Replace Case Summary
This memo includes the final recommendation from our consulting group related to the dilemma that the company is facing: targeting the right market. Our final recommendation is to follow a strategy focused in medium businesses.
SparkPlace has been working with two market targets: small businesses (Sams) and medium businesses (Marys). Sams have less sales costs and more potential customers (1,000,000). Marys, in contrast, have more sales costs and less potential customers (500,000). Sams stay for a shorter amount of time, while Marys stay longer. The Sams produce a higher return of investment, $5 of profit per each marketing dollar spent. The Marys produce $2 of profit per each marketing dollar spent. Marys are more profitable than Sams, over their lifetime as customers, on average, each Mary generates $50 of profits, Sams generates only $10 of profits. …show more content…
The company needs to select a specific strategy.
Combining both strategies could lead to a failure in both markets. The marketing strategy for SparkPlace will be very different depending on which group we are going to target. In addition, the selected strategy will affect a whole host of decisions over the coming months like: what features to add to the software, what adjacent products they might offer, how to price all the services and so
on.
SparkPlace should focus on Marys because they stay in the long term using the software, they are highly profitable, they are willing to pay a high monthly rate and they use all the features of the software. Therefore, the Marys will create a long term solid base of profitable customers that will lead to an economic growth in SparkPlace.
Even though the Sams have low sales costs and their market is twice as the size of the Marys market, the Sams do not represent a profitable source for growth because most of them are not using the software after three months.
Having a focus on the Marys will increase the market shate in the Marys market and that will increase profits in the company. For the future, creating a software or modifying the current software making the Sams stay for a long term represents an opportunity for the company.
SparkPlace has been working with two market targets: small businesses (Sams) and medium businesses (Marys). Sams have less sales costs and more potential customers (1,000,000). Marys, in contrast, have more sales costs and less potential customers (500,000). Sams stay for a shorter amount of time, while Marys stay longer. The Sams produce a higher return of investment, $5 of profit per each marketing dollar spent. The Marys produce $2 of profit per each marketing dollar spent. Marys are more profitable than Sams, over their lifetime as customers, on average, each Mary generates $50 of profits, Sams generates only $10 of profits. …show more content…
The company needs to select a specific strategy.
Combining both strategies could lead to a failure in both markets. The marketing strategy for SparkPlace will be very different depending on which group we are going to target. In addition, the selected strategy will affect a whole host of decisions over the coming months like: what features to add to the software, what adjacent products they might offer, how to price all the services and so
on.
SparkPlace should focus on Marys because they stay in the long term using the software, they are highly profitable, they are willing to pay a high monthly rate and they use all the features of the software. Therefore, the Marys will create a long term solid base of profitable customers that will lead to an economic growth in SparkPlace.
Even though the Sams have low sales costs and their market is twice as the size of the Marys market, the Sams do not represent a profitable source for growth because most of them are not using the software after three months.
Having a focus on the Marys will increase the market shate in the Marys market and that will increase profits in the company. For the future, creating a software or modifying the current software making the Sams stay for a long term represents an opportunity for the company.