Date of Submission: November 11, 2020

Marketing of IT Products and Services

Submitted to:
Mukund Prasad
Submitted By:
Group 08 Div A

Name Roll No.

Simranjeet Sachdeva A049
Davinder Pal Singh Arora B008
Shivangi Goel B023
Harneet Kaur B034
Parth Purandare B046
Ishan Bhatia F011
Table of Contents

1. Executive Summary...............................................................................................................3

2. Market Analysis.....................................................................................................................3

3. Company Analysis.................................................................................................................3

4. Objectives...............................................................................................................................3

5. Segmentation, Targeting, Postioning & Value Proposition...................................................3

6. Marketing Strategy.................................................................................................................3

7. Bugeting & Control................................................................................................................3

8. References and sources..........................................................................................................3

2|Page
1. Executive Summary

2. Market Analysis

3. Company Analysis

About
SAP SE (formerly known as SAP AG) is a leading multinational tech firm headquartered in Germany.
The company produces enterprise applications that lets businesses handle both business processes
and client relationships. The organization is active in more than 125 countries around the world.

Customers
 Approximately 80% of SAP’s customers are SME
 SAP customers include:
o 92% of the Forbes Global 2000 companies
o 98% of the 100 most valued brands
o 97% of the greenest companies
 SAP’s customers distribute 78% of the world’s food and 82% of the world’s medical devices
 77% of the world’s transaction revenue touches an SAP system

Innovations and Capabilities

 €4.3b R&D expense in 2019. R&D expense ratio: 15.5% (IFRS; R&D expense as % of total
revenue)
 R&D headcount (FTE): 28,955 as of Sep 2020, equaling 28.5% of total headcount
 Greater than 100 Development locations worldwide
 20 Development centers (SAP Labs) worldwide
 17 Co-Innovation Labs worldwide
 5 SAP Innovation Center Network locations
 Greater than 22,400 SAP partner companies in more than 140 countries
 Sapphire Ventures: Invested in 110+ IT startups. More than 55 IPOs and M&A exits since
2011
o More than $4b assets under management
o Operates independently from SAP
o Provides SAP early access to trends & innovation
o 900+ patents granted and validated in 2019
 Artificial intelligence, machine learning and robotic process automation: Upwards of 300 use
cases in SAP’s applications

Market Position: Areas of Advantage

 Enterprise Application Software
o SAP is a market share leader in Enterprise Resource Planning (ERP), analytics, supply
chain management, human capital management as well as in experience
management & customer experience
o Recognized database leader

3|Page
 o Broadest portfolio of modular and suite solutions available on premise, in the cloud
and hybrid
 Top Cloud Vendor
o Cloud user base of approximately 230m users
o SAP Cloud Platform is the most preferred choice across hyperscale cloud vendors
(Alibaba, Amazon, Google, Microsoft)
o Largest cloud portfolio with over 100 solutions for all lines-of-business (LoB) as well
as software suites
o 65 datacenters in 35 locations in 16 countries
o SAP Digital Commerce for online SAP and partner offerings >194,000 orders from
170 countries

VRIO Analysis
Resource or Valuabl Rare Inimitabl Organized Impact on Competitive
Capability e e to Exploit Advantage
Financial Resources Yes Yes Yes Yes  Strong Financials
 Strategic Investment
 Sustained Competitive
Advantage
Employees Yes Yes No -  Employees are valuable
and rare
 Can be imitated
 Temporary Competitive
Advantage
Patents Yes Yes Yes No  There are many patents
still unused
 Unused Competitive
Advantage
Distribution Yes Yes Yes Yes  Sustained Competitive
Network Advantage

Key Weaknesses
 Limited success outside core business – While SAP is among the leading players in its
industry, it has faced difficulties in moving to other product segments with its current culture
 Not so good at merging businesses into a diverse work culture. As stated earlier, even
though SAP is effective in integrating small businesses, it has a share of the inability to
integrate firms with a different work culture
 High rate of turnover in the workforce – compared to most companies in the sector, SAP has
a higher rate of attrition and would expend much more than its rivals on the recruitment and
growth of its workforce

4|Page
4. Objectives

Financial Objectives: Revenues

● The expected cloud revenue to be in the range of 8.7 billion to 9.0 billion euros
● The expected cloud and software revenue to be in the range of 24.7 to 25.1 billion euros
● The expected total revenue to be in the range of 29.2 tp 29.7 billion euros
● The operating profit is expected to be in the range of 8.9 billion to 9.3 billion euros
● The expected share of more predictable revenue defined as total cloud and software
revenue is expected to be approximately 70%

Financial Objectives: Gross Margins

● The gross margins from the intelligent spend group segment will be higher than 80%
● The gross margins from our public cloud offerings will reach approximately 70% and expand
upto 80% in the years thereafter
● The gross margin from cloud to be approximately 71% and continue to be the same
● The gross margin for services to continue to remain at approximately 25

As the profitability is looked to increase further, the cost ratios are expected to develop as follows
where research and development are expected to remain the same, sales & marketing along with
general expenses to decline slightly. Further the segment profit is expected to increase in all the
reportable segments.

Organizational Changes:

The organization to be structured to strengthen the focus on customer success and employee
engagement while driving innovation and simplicity. The new set up should aim at rising synergies,
reducing complexity while initiating key steps towards further integration. The changes will also
affect SAP’s segment reporting.

Non Financial Goals:

In Addition to finance goals the focus is also on 3 non financial goals : customer loyalty, employee
engagement and carbon emissions

● The aim for the next 3 years is to lift employee engagement as measured by Employee
Engagement Index and keep it at 84% to 86%

5|Page
 ● Customer loyalty measured using customer net promoter score NPS. The target is to
increase NPS by 3 points to 5 points to steadily increase in customer NSP
● The aim is to decrease carbon emissions to 238kt with a steady decrease further on reaching
93kt in 2023. The overarching aim is to achieve a net zero carbon footprint by SAP’s
operations by 2025.

5. Segmentation, Targeting, Postioning & Value Proposition

Segmentation:

Any Enterprises seeking IT solutions along with hardware can use the SAP software. In the two
images below, we have compared the employees of SAP by industry and by employee strength. In
the image below, we can see the clients of SAP are from a wide range of company types, from
Machinery, Retail to Oil and Energy. The majority of SAP clients are in the computer software
segment followed by staffing and recruiting segment. The reason for this vast segmentation is that
SAP software can be used in any industry.

 By Employee Size: As mentioned in the report earlier, approximately 80% of SAP’s customers
are SMEs, which can be seen in the diagram below. It initially had few large companies as
clients but now has dominated the SME’s with most of the clients in this business range.

6|Page
Targeting: SAP focused on industries that require high technology software, like machinery,
automotive, chemicals and engineering. They targeted the subsidiaries of large companies and
quickly got a big pie of the market share.

Positioning: SAP aimed at positioning itself as the state-of-the-art provider of commerce solutions.
The number one and the best ERP. They were focused on offering the possibility of total
customization of the product Long product lifecycle and even longer customer life.

Value Proposition:

SAP generates value by defining the business needs of its clients, and then designing and providing
applications, services and assistance that meet these business needs. They seek to ensure, through
close coordination with their clients and collaborators, that their software provides value for their
customers. By seeking input from our clients, we aim to constantly develop our solutions, recognise
more market needs and provide improved value to our customers. The customers of SAP helped
them to develop customized solutions for them and provided their feedback to the company about
what things can be modified or improved.

Functional Benefits of SAP:

 Well-suited for any business - • Ideal for any business-regardless of the number of staff you
have, or whether the company is well developed or in a rising process, SAP has a broad suite
of leading cloud-based ERP technologies and resources to fulfil your needs. In addition, your
company will rely on the 24/7 support teams from SAP.

 Innovative technology - SAP is up to date on all the new developments to ensure that the
company is fitted with the best technologies for the future. SAP offers future-proof cloud-
based ERP technologies that can fuel the next generation of companies.

 Flexible and secure - SAP helps the company to configure systems, use a public or private
cloud, or pay for what you need. Furthermore, when it comes to keeping your company
secure, it is vital to have a team of experts by your side who are continually looking ahead.
SAP guarantees that your data is safe and defends your company from hackers.

7|Page
  Easy scalability, Data Management and Long Term Monetary Gains. - SAP gathers all the data
in one location and organises the fragmented data in a very nice way. If you are going to
implement the CRM programme, you can quickly integrate it into the SAP platform to handle
all details relevant to your unified customers. Implementation of the SAP ERP lets companies
minimise unnecessary operating costs. It also offers administrators 360 power over the
breakdowns and future failures to major business processes.

Other functional benefits of using SAP for companies:

 Revenue growth
 Profit margins
 Customer acquisition and retention
 Sales conversion
 Customer profitability
 Product / product line profitability
 Incentive programs and monitoring
 Market penetration / market share
 Marketing program performance
 Smart growth (i.e. “good” customers vs. “bad” customers)
 Time to market

Pricing - The ERP pricing model of SAP was intended to be used while the customer's employees
were required to log directly into the SAP ERP and concentrated on defining and licencing each
person using the programme. This user-based pricing works well for direct human entry, since it is
predictable and well known.

However, it is not easy to implement when the ERP method is used either implicitly or digitally. This
has led to ambiguous interpretation of use and to unproductive discussions over what counts as
users. The ambiguity has also led to inconsistent sales and audit practices that have ultimately
shaken some of the customers’ trust.

A New Pricing Model - Outcome Based Pricing: Instead of consumers, the current pricing paradigm
is based on the pricing of company records and line products. In the result-based scheme, the IT
supplier is dedicated to those quality thresholds in the deal. When they surpass their service levels,
they will be charged more than their negotiated billing sum. If they default, they will be penalised.
Customers should either adhere to their user-based pricing or turn to the result-based pricing.

8|Page
6. Marketing Strategy

The Five Pillars of Marketing Transformation

Over the past few years, SAP has succeeded in the art of marketing; developing clear
branding strategies that boost brand recognition, credibility, and buying intent. Now, the
focus should be to thoroughly codify a plan that will constantly direct SAP Marketing to
achieve SAP's overall organisational objectives. To do this, SAP must build a forum that can
successfully combine art and science of marketing. The SAP Marketing Team will need to
strive to enhance its attempts to collect data and obtain intelligence in order to comprehend
customer needs and improve its outreach to them. The following five pillars are proposed for
this reason.

Humanize the Brand

Cultivate a customer-focused mindset that seeks to: help SAP reach new audiences; explain
how SAP provides real benefits to its customers and society; establish trust between its
users and stakeholders; and motivate advocacy. The goal should be to get all 54,000 workers
to be brand ambassadors and to transform the way they share the tale of what SAP is doing.
SAP should be transitioned from what has been seen as an extremely conventional,
conservative, closed business into a transparent, creative, accessible entity that can play on
the world arena of industry as it moves through the contemporary world.
In addition, much of the conversation on SAP 's platforms should come from outside sources.
Beyond just publishing customer reviews, SAP can interview customers, collaborators and
users and integrate their direct words and experiences into its core traditional and digital
marketing activities.

Develop Pull marketing

This reflects a shift in thought to turn SAP from a conventional sales-driven viewpoint to a
consumer-driven perspective. The goal is to understand how customers may choose
to consume SAP products and services and also to encourage them to engage with SAP
where, where and how they want to do so. In order to achieve this, SAP should create and use
marketing channels that will encourage people to engage with SAP and talk about their
experiences in whichever way they like to. To get going, SAP should concentrate on adding
more exciting content to all of its digital platforms. SAP should create a theme-based website,
linking to the company's key market, but packed with content that is a combination of SAP
staff written work and selected content produced by external experts and customers. External
voices can help introduce potential customers to the website, as well as put users into touch
with SAP through organic online searches for more generalised knowledge on technology, IT
solutions, and market processes. This forum would not only provide one-to-one contact and
assistance to and from key SAP stakeholders, but it would also provide SAP a content farm
of interesting content and insights that could be integrated into its marketing activities.

Simplify Marketing
9|Page
SAP should simplify the framework and operational process of SAP Marketing with a view
to: making the most effective use of its spending plan; enhancing the exchange of knowledge
and expertise around the company; and allowing more bottom-up decision-making. Its
primary objective should be to establish a more effective internal marketing operating
system, partly motivated by SAP 's marketing understanding of the challenges confronting all
marketers to develop insight-driven marketing strategies. For SAP, this initiative should
include capturing and extracting data produced when consumers engage with every SAP
marketing point of contact (live events, workshops, online material, social media).
SAP can automate this process with algorithms that screen out low-probability interactions –
such as academic research paper information. The software should also collect any SAP
source of data that the contact is aware of in order to decide the necessary follow-up
information that should be immediately sent to the contact. A follow-up call can only arise if
the algorithm recognises a communication as having an extra-high interest and ability. Also,
without the availability of contact information, the framework should also look at all other
empirical data generated from website traffic and social media visits. Such efforts can
contribute to an assessment that a collection of SAP content has been viewed from a specific
ISP address. If the ISP is licenced with a specific entity, it would be suggested for a follow-
up call back from SAP to determine if the enterprise will still be interested in certain SAP
product or service.

Tighten the business-links

SAP should change from an evaluation model that credits marketing strategies to a model that
credits the accomplishment of a company result, thereby providing a direct correlation
between marketing and total ROI for SAP. SAP should delegate more power and profit and
loss of liability to mid-level managers with geographic or line-of-business roles and re-adjust
marketing expenditure every quarter as the marketing team collects information and metrics
on the business performance.

Invest in people
A major internal agenda of SAP should be to improve the expertise and experience of SAP
Marketing staff and to build a community of common visions and priorities. A work rotation
schedule should be implemented to allow SAP Marketing staff to become more acquainted
with operations beyond their core roles, and a mentoring network should be developed to
disseminate skills around the company and help new staff speed up their learning curve. The
SAP Marketing Team should also set up its own internal online network to encourage
engagement and information sharing.

Setting the KPIs

(Gas required as intro)

Return on Marketing Effectiveness: This analyses the overall marketing costs (people and
programme) against the revenue raised by the marketing spearheaded, eligible leads which
have been converted to sales and have been real transactions. Any marketing initiatives that
may affect the production of revenue indirectly are not credited in this KPI, e.g. the situation
when the consumer saw SAP advertisement or other promotional materials and first made
direct communication with the SAP sales agent rather than via the SAP marketing platform.

10 | P a g e
Conversion Rate: A metric of the total number of qualified leads produced by marketing and
forwarded to sales relative to the total number of such leads that were ultimately booked and
won. This offers an evaluation of the pace at which marketing generates successful sales
prospects, regardless of the amount of revenue produced by the transactions made.
Audience Engagement: A metric intended to monitor engagement with SAP content (e.g.
Facebook Views, social media feedback, retweets, etc.). This metric incorporates content that
produces a committed response from both push (e-mail, direct marketing, ads, etc.) and
pull channels (social media messages, organic visits to the SAP website)
Marketing Expense as a Proportion of Software and Software-Related Resources
(SSRS): This is part of the business links pillar, as it is an indicator of SAP's total revenue
generation proportional to marketing expenses.

7. Budgeting & Control

Sales and Marketing expense includes direct sales costs, personnel costs, and the costs
incurred to market the products and services. In 2019, the sales and marketing expenses rose
13% from €6,781 million to €7693 million. The ratio of sales and marketing expenses to total
revenue also rose to 27.9% in 2019. The increases were mainly due to the expansion of global
sales force, acquisition of Qualtrics, and also due to bonus payments offered because of
strong revenue growth.
Considering the plans of the company, and the related growth factors, the cost ratios of the
company are expected to decline in 2020. Further, along with administration costs, sales and
marketing costs are likely to decline by 5% to 10%. Following are the two scenarios:
Scenario 1- Optimistic: Marketing expense (decrease by 5%) – €7308 million
Scenario 2- Pessimistic: Marketing expense (decrease by 10%) – €6923 million

8. References and sources (If required)

11 | P a g e