New business segment case scenario

Ivan fragte am 14. Aug 2019 - 2 Antworten

A Health consulting client is currently selling a third party software through his webpage. This client ask our software agency to develop a bespoke development to differentiate his company from the competitors. He also plans that after our company releases the requested development, he can sell the development as part of his current consulting services (as an included “communication tool”). We are analyzing if we should charge a one time fee every time our client sell his consulting services and a monthly/annual fee to provide hosting maintenance. ¿Do you think this is the best solution for our company?

(editiert)

2 Antworten

  • Upvotes
  • Datum aufsteigend
  • Datum absteigend
Beste Antwort
Lin bearbeitete seine Antwort am 15. Aug 2019

There are two important concerns other than the profitability analysis as suggested:

1) Does the service have a material cost attached?

For the communication tool development, if the tool needs to be customized for each sales of consulting service, a pay-per-sale pricing model is justified. If the tool is a general model and needs minimum tweaking after the initial R&D and implementation, it may be more sensible to have a bulk one-time initial charge or a subscription model in order to minimize the impact of potential sales fluctuations.

Similarly, for the maintenance service, if the cost of service is primarily attached to the sale of communication tool (i.e. maintenance service is only provided as part of the consulting service project), a pay-per-sale pricing model is more suitable. If the maintenance service is spread out such that it is carried out regularly during the year (e.g. once a month), a monthly/annual fee is more justified.

2) Shifting to subscription model in the long run

In the short term, pay-per-sale model is a flexible option that provides feedback on the client's business performance.

If the client consistently has a low sales number, it may not be profitable for the company to continue providing the communication tool service. Potentially, the company may consider ending this engagement, making a few adjustments to the communication tool and selling it to other interested third-party clients.

If the client has a steady sales number that generates reasonable profit for the company, the company can switch to a subscription model in the long run to secure consistent revenue streams and better capture customer lifetime value by maintaining customer relationships.

The pay-per-sale model is a 'testing ground' to probe into whether the engagement is potentially a profitable one. The conversion to subscription model can maximize the future revenue potential based on the testing results.

Hope this gives you another perspective of the case.

(editiert)

Ivan bearbeitete seine Antwort am 14. Aug 2019

Client = software developer

Problem statement:

  • A developer of individual software is asked to provide a communication tool for a specialised consultancy (health sector).
  • The client (software developer) wants to know how to price the new software solution: based on usage (per project), monthly fee -- pricing case.
  • No further objectives are known.

1) Firm:

  • Assumption: as we have no information on clieint's revenue (volume, trends), I suggest, the client is driven solely by business opportunity rather then by declining profits and operational issues.
  • There are no other restrictions known to provide this software (availability of talent, technical restrictions etc.)
  • What constitutes success? We assume the firms seeks revenue maximisation.

2) Industry:

  • I assume the market for consulting and technology services for the clients from the heath sector is thriving. We can clearly see the forthcoming digital transformation of hospitals, insurers etc. and this trend traslates into commercial success for the client.
  • However, higher demand might lead to more firms entering the market and competition becoming more fierce.

3) Product/Service:

  • A new communication tools shall be used by consultants during the project as means of communications with health care customers (hospitals, insurers, ...)
  • The software developer has two options:
    • Provide software as pay-per-use / per-project basis (option1)
    • As monthly subscription (option2)
  • Revenue formula for the option 1: number of projects x fee (annually)
  • Revenue formula for the option 2: subscription fee x 12 months
  • The comparison of these two calculations should be base for the recommendation.

4) Summary and final considerations:

  • The final recommendation should be dependent on the calculation performed in #3
  • Some points, as we have no factual information on the number of projects, calculated fee per project, calculated fee per month etc:
    • Fee per project should be higher, as projects are expected to come irregularly and the developer has to maintain software on its own and keep it operational
    • Monthly subsctiption fee should be subject to the length of the contract as it constitutes promised cash flows and gives certainty

Hope this helps

(editiert)

Verwandte BootCamp-Artikel

Cost-Benefit Analysis

Investments or single business cases need to be evaluated based on a certain set of criteria. Since financial performance is the key criterion in most cases you need to have an idea about future financial impacts. A key tool to asses this impact is the cost-benefit analysis which is used to determine the net effect of potential revenues and costs.

1 Q&A

Approaching a Case

In order to get into consulting, the case study is the most important element of the interview. Here, you can learn the specific skills and concepts to solve them.

1 Q&A

4C Framework

Get an overview over a company’s customers, competition, cost and capabilities by conducting a 4 C analysis in your case interviews

Market Entry

Market Entry Strategy Frameworks may be a great solution to apply in your Case Interview if your client is searching for growth alternatives.

Verwandte Cases

Bain Case: Asiatische Schmierstoffe

104,2 Tsd. mal gelöst
4.7 5 27503
| Bewertung: (4.7 / 5.0)

Der in seiner Heimatregion äußerst erfolgreiche asiatische Premiumhersteller von Schmierstoffen, LubricantsCo, möchte seinen Umsatz und Gewinn weiter steigern. Die Produktpalette erstreckt sich von Schmierstoffen im automobilen Umfeld (z. B. Motor- und Getriebeöl) bis zu Industrieanwendungen (z. B. ... Ganzen Case öffnen

Roland Berger Case: Licht an!

54,3 Tsd. mal gelöst
4.6 5 13765
| Bewertung: (4.6 / 5.0)

LumCO, ein Hersteller von Spritzgussteilen für Beleuchtungskörper, ist auf seinem europäischen Heimatmarkt mit großem Erfolg tätig. Das Unternehmen plant die Errichtung zweier Produktionsanlagen in China und den USA sowie den Aufbau eines eigenen Vertriebsnetzes in den beiden Ländern, das als zentra ... Ganzen Case öffnen

TKMC Case: Elevators

12,7 Tsd. mal gelöst
4.2 5 1150
| Bewertung: (4.2 / 5.0)

Ihr Kunde ist Marktführer im nordamerikanischen Aufzugsservicegeschäft. Dieses gliedert sich in die Bereiche Neuanlagenbau, Aufzugsmodernisierung und Service. Unser Kunde ist über ein Filialnetz besonders stark in mittleren Städten vertreten und möchte nun in Großstadtzentren sein Geschäft weiter a ... Ganzen Case öffnen

EY-Parthenon Case: Nachhaltiges Geschäftsmodell

1,1 Tsd. mal gelöst
4.4 5 32
| Bewertung: (4.4 / 5.0)

Der Geschäftsführer eines in Deutschland führenden Telekommunikationsanbieters denkt über einen Einstieg in den SVoD (Subscription-Video-on-Demand)-Markt nach. Bevor er jedoch viel Zeit in die detaillierte Marktanalyse steckt, möchte er erstmal das Geschäftsmodell von Onflix, dem derzeit internation ... Ganzen Case öffnen

Nutripremium

54,2 Tsd. mal gelöst
4.5 5 1677
| Bewertung: (4.5 / 5.0) |

Nutripremium ist ein sehr bekanntes Unternehmen für hochwertige Nahrungsergänzungsmittel in Europa (1 Milliarde Euro Umsatz letztes Jahr). Es stammt aus Spanien und hat nicht nur dort einen sehr hohen Marktanteil, sondern auch in Portugal, Frankreich, Italien und Deutschland. Nutripremium hat zwei ... Ganzen Case öffnen