, and complex selling cycles. These Sales VPs find it difficult to provide their firms with accurate forecasts, which in turn affects the firm’s ability to plan operations and resources. Thus, TH might be an easier sell than PROCEED. Looking at the value line created for PROCEED, students will point out that all the benefits listed for PROCEED are also applicable to TH.
Compared to PROCEED, TH needs minimal customization (customizing the program requires only small alterations such as changing the number and names of segments in the opportunity pipeline). Some students will point out that TH might not really by a TH for PROCEED, since it appears to be addressed to a market segment that is not the same as the PROCEED product. Not all PROCEED prospects would necessarily want to start their automation efforts with TH. Also, not all TH users might be interested in the complete PROCEED product. This is the point where the instructor needs to run a discussion on what is the role of TH, how does one design a TH product, and what is the link between TH and the customer acquisition and retention process. What is a Trojan Horse? How does it facilitate customer acquisition and retention?
TH is a good solution in situations where the complete product is very expensive and involves a high level of risk for customers. In these cases, customers might not be willing to make the investments in the vendor. As is the case with PROCEED, vendors are able to generate interest in the product but are not able to convert this interest into actual sales. In these situations, if there is an opportunity to unbundle the complete product into distinct products that can be sold and used independently, and it is also possible for the customer to add modules over time without risking any loss in past investments, then TH can be a very effective tool for the vendor.
TH provides with an opportunity to penetrate a customer account faster and more economically. A good TH product will also facilitate and ensure future sales of other products to the customer. For the customer, TH offers an opportunity to reduce the risk and the investments involved. The customer is able to use the TH product and experience the benefits fro that product before making any further investments. It also gives the customer a chance to assess the capabilities of the vendor to support and serve them over time. TH also provides the vendor with an opportunity to make some money relatively quickly. Vendors can use TH to create a barrier to entry for competitors by increasing the switching costs to the customer.
Designing the TH product involves the integration of product bundling/unbundling issues with pricing issues. In designing a TH product, the vendor should be careful not to design a TH that becomes an end in itself such that customers do not see the need to buy the full product. How much of the functionality of the full product should be incorporated in the TH product? What should the price of the TH product be compared to the full product? How should the vendor manage the migration of customers from the TH product to other products? Exhibit 1 provides a set of PowerPoint slides that I use to discuss these issues in greater detail. Based on what we have discussed, how will you price TH?
Based on customer value, one could potentially make the case that TH should be priced at the same level as PROCEED, i. e. , $2,400 per user. This is base on the fact that the value line for TH is the same as that of PROCEED. Some students will point out that this price is difficult to justify given that SaleSoft is having trouble selling PROCEED at $2,400. Other students will suggest that if SaleSoft were to go after prospects that had never seen PROCEED or used a CMS product, then it is possible for SaleSoft to price TH at $2,400 or even higher. Using competition as a basis, given that TH is closer to a CMS product, students are likely to suggest a price anywhere from $200 to $400.
Finally, in the case, Miller has suggested a price of $1,000, and Tanner has suggested a price of $400 per user. Students that suggest a low price will point to the fact that SaleSoft has to minimize customer resistance and reduce marketing and sales costs. At a price of $400 per user to below, they will suggest that TH will sell like hot cakes. They will quote Tanner who says, “at this price, our salesforce will have to just go out and pick up these orders. ” Those that suggest a price closer to $1,000 per user will argue that at a lower price, SaleSoft is leaving money on the table. Given the enormous benefits TH provides customers, these students, like Miller, will want to charge a higher price to extract a reasonable value for themselves.
It is also possible to do the following break even calculations to determine the price of TH. TH Cost = Development cost + Init. Marketing cost + ongoing marketing costs = $200,000 + $500,000 + $200 / user At $1,000 (as per Miller), SaleSoft would need = 700,000 = 875 users to break even 1000 – 200 And at $400 (as per Tanner), SaleSoft would need = 700,000 = 3500 users to break even 400 – 200 Using the results of this analysis and information from Exhibit 7 that suggests that SaleSoft can expect to get 200 users per prospect, one can conclude that SaleSoft needs 875 / 200 = 5 customers at $1000/seat and 3,700 / 200 = 18 customers at $400 per user to break even.
The instructor can then ask the students how many prospects they think SaleSoft is likely to be able to get in the next 9 to 12 months. This is also the ideal spot for the instructor to draw the attention of students to Exhibit 8. “What do you think of the way this firm has been organized? Do you think the organization has been set up to sell PROCEED? Would it need to be changed if TH were introduced? How do you think SaleSoft’s organization structure will affect its ability to sell PROCEED or TH? A look at Exhibit 8 suggests that a plurality of employees comprise the development department, with the next largest number of individuals working in support services. Both the sales and the marketing departments are small, with only five and four members, respectively.
It is interesting to point out that Miller seems to recognize this when he points out that SaleSoft has neither the resources to have separate sales forces for the two products nor the will in the sales department to sell PROCEED if TH is available. Students will look at all this information and suggest that this firm is still organized to develop products—not to sell them. They will suggest that Miller completely re-organize the firm and build up selling capability very quickly. The instructor can push students on this point by asking the following question, “If you are an entrepreneur in a high tech industry and have been developing products for a while, when will you change the organization? How will you change it?
It is very easy to say that Miller should do it. However, students have to understand that this is a non-trivial issue. The instructor can highlight that the transaction from being product development oriented to becoming marketing/sales oriented is a very tough one and is usually the place where many high tech startup firms falter. In these businesses, the need to innovate continuously and develop new product only complicates issues further. What Happened? As the case points out, Miller and Tanner were looking for an additional $2 million of venture capital. Late in 1995, they decided to use the TH proposal as their trump card to get more investments from the venture capitalist (VCs. ).
As a condition to giving more money, the VCs demanded that SaleSoft put the PROCEED project on the back burner and push ahead with the TH product. SaleSoft made a big announcement that it had now positioned itself as an “Opportunity and Pipeline Management” company. The VCs did not allow the organizational structure to be changed in any manner since they saw this as major and unnecessary expense. As a result, when asked to sell the TH product, the firm’s sales reps took the standalone TH product to the same set of prospects to whom they had been trying to sell PROCEED. Two things happened as a consequences. First, competitors that were trying to sell CSAS to these prospects immediately seized upon this chance.
They started telling the prospects that if they wanted a sales forecasting and opportunity pipeline manager, then possibly TH was a good bet. However, if they were looking for a complete CSAS solution (which these prospects were) then TH wouldn’t cut it. Further, with SaleSoft calling itself the pipeline manager, it was more or less clear that SaleSoft had pulled out of the CSAS marketplace. The other thing that happened was that these prospects had moved so far down the buying cycle that they were not willing to go back and put everything on hold and shift their attention to buying TH. Add to this the competitive reaction and there is little doubt about what happened. TH sales did not take off quickly and Miller and Tanner had to back to the rawing board to think of how they were going to manage the whole process. Teaching Process One way to manage the wealth of information in the case is to break up the discussion into several times. Theme 1: As the case revolves around a binary decision, the best way to begin the discussion is with a comparison of PROCEED and TH. There is usually an even split in class with support for both products. The instructor can lead the class to the next theme by pointing out that people who support TH appear to suggest that SaleSoft will not be successful if it continues to sell PROCEED, and those who support PROCEED appear to suggest that SaleSoft is on the verge of getting a major break in PROCEED sales.
Clearly, it is the interpretation of the current PROCEED sales that is at the heart of their analysis of both sides. Theme 2: Here, the instructor needs to walk the class through details of the different stages in the CSAS purchase process (or buying cycle). It is important that the instructor needs to push the discussion on who is involved in each stage, their needs, and what they are looking for in that stage of the buying cycle. Having done that, the instructor then can ask the class to map SaleSoft’s selling cycle onto the customer’s buying cycle. It becomes evident that SaleSoft enters the picture very late in the game and is at the mercy of consults.
Once this issue has been identified, the instructor can transition the class to the next theme by asking the following question, “Okay, we have found that SaleSoft is very late in getting into the game. That is clearly not good, but let’s live with that for the moment. At least, do they have a good selling story to tell? Does PROCEED deliver value to a customer? ” Theme 3: The third theme is all about understanding and quantifying the benefits of PROCEED to the customer and revolves around the numbers in Exhibit 7 of the case. The instructor can build a column, (or, a line) of benefits to a customer. With the customer value line developed, the instructor can get details on costs to a customer of buying PROCEED.
The instructor can then summarized by saying something like “With these kind of numbers and a pay back period of less than a year, customers should be lining up at SaleSoft’s door to buy the product. But that’s not what is happening. What’s wrong with our analysis? ” This leads to the idea that it is not enough to come up with these value lines, it is also important for the firm to figure out how it is going to sell these benefits to the customer. Will a customer see this value? Are there other factors that were not considered? Theme 4: Next, the instructor can move the discussion to the other side and ask how students see TH solving all these problems. The associated decision that needs to be addressed is about how to price the TH product.
The instructor should then ask the students if they think that the TH product should be sold to PROCEED prospects. Most of the students will say that the TH product has to be sold to a different set of customers and that it is good for those customers who don’t want to buy PROCEED today but might be prospective customers for PROCEED in the long-run. The instructor should capture this issue on the board since it will be very useful to go back to in the summary. The instructor can also choose to use this time to do a short lecture on the role of TH: how does TH help manage customers better over time? When is it useful to think about a TH product? What factors should be considered in the design of a good TH product? etc.
Linked to the pricing decision of the TH product is the issue of whether SaleSoft has the capability to sell this product. This leads to the next theme in the case discussion. Theme 5: The instructor can then bring the attention of the class to the organization chart in case Exhibit 8. The instructor can initiate this part of the discussion by asking a question like, “What do you think about this organization? What is it designed to do? The discussion then revolves around the issue of whether one should organize proactively, or reactively in developing markets. How should a start-up firm that is still focused on product development develop an organization that will take care of market development?
SaleSoft’s organizational structure, not atypical for a start-up firm, might make it difficult for the firm to be successful in a mass marketing strategy. Theme 6-7: Here the instructutor can tell the class what happened and ask them how they would respond to SaleSoft’s decision to market the TH product. It is important to get the customer and competitor’s veiwpoint here. Finally, the instructor can do a short 5-10 minute lecture that summarizes the learning from this case discussion. Some Additional Thoughts For the last three years, I have visited the Sales and Marketing Automation Conference that is held in Boston every year. It is amazing to see the turnover of firms in this business. More than half the firms seem to be new ones.
Interestingly, the people in the booths seem familiar. They just have changed jobs and work for new firm every time I see them. During one visit with Professor Ben Sharpiro, we asked several vendors to tell us more about their product, and who were their main competitors. The most common answers were (a) we are the only ones who have truly integrated sales and marketing automation software in the business, and (b) we really don’t think we have any competitoin. In the last twenty minutes of the class, I tell students that SaleSoft decided to launch TH and that it did not change its organization very much. I then ask them to tell me what they thought would happen.
Students very quickly get to the point that SaleSoft must have gone back to its PROCEED prospects with this new product. Next, I ask them how this customer would react. Most say that there will be a signficant customer resistance to this move by SaleSoft. However, there are some who think that these prospects have not bought because they have doubts about CSAS. I take these comments as they come and then ask students to tell me how competitors would react to this move by SaleSoft. There are a few students who come up with the point that the competition can do best by acknowledging that the TH product is good but something that the customer really doesn’t want, and also that SaleSoft would be unlikely to deliver a CSAS product to the customer in the long-run.
After this discussion, I run a short 10 minute lecture on the role of TH in helping vendors manage customers more effectively and link product line management (bundling) issues with pricing (value extraction)—especially when the products are expensive, complex, and require major changes on the customer’s part, and customers are risk averse. Managing the product line across customer life cycles and providing customers with a clear-cut migration path that reduces their risks and maximizes value to them will always ensure that vendors retain customers. TH also can be very effective in providing vendors with resources in the beginning that will help them survive and support themselves in the market development stages.
Exhibit 1 of this teaching note is a PowerPoint slide presentation that I use to discuss the role of TH in managing customers and managing the firm. Issues to Manage There are a few issues that the instructor will need to watch out for. First, it is possible that some students raise the issue that cost of converting the existing modules of PROCEED’s Sales System appears to be too high. That it is difficult to understand how SaleSoft did not anticipate this when developing the system. This is an issue that cannot be answered satisfactorily using information in the case. The instructor can manage this issue by directing the students to the information on the page where Miller clearly explains why this happened.
Second, some students try to take the easy way out and suggest that Miller should sell SaleSoft to a large software firm that is seeking to enter this market. The instructor can address this by saying, “What would Miller think of your idea? Miller says he brought order to chaos in manufacturing and is going to do the same in selling, marketing, and service. How are you going to make him walk away from what he sees as a tremendous opportunity? ” Students quickly understand the passion that the entrepreneur has in his baby. I also ask students whether this is the time to sell the firm. Given the current situation, would Miller be able to get a good price for the firm, or would he be better off getting some more sales before trying to sell the company. ———————– The term “Trojan Horse” is used to refer to an object or action used to gain easy entry into areas that might otherwise be difficult to access. The Trojan War is the subject of Homer’s Iliad and is thought to reflect a ten- year siege of Troy by the Greeks circa 1200 b. c. The fall of Troy is recounted in Virgil’s Aeneid: according to Virgil, the Trojans, having held out against the Greeks for 10 years, were tricked into hauling inside their city walls a large wooden horse (the so-called Trojan Horse) left as gift for the Trojans by the Greeks. The belly of the wooden horse was full of Greek soldiers who, once inside, opened the city gates at night and thus let in their compatriots to sack Troy. There is an interesting question here about how one would select the sample for the pilot test: should the test sample constitute people who will be most comfortable with the product, or should it be done with a group of people who are very skeptical about it? Should the test site be one of the more important markets for the customer, or should it be done in one of the secondary markets where there is less at stake for the customer? I had the opportunity to sit in on a couple of pilot test design sessions and found that these were issues on which the parties involved had a lot of trouble coming to any sort of agreement. The vendor and product champion (on the customer side) wanted to have a sample of favorably disposed users in a high profile office of the customer. They felt that this would given them a higher chance of success.
The customer’s senior management wanted to pilot test using skeptics in a low profile market. I usually take a minute to bring this issue to the attention of the students. Given the time constraint, I usually don’t get into a long distance on this issue. * I have had executives come back to me after class with their versions of ladders and how they just realized what was missing in their own sales approach.  In my own personal experience, I have found that vendors that do a win / loss analysis of orders, very often find a dramatic difference in the probability of winning a bid when the specifications have been designed to favor a competitor’s product as compared to when the specifications are more favorable to their own product