Product Strategies of UK Leads - Case Study Example

Executive Summary A company called UK Leads was the of study and an appraisal of its founding and current status revealed that it was an entrepreneurial effort with the objective of developing and marketing a unique product for which a huge market exists. The methods adopted by the company to evolve the product and raise finances were discussed at length. The company stands at crossroad at this moment as it is showcasing its product before a distinguished industry audience and the outcome could be decisive for its survival. However the redeeming factor is that it has three committed buyers of great repute and it has been recommended that it should concentrate on succeeding with them first to establish its credentials. A firm’s competitive advantage is checked against the PESTEL analysis which reveals the external environmental pressures and Five Force Analysis that copes with the five forces of power and it has been found that UK Leads is well placed with competitive edge in the market. An explanation of the Elaborative Likelihood Model has been made to explain the attitude of buyers and to evolve persuasion policies for achieving the objectives of the company. The company is facing its toughest test for efficacy in the market and needs to pass the litmus test in a demonstration of its product to a distinguished gathering of industry representative that can make or mar its future. However it has been recommended that it should make a more serious attempt to conclude its deals with the three committed buyers and make successful implementations to establish its credentials in the market. 1 Introduction UK Leads is a software Development Company set up in 1998 to cater to a market for Lead development and Tracking Enterprise software for large companies. There is a genuine requirement in the market for a solution that can collect generated leads and convert the same into usable data. This can then be used for converting potential clients into customers with data management tools and these leads need to be tracked till either conversion or discard takes place. They have developed a Marketing Automation Software called e-LeadsTM which can optimize the lead flows across the enterprise. At this point in time the company is preparing for a live demonstration of this software package to an informed audience of potential customers and industry analysts at a forum organized by PC World. This is the first time people across the industry will be getting a hands-on demo, which can make or break the company’s future, and the presentation team, headed by the CEO and VP Marketing are understandably nervous and edgy. 2 Company Profile 2.1 The Vision The company came into being in 1998 and the software was envisioned by its CEO Arnold Smith with a vision to develop a product he believes will revolutionize the industry. Large companies having huge turnovers of consumer durable products like computer hardware and peripherals and medical equipment and service providers like consulting firms generate numerous leads. The vision was to provide a solution that will Capture the lead Sources: Web, E-Mail, Call Centres Qualify the leads Evolve A Business Engine For This Functionality Assign the leads Design Workflow as per Business Rules And Logic Prioritize the leads Set Up Sales Force Automation (SFA) Distribution of leads Allocate Amongst The Sales Force By Demography/Geography Track the leads Using SFA Tools Like Seibel/Onyx, E-Mail & Contact Manager 2.2 The Team Arnold built up a core team comprising of Nancy Bertrand (Vice President of Engineering), Peter Froth (Product Manager), John Mendez (Director of Engineering), Charles Downing (Lead Architect) and David Beyer (Principal Engineer). He made them all stakeholders by making them Founding Members to ensure the success of the business. 2.3 The Funding The venture capitalists liked Arnold’s idea and suggested that he should invite Nancy to join his team. They knew Nancy when she was part of the team of AMCORP which they had earlier funded in a satisfactorily concluded venture. Nancy was available as AMCORP was taken over by a rival and Nancy was not entirely happy with the new set of owners. The Venture Capitalist felt that with Nancy around their comfort level on technical issues will be greater hence their suggestion. Greg understood the compulsion and approached Nancy with position and stake in the company. Nancy too saw an opportunity to use her skills and liked the project. When Nancy agreed, the venture capitalists immediately granted a total of $ 11.25 million towards funding the business venture. The first tranche of 5.25 million was released on May 1, 1998 by Barclay Capital, Prism Venture Partners and Cheshire Partners. 2.4 The Development Methodology Before the actual development vast amounts of information was collected from a large number of potential clients from across the industry spectrum. The idea was to collect and assimilate all kinds of requirements which would form the backbone of the development process. This methodology involved the use of a LP Tool for analysing the information collected through conducting in-depth interviews of the actual users. This effort resulted in finding the gaps in understanding the needs and the wish-list of would-be customers. Beyond this a Team work environment was prepared and a Uniform Qualitative Language was framed which helped in structuring of the data. The architecture was thus designed and then codified by programmers under supervision of the Director of Engineering and Integrated as a whole product. 2.5 The Product Concept UK Leads developed the concept under which the first step would be to collect the leads from various sources. It would then sort and segment the leads according to geography and other parameters and distribute them to the sales force for follow up and conversion of potentials into firm commitments. During, before and after lead generation these leads are to be tracked for effectiveness and later analysis. A data bank is to be organized and maintained for verification and follow ups for CRM and customer service issues and finally costs are to be determined on basis of conversions as against total leads followed. 2.6 The Value Proposition The intention was to make a value proposition to the prospective customers that would cover end to end needs from Installation to Integration and Implementation. The targeted audience were the Vice Presidents of Sales and Marketing of large corporations having turnover of over £ One Billion and who generated at least 100 leads a week. It was estimated and projected that use of the e-LeadsTM solution would result in about 4% increase in lead conversions which in a billion dollar sales environment figures out to £ 40 million. This figure was attractive enough to catch their attention. Another value proposition was the flexible pricing. While it was proposed to price the solution in the range of £ 100,000 to £ 500,000, depending on the turnover of the customer, it was also proposed to offer the solution on monthly rent of £ 10,000 to £ 50,000 to those who were still hesitant. This was indeed an innovative way of gaining a foothold in the market. It also displayed confidence by UK Leads in their product. 2.7 Current Alternatives – Competition In the market competition to UK Leads comes from three main sources. In-house developments by the clients, Response Management services that work manually to gather leads and SFA developed for tracking only without lead management. Besides there are host of others like data mining software. However since none of them offers data integration, and are piecemeal efforts there is no likelihood of serious competition. The also lack enterprise wide spread and this too is a plus point in favour of e-LeadsTM. 2.8 Commitments UK Leads t is preparing itself for and industry presentation with 3 committed customers in hand. They are Tech Data Corporation, Compaq and Anderson Consulting Company. All of them are willing to try the solution and have been known as patronizing new comers. Each has also designated a pilot group to seriously work with the solution. These commitments are an indication of the acceptability of UK Leads solution and the principle formulae behind it. 2.9 The Presentation at PC World With this background the presentation at the PC World forum is a huge opportunity that must be handled very carefully. It will be the stepping stone into the real world from the theoretical world they had been living in for the last 9 months. It will showcase the product in live environment and prove its viability to those present. The challenge lies in the capability of demonstrating to the industry stalwarts that there is a workable and practical solution that will offer them a potential marketing tool to enhance their sales. When convinced, these decision makers will set an industry trend that Marketsoft will hope to encash in the coming months and years. 3 Entrepreneurship Entrepreneurs are bold individuals hence they are known for their innovative and pioneering efforts especially in new technologies. This is the result of their experience and the more experience they have the more confident they are and they rely heavily on their informal contacts and network (Cooper et al1995). Indeed they are known to possess “high order thinking” (Lei et al, 1996; Krabuanrat & Phelps, 1998) and this enables them to respond creatively to opportunities ((Tversky & Kahneman, 1974). As such they are known to set the rules of the game as pioneers (Van Maanen, 1979) and take important decisions. They are able to carry their group with their enthusiasm and they share this with them in the organization culture that they develop with their values, visions and goals (Schein, 2004). Arnold, the CEO and entrepreneur, has similar qualities, but then external factors affect the business and UK Leads has to take cognizance of the PESTEL factors as they will impact their business too. Mintzberg (1973), states that organizations have to be adaptive in their strategy to overcome or make use of these external factors. A firm has to be competitive in the marketplace and the PESTEL analysis helps to establish its competitiveness. 4 PESTEL A PESTEL Analysis measures the market potential and situation. These are external factors beyond the control of the Management. They are Political, Economical, Socio-Cultural, Technological, Ecological and Legal factors. A PESTEL analysis of UK Leads revels the following. POLITICAL factors cover legislation, regulations of capital and labour transfers and the stability of the political system. Fortunately the current environment is business friendly and with political stability and sound capital oriented principles there is nothing that can restrict the company’s progress except its own policy. Adoption of sound strategies will be useful to take advantage of the current environment. ECONOMICAL factors indicators are about business cycles and unemployment. With the current economic indicators business generally is developing along predicted lines and Marketsoft should take full advantage of this situation. Industry in general is looking for solutions to aid its progress nationally and internationally. SOCIO- CULTURAL factors show that the population is fairly educated and customer behaviour looks towards technological innovations and offers with interest and desire as it offers further avenues for both personal and corporate development. This augurs well for technology companies who are held in high esteem for their knowledge base. TECHNOLOGICAL factors are about life cycles phases of the product and the research and development efforts. The products developed by UK Leads have fortunately been funded by venture capitalists and their confidence in the company shows the market is in favour of technology firms. The life cycle of the products is quite long and it will take long time to mature. This offers new opportunities to Marketsoft to continue their development for other products well in time when replacements will be required. ECOLOGICAL factors relate to environmental issues and being a technology company in the knowledge sector, these do not effect UK Leads. LEGAL factors mean the judicial and legal system and are useful in contracts and agreements. With a good legal system backed by quick dispensation of justice, companies are assured of fair dealings between themselves and quick decisions when needed. These also act as deterrents for those who wish to take advantage of nascent firms. The overall PESTEL looks favourable for UK Leads and it can make sound strategies in these conditions to attain the competitive advantage needed to face competition. 5 Five Force Analysis Another important method of finding the competitiveness is by using the Five Force Analysis devised by Porter M.E. (1985), often called the Porter’s five force analysis. This will help the management to devise appropriate marketing strategy to take care of vital issues. Porter divides the competitive environment into five forces of ‘powers’, these are Power of buyers, Power of suppliers, Threat of new entrants, Threat of substitutes, Intensity of rivalry between existing firms. (Porter, M. E.1985) A The Power of Buyers Four different reasons influence a buyers’ decision. They are also known as 4Ps as explained by McCarthy (1964). This needs careful study to understand customer behaviour. 1 Product. The buyer is greatly influence if the product or service is perceived as useful for him. Marketsoft has developed a product that is perceived to be imnnovative as well as useful. This is corroborated by the fact that they have three committed well established buyers. This is indeed very encouraging. 2 Price. The price is not usually a stand-alone factor. It has to be comparable with other products or services but with weight given to factors like quality and after sale service. There is a play on the mind of the buyer that middle ground is best for him. He also considers price in context of the privileges attached to it. The prices offered by Marketsoft appear to be competitive as the payback period is not very long. Also the alternative of rent is attractive as it avoids the initial heavy outlay by customers. 3 Promotion. Image plays a very important role. Whether it is the image of the product which enhances value or status or the image of the buyer when he acquires a product, both factors are extremely important for the buyer in arriving at a purchase decision. Here too Marketsoft scores well as the platform where the product is being showcased is very prestigious and the industry values the outcomes. 4. Place or Time of offer. It is of great value to the buyer if a product is offered to him at a place and time that suits him. The importance of this can be gauged from the fact that often a deal is concluded at the most awkward time and place just because of the whim and fancy of the customer. The timing of e-Leads TM could not be better as the industry is hungry for such a product. Marketing has become so competitive that companies are looking for ways and means to increase their reach and this product is just what is needed for the purpose. B The Power of Suppliers When there a few suppliers of components or services, they offer better terms and service to the company but when they are few, they normally offer goods and services as per their own priorities. The external factor that affects quality of service depends largely on the cooperation and coordination of various suppliers. The power of the suppliers cannot be ignored. This factor does not really concern UK Leads as their product is entirely developed in house and does not need suppliers to support or maintain it. Theirs is a service industry that generates its own standards and products. C Threat of New Entrants The Evolutionary Cycle of Competitive Behaviour advocates that change takes place only when one of the competitors come out with an innovation and others follow it and improve upon it until it becomes an industry standard, at which time the cycle ends. The two ends of the cycle are Innovation and Efficiency. Then, with the introduction of another innovation, the cycle recommences. The performance of all players is evaluated vis-à-vis the efficiencies they are able to achieve. This theory evolved by Strebel (1966) suggests that evolution is a continuous process; no product can expect to be acceptable to customers in its present form and functionality to be for all time to come. Unless some competitor comes out with a better version of the product or offers an alternative that will serve the same purpose, UK Leads are on safe ground, subject of course to te acceptability of their product in the first place. D Threat of Substitutes At any point in time there is always a possibility that, inspired by the popularity and acceptability of a product, a substitute is offered that will replace it due to its better features or innovative idea (J. Schumpeter 1934). There is a delicate difference between innovation and invention although one leads to the other. Innovation is the first happening or germination of an idea for a new product or a process while the first attempt to make it or practice it is what invention is all about. Innovation is therefore creation of a new value and invention is the creation of a new product or service that offers this value to the customer. Sometimes additions to existing products are also called innovations as they enhance the value or are value creators and generate revenues. But a better way of describing an innovation is the discontinuation of an old value and replacing it with new value. As a consequence discontinuation becomes a source of an innovation. Again UK Leads appear to be safe at the moment on this point. E Intensity of Rivalry Finally the competition never gives up and is always finding newer and better ways and mean to make inroads into the market share of an existing product. This is an ongoing struggle and has to be met head on with innovative practices. A few of the marketing strategies in this direction are Product Strategies, Brand Management, Publicity and Promotional Strategies. The best possible situation to deal with this will be for UK Leads to implement the first three sites of the committed customers. Their satisfaction will spread the good word in the market and will be a deterrent for threats from rivals. 6 Attitudes All Buyers have an opinion about a product or service formed out of experience, and information. These are perceived over a period of time. Companies attempt, through their marketing strategies, to garner this opinion in favour of their product or brand. However the customers have usually built an attitude towards the company and its products. The strategy is to persuade the buyers to purchase this product or service. Extensive use is made of the Elaborate Likelihood Model and this theory provides the most efficient way to persuade the targeted segment for producing an attitude change. The company needs to communicate the message in the most effective way for the audience to respond. There are basically two ways of forcing changes in attitudes. These are the two routes to persuasion. One is the Central Route and the other is the Peripheral Route. Petty and Cacioppo (1981) have defined Central route to be one that looks at attitude that has developed as a result of issue related arguments. This means that this attitude is well thought out and has encompassed all possible views on the subject. Usually this attitude is also rather rigid and not changeable as it has already considered alternatives. Elaboration or explanations tend to impact attitude changes. In such cases careful evaluation of the content of the message is made through the central route to test the strength of the arguments and attempts are made to change the mind-set of the customer. If successful, the result is strong change in the attitude. On the other hand the Peripheral route is subject to change based on either positive or negative attitudes. When the views have not become unyielding or rigid they are likely to be either for or against. However these are triggered by some event or phrase/word or activity that sets off this attitude. Here the message is less important but the attack is on motivation and emotions of the buyer. If successful, the result is a change in attitude but since it is a play on sentiments, it is comparatively weak. The central route fabricates a major positive attitude change, while the peripheral route uses six different signals or cues to draw a quick response with a slight shift in attitude. Both routes involve message elaboration. The central route is used to examine ideas, wrap up their merit and consider possible consequences. The peripheral route is used to offer a quick accept or reject judgment without going into the depth of the matter. These cues relate to reciprocation, consistency, social proof, liking, authority and scarcity. These six cues automatically lead a person to the peripheral route. By character ELM is a scientific theory that portrays people as reactors to a motivation. It provides a platform for making a desired reaction or assists in making attitude change possible.  Indeed it is a fairly accurate model of how attitude changes are achieved and it also shows the difficulty in producing a major or long-term attitude change. The theory clearly and simply explains both routes of persuasion and the ideal circumstances for each. But despite being scientific in approach it is not possible to verify it through the traditional falsification test of true and false. Petty and Cacioppo (1981) conducted studies to arrive at the above conclusions. The study revealed that when perceptions are fixed or rigid, reactions of customers are predictive. People will react in an identical way in a comparable situation. When perception is flexible or unclear then people look for cues or indicative signs to take a positive or a negative attitude. Central and peripheral progressions are a continuous occurrence but there is relative variance in the impact of these processes from time to time. The Elaboration Likelihood Model (ELM) serves the purpose of conveying an explanation of information to test the probability of the likely change in attitudes through the message. The level of motivation these can generate, and the ability of the buyer, will have a bearing on the outcome. It is therefore imperative for UK Leads to take the peripheral way of persuasion during the demonstration. Forcing the issue might not work and a gentler persuasion using the six options of reciprocation, consistency, social proof, liking, authority and scarcity should be used judiciously to nudge the participants to react positively towards their product. The use of the three committed buyers will be a big factor in convincing others to try the product. 7 Conclusion The UK Leads team has worked diligently and with proper procedure and methodology and has carefully crafted the solution that should work effectively in the industry. Each of the steps described in the study brings about confidence that the whole process was professionally executed and will bring in desired results. The PESTEL and Five Forces factors show the company has the competitive edge. The time has come to prove their resilience during the demonstration. Arnold, as leader and entrepreneur, will do well to lead the team from front and to satisfy the curiosity of his future and potential clients and handle their questions with poise and calm. The real challenge that faces the team is the acceptability. ( Interview Appendix 1) The bigger challenge that faces UK Leads is stabilizing the company. Too much rests on the success of their product. However with three potential customers in hand they should not press too much during the demonstration and take the result in their stride. The real test will be in implementing the three sites. All their concentration should be on making this a success story. After that their business will automatically achieve maturity. 8 Bibliography Cooper, A.C., Folta, T.B. & Woo, C., (1995). Entrepreneurial information search, Journal of Business Venturing, 10: 107-120. Krabuanrat, K. & Phelps, R., (1998). Heuristic and rationality in strategic decision making: An exploratory study, Journal of Business Research, 41: 83-93. Lei, D., Hitt, M.A. & Bettis, R., (1996). Dynamic core competences through meta-learning and strategic context, Journal of Management, 22 (4): 549-569 McCarthy, E.J. (1964), Basic Marketing, Richard D. Irwin Homewood, IL. Mintzberg, H. (1973). Strategy-making in three modes, California Management Review, Winter: 44-53. Petty, R.E., and Cacioppo, J.T., (1981) The American psychologist 36 (5), pp. 441-456 Porter, M.E. (1985) "Competitive Advantage", The Free Press, New York, 1985. Schein, E. (2004). Organizational Culture and Leadership, San Francisco: Jossey-Bass Tversky, A. & Kahneman, D., (1974). Judgement under uncertainty: heuristics and biases, Science, 185, 1124-1131. Van Maanen, J. (1979). The fact of fiction in organization ethnography, Administrative Science Quarterly, 24: 539-550. Appendix 1 Interview with Arnold Smith, CEO and Founding Member of UK Leads. Q. You are the spirit behind UK Leads. What was your motivation? A. I have been working as a marketing man for the last 15 years with various MNC’s dealing with a variety of consumer and industrial products. I found that the most difficult part was to find leads for now prospects. It was also difficult to track these leads and record why they most of them failed to generate business. I kept thinking and looking for a solution, but could find none until I stumbled on a generic solution by a small time company that had developed a product but lacked the depth that I was looking for. This motivated me to firm my own company and offer a product which I perceive will have great demand., Q. You could have joined hands with that small company or even join a larger firm which would have assisted you with resources, then why your own venture which is risky? A. Of course that was the easy way out but there were two impediments. First it would take lot of convincing on methods and routes and the hierarchical system in a large company delays and affects decisions. I know this from experience in working with such companies. Secondly the smaller firm would be facing the same issues that I face now and I would have been saddled with partners that I did not choose. Finally I frankly wanted to be on my own and use the experience that I have gathered with my own team with whom I could share my ideas. Q. What do you foresee in the long term future for your company? A. I am very hopeful that the time is rip and the idea presented in e Leads TM is both novel as well as exciting enough to generate a lot of interest. The whole strategy now hinges on marketing the product, pricing it right and implementing it successfully within short periods. I am very confident of success and see a bright future for the company. Fortunately I have a dedicated team and I rely heavily on them to rise to the occasion deliver the goods. I have made them all Founding Members so that they too can share the confidence and returns in due course. Read More