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.
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