CASE ANALYSIS : TARGET THE RIGHT MARKET : SPARKPLACE

EXECUTIVE SUMMARY :

This report explores case study of SparkPlace, an online-marketing software company. Due to the limited resources available to this company, it wants to target two available markets: small businesses with no more than 20 employees (Small Sams) and medium-size businesses with 20 to 100 employees (Medium Marrys). The case illustrates that SparkPlace is in a crossroad to and the major challenge faced by the sales and marketing executives at Sparkplace is the dilemma in selecting the suitable market segment within these two segments. The report will review the SparkPlace’s Potential, marketing challenges and possible solutions.                                                            

                                                                    CASE ANAYSIS

SWOT ANALYSIS OF SPARKPLACE:

STRENGTH

·       Spark Place’s user friendly software

·       Success in acquiring Sams

·       New venture in to content development will increase SparkPlace market presence

·       software development capability to create products which can target both Sams and Marys

WEAKNESSES

·       Concentration on Permission based Marketing.

·       limited experience in the industry (Approx. 2years) can be the reason for fewer acceptances among Marrys

·       Funded by VCs and has resources constraints

OPPORTUNITY

·       Growing market potential(Sams & Marrys)

·       Beyond permission based marketing. e.g Send the content that subscribers want. Upon sign-up, allow subscribers to choose whether they want deals, business updates or tips about products

·       VCs need return on their investment and of course, if they get it, they represent a new source of funding

THREAT

·       Competition is tough for Marrys and also Sams are more volatile

·       There is always a pressure on Margin since Sams are very prone towards low cost products.

·       Sparkplace software available on Monthly fees, can be a probable reason for customer churner. Since many Sams may found this as an immediate pressure on balance sheet.

MARKET ROI ANALYSIS (SAMS VS MARRYS)

Examining SparkPlace’s data, it can be seen that each $100K of combined Marketing and Sales expenditure can brings in 33 Numbers of small Sams & 3 numbers of medium Marrys.

On an average life time, the 33 Sams will generate Profit of $330K ( $10K* 33Nos). The average contribution to profit after marketing & sales cost $231K ($7 K* 33Nos).

Similarly on an average life time, 3 Marrys will generate profit of $150K ( $50*3 Nos). The average Actual contribution to profit after marketing & sales cost $60K ($20 K* 3 Nos).

Based on the profit contribution, total Market potential for Sams: $9.1bn( $7K*1.3M)

Based on the profit contribution, total Market potential for Sams: $10bn( $20K*0.5M)

Even if the average customer churning rate of Sams are 3 months and that of Marrys are of longer duration, on an average Sams seems to be of more profitable for an equal amount spend on marketing and sales. But looking in to the total market potential based on profit contribution, it is almost same in both the cases.

Considering the average marketing and sales cost per customer, to acquire 1.3 million Sams, SparkPlace needs to invest a total of $3.9 bn in marketing & sales. To acquire 0.5 million Marrys SparkPlace needs to invest a total of $15 bn in marketing & sales.

THE BUSINESS SOLUTION: Focus on Sams but not to ignore Marrys

Sams are the cash cow for the company since the market penetration is very good. Initially SparkPlace should continue to mainly focus on Sams and simultaneously understand the needs of Marrys and continue to invest in Marys too. Sams will no longer remain Sams but would graduate to Marys, so even if there are 20% graduation rate, SparkPlace will be better off sticking with Sams and growing the business to eventually cater to Marrys.

The flip side of not targeting both the market is that, SparkPlace runs the risk of creating self-inflicted boundaries for themselves, which could act adversely if market dynamics were to change radically in the future.

Sales and marketing Strategy:

• Profile Sams into different groups based on profits, turnover and lifecycle.

Ø  Potential Marrys: These Sams would have more chances of converting to Marys. SparkPlace should target this segment by providing trainings/demos for the software, preparing sales pitch for selling its features and services, consultative or value selling, providing free trial/discount during adoption phase.

Ø  The churners: SparkPlace should understand the reasons for the churn and how to retain them. Feedback should be taken and share with sales, marketing and development team.

• Increase the contract length  to  Six months or One year and provide Sams the product on Quarterly rent basis. It will not put immediate pressure on Sams balance sheet and will eventually help Sams to concentrate on other areas of business for growth and profitability.

• Keep the detailed product demos and customer support to show how the product adds value to Sams/ Marrys. The users should be well trained to use the product and know why it adds value to their business.

• Prepare and train the sales and marketing team for selling content development software along with e-marketing software. This will help in building a long-term relation with customer.

• While selling and making a profit on the Sams, reinvest the profits into making contacts with Marrys.

Product development Strategy:

• Supporting sales and marketing strategy, standardized the software for Sams and Marys so that sales team could be given training for the overall product which could be easily customized depending on the needs of the customer. The sales team then could decide the value proposition of the product when they prepare the sales pitch.
• Create a niche product that does something really well for a specific size of business or for a specific industry
• Focus on creating an 'all in the box' software product that is well known, easy to use and does a lot more than competitors.

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