Analyzing Centra Software's Market and Sales Strategies

This case study analyzes Centra Software's market strategies, focusing on segmentation, sales force structure, and product distribution. The analysis examines the effectiveness of different market segmentation approaches, recommending a combination of behavioral and demographic segmentation to target specific customer groups. The study compares the performance of field sales and telesales, concluding that field sales are more effective for Centra's business model due to their ability to establish strong customer relationships and facilitate enterprise-level sales. The case further explores the pros and cons of different sales channel designs proposed by Reed and Lesser, ultimately recommending a field sales-focused structure to align with Centra's objective of disseminating its products within its target market. The study highlights the importance of adapting sales strategies to the specific needs of the target market and the product's lifecycle, emphasizing the need for strong customer relationships and efficient knowledge capture.

CENTRA SOFTWARE CASE
Case: Centra Software
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Question 1
Centra should segment its markets a way that helps it to reach out its target customers
appropriately. Market segmentation encompasses organizing the company’s customers or
business base along certain characteristics that enables it to meet the needs of their customers
appropriately. In this perspective, Centra should segment its market on the basis of behavioral
and demographic aspects.
Centra marketing strategy focuses on dominating the enterprise eLearning market. In
order to mature its new enterprise-wide software markets, the company should understand the
behavior and needs of various customer groups within its market. On this basis, behavioral
market segmentation strategy will be appropriate in helping Centra to attract a group of
relatively visionary customers who are most likely to show tolerance for product
imperfections. The strategy would help the company to use these visionary customers to
attract other less indulgent customers to support the market-leading vendor. The strategy will
be helpful to Centra in securing the benefits of dominant technology standard and promote a
robust product performance.
Demographic segment strategy is the other highly applicable technique that the Centra
can use to penetrate and dominate its market. Demographic segmentation entails identifying
non-character traits of target customers. Some of these common traits include age, gender,
income, level of education and profession. Centra has three main products, which are
eMeeting, conference, and symposium (Deighton, 2002). Each of these products appeals to
different classes of customers. Marketing these products require a prior knowledge of the
non-character traits of the target customers. For example, in an enterprise marketing, different
departments may require different products depending on the nature of their work. This
means that Centra marketing team have to identify these respective needs based on the
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different characteristics and offer products that would meet the specific needs of the
customers.
Centra has three products and each of them has its specific role. The first product is
the eMeeting, which allows firms to conduct virtual meetings for up to 100 participants. The
meeting can either target internal or external audiences. The second product is the conference
product, which offers interactive seminars and corporate briefings to up to 1,000 participants
in different places (Deighton, 2002). It relies on either intranet, extranet or the Internet to take
place. The third product, Symposium, provides a virtual classroom experience for interactive
team collaboration or hands-on training. It is highly applicable for about 250 participants. It is
majorly applicable in new-hire orientation and employee training for a product launch.
Average Deal ¿ ¿ Total Revenue Achieved
Number of closed−won opportunities
Average deal ¿ eMeeting= $ 201
28 =$ 7.18
Average deal ¿ Conference= $ 3450
48 =$ 71.88
Average deal ¿ Symposium= $ 14836
398 =$ 37.28
Question 2
Centra’s field sales force and telesales force have certain similarities and differences.
A close observance of the performance of these two marketing strategies in the United States
determines their comparative aspects. From exhibit 5, it is noticeable that field sales have up
to 25 employees within the fourth quarter of 2000 whereas telesales had only 2 employees
within the same quarter. During the same period, the quarterly salary and commission per
employee was $46,250 for field sales whereas it was $24,000 for telesales (Deighton, 2002).
The difference shows that the compensation for field sales employee is almost double that of
the telesales. Within that same period, field sales recorded a number of sales of up to 43
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while telesales recorded 36. The quarterly sales revenue recovered from field sales was $5.4
million whereas telesales realized $463,000. Based on these performance measures, it is
noticeable that Centra realize a significant value of sales revenue from field sales as
compared to that of telesales. The main component of performance measurement is revenue.
Therefore, Centra’s field sales provide more revenue to the company as compared to
telesales. This means field sales record a higher performance than telesales.
Centra should hire more field sales. Centra is focusing on defending their turf. In that
perspective, it needs more of dissemination sales as compared to penetration sales. Centra
focuses on selling its products to an entire corporation and not only for Centra products to run
in some of those corporations’ operating units. The primary goal of Centra is to make any of
its products, for example, eLearning to advance to top priorities in an enterprise. Based on
this basis of strategy, Centra should hire more field sales to follow up on interest from all the
29 divisions where the General Electric has accessed. Selling on an enterprise basis requires
field sales because they know when to pursue a dissemination opportunity and attract a new
account. Telesales do not offer this dissemination opportunity.
The decision to hire more field sales relies on a number of factors. These factors
include:
Target market: Centra concentrates on offering their services to divisional line
managers and human resources managers. Its target market constitutes global corporations,
mid-sized and small firms. For example, out of the 440 firms it served in 2000, about 200
were global 2000 corporations, 100 were mid-sized firms and 140 firms had annual sales of
below $200 million (Deighton, 2002). Individual divisions of large corporations constitute
the largest composition of Centra’s transactions in that year. Maintaining this target market
requires field sales.
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Value proposition: Centra is highly likely to realize a higher return on investment
when its sales force uses a business approach that attracts top managers. For Centra to have a
competitive edge, it has to accelerate its process of knowledge capture and use. The field
creates a lot of knowledge. Therefore, the choice of field sales would bring critical insights to
Centra’s headquarters, which are vital in developing new ideas and subsequently new
products.
Distribution channel: Centra requires a customer relationship management system to
reach its customers. It is also important in capturing and sharing customer contact
information. Field sales give each field sale representative an opportunity to manage his or
her own sales cycles and negotiate appropriately to close a deal. This makes field sales
appropriate way to reach out to customers, capture their contacts and share with the company.
Technology: The effectiveness of technology in the marketing of Centra’s products is
a component of consideration in the decision. Centra has its products as “product” and “ASP”
packages (Deighton, 2002). It means that once a customer buys a product package, it is
installed in a server of the company, which is able to monitor its operations and customer
experience. It provides a platform for the customer and Centra’s corporate network to interact
and provide necessary solutions. Based on this perspective, telesales looks like a repetition of
its technological advancements, which limits creativity. In that sense, field sales would play a
significant role of bringing new knowledge into the company for appropriate action to
develop new products. It is difficult to develop new products without the intervention of the
sales representatives on a face-to-face approach.
Question 3
Reed’s proposed target market and sales channel
Pros
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 Reed’s target market can capture the “business velocity” priority. Centra operations in
an industry with short product life cycles. Therefore, the ‘Rule of 5’ market
accelerates the process of knowledge capture and use within a short time.
 The sales channel can compress the time Centra takes to introduce new products to
the target customers. The channel takes a short time to familiarize the customers with
any new product.
 The sales channel gets products out of the market faster than its rivals as it shortens
the time to get them. Allowing a product stay in the market over a shorter period in
the software industry helps in establishing a competitive advantage over Centra’s
rivals.
Cons
 The target market limits the sales force. Centra’s products cover a wide range of
customers including line managers. Limiting the target customers to a certain group
will make it not to reach many customers.
 The cost of deploying a product is high. When the sales channel shortens the time for
distribution of products, it implies that overhead expenses and salary opportunity
costs will have to be high.
Lesser’s proposed target market and sales channel
Pros
 The sales channel improves dissemination rate. Field sales force serves as the closest
to the market opportunities and this makes it easy for them penetrate the market with
products.
 It promotes ownership at a corporation’s departmental level. Selling a product at the
enterprise level denies the troops at the departmental level a dissemination
opportunity. Lesser’s sales channel promotes trust among the sales force.
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 Lesser’s target market and sales channel contribute a high amount of total revenue.
For example, after carrying out 400 transactions, Centra realized total revenue of
$38,000,000.
Cons
 The target market involves many target customers, which may be difficult for Centra
to manage effectively. For instance, it involves divisional line managers and human
resources managers of various corporations.
 It involves small and numerous transactions. Most of these transactions range between
$30,000 and $150,000, which means Centra has to do several transactions to realize
its annual target.
 With Lesser’s sales channel, Centra has to hire many field sales representatives to
reach a greater part of its target market, that is, Europe and North America.
Challenges prevalent to Reed’s and Lesser’s Designs
Reed’s Designs
Disseminating the product idea from the top managers to departmental line managers.
Once the top managers accept the idea and embrace it for applicability in the company, it
may face resistance at the departmental. An appropriate approach for its collective use may
be difficult to devise.
Centra will have to reduce its workforce to apply telesales in its operations efficiently.
The challenge would be the criteria they will use to determine the appropriate workforce for
its new idea and its strategy to penetration the market amidst stiff competition.
Lesser’s Designs
The major challenge will be devising a balance strategy of maintaining performance
and high revenues and hiring more field sales. The dissemination of the products requires
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more field sales. This means that certain expenses will rise. A rise in expenses translates to
reduced revenue in most cases. Therefore, a balance is critical and this may difficult to
achieve.
Recommended product-market and sales force structure for Centra
Field sales is my recommended structure for Centra. The structure is appropriate for
the company since its primary objective is to disseminate its products into its already
identified target market. The structure is appropriate for establishing a close customer
relationship, which is a component that Centra needs to maintain a strong market share. It
offers a wide scope of customer base as compared to enterprise and telesales structures.
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Reference
Deighton, J. (2002). Centra Software. Harvard Business School, 1-17.
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