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%