Amit, Jeffrey 150209
1. What What is your view on the 3 prim ary options AD is contemplating going forward? What What woul d you recommend company to pursue?
Option Comparison Table Options
Pros
Cons
Option 1: Lower
Customer aquisition cost
AD had no direct control control
Acquisition Costs: Costs: Reduce
was alarmingly high at
over the decision power in
the number of stakeholders
$1,500/customer. This
the companies they were
involved in the decision
would significatly reduce
trying to acquiring, and
that.
perhaps talking to people of higher decision power would be difficult to reach.
Option 2: Move Upstream:
Big corporations normally
Customer aquisition was
Focus on selling to
have a bigger market m arket and
already way beyond what
enterprises
more capacity to pay, so
they could afford, going
this could possible speed
with this spath would make
up their ROI and gain them
it even higher.
more profit. Option 3: Going Vertical:
If this option works, they t hey
When going industry-
Targeting specific
could recover the costs of
specific, AD would
customer types or
the research and
probably have to invest in
industries
development, and
experts or research and
costumer acquisition will
development. This path
start costing less in the
would initially increase
long run, since they don’t
costs.
have to contact a wide variety of customers anymore.
Based on the comparison table above, I w ould recommend the company to pursue Option 2. In my opinion, Option 1 should not be an option because AD is an external
entity; therefore, they do not have direct control over the stakeholders and d ecision power of their customers. Option 3, on the other hand, could possibly work. However, it would be a risk to invest more time on research and capital on industry experts. Option 2 offers the least risk, which would allow AD to fail f ast and immediately know whether i t’s the right decision to pursue it or not. Incase it doesn’t work out, at least not a l ot of investment (in terms of time and money) was made, and incase it does work out, they would not lose anything. 2. Calculate the economic value that the AD product delivers for an e-commerce vs a SAAS. Separate between cost savings and revenue life benefits. *As a starting point, you can consider an org with 100,000 monthly web visitors and $1,000,000 in monthly revenue
3. For the strategic option that you support, develop a marketing plan and strategy, including which companies to target, how to position the v alue proposition, how to sell an org, and what pricing method/format to follow.
Economic Value Added
Income Statement Answer Dash
SAAS
REVENUES
Sales Gross Profit
$ 13,560,000.00
12,000,000.00
₱
₱
13,560,000.00
12,000,000.00
₱
₱
720,000.00
7,188.00
₱
₱
120,000.00
360,000.00
₱
₱
6,832,812.00
6,832,812.00
₱
₱
7,672,812.00
7,200,000.00
₱
₱
5,887,188.00
4,800,000.00
₱
₱
2,060,515.80
1,680,000.00
₱
₱
3,826,672.20
3,120,000.00
₱
EXPENSES
Operating Expense Answer Dash Expense Customer Support Staff Other Expenses TOTAL EXPENSES
Income before Taxes Taxes (35%) NOPAT
Sales Customer Suppor Staff Profit Margin Tax
Assumptions 13% more 67% more 60% 35%
NOPAT AFTER TAX WACC
ECONOMIC VALUE ADDED AnswerDash $ 3,826,627.20 $ 2,953,600.00 $
EVA
SAAS ₱
3,120,000.00
₱
2,953,600.00
$
166,400.00
873,027.20
Assumptions COMPANY X Amount of Financial Capital Tax WACC Debt Total Assets
10000000 35% 29.50% 4,800,000 10,000,000
Equity
5,200,000
Option 2: Move Upstream: Focus on selling to enterprises
The following is a one-year marketing plan and strategy Phase 1: Internal adjustments Modify pricing tiers
AD’s current costumer acquisition cost is at $1500/customer. Small clients pay only $99/month, and they are allowed to unsubscribe any time. Given this, it would be difficult for AD to recover their costs, and they must find a way to secure themselves financially. One way to do this is by revising their pricing tiers. Current Pricing Tiers Basic
Pro
Enterprise
$99/month
$399/month
$1499/month
Up to 2500 tab clicks
Up to 15,000 tab clicks
Unlimited tab clicks
Few Analytics Included
More Analytics Included
All Analytics Included
Since AD will now shift their focus to Enterprises only, the pricing tier can be modified this way. Modified Pricing Tiers Basic
Enterprise
$999/month
$1499/month
Up to 15,000 tab clicks
Unlimited tab clicks
(Extra $99 for an additional 2,500 tab clicks) Limited Analytics Included
All Analytics Included
Change subcription m odel
Aside from the modification of pricing tiers, all packages are now going to be subject to a minimum 6 month subscription. This should secure a return of investment on costumer acquisition. Phase 2: Proof of Concept Company partnership
More often than not, big corporations only entrust th emselves to be serviced by reputable corporations. Having only 4 customers at that time, doesn’t help increase AD’s credibility. One way to improve this is to give 1 reputable corporations AD’s services for free or at least at cost. Based on all their previous customers’ experiences, AD has helped improve sales. All they have to do is encourage a respectable company to take on these services, so that other corporations will be interested to follow and take on AD’s services as well.
Sales pitches
Once they’ve been able to establish a decent reputation with a partner company (as stated above), they can now more on to a more personal approach. Since they now have credibility, big companies should be more open to entertaining them. A personal sales pitch could be more entising, which will hopefully encourage the companies to avail of AD’s services. Target Companies Phase 3: Feedback and analytics Revamp com pany profi les
Based on the post-service data gathered from their company partnership. AD should make a statiscal improvement report detailed in their com pany profile in print, their pitch decks, and on their website. Data is important in backing up their credibility as a firm. Improve strategy
Based on their performance as a service firm and in their sales pitches, they should adjust their existing strategy accoridngly to further boost sales and profit. Summary of Marketing Plan Phases
TIMETABLE GANTT CHART
YEAR 1 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Phase 1: Internal Adjustments Modify pricing tiers Change subscription model Phase 2: Proof of concept Company partnership Sales pitches Phase 3: Feedback and analytics Revamp company profiles Improve strategy
