Siebel Case Study:Pricing Strategies in Software Tania T. Goldszmidt
VP, WW Operations, Sales
Siebel Systems, Inc.
October 18, 2004
High Tech: Software License Pricing Drivers
Multi-tier Multi-tier Order Order
ManagementManagement
Key Solution Components
• Intelligent Product Recommendations
• Complex Pricing and Configuration
• Entitlement Verification and Tracking
• Collaborative Order Management
• Streamlined Quote to Contract Process
• Simplified Self-service Purchasing
Pricing primarily has to be: Scalable Flexible Enforceable
Pricing then has to: Reflect Value (Communications, perspectives, end to
end solutions)
Incorporate feedback from Analysis
Include services bundling
Reflect software industry trends: Driving recurring revenue streams: subscription,
maintenance
Utility based: How many times system is accessed or used vs number of users
Serve different segments: Enterprise & Small and Medium Businesses
On Premise License & On Demand Subscriptions
Support Services & Custom Solutions Development
Pricing Governance: People, Process, and Technology
People
Process
Technology
= Optimal Pricing & Ease of doing business
Methods& Practices
A Customer-Centric Pricing Process
CustomerCustomer
Price Price ExecutionExecution
Price Price EnforcementEnforcement
Price Price PlanningPlanning
Price Price AdministrationAdministration
Determine prices based on customers’ sensitivity to prices from win/loss history and discount analysis
Introduce new products and price lists, and update and maintain pricing data.
Deploy price and discount information to support price negotiations and transactions in a cost effective manner.
Enforce contractual pricing policies, discount authorities through approval processing and routing Design compensation for pricing incentives and discount penalties
Phase 1: Focusing on Execution and Administration
Objective: Develop base infrastructure to drive operational efficiencies
Redesign and Deploy New Lead-Quote-Order Management System
Develop Analytics Datamart
Create a predictable fulfillment model
Help build, validate & deploy best in class product configurations
Create low touch, highly integrated applications that increase employee productivity rates
Ensure effective communication & handoffs between different business units involved in creation and management of price lists, deal approvals and orders
New Integrated Order Management Infrastructure
Product & Catalog Product & Catalog ManagementManagement
Product Selection
Product Configuration
Define Offerings
Deploy Catalogs
Order Lifecycle ManagementOrder Lifecycle Management
Quotes
OrdersCustomer Assets
Contracts
PricingPricingManagementManagement
Price Administration
Price Planning
Price Execution
Price Enforcement
Customer InformationCustomer Information
Account Opportunity Contact
Mobile
Call Center
Web
Partners
Retail POS
Pricing Analytics
Customer Surveys
Industry Analysis
Contract Systems
Billing Systems
Results:
Operational Efficiencies Lower order costs by reducing quote and order errors by 35%
Reduce order cycle time up to 37%
Reduce customer inquiries & collections by 50-80%
Created a consistent repeatable set of business processes
Deployed a low touch, fully integrated set of applications
Increased accuracy & completeness of order data by 90%
Improved visibility into customer asset base & deployments.
Identification of up-sell & cross sell opportunities
Increase orders processed per employee by 15%
Manage order process with 47% less staff
Phase 2: Focus on Pricing Enforcement and Analysis
Objective: Design Organizational Structures and Pricing Metrics
Drive Top Management attention to pricing and discounting
Increase visibility across deals, customers, products, markets
Develop feedback mechanisms for better pricing planning
Align incentives to drive improved pricing performance
Facilitate negotiation process and improve customer relations
Pricing Enforcement Challenges
3. Wide Variability in Discounting• Large Discounts on Small Deals• Wide Discount range on similar sized deals
0
10
20
30
40
50
60
70
80
100 1,000 10,000 100,000 1,000,000
D
isco
unt
from
list
in %
Deal size in Dollars
New Deal Approval Process
Siebel Siebel Pricing Pricing
CommitteeCommittee
Sales Sales PresidentPresident
Any Pricing + Special Business Terms on All Any Pricing + Special Business Terms on All Deals to be sent to Sales-Deal ApprovalsDeals to be sent to Sales-Deal Approvals
Siebel Siebel FinanceFinance
Siebel Global Siebel Global Services ServicesLegalLegal
CEO
The Siebel Pricing The Siebel Pricing Committee will Committee will
request CEO Approvalrequest CEO Approval
Siebel Siebel Technical Technical ServicesServices
Products/ Products/ EngineeringEngineering
Sales OperationsSales Operations
- - Review validated quotes Review validated quotes
- Review business terms- Review business terms- Review discount approval authorityReview discount approval authority- Review existing contract termsReview existing contract terms- Review potential revenue recognition issuesReview potential revenue recognition issues
DiscountDiscountand otherand otherTermsTerms
BusinessBusinessTermsTerms
RevenueRevenueRecognitionRecognitionRevenueRevenueRecognitionRecognition
MaintenanceMaintenanceTermsTerms
ServicesServicesTermsTerms
Product andProduct andDevelopmentDevelopmentCommitmentsCommitments
ContractContractTermsTerms
Sales Team
VPVP
RMRM
DMDM
If no additional approvals are required, Sales-If no additional approvals are required, Sales-Deal Approvals will approve the transactionDeal Approvals will approve the transaction
Alignment across Business Units
Recommended Pricing Envelopes
Discount
Deal Size
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%$0 $100K $500K $1.0M $2.5M $5.0M $10M $15M
• Opty #1•Opty #2
• Opty #3
• Opty #4
• Opty #5• • Opty #8Opty #6
• Opty #7
• Opty #9•Opty #10
• Opty #11• Opty #12Consistent Pricing Practices
• Provides discount guidelines by Industry, deal size, region
• Based on historical transactions analysis
• Aligned with Sales Compensation
•Discount Ranges
•Comp Plan Matrix
• Revised Quarterly
• Effectively used to set customer expectations
Results:
Continuous drive toward more consistent discounting practices Deal Size vs Overall Discount for Q1'03 - Q3'04
10
100
1,000
10,000
100,000
1,000,000
10,000,000
100,000,000
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Discount
Net
Dea
l Siz
e
Case Study: Packaging and Pricing for the SMB market
Have Infrastructure
Have Discipline
Have Analytics
….discovered deep discounts and customer satisfaction issues in Mid Market offering
Phase 3: Address Value Proposition in Key Segments
Need to understand and address different customer segments
Need to understand customer key buying factors and provide appropriate deployment and pricing options
Need to understand value and rethink how to package your products
Do not forget about the complete solution: service bundles
Understanding the Customer’s key buying factors
Feedback from MME Customer Interviews--10/03-6/04 “Siebel is too expensive for SMBs”
MME was 2X cost competitors Siebel often tried to sell SMBs enterprise product at 4X cost of competitors SMBs pay enterprise prices for maintenance
“Siebel does not understand SMB needs” MME strategy of “less functionality for smaller customers” was patronizing Siebel offered no vertical solutions for the SMB Siebel assumed SMB sales cycle was simpler an attempted to close business over
phone
“Siebel makes SMBs “compete” with enterprises for attention” No separate service and support channel No separate sales org
“Siebel is too complex” SMB customers reported spending 4X-6X more on Siebel implementations than on
competitors1
Product bundles forced customers to buy more CRM than they needed
1TCO for MSB CRM Software, Gartner, Feb ‘04
Customer Sat Survey Supports Interview Findings
Scalability of Product .5
TAM Effectiveness .7
End User Education .7
Sales Org Effectiveness .8
Technical Training Effectiveness .8
Reseller and End User Education .8
Software Reliability 1.2
Consulting Services Effectiveness 1.3
Ease of Doing Business 1.3
Ease of System Administration 1.3
Ongoing Tech Support Effectiveness 1.4
Product Effectiveness 1.7
Functionality Meets Your Business Needs 1.7
Ease of Integration With Other Vendors 1.8
Ease of Using Product on Day-To-Day Basis 1.8
Speed of Product 1.8
Documentation 1.8
Ease of Product Configuration 1.9
Product Meets expectations 2.0
Ease of Product Installation 2.0
Price Of Product At Time of Install 3.3
Q1 ’04 MME Customer Satisfaction Scores
Gap between “Product Effectiveness” and “Product Meets Expectations” reflect disatisfaction with “striped down product’ strategy
Customers frequently expressed concern regarding price of software and installation
Many SMB customers underestimated complexity of install and attempted without an SI
MME Customers Want More Value
Analyze Competitors Offering and Capabilities
SiebelSiebel ProfessionalProfessional
SalesLogix
MSCRM
Onyx
Pivotal
SF.com
Fie
ld S
ales
Insi
de S
ales
Par
tne
r M
anag
eme
nt
E-C
omm
erc
e
Cus
tom
er S
ervi
ce
Fie
ld S
ervi
ce
Dat
a C
lean
sin
g
CR
M A
naly
tics
Con
tent
Mgm
t.
Cam
pai
gn M
gm
t.
Good enough functionality
Light Features or features delivered through partnerships
Has yet to demonstrate functionality
Source: A Feature Comparison of CRM Suites for MSBS, Wendy Close, Gartner, August 8, 2004
Siebel Delivers CRM for Everyone
CRM for any type of userCRM for any type of user
CRM for any size OrganizationCRM for any size Organization
CRM for any industryCRM for any industry
CRM any way users preferCRM any way users prefer
Enabling companies to deliver seamless and superior customer experiences by extending CRM to everyone in their organizations and partner ecosystems
Hosted CRM
On premise CRM
Hybrid Hosted/On Premise
Enterprises
SMBs
Workgroups
27 Industry Solutions
1000’s of business processes
Universal Application Network
Power User
Casual Users
Mobile Users
Key Insights from Analysis
Depth in Focused AreasDepth in Focused Areas
Sophisticated requirements
SMB deployment is narrower in scope than enterprise
Usability drives ROI
Trusted AdviceTrusted Advice
Local presence
Domain Expertise
Track record for Success
Thin margins
Limited cash supply
Limited Room For ErrorLimited Room For Error
5 M SMBs have diverse needs
Solutions must grow with business
Diversity Requires FlexibilityDiversity Requires Flexibility
CRM Professional Edition—Exactly What SMBs Need
Enabling companies to deliver seamless and superior customer experiences by extending CRM to small and medium sized businesses and partner ecosystems
Expanded ProductExpanded Product
35 new or enhanced modules
Horizontal, FINS, CME, Life Sci. and Consumer Goods products
80% improvement in task completion
Flexible PackagingFlexible Packaging
Create customer bundles
Purchase additional modules a la carte as needs evolve
Premiere PartnershipsPremiere Partnerships
Leading SMB resellers in U.S.
12 Point Certification Process
CRM Domain Expertise
Horizontal-$995/user
Vertical-$1095/user
$54K Implementation
Pre-negotiated financing rates
Affordable PricingAffordable Pricing
Flexible Packaging Allows SMBs to Create Custom CRM Bundles
Option 5Option 5Customer Choice
Option 6Option 6Customer Choice
Option 3Option 3Customer Choice
Option 4Option 4Customer Choice
Option 1Option 1Customer Choice
Option 2Option 2Customer Choice
Base ApplicationBase Application
Build the Application You Need Start with a Sales, Service, Marketing or
Call Center base Choose 6-8 additional modules at no
extra cost
Solution Grows with Business Purchase additional functionality a la
carte Select from over 50 modules
Affordable Pricing Options Address SMB Purchasing Preferences
Single payment at time of purchase
Maintenance and support purchased separately$995 per user$995 per user
$54K implementation
Up to 200 users
6 week implementation
Fixed Fee Fixed Fee ImplementationImplementation
Access to Siebel’s pre-negotiated rates
Loan durations range from 24-36 months
Convenience of dealing with a single vendor
Partnerships with premiere financing companies
FinancingFinancing
$100K Software and Implementation for 50 users
Software Cost
50 users 100 users
Fixed Price Implementation
$50,000
$54,000
Total Cost
Cost Per User
$104,000
$2,100
$100,000
$54,000
$154,000
$1,540
$54K Fixed Priced Implementation Up to 200 Users Sales, Service, Call Center Vanilla configuration with some
allowance for customization
Deployed in 6 Weeks Project Charter and requirements
definition Design and configuration Data Migration Testing User and Administration setup
Cost Scenarios
Siebel 7.7 CRM Professional Edition Delivers Unique Value That No Competitor Can Match
Deep product functionality and usability drives adoption and reduces costs associated with customization
Packaging that offers flexibility and expandability to simplify deployment and adoption and to grow with the business
Competitive pricing with no hidden costs
A partner network with the deepest CRM domain expertise to ensure customers get what they want, when they need it, for the price they can pay
The solution that addresses evolving business needs through migration to Enterprise and deployment in a hybrid hosted environment
Siebel Case Study: Tania T. GoldszmidtVP, WW Operations, Sales
Siebel Systems, Inc.
October 18, 2004