Indian Institute of Management, Indore

PGP-1, 2013-2015

Analysis of Case: Salesoft (Inc)

(As a part of course Marketing I, PGP 2013-2015)

Submitted on August 26, 2013

Prepared by:

Group 2, Section B

Ajnas Hashim
Arpit Kasture
Bhavya Tiramdasu
Nilay Biswas
Rajasekaran C
Shiksha R Singh
Wazeem M A

Under the Guidance of

Prof. Sabita Mahapatra
Indian Institute of Management, Indore
 PROCEED vs TH

QUALITATIVE ANALYSIS

The arguments supporting going ahead with PROCEED are as follows:

Salesoft will lose their first mover advantage in the CSAS market if they divert their attention to
TH
TH will prevent SaleSoft from partnering with consultants
SaleSoft has promised the delivery of the remaining modules of PROCEED to current customers
by June 1998
Twenty Prospects for PROCEED want to see completed product before making any purchase
commitments
Microsoft and Lotus are planning to enter the TH market, thereby, making competition tight.
There are no big players in the CSAS domain, making it an easier avenue for Salesoft.
Salesoft lack the skills to mass market products like TH.
It will cost Salesoft around half a million dollars over the next six to eight months to create
awareness about TH.
Salesoft will hit $5.7 million in sales if they are able to convert just 6 of the 20 prospects
($2,400/sale * 400 sales per prospect * 6 prospects= 5.76 million). This is achievable given the
fact that there are just five players in CSAS and Salesoft are considerably better than its
competitors.

The arguments supporting going ahead with TH are as follows:

Selling TH is very much like selling CMS and there are so many success stories in the CMS
market. Customers dont need to be educated on the benefits of TH. Most Sales VPs will grab it
at any price.
The cost involved and the time required to develop the TH product are not very high.
Consultants are not needed to sell TH.
The TH market is much bigger and broader than the PROCEED market.
TH is an easy way to gain quick sales, and generate much needed revenues .
Customers are skeptical about CSAS and the ability of CSAS vendors to survive in the long-run.
TH doesnt require customization, and its benefits can be easily quantified.
There are too many players involved in the purchase of PROCEED (from CEOs to SalesReps).
Only the sales VP needs to get on-board for a TH sale.
The time needed for seling TH is much lesser than the time taken for selling PROCEED

QUANTITATIVE ANALYSIS

What are the benefits of CSAS?

The benefits of CSAS are:

1. Sales cycle reduction,
2. Startup time reduction for new employees,
3. Employee turnover reduction.
Company A (a financial services firm)

Additional Sales due to Sales cycle reduction

= Selling time reduction x ($ sales/ year)
Avg. selling time
= 6 x $120m = $6 million / year --------- > I
120

Additional Sales due to reduction in start-up time for a new sales rep

= Days reduced in startup x ($ sales/rep/year) x Days to startup x (No of new reps)

Number of days to startup Workdays / year

=14 x $120m x 60 x 24 = $1.1 million / year ------------------------ > II

60 120 300

Additional sales due to reduction in sales rep turnover

= (% reduction) x (current turnover) x ($ sales / rep) x Days to startup

Workdays / year
= 0.1 x 24 x ($1m) x 60 = $480,000 / year -------------------- > III
300
The total additional sales (I +II+III) for Company A from using CSAS are = $7.6 million

Without
PROCEED With PROCEED

Sales Costs (at 30$ of

sales) $127.6 million $127.6 million

Selling Costs (at 30$ of

sales) $38.28 million $36 million+commissions

=36 + .1 x 7.6

= $36.76 million

=38.28 36.76

Difference = $1.52 million

*-$120 million x .30 = $36 million. Using PROCEED, cost of sales remains the same as it
would be if sales volume were $120 million without PROCEED.
Assuming that selling costs dont change, then the company saves 30 percent (row 3 of
Exhibit 7) of the additional sales in costs less commissions of 10 percent. Thus, the firm
gets $7.6 x .20 = $1.52 million in the first year after implementing PROCEED.
The Costs of implementing CSAS for Company A are:

Initial Costs = H/w + PROCEED license fee + start up + Implementation &

training costs + annual costs of internal resources

= $1500000 + $600000 + $200000 + $180000 + $150000

= $2.63 million

Thus, the pay back time for the CSAS investment is around 1 years. For Company B,
the results are even more dramatic and the pay back period is less than a year.

Company B

Additional Sales due to Sales cycle reduction

= Selling time reduction x ($sales / year)
Avg. selling time

= 15 x $350m = $29.16 million / year -- > I

180

Additional Sales due to reduction in start-up time for a new sales rep

= Days reduced in startup x ($ sales / rep / year) x Days to startup x (No new reps)
No of days to startup Workdays / year

= 20 x $350 x 90 x 88
90 250 300
= $8.2 million / year --------------------------------- > II

Additional sales due to reduction in sales rep turnover

= (% reduction) x (current turnover) x ($ sales / rep) x Days to startup

Workdays / year
= 0.15 x 88 x ($1.4m) x 90
300
= $5.54 ------------------------ > III
The total additional sales(I+II+III) for Company B from using CSAS are = $42.9
million

Without
PROCEED With PROCEED

Sales $392.9 million $392.9 million

Selling Costs (at 35% of

sales) $137.5 million $122.5 million + commissions

=122.5 + .04 x42.9 = $124.2 million

Difference =137.5 124.2 = $13.3 million

We also get this by working directly from the savings: if we assume that selling
costs dont change, then the company saves 35 percent (row 3 of Exhibit 7) of the
additional sales in costs less commissions of 4 percent. Thus, the firm gets $13.3 million
in the first year after implementing PROCEED.

The Costs of implementing CSAS for Company B are:

Initial Costs = H/w + PROCEED license fee + start up + Implementaiton & training costs
+ annual costs of internal resources

= $3.6 m + $1.44m + $450K + $430k + $350k

= $6.27 million

Thus, the pay back time for the CSAS investment is less than half a year (.47 years).