Term Paper on "SAP's Internet Marketing Strategy"

Term Paper 10 pages (4815 words) Sources: 5 Style: MLA

[EXCERPT] . . . .

SAP's Internet Marketing Strategy

Evaluating SAP's Internet Marketing Strategy

SAP's ability to execute on and compete using their Internet-based market strategy as part of their global approach to defining integrating marketing strategies, defining go-to-market architectures that support core messaging and the definition of key target markets. SAP is very unique in their approach to defining entire architectures to support the multi-market focused based approach to planning, implementing and measuring the effectiveness of multi-channel campaigns over the Internet. The intent of this paper is to review SAP's use of go-to-market architectures to support their use of Internet marketing strategies, taking into account the facts of customer target segments, their acquisition strategies, and customer retention strategies. In addition, the use of these architectures includes customer service strategies, a highly developed approach to integrating Internet-based strategies with the overall marketing strategies. The technical architecture of how SAP is accomplishing this is also presented, along with an overview of their systems for content management. Finally the use of dashboards for measuring the performance of Internet strategies is discussed in addition to an overview of the social and regulatory issues the company faces in its global operations. Conclusions and analysis about the company's integrating marketing campaign are also provided.

Target customer segments

SAP's core business applications generated $30bn in worldwide revenue in 2004 and by 2010, an additional $40bn in Total Addressable Market gets created through organic growth of SAP NetWeaver, mid-market, industry vertical marketing and Small and Medium Businesses (SMB) programs is anticipated. The following graphic shows the growth projection of Total Addressable Market (TAM) as defined by SAP's senior management during the last Annual Shareholder's Meeting.

Figure 1: Global Available Market Sizing (SAP, AMR Research)

Source: SAP Annual Shareholder's Conference, 2006.

At the center of SAP's global growth is its coverage of key vertical markets. SAP's vertical market penetration is shown below, shows by vertical the total count of companies in the Global 500 overlaid by SAP's customer penetration by vertical.

Figure 2: SAP Penetration by Vertical Market Source: SAP Annual Shareholder's Conference, 2006.

SAP's approach to defining vertical markets is another segmentation criteria the company has consistently applied with success to their product strategies. Figure 3 shows how SAP's vertical market segmentation is used as the basis of their product differentiation strategies.

Figure 3: SAP's Vertical Market Segmentation Directly Drives Their Product Strategies

Source: Friedman, Billings, Ramsey (13)

Recognizing the recent growth of technology spending among SMB customers -- a 41% increase between 2001 and 2001 -- SAP sought to segment small- and medium-sized businesses according to their software needs to better serve this customer group.

SAP now divides SMB customers into two segments: "sophisticated," for the most technologically equipped, and "advanced," for those with less it sophistication. The following quotation illustrates the impetus behind SAP's segmentation strategy. 28

Based on SAP's segmentation initiative, the company launched a new program called "Smart Business Solutions," which addresses the distinct segments of SMB customers based on their degree of technological sophistication. SAP identified a need for product individualization and industry-specific functionality among the sophisticated customer segment, developing a product offering based on the company's flagship mySAP.com suite. The mySAP.com SMB product assists small- and medium-sized manufacturers that seek to extend and maximize their supply chains. For the advanced customer segment, the company recommends its BusinessOne product, a relatively less complex offering that assists with the core operations required to run a SMB, including accounting, customer and vendor management, purchasing, selling, reporting, and analysis. The BusinessOne software also offers analytical tools that can track events online and create customizable reports.

In 2002 -- one year after introducing its two-tiered segmentation strategy for small- and medium-sized businesses -- SAP representatives report strong global support for the initiative, citing increases in new customers obtained, geographic markets reached, and distribution partners utilized. Company representatives note that the momentum of the first year validates SAP's approach to the market. The following quote emphasizes the company's satisfaction with its segmentation effort. Today's growth continues with the development and refinement of SAP's approach to offering hosted and on-premise application solutions in the SMB arena.9

Customer Acquisition Strategies

SAP's approach to customer acquisition centers first on mining their existing customer base for follow-on sales of their products, in addition to extensive reliance on all forms of digital and electronic media. At the center of SAPs' customer acquisition strategies is a heavy reliance on their world-class base of referencable customers. Here are the key lessons learned from SAP in creating customer references as the basis of their acquisition strategy:

Approach references through multiple channels -- SAP relies heavily on approaching customers through multiple channels, including mailings, Web announcements, and sales representatives who are incented for bringing on references. Once accepted as a reference, participants receive a welcome call and a "fun box" filled with goodies like "bobble heads" and a fifties-style radio.

Maintain privacy of references -- SAP maintains the exclusivity and privacy of its community. To become a member, a potential reference has to apply and be accepted by moderators. Applicants have the option to remain anonymous. Furthermore, only customers and potential clients can access the community; extraneous SAP staff and sales representatives cannot participate in the program.

Ensure full disclosure of the reference program -- Once the customer agrees to participate, an SAP representative contacts the reference to explain the exact role and obligations of serving as a reference. From there, the reference and the representative examine availability and determine how the reference would like to interact with potential clients, such as via e-mail, telephone, or at trade shows.

Cultivate relationships with references -- Milam decided that the community needed to focus on one purpose -- to cultivate relationships with customer references -- thus narrowing and maximizing the efforts of the group.

Provide a rewards system -- SAP maintains a compelling rewards system based on a point accrual system. In addition, because many corporations have strict rules about employees receiving gifts from vendors, SAP carefully chose the incentives offered to references. For example, incentives include hats, T-shirts, free SAP technology training, free tickets to SAP conferences, and significant donations to charities. SAP utilizes a point system and awards incentives based on points accrued. Additionally, references who accrue a high level of points receive guest speaker invitations at lectures and conferences, thus acting as experts among their peers.

Make the Internet site enjoyable -- SAP strove to make the Customer Reference Internet site fun. The immediate result was a major jump in traffic and a very high level of adoption of the program by those companies wanting to be references.

Customer retention strategies

SAP administers customer satisfaction surveys in 17 languages and 32 countries. As such, the company employs the following two mechanisms to ensure consistent communication and internal support of this customer retention effort among all SAP employees worldwide:

Global Survey Advisory Counsel -- SAP invites selected high-level executives from every region and company organization to join the Counsel, which facilitates the survey process locally at offices worldwide. The company considers the Counsel akin to a "24-hour support hotline" for survey administration that can answer questions, provide education and support to account managers, and coordinate at a local level. The Counsel holds bi-weekly conference calls as the survey nears completion, which serve to identify and problems or necessary changes within the survey process.

Retention Communications campaign -- Through an internal Web site called Customer Advocacy, SAP posts frequently asked questions, tips, and news regarding the survey for internal constituencies. The site informs visitors of the survey process's start and completion dates, as well as information on changes from the previous survey. An internal newsletter delivered to sales managers also keeps employees updated on survey news.

Heavy Emphasis on Customer participation

Once SAP has compiled its target list, sales representatives briefly speak to customers to explain the importance of the survey and secure participation. Should the rep require additional assistance to answer questions, they may request support from the Global Advisory Counsel. Upon speaking to the rep, customers receive an e-mail invitation to participate, along with a user ID, password, and a link to a unique URL where they complete the survey online.

Customer service strategies

SAP is one of the few software companies that actively look to tie back their performance service to their customer service strategies. As SAP actively uses their own CRM applications, the company has often been quick to point out that the higher the level of integration between their internal systems, the greater the ROI possible from a synchronized customer service strategy. This is consistent with Columbus (1). Integration specifically is the foundation of SAP's core strength in customer service; they company strives to create a 360 degree view of their customers. Here are additional key points from Columbus 1, 3):

CRM plays a key differentiating role between the average and top performers in the enterprise software arena

Investments in CRM capabilities directly impact SAPs' bottom linesand may generate hundreds of millions of dollars in additional profits.… READ MORE

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