Salesforce’s mission is to empower companies to connect with their customers in a whole new way.
Marc Benioff was a Senior Vice President at Oracle. After returning from a sabbatical, he decided he wanted to start his own business. His goal was to launch a Customer Relationship Management (CRM) solution – one that did not sell packaged software (as was the norm), but instead stored customers’ data on central servers — allowing them to access it through the Internet.
Benioff called the new type of offering “software-as-a-service.” It would automate sales processes and connect salespeople, enabling them to track contacts, prospect conversations, and other relevant information online. This would eliminate the need to buy hardware and software, as well as to install, customize, and maintain software. Consequently, it would yield major cost savings.
Benioff founded his firm, Salesforce, in 1999. He hired Parker Harris, Frank Dominguez, and Dave Moellenhoff, software developers who had previously worked at consulting firm Left Coast Software. The team developed the solution and then attempted to obtain funding. However, investors insisted they supplement their offering with a CRM software package, believing it would draw more clients.
Benioff refused, wanting to stick with his hosted model. So he used $6 million of his own money and garnered $2 million from Oracle’s Larry Ellison to get things going. Salesforce.com launched in February 2000, targeting small businesses. It charged clients $50 per five users per month. It was a major success — within four months, its customer base reached 5,000.
The solution initially limited its service to the automation of sales processes, allowing users to click on tabs to go from their contact list to account information and sales leads. However, it eventually expanded by automating various customer service and marketing activities, becoming a full-fledged CRM tool and increasing its appeal to larger companies. In 2004, Salesforce went public.
Business model of Salesforce
Salesforce has a mass market business model, with no significant differentiation between customer segments. The company targets its offering at firms of all industries and sizes that have sales teams.
Salesforce offers five primary value propositions: innovation, convenience, performance, risk reduction, and brand/status.
The company embraced innovation from the very beginning, introducing the world’s first cloud CRM solution. Today, it introduces hundreds of new features to its clients three times a year.
The company offers convenience by simplifying operations for customers. Because it is a cloud solution, users do not have to spend time installing or maintaining servers, storage, networking equipment, security products, or other software/hardware. Furthermore, clients can integrate and configure its solutions with existing applications rapidly and seamlessly. Lastly, its solution runs on a single code base, enabling all customers to run programs on the latest release without disruption.
The company has demonstrated strong performance through tangible results. It claims to help customers gain an average revenue increase of 20% and an average ROI of 50% in a little over a year.
The company reduces risk by maintaining high standards. Its solution has a comprehensive security infrastructure that features intrusion detection systems, firewalls, and encryption for online transmissions, which are monitored and tested on a frequent basis. Its multi-tenant application architecture can scale securely, and maintains the separation and integrity of customer data. Lastly, the company’s website has a “Trust” section that provides security and system status updates.
The company has established a powerful brand due to its success. It produced the first cloud solution and has the #1 CRM platform in the world. It is the fastest-growing top 10 software firm, having reached $6 billion in annual revenue faster than any other enterprise software competitor. It is used by more than 150,000 businesses and oversaw 976 billion digital transactions (retrievals or updates in the Salesforce database) in 2016. Lastly, it has won many honors, including a ranking as one of the “World’s Most Innovative Companies“ by Forbes five years in a row and as one of the “World’s Most Admired Companies” in the software industry by Fortune four years in a row.
Salesforce’s main channel is its direct sales team, which includes field sales personnel and telephone sales employees. The company also sells its offerings through a network of systems integrators, independent software vendors, global consulting firms, and regional partners.
The company promotes its offering through its website, social media pages, search engine marketing and advertising, promotions such as free trials, and participation in trade shows and conferences.
Salesforce’s customer relationship is primarily of a personal assistance nature. The company assists customers in the following ways:
Support Services – The company offers three customer support plans:
- Standard – Includes online case submission with a response within two days
- Premier – Includes 24/7 toll-free phone and online support, as well as a one-hour initial response for critical issues
- Premier+ – Includes Premier plan features as well as configuration services by a certified team
Customers can supplement their service plans with plan “add-ons”, which include Accelerators, Marketing Cloud Services, Mission Critical Support, Strategic Projects, Advisory Services, and the Innovation and Transformation Center.
Training Services – The company offers instructor-led classes, private workshops, and custom training. It also provides certification services to enable clients to become certified as Administrators, App Builders, Developers, Implementation Experts, Marketers, Pardot Specialists, and Architects.
Despite this orientation, there is a self-service component. The company’s website has a “Help & Training“ section that features self-help resources such as guides, how-to videos, articles, and answers to frequently asked questions. There is also a community element in the form of a forum.
Salesforce’s business model entails maintaining a robust cloud platform for its customers.
Salesforce maintains partnerships with other firms that refer sales leads to the company and then assist in selling to the prospects. These firms include systems integrators, independent software vendors, global consulting firms, and regional partners. Salesforce pays the partners a fee based on first-year subscription revenues generated by the clients that they referred.
Salesforce also operates Salesforce Ventures, a program through which it invests in enterprise cloud companies in order to foster the creation of innovative new ideas. The initiative has invested in over 150 companies since 2009.
Salesforce’s main resource is its proprietary software platform, which serves over 150,000 clients. It depends on its technology employees to maintain and update the platform, its sales staff to promote it, its training staff to provide instruction, and its customer service staff to provide support.
Salesforce has a value-driven structure, aiming to provide a premium proposition through significant personal service and frequent product improvements.
Its biggest cost driver is sales/marketing, a fixed cost. Other major drivers are cost of revenues (a variable expense that includes cost of services and cost of subscriptions/support) and research/development, a fixed cost.
Salesforce has two revenue streams: revenues generated from sales of subscriptions/support plans and revenues generated from sales of professional services such as training.