Case: Precise Software Solutions

Q1. Should Alon plan on introducing Insight at Openworld 2000? Why or Why not?

The following are the arguments in favour of INSIGHT's launch:

1. Creating 'end-to-end' space and defining market expectations
2. Being recognised as a player in the developing market - First mover advantage, with the
ability to create a market presence and lead the industry with this kind of product.
3. Thousands of motivated and interested prospects were present at this yearly conference to
hear about and see demonstrations of new products. This translates to a strong marketing
platform for the new product with minimal time and financial commitment and maximum
impact.
4. Postponing the product past the Open World will give rivals enough time to spot and seize
the new chance.
5. If they believe they won't be able to make it, they can simply withdraw from Open World.
6. Recognising potential space issues before others

Launching INSIGHT is opposed by the following reasons:

1. Reputation: If Precise sets expectations and only provides partial solutions, this could harm
the company's reputation.
2. Effect on the process: Precise may skip key insights by rushing through the alpha and beta
phases.
3. Pricing: If Precise releases a stripped-down version of INSIGHT at a lower cost, it might be
challenging to increase that cost once the product is fully complete.
4. Launching a product too soon and with insufficient functionality may harm its reputation
and may make it less valuable in the eyes of consumers.
5. Launching a product too early will also give rivals the opportunity to develop superior
substitutes and steal Precise's opportunity to be the market leader.
6. In the best-case scenario, the product designed for Open World could simply have the
monitor capabilities; nonetheless, the whole analysis functionality would be lacking and be
perceived as a gap.
7. The business is still unsure of how it will advertise the product and determine its price.

Keeping the product insight a secret and finally made public in 2001 is, in my opinion, the best
course of action. Customers will view an immature product that only has monitor capability and
a poor user interface as a down product. It will give competitors time to see and duplicate the
product because a GA version might not be ready for another 18 months and a fully functional
version might not be accessible for another 2 years.

Q2. 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?

Ans. Justifications for a single sales force

1. They have previously had success selling both Interpoint and Pulse, among other goods.
2. They have success and experience. They are familiar with the area, and nobody has contested
their knowledge up until now.
3. They have established solid bonds with the DBAs and are respected as valuable issue solvers.
4. Establishing and maintaining a sales staff has a set cost.

Arguments in favour of a larger sales force

1. Buying is done in a very different way. Because it enabled her to triumph in the "blamestorming"
session, DBAs purchased SQL. The sales of INSIGHT, however, are predicated on an awareness of
the problems faced by CIOs.
2. The 'cross-product' effect may be problematic. The sales team might not be able to devote
enough time to both INSIGHT and SQL at once.

Yes, this product should be sold directly to consumers. Given that Insight is a more expensive
product with more complicated features, better results will be obtained with a skilled and committed
sales staff. The sales staff will then be able to learn more about complete IT setups at customers'
locations, recommend the optimum configurations for the insight solution to them, and accurately
predict their ROI, leading to improved sales.

Precise presently uses a dual-channel distribution structure and one sales team to market all of its
products. Each salesperson receives a base pay of $75 000 in addition to commissions based on
sales. The typical rep generated annual sales of up to $800,000 and earned $120,000 as a result. The
top rep earned around $300,000.

The new sales force should be distinct from the current ones and unrelated to the current products.
A premium-priced holistic solution that provides a perceived value addition to the end user needs to
be aggressively advertised and sold, thus they require the best salespeople in the business.

Q3. Develop an ROI model for Precise/SQL product?

Ans. ROI from Value-based approach:

DBA average salary (in $) 6000

DBA’s work hours per week 40

Total worked hours per year (40 hours * 52 2080

weeks)

Salary per hour (60,000/2080) (in $) 28.85

DBA’s saved hours (exhibit 4) 9.4

Total hours saved per year (9.4 hours*52 488.8

weeks)

Savings per DBA 14100

 Average no. of DBA’s (Exhibit 4) 10

Total savings for DBA 141000

User Savings:

Average salary of end user (in $) 30000

Average employee burden rate 33

Improvement in end-user response time per 25

transaction (%)

Savings / end-user (30000*33%*25%) 2475

No. of simultaneous users 215

Total savings through users (2475*215) 532125

Hardware cost saving:

Average Annual Hardware budget affected by 1430000

precise/SQL

Effect on hardware cost if postponed by one 429000

year
(143000*30%)

Effect on hardware Cost (postponed by 1

year)

Probability of postponing hardware purchase 60

by 3 months

Hardware cost saving (429000*60*25%*3 64350

Net savings = Savings from DBA + User Savings + Hardware Cost Savings

= 141000 + 532125 + 64350

= $ 737475

10 DBA installations @ average cost of $ 20000 with 25% discount = $ 150000

ROI = 491.65%

Q4. How should Precise Insight be priced?

Ans. Precise should be priced using Value-based pricing approach as explained above.
Net savings = Savings from DBA + User Savings + Hardware Cost Savings

= 141000 + 532125 + 64350

= $ 737475