What Market Should SparkPlace Go After?
In this case study, we are investigating Sparkplace, a provider of online marketing software. Currently, they are involved with two types of companies: smaller “Sams” and medium “Marys”. This multi-market approach is not ideal for long term growth, and the CEO, Dirk, is looking to specialize in one market. The company now needs to make the pivotal decision between Sams or Marys as their focus. Our group believes that the medium sized Marys are a better group to focus on, due to their longevity, brand recognition, scalability, and total revenue possibilities.
One advantage of targeting the Marys is that they are more reliable than the Sams. The Marys tend to stay with the company longer, and require less hand-holding than the Sams. Unlike the Sams who leave the company after the easy wins are achieved, the Marys are more committed and engaged with the software over time. The Marys also make better use of the software's features, which shows they see more of the long-term value. In the end, due to the Marys having a better retention and product usage, they provide SparkPlace with a more dependable and stable customer base.
SparkPlace also will have more potential to grow as a company with Marys. Since Marys are more reliable and sustainable, SparkPlace will be able to keep more of them on as clients in the long-run, thus giving them the opportunity to grow as a company. Even though there are only ~500,000 Marys to the 1,500,000 Sams, the Marys are still a better option due to their higher total revenue generation. If, hypothetically, SparkPoint could have every Mary as a client or every Sam as a client, SparkPoint would have roughly 10 billion dollars more in revenue with the Marys. While unrealistic, it will still prove to be true to some extent. The Marys also provide more growth opportunities due to brand recognition. Larger companies using Sparkplace’s software leads to more people being exposed to the software and it eventually will become an industry standard if it works well. SparkPoint has a much better chance to grow and become a larger company with the Marys.
SparkPlace is currently in a position where they need to make a decision on their future. In a currently tough economy at the writing of this case study, betting on the unknown is a much riskier endeavor than betting on the Marys who have been known to stick around longer than the smaller companies, can possibly generate more overall revenue, engage in the software more than the smaller companies. The Marys are a more dependable and stable customer base, making this an easy decision. SparkPlace should go after the medium Marys as opposed to focusing on smaller Sam’s or both at the same time.