Discuss about the AnswerDash Marketing Analysis.
AnswerDash Go-To-Market Approach
AnswerDash is a self service interface offering questions and answers to customers on website. The company has been in operation since 2012. The company aims to facilitate customer service for businesses by intelligently coming up with an analytic feature that predicts questions and answers. The following study will assess the go-to-market approach of AnswerDash in meeting it marketing objectives.
Customer Selection: The AnswerDash targets businesses involved in e-commerce. These business have many customers visiting their website to order for products or seek more information about the product. Answer Dash fulfills the need for corporate organizations to answer questions from customers regarding various aspects of the organization, products offered, prices, as well as services (Baron 2007). Therefore, AnswerDash provides its customers with an easy to use user interface where customers can interact with the organization directly but without having an individual personally attending to the questions of customers. The customer base of AnswerDash is therefore composed of corporate organizations and other non-profit making organizations that have a large customer base (Zimmerman & Ng n.d.). This organizations use AnswerDash to offer customers of these organizations customer services.
Pricing strategy of AnswerDash: The strategy of that AnswerDash uses to set its prices is based on a combination of various price setting mechanisms. The first consideration for the company is covering the cost of providing the services. The company has to identify the point at which it breaks even and then set a price that is able t generate profits for the organization. AnswerDash pricing is also done depending on the specific needs of the client. If a client is in need of a more sophisticated contextual Q&A services will be charged higher prices for this services (Fottler et al. 2012). The prices also depend on factors such as site traffic, complexity of content and the deployment channel. There is also the fixed rate option where the consumer agrees on usage and the price to be charged for the services.
Communication- communication and advertising for AnswerDash is mainly done through internet. The company publicizes itself through its website and other internet means to publicize itself. The company also participates in trade fairs, shows, and exhibitions to showcase the products and services offered by the company. AnswerDash has a sales department with many sales representatives who find clients on behalf of the company. The company engages various corporate organizations and enters into partnership with them to provide important customer care services. Communication by the company is also done through print and broadcast media (France 2013). This however is not on a large scales basis since the company is still growing and has little revenue to spend on advertising.
Sales effort: The sales efforts for AnswerDash are coordinated by the marketing department of the organization through sales representative who represent the company. The direct sales method of the company is very suitable in this service industry since there is need for personal engagement with the client.
Economic value created for E-Commerce user vs Saas
The economic value created by a customer by using a particular product is determined by the anticipated benefits associated by the product that is being consumed. The economic value to customer for a product is calculated by comparing the cost of the product or equipment and comparing the cost associated with the current product with the cost of the current commodity. In this case, the cost and benefit of using E-commerce is assessed against the cost of using Saas. The E-commerce business has expanded and become more reliable with the development of social media which has resulted to an evolution in customer service. Most businesses have shifted their sales to online platform and this has made it increasingly important for companies to offer E-commerce customer service. One of the advantages of E-commerce over Saas is that the E-commerce customer service is that it helps in shaping and controlling buying cycles and amplifying the voices of the consumers whereas SaaS only answers the queries of consumers concerning organizations products (Gillin & Schwartzman 2011). This therefore means that the customer E-commerce interacts with customers better than SaaS on a personal level basis and therefore customers and the organization create a better understanding between them.
Economic value for an E-Commerce client
Costs for company X without using E-Commerce
Customer service cost $10,000
Selling costs $15,000
Internet advertising cost $7,800
Cost for company X after using E-Commerce
Customer service cost $7,900
Selling cost $6,800
Internet advertising $5,900
Total cost $20,600
The economic value that E-Commerce offers to customer X is calculated by adding the cost before using E-Commerce and then subtracting the total from cost after using E-commerce. If the value is positive, it means that the system has positive economic value to the company. In this case, the economic value offered to company X is 32,800-20,600=$12,200
SaaS provides an organization with reduced time to benefit. This means that the online customer service under SaaS does not only provide customers with an opportunity to interact with the organization but also an opportunity to acquire goods and services. This is done by providing proper red directs and hierarchies of site that directs customers to the specific websites where they can obtain specific relevant information. The following is an example of how the economic value of a company applying SaaS can be calculated as follows:
Cost before application of SaaS
Customer service cost $14,400
Selling costs $12,000
Internet advertising cost $9,800
Cost after use of Application of SaaS
Customer service cost $9,400
Selling costs $8,800
Internet advertising cost $7,200
Cost savings benefits are the benefits derived from the use of AnswerDash are the advantages of using the service due to its ability to reduce costs for the organization. The cost benefit value of AnswerDash to its users is the amount of cost that the service is able to save as compared to when it was not being used for customer service.
Revenue lifting benefits are the benefits that accrue to an organization as a result of use of increase in revenue due to use of a technology that did not exist before. The revenues that are being accrued to the organization now is subtracted to the revenues that were being accrued previously by the business.
Calculating Customer LTV
Customer LTV is important for a company to be able to plan and increase its profits to desirable levels. The customer lifetime value is also important to overcome the overall e-commerce success. The following is the formula for calculating customer lifelong.
CLV= ((T×AOV) AGM) ALT
T=Average monthly transactions
AOV= Average order value
ALT=Average Customer Lifespan (in months)
AGM+ Average gross margin
The overall formula then appears like: CLV=GML(R/ (1+D-R)
R=monthly retention rate
D=monthly discount rate
By the end of the first year, AnswerDash had lost about 12,000 customers and gained approximately 9,000 new customers.
In order to earn back their original investment at the current retention rate, the company needs to earn the original investment of $2.54 million the company needs to approximately 250,000 paying customers.
The current conversion rate for the company is 65%. This therefore means for every 100 prospective clients approached, only 65 will become paying customers. With the current customer number standing at 100,000, it means that the company requires 150,000 more customers. So the company will require approaching 6,337,500 more clients in order to recoup the initial investment.
The three options available for AnswerDash include concentrating their focus on smaller corporate organizations with huge growth potential. The other option available to the company is minimizing the costs for the company so as to reduce prices for consumers. The third option for AnswerDash is the option of differentiating to develop new products and increase its product portfolio so as to increase its revenues and profit levels. the options available to AnswerDash are strategic options that the company can use to improve its market position and increase the number of customers to help the company break even.(Goodman 2009) The strategic options available to the company are in line with the goals and objectives of the company.
The advantage of focus strategy for AnswerDash
The focus strategy of AnswerDash will help the company to concentrate on serving the market needs of the small businesses which are not fully established. Concentrating on this market segment will help the company to have a huge number of potential clients and therefore it will be able to achieve its objectives (“The Investigation of Effect of Customer Orientation and Staff Service-Oriented on Quality of Service to Customer Satisfaction and Loyalty in Hyperstar Stores" 2016).
The strategy by the company will help the company since its capital and infrastructure is limited and therefore limiting its capacity to serve more sophisticated clients.
The strategy of focusing on the specific market segment will help the company to position itself in the market and create a recognizable brand for itself.
Disadvantages of the focus option
The focus option limits the customer base to customers belonging to only the chosen focus market segment. By limiting itself to the young and growing business organizations, AnswerDash will have limited its options to clients with low capacity and therefore the bigger customers will not be given the necessary attention.
Focus on the market segment of low capacity business organizations mean that bigger organizations will not have confidence in the ability of the company to offer them the services per their high expectations (Heaton 2012). This limits the growth potential of the company since both sets of customers are required to maximize growth.
The other disadvantage of this option is that focusing on one segment increases the risk for the organization. This is because, in case of failure in the segment, the operations of the whole company will be affected and this may lead to total collapse for the company.
Concentrating on the small business organization will cause the company to lose revenue. This is because, the big companies have more consumers, and therefore the company will have to pay more for the services provided.
Advantage of cost reduction option
By minimizing cost for AnswerDash, the company will be able to become more efficient and offer customers increased value for the services offered.
Cost minimization will result to price reduction and therefore more customers will join the company and this will in turn result to increased revenues and profits for the firm.
Cost leadership option will help the company to cement its position in the market and prevent competition from tech giants such as Google and Microsoft which are always seeking to differentiate and develop new products.
Disadvantages of cost reduction option
The reduction of cost will directly cut per unit selling price and this will in turn reduce the revenue for the company.
Decreasing price does not necessarily mean that the demand for the service will increase since price is not the only determinant of demand.
Advantages of differentiation option
Differentiation will increase the product portfolio for the company and therefore increase its income streams. This in turn increases profits for the company.
The differentiation of the products of the company will result to spreading of risk and therefore making the company more secure.
Disadvantages of differentiation
The option will increase the products of the company and it will be difficult to concentrate and market all the products. This therefore may lead to failure of the company.
Differentiation requires a lot of capital so as to invest in new product development and marketing. AnswerDash lacks enough capital and this is not suitable for this company.
AnswerDash will use the focus strategy to achieve its set objectives. The following is the marketing plan using the focus strategic option that AnswerDash will use to increase its customers and revenue:
This strategy will focus on small businesses with huge growth potential. The companies that will be the main target for this strategic plan include companies in the retail sector, technological start ups, food and beverages industry, hospitality industry as well as transportation sector. The strategy will focus on ensuring that these clients get the customer services that they deserve at a very low cost (Hidalgo 2015). The decision to focus on the small businesses and start ups is informed on the potential growth of these businesses together with the cost involved in serving this market.
Market positioning for AnswerDash
The company will position itself as the most efficient and reliable contextual question and answer service. The business will be seeking to offer business organizations a chance to interact with their customers using a user friendly interface. This will reduce the need for customer service agents in the organization who are mostly overburdened by customers by questions regarding products, services and the company itself. The market position of AnswerDash is that of offering small businesses and organizations a chance to reduce the cost and increase effectiveness in delivery of customer services (Rundle-Thiele & Russell-Bennett 2008)
The company will mainly rely on online communication to reach its prospective and existing customers. AnswerDash will advertise in its website together with other high traffic websites in order to gain publicity. The company will also rely on social media advertising through platforms such as Facebook and Twitter. The company will also rely on sales agents to approach prospective clients and sell the products and services to them.
Selling and pricing strategy
The company will use the direct sales method to reach its clients from different places. The company will use its sales agents who will sell on the behalf of the company and interact with the client to agree on prices and other relevant aspects of the deal (Sienkiewicz et al. 2016). The pricing strategy for AnswerDash will be a combination of various techniques. The main pricing method will be depending on the number of questions asked by clients and the second will be on complexity of the service being offered. The pricing will be such that consumers will be able to achieve their efficiency objective.
Marketing analysis is very important when designing strategies for an organization. This is because, analysis of the companies information and data helps to provide a marketer with all the necessary statistics that are needed to identify the strengths of the organization and the required to develop an effective strategy. This paper analyzes the economic value to customers of AnswerDash and also the Long life value of each consumer to the organization. From this analysis, a marketing plan is developed to help the company in achieving its marketing objectives and goals.
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