Business Marketing - Precise Software

Description
Case is about the Precise Software Solutions which has developed and sold few of
the leading software products in the area of Availability and Performance
management of the deployed IT solutions. They have identified an opportunity and
they are committed to develop a product to capture that. However they are not
clear how fast they can enter the market, what should be marketing and pricing
strategy, and what all functionality to deliver in their alpha product.

1. Should Alon plan on introducing Insight at Open world 2000? Why or Why not?

The reasons why Alon should target his product Insight for Open World 2000 are
a. This annual conference gathered together thousands of interested and motivated prospects, who
could hear about and see demonstrations of new product. This means a good marketing platform
for the new product with least expense in terms of cost and time and maximum impact.
b. First mover advantage, Can establish a market presence and be the first in this field with this
type of product
c. Delaying the product beyond the Open World will give enough time to competitors to identify
and exploit the new opportunity.

The reasons why Alon should not hurry to introduce insight by Open world 2000, which is just
few months away, are

a. Going to market too early with a product with not enough functionality will damage the
reputation of the product and might not be attractive in terms of value to the customers.
b. Also, going too early with an immature product will allow competitors to come up with better
alternative solutions and snatch the chances from Precise to be a leader in the industry.
c. The product if developed targeting Open World could only have the monitor functionality in the
best case scenario, however the complete analyze functionality would be missing and will be
seen as a gap.
d. The company is still not sure on how they will market the product and how they will price this
product.

The best approach in our opinion is keeping the product Insight under wraps and announces it
only in 2001. An immature product, with just monitor functionality and no nice user interface,
will be seen as a down product by customers. Since a GA version could only be available in 18
months from now, and a fully functionality only in 2 years, it will give time to competitors to see
and copy the product.
2. What should precise strategy be for insight? Should they launch a separate sale
force for the new product or sell it through their existing sales force? How good is their
current sales force?

Yes, a direct selling approach should be used for this product. Insight being a premium priced
solution with more complex functionality, a trained and dedicated sales force will achieve better
results. The sales team will then be able to gather more and more knowledge on end to end IT
deployments at customer places, and suggest them best possible configurations for the insight
solution and accurately estimate their ROI resulting in better sales. Also, Insight being new to
market, and not already established product, in-fact being a product first of its kind would be
harder to sell through VARs, and system integrator.

Precise currently has one sales team to sell all products through dual channel distribution system.
Each sales person is paid base salary of 75000 $ and then commission depending on sales made.
The average rep made sales of up to $800,000 annually thus earned $120,000. The highest paid
rep about $300,000

The new sales force should be different from existing ones, i.e. not shared with the existing
products. They need the top guys in the sales industry, being a premium priced holistic solution
that provide a perceived value addition to end user needs to be promoted and sold aggressively.

3. How should Insight be priced? Develop an ROI model for Precise/SQL product.

We would recommend value based pricing approach. That means a price for a customer should
be proportional to the perceived value derived by the customer from the solution.

DBA Savings
Assuming they work 45 hours a week 45
Hours saved per DBA per week 9.4
Average DBA salary $ 60000
Hours worked Per Year 52 * 45 2340
Hours Saved per year 52 * 9.4 488.8
Savings Per DBA (9.4/45) * 60000 12533.33
Number of DBAs 10
Savings for all DBAs 10 * 12533.33 125333.33

Hardware Savings
Average Annual Hardware Budget 1,430,000
Hardware Saving if postponed purchase by 1 year 30%
Probability of postponing by 3 months 60%
Savings 64,350
User Savings
End User Salary 30,000
Average Employee Burden Rate 33%
End User Time Improvement 25%
Savings Per User 2475
Number of Users 215
Savings for all users 2475 * 215 532125

Total Savings
= 125,333.33 + 64,530 + 532,125
= 721,808.33

Cost of 10 DBA installations with 25% discount

= 10 * (25000 * .75)
= 187,500

ROI = 285%