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Salesforce.com Analytics Cloud
Marketing Plan for Emerging-Small-Medium
Businesses
Paul Gabriel
Brandon Gojenola
Philip Lam
Matt Levine
Elliot Mar
Objective:
Provide a strategic go-‐to-‐market plan for lower tier markets, with
recommendation on whether or not it is worth positioning a stripped down
version of Analytics Cloud to smaller companies.
Analytics Cloud, powered by Wave:
Up until now, Salesforce customers have been able to run reports on data in
Salesforce to understand some trends, but have not been able to cross
reference that data with other data they have in other systems, like ERP, or
other back-‐end systems. Analytics Cloud is a new service provided by
Salesforce that enables companies to use the data they have in Salesforce,
back end systems, and even product usage trends so that those companies can
make strategic decisions for the future using all this data together. The
pricing structure is currently as follows: 1 license of Wave to power the
platform, $495,000/year. Builder licenses (to create reports) -‐ $3000/year,
and Explorer licenses (for business users), $1500/year.
Analysis Overview:
Company and Climate: At Dreamforce ’14, Salesforce launched Analytics Cloud,
positioning the product for enterprise level companies. Given the cost-‐
prohibitive budgeting required to pay for this product by smaller companies,
we will explore whether or not there is a legitimate opportunity for
Salesforce to take the product down market after the initial launch, assuming
the product find success in at the enterprise level.
As there is already a team in place for this product, we are assuming that
rolling this out to a new market segment would require relatively few
additions to the existing Analytics Cloud team of product developers,
engineers, marketing, and management. We are going to outline the additional
required resources in this report.
Customer: As mentioned, typically, Salesforce customers have been looking for
a way to combine all of their data together to make more sense out of expected
market trends. This is the classic Big Data problem that has arisen with the
success of cloud computing.
Collaborators: The main collaborators here will be existing implementation
partners as well as other divisions in the company. Many of our implementation
partners serve as advisors to our customers and help them implement of our
products with best practices to help ensure success. These partners can be
educated on our new product at so that they are knowledgeable on new
opportunities with their clients. While these partners are used more in the
upper tier market segments, they are still used frequently as low as the SMB
market segment. In conjunction with how Salesforce markets all of its non-‐CRM
products, positioning our core sales teams to loop in Analytics Cloud will be
a commonly used internal “lead-‐pass” system that Salesforce already uses for
all products.
Competition: Our closest competition to Analytics Cloud (AC) would be Tableau,
as they target the same business need as AC does. While many of Tableau’s
capabilities mirror those of AC’s, Tableau does not cover some of the key
differentiators like predictive analytics, and of course lacks the thorough
integration with the world’s most commonly used CRM, Sales Cloud by
Salesforce.
Strategy and Implementation: With our recommendation to pursue the SMB-‐MM
business segments, we plan to utilize the existing team in place from the
launch of Analytics Cloud from a product, engineering, and management
perspective, all while adding minimal staff to handle the additional
responsibilities around marketing and sales for this segment and 2 additional
staff for the product as it will be positioned to this segment. The product
will also be stripped down from its original formatting to fit the needs of
smaller businesses.
The product: Many of the capabilities will need to be reduced with the lower
edition product, including reducing the max users of the platform down from
400 users to 20 users. As with the higher tier product, if they need more,
another Wave license would need to be purchased. Additionally, we recommend
limiting the number of outside applications that can be integrated for data
addition to 1 app and a product channel as well. Most of these smaller
companies won’t need as many channels for input anyway to other systems, and
this will be a good way to get them to upgrade to the higher tier should they
continue to grow. The price of the product will therefore drop to: Wave,
$50,000, Builder, $1,200, Explorer, $600.
The people: As with many other Salesforce products, we will include our sales
team in a co-‐prime model, where a core AE will be able to engage the
appropriate resource when they discover a potential opportunity. This is the
way Salesforce has had success with other products like Marketing Cloud,
Service Cloud, Desk.com and Data.com, and we fully expect this to continue to
work. This also allows us to add minimal staff as we have already hired and
staffed most of the other positions for AC earlier in the year for the
enterprise launch.
In order to justify our business initiative towards marketing a lightweight
and barebones version of the Salesforce Analytics Cloud software to ESMB-‐MM,
we first identified the total approximate potential opportunity for our
product launch. To begin, we leveraged data collected by the US Census’
Statistics of US Business. The Census data collected has been pooled together
annually from years 1988 – 2011. Given that we are in Q4 2014, we developed a
way to annualize changes in the segmented data by taking the average growth
rate broken down into the following market segments.
A) US Firms with less than 20 Employees
B) US Firms with 20-‐99 Employees
C) US Firms with 100-‐499 Employees
Our itemized market data begins goes from 2006 to 2011. We chose this time
frame to capture our economy prior to the economic downturn, the downturn
itself, and the slight recovery that followed. We argue taking the average
change in total US firms – segmented by total employees would give us a
growth rate in order to project US business data for years 2012, 2013 and
2014. (Itemization of each market segment is shown in Exhibit A.)
It is worth acknowledging that given the current macro-‐economic landscape, GDP
is still relatively low and our recovery from the most recent economic
downturn, we are still struggling to gain traction as a country. Even with
Unemployment hovering around 5.8%, the under-‐employed add significant
percentage points to the unemployment rate, bringing the US closer to 11.5%
percent. Because of this, we are comfortable using average negative growth
rates for our forward-‐looking data as outlined above (Exhibit B).
Salesforce’s launch of Analytics Cloud primarily targets firms of enterprise
scale (Exhibit C). We argue developing a barebones version of their latest
Analytics Cloud software, packaging it with their CRM, and targeting ESMB-‐MM
companies would add significant top-‐line revenue for the firm and its
shareholders. Additionally, we provide an entry point into the broader
Salesforce suite of services as the small-‐to-‐mid sized companies scale up over
time.
We have divided the potential market into the following two segments (Exhibit
D):
1. Those currently using Salesforce – without Analytics Cloud (44.5% of top 5
CRM Market)
2. Those not using Salesforce and not using Analytics cloud (55.5% of CRM
Market)
Based off our 2014 estimate for total US businesses, there are approximately
528,272 firms that currently employ people ranging from twenty to 500
employees. Not all of those firms are equal candidates worth targeting, as
the data includes small “mom and pop” type companies and other small
businesses such as convenient stores and skilled labor proprietorships that
would not need to use our software or could not afford it. Therefore, we
assumed net opportunities of 40% of the 528,272 companies are worthy
potential customers to either a) enhance their current Salesforce
relationship by selling them the Analytics Cloud software, or b) companies
not using any Salesforce software.
Per AMI-‐Partners CRM growth projections, the total market share opportunity
for 2014 is approximately $3.25bn. With respect to the 44.5% of CRM users
currently utilizing the Salesforce software, we assigned a 20% close ratio and
a 15% close ratio for those currently not using the Force platform. Given
these close ratios, we predict that over a five-‐year business development
initiative, we can collectively close approximately 18,806 firms and 17,591
firms in each respective market segment. The total opportunity is 36,398
firms. Given this estimate, we can project a total revenue opportunity as
follows: 36,398 potential firms * $15,380 Average Revenue per firm equates to
approximately $559.8MM. (Exhibit E,F)
The above average revenue projection on a per firm basis is a conservative
estimate. Our goal is to sell the CRM and Analytics Cloud Software for roughly
$51,800 per company for those already utilizing the Salesforce platform and
$53,300 per company to those not currently using the Salesforce platform. The
difference between the two is that the additional cost accounts for a $1,500
per year CRM fee on top of the $51,800 Analytics Cloud user fee. We calculated
a Customer Lifetime Value in Exhibit G.
The Task Force will be comprised of 8 Account Executives, 2 Analysts, 2 Sales
Engineers, and 2 Software Engineers. The total cost of running this unit will
cost $1,270,000 per year. Salesforce.com will also allocate .5% of their R&D
budget for this project, which translates to approximately $3mm over five
years (or $623k/yr. for five years). In addition to R&D, the company will also
budget .2% of their gross profits for marketing -‐ $6,205,150. The total costs
of adding this program is approximately $10.5mm (see Exhibit H).
Of the allocated .5% of 2014 gross revenue of $3.1bn, a maximum of 70% will be
used to acquire new customers currently not using Salesforce and the 30% will
be used to upsell existing Salesforce CRM clients with our new Analytics Cloud
tool. Total Marketing Campaign Costs for Existing Salesforce CRM clients and
new customers is $4,653,862 and $10,859,012 respectively. (Exhibit I)
Cost of Customer Acquisition is approximately $1,237 and $3,087 respectively.
This cost will remain the same from Years 1 through 5, assuming that our
program will be able to penetrate the target market at 20% per year. (Exhibit
J)
Our total projected revenue for the product launch over an estimated five-‐
year horizon is $1.9bn ($974mm for market 1, $937mm for market 2; see Exhibit
E)
Competitive Analysis
The biggest emerging player in the SMB Business Intelligence market is
Tableau. This company was founded in 2003 and recently went public in 2013.
Tableau is known for their rich user interface and design, the best looking
product in the industry. Though they have a solid looking product, when
taking into account the value of both their product and Tableau as a vendor,
we soon realize that beauty is only skin deep.
Referencing Exhibit K from the Analytics x Tableau Competitive Array, both
Tableau and Analytics Cloud offers great products and services. In the
Product Evaluation table, Features, Usability, Affordability, and
Architecture were taken into consideration. Tableau scored very high in
Usability but lacked in Affordability and Architecture. Analytics Cloud
exploits these weaknesses, as these categories are its strengths.
Salesforce.com is a multi-‐billion dollar company that has not only the
technological and financial resources, but is also the market leader of
Software as a Service (SaaS) in Sales, Marketing, Service, and Community
Industries. By being the provider of SaaS, it makes integrating their front-‐
end UI product, Analytics Cloud, seamless for customers already using
existing Salesforce SaaS services. This is a huge advantage for Analytics
Clouds for one of the main considerations in selecting a Business
Intelligence product is system compatibility, integration complexity, and
cost. Another valuable feature that Analytics Cloud offers is predictive
analytics, a highly sought after feature that can only be achieved through
scientific and technological competence (ref: Business Intelligence
Technologies Spectrum). The categories covered in the Vendor Evaluation are
Viability, Strategy, Reach, & Channel. Salesforce’s stronghold of the SaaS
industry explains their 9.1 score in the Vendor Evaluation segment. Tableau
as a vendor remains mainly as a front-‐end graphical user interface of data.
Analytics Cloud offers not only a solution for Business Intelligence, but is
built upon the largest SaaS platform in the world, Salesforce.
Risk Acknowledgements
Risk
The main risk involved with launching this product would be the costs
associated with the development, staffing, and marketing.
Product Development Costs
Since this is a simplified derivative of the full Analytics Cloud software,
the product development costs will be very little. We have estimated that the
total costs to run the operation is approximately $10.5mm (see exhibit H).
New Hires Associated With Product:
The most that the team would have is 14 people – Eight account executives
(Average Salary: $95,000), two sales engineers (Average Salary: $80,000), 2
analysts (Average Salary: $75,000), and two software engineers (Average
Salary: $100,000). The total cost of paying this team would be: $1,270,000
per year.
Marketing Expenditures
Since we are tapping into a new market, we estimate that we will spend
approximately $6.2mm million over the course of five years, until our product
becomes well known in the market that we are penetrating. It is presumable
and estimated that these costs will drop as the product gains traction.
Overall Estimated Risk
If this project were to fail, we will incur over $10.5mm in fixed costs. If
the project gets no traction after implementation and launch, the company
would eat almost all of the costs accounted for here. It may be a couple
years for this product to be profitable since we would increase advertising
at launch.
Risk Analysis
This is actually a very low amount of risk for a large company like
Salesforce.com to take. The product itself may not generate revenue in the
short term to cover the costs. If the product fails, the max loss with no
sales will be $10.5mm. Not only is this solution a product that can generate
cash flow by itself, it will also be an investment in other solutions by
acting as a gateway into our services and solutions; customers that are
experiencing growth could turn into larger wins. For a rapid growing company
like salesforce.com, the risk is not all that large.
Implications
1. Many of the costs associated with this product were already incurred
when the Analytics Cloud Software was created to target larger
companies. Outside of marketing expenses, all other incremental costs
on top those already spent on the parent software will be small. If we
can be successful in tapping the new market, our new version of
Analytics Cloud could help pad our bottom line effectively.
2. There is also a strong desire to get into this market because of growth
potential of the customers. If a customer begins to grow, we can use
the small to medium sized business software to segue them into our more
premium and more expensive offering. This is a win-‐win for our
customer and us because the only learning curve will be with the added
features. This will also be a gateway for our customers to purchase
other company offerings.
3. This could be an area for company growth. These smaller businesses and
companies could have a legitimate need for a simplified version of
another current product offering or a future product offering.
4. If the project does flop in the United States, we would not roll it out
in other countries. The US releases can be used to test the
effectiveness of our product.
Conclusion/Recommendation
In conclusion, we recommend the use of a stripped down version of Analytics
Cloud to penetrate the market for ESMB-‐MM companies. Adding AC to CRM
customers should be a primary goal. A secondary goal should be to capture all
other customers who could use CRM, perhaps by introducing them to the basic
version of AC, and using the basic version to hook customers into the variety
of products available from Salesforce. We believe the market size and
customer lifetime value justify the implementation of our proposed strategy
when compared to the cost of implementing and maintaining the team needed to
execute.
Appendix
Exhibit A: Itemization of Each Market Segment
Exhibit B: Percentage Change in Total Businesses YOY. SBA.gov
Exhibit C: SWOT Analysis
Exhibit D: Top Five CRM systems for 1-‐100 employees
Exhibit E: Market Overview
Projected # Firms -‐ Deal Closed Revenue Projections
Market (1) 18,806 $974,174,973.44 Market (2) 17,591 $937,623,865.89
36,398 $1,911,798,839.33
Exhibit F: Average Revenue Per Firm
Exhibit G: Customer Lifetime Value for Target Markets
Exhibit H: Costs of Running Operation
Cost of Running Program
Product Development
Number of
Employees Salary
Account Executives 8 $95,000.00 $760,000.00
Sales Engineers 2 $80,000.00 $160,000.00
Analyst 2 $75,000.00 $150,000.00
Software Engineer 2 $100,000.00 $200,000.00
Total Cost of Annual Salary
$1,270,000
Research & Development
Total R&D in 2014 $623,698,000
Percentage Allocated for SMB AC .5% $3,118,490
Total Cost of R&D (5 Yr. Period – Max
Contribution)
$3,118,490
Marketing
10% of Gross Profit ($3,102,575)
Gross Profit $3,102,575,000
Percentage allocated for SMB AC .2%
Total Cost of Marketing Campaigns (Max
Contribution)
$6,205,150
Estimated Initial Cost of SMB AC Program
$10,593,640
Exhibit I: Costs of Running Operation
Marketing Expenditures Breakdown
Total Dollars Allocated (.5% of 2014 Gross Profit) $15,512,875
Percentage allocated for Existing CRM Users (#1) of the 10% SMB AC Budget 30% $4,653,862
Percentage allocated for New CRM Users (#2) of the 10% SMB AC Budget 70% $10,859,012
Exhibit J: Cost of Customer Acquisition
5 Year Market Penetration Forecast *
Y1 Y2 Y3 Y4 Y5
(#1) Existing CRM Users +AC 3761 7522 11283 15044 18805
(CA#1), Change per Year (delta) 3761 3761 3761 3761 3761
(#2) New CRM Users + AC 3518 7036 10554 14072 17590
(CA#2) Change per Year (delta) 3518 3518 3518 3518 3518
CAC Existing Users (MCC#1/CA#1) $1,237 " " " "
CAC New Users (MCC#2/CA#2) $3,087 " " " " * 5 Year Projection: Assuming that we achieve 20% of our projected penetration
Exhibit K: Analytics Cloud vs. Tableau Competitive Array
Analytics Cloud Tableau
Product Evaluation Array Weighting Rating Weighted Rating Weighted
Features 0.3 9 2.7 8 2.4
Usability 0.3 8 2.4 10 3
Affordability 0.2 7 1.4 4 0.8
Architecture 0.2 9 1.8 6 1.2
33 8.3 28 7.4
Vendor Evaluation Array Weighting Rating Weighted Rating Weighted
Viability 0.3 10 3 7 2.1
Strategy 0.2 8 1.6 8 1.6
Reach 0.3 9 2.7 6 1.8
Channel 0.2 9 1.8 6 1.2
36 9.1 27 6.7
*Tableau ratings derived from Gartner’s 2014 Magic Quadrant for Business Intelligence and Analytics
Platforms report. See Exhibit L
Exhibit L: Business Intelligence Technologies Spectrum
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