An overseas-based vendor of a Computer-Aided Engineering (CAE) software solution was struggling to gain market share in the US market, dominated by a well-established competitor with a very substantial market share and brand awareness.
The new entrant was virtually unknown in the North American market and lacked adequate sales and marketing staff in the US.
Griffioen Consulting was contracted to help the US-based distributor a marketing strategy and marketing plan.
A comprehensive review of the software and vendor’s strengths and weaknesses was carried out, combined with an analysis of opportunities and threats.
It became clear that the new entrant possessed superior technical capabilities based on new numerical algorithms for quickly solving complex engineering systems. This was a significant advantage of the established competitor.
The original pricing strategy placed the product at the same price point as the key competitor. For an unknown new entrant, despite the technical advantages, this presented a serious obstacle to rapid market penetration. Potential customers perceived the risk of adopting the new software as too high.
A new pricing strategy was proposed, switching from a high “paid-up” pricing model to a lower-cost subscription pricing model. The objective of this strategy was to promote trial and allow smaller manufacturers and engineering companies to start using the software without the financial risk and sticker shock. The price advantage was determined to a key factor in penetrating the market.
An analysis of Customer Lifetime Value showed significant long-run benefits to the new pricing structure.
Although the US sales representative was interested in introducing the new pricing strategy, the overseas-based corporate management did not fully understand the competitive challenges of the US market and the need for a more strategic “out-of-the-box” approach.
The new pricing structure was not implemented and the company continued to struggle with growing its market share in the US.
Last year, the software vendor signed on with a different engineering firm for distribution in the US.Back to Case Studies