Target the Right Market

A software company debates its strategic focus

by Jill Avery and Thomas Steenburgh
SparkPlace
A two year old provider of online marketing software.
Software lets customers manage and measure the
effectiveness of their marketing approach.
Software available for a monthly fee Software available for a monthly fee
Limited resources
Focused on growth
Marketing Dilemma
Sams Marys
Size < 20 employees 20-100 employees
Potential market size 1.3 million <.5 million
Av. Costs/Customer $1,000 $5,000
ROI on each $ spent in
marketing
$5 $2
marketing
Sale effort Low High
Average Profits in a life
time
$10K/Sam $50K/Marry
Avg. Customer life cycle 3 months Long term
Churn rate High Low
Argument made by Josh Head of Marketing
Argument made by Jane Sales Director
Sams
Pros Cons
1.3 million potential
customers
$1 Marketing = $5 profit
Lower customer retention
Profits are only $10k
$1 Marketing = $5 profit
Less complex software needs
Less competition from other
marketing firms
Sales cost are $1000
Marys
Pros Cons
Longer customer retention
$50k profit for each
More invested in product;
Less than million potential
customers
$1 Marketing = $2 profit
More invested in product;
easier to upsell
$1 Marketing = $2 profit
More complex software needs
More competition in the
space
Sales costs are $5,000
Target Both Markets
Pros Cons
Greater potential market
Greater overall profit
potential
Spreading resources thin
More intense marketing
needs potential needs
More intense development
needs
WHICH MARKET WOULD YOU TARGET!