Amit, Jeffrey
150209
1. What is your view on the 3 primary options AD is contemplating going forward?
What would you recommend company to pursue?
Option Comparison Table
Options Pros Cons
Option 1: Lower Customer aquisition cost AD had no direct control
Acquisition Costs: Reduce was alarmingly high at over the decision power in
the number of stakeholders $1,500/customer. This the companies they were
involved in the decision would significatly reduce trying to acquiring, and
that. perhaps talking to people
of higher decision power
would be difficult to reach.
Option 2: Move Upstream: Big corporations normally Customer aquisition was
Focus on selling to have a bigger market and already way beyond what
enterprises more capacity to pay, so they could afford, going
this could possible speed with this spath would make
up their ROI and gain them it even higher.
more profit.
Option 3: Going Vertical: If this option works, they When going industry-
Targeting specific could recover the costs of specific, AD would
customer types or the research and probably have to invest in
industries development, and experts or research and
costumer acquisition will development. This path
start costing less in the would initially increase
long run, since they don’t costs.
have to contact a wide
variety of customers
anymore.
Based on the comparison table above, I would recommend the company to pursue
Option 2. In my opinion, Option 1 should not be an option because AD is an external
entity; therefore, they do not have direct control over the stakeholders and decision
power of their customers. Option 3, on the other hand, could possibly work. However, it
would be a risk to invest more time on research and capital on industry experts. Option 2
offers the least risk, which would allow AD to fail fast and immediately know whether it’s
the right decision to pursue it or not. Incase it doesn’t work out, at least not a lot of
investment (in terms of time and money) was made, and incase it does work out, they
would not lose anything.
2. Calculate the economic value that the AD product delivers for an e-commerce vs a
SAAS. Separate between cost savings and revenue life benefits.
*As a starting point, you can consider an org with 100,000 monthly web visitors and
$1,000,000 in monthly revenue
3. For the strategic option that you support, develop a marketing plan and strategy,
including which companies to target, how to position the value proposition, how to sell an
org, and what pricing method/format to follow.
Economic Value Added
Income Statement
Answer Dash SAAS
REVENUES
$ ₱
Sales 13,560,000.00 12,000,000.00
₱ ₱
Gross Profit 13,560,000.00 12,000,000.00
EXPENSES
Operating Expense
₱ ₱
Answer Dash Expense 720,000.00 7,188.00
₱ ₱
Customer Support Staff 120,000.00 360,000.00
₱ ₱
Other Expenses 6,832,812.00 6,832,812.00
₱ ₱
TOTAL EXPENSES 7,672,812.00 7,200,000.00
₱ ₱
Income before Taxes 5,887,188.00 4,800,000.00
₱ ₱
Taxes (35%) 2,060,515.80 1,680,000.00
₱ ₱
NOPAT 3,826,672.20 3,120,000.00
Assumptions
Sales 13% more
Customer Suppor
Staff 67% more
Profit Margin 60%
Tax 35%
ECONOMIC VALUE ADDED
AnswerDash SAAS
NOPAT $ 3,826,627.20 ₱ 3,120,000.00
AFTER TAX WACC $ 2,953,600.00 ₱ 2,953,600.00
EVA $ 873,027.20 $ 166,400.00
Assumptions
COMPANY X
Amount of Financial Capital 10000000
Tax 35%
WACC 29.50%
Debt 4,800,000
Total Assets 10,000,000
Equity 5,200,000
Option 2: Move Upstream: Focus on selling to enterprises
The following is a one-year marketing plan and strategy
Phase 1: Internal adjustments
Modify pricing tiers
AD’s current costumer acquisition cost is at $1500/customer. Small clients pay only
$99/month, and they are allowed to unsubscribe any time. Given this, it would be difficult
for AD to recover their costs, and they must find a way to secure themselves financially.
One way to do this is by revising their pricing tiers.
Current Pricing Tiers
Basic Pro Enterprise
$99/month $399/month $1499/month
Up to 2500 tab clicks Up to 15,000 tab clicks Unlimited tab clicks
Few Analytics Included More Analytics Included All Analytics Included
Since AD will now shift their focus to Enterprises only, the pricing tier can be modified
this way.
Modified Pricing Tiers
Basic Enterprise
$999/month $1499/month
Up to 15,000 tab clicks Unlimited tab clicks
(Extra $99 for an additional 2,500 tab
clicks)
Limited Analytics Included All Analytics Included
Change subcription model
Aside from the modification of pricing tiers, all packages are now going to be subject to a
minimum 6 month subscription. This should secure a return of investment on costumer
acquisition.
Phase 2: Proof of Concept
Company partnership
More often than not, big corporations only entrust themselves to be serviced by
reputable corporations. Having only 4 customers at that time, doesn’t help increase AD’s
credibility. One way to improve this is to give 1 reputable corporations AD’s services for
free or at least at cost. Based on all their previous customers’ experiences, AD has
helped improve sales. All they have to do is encourage a respectable company to take
on these services, so that other corporations will be interested to follow and take on AD’s
services as well.
Sales pitches
Once they’ve been able to establish a decent reputation with a partner company (as
stated above), they can now more on to a more personal approach. Since they now
have credibility, big companies should be more open to entertaining them. A personal
sales pitch could be more entising, which will hopefully encourage the companies to
avail of AD’s services.
Target Companies
Phase 3: Feedback and analytics
Revamp company profiles
Based on the post-service data gathered from their company partnership. AD should
make a statiscal improvement report detailed in their company profile in print, their pitch
decks, and on their website. Data is important in backing up their credibility as a firm.
Improve strategy
Based on their performance as a service firm and in their sales pitches, they should
adjust their existing strategy accoridngly to further boost sales and profit.
Summary of Marketing Plan Phases
YEAR 1
TIMETABLE GANTT CHART
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
Phase 1: Internal Adjustments
Modify pricing tiers
Change subscription model
Phase 2: Proof of concept
Company partnership
Sales pitches
Phase 3: Feedback and analytics
Revamp company profiles
Improve strategy
