Executive Summary With the increasing need for enterprises to efficiently manage their employees, talent

management market has been rapidly expanding in these years. The development of computer

technology has also changed the way of managing people. Nowadays almost all evaluations are

done on cloud based software (Saas platforms), which offers great convenience and efficiency for

enterprises to input, edit and review evaluation data over time. However, the convenience and

efficiency do not come cheap. Talent management suites developed by large professional

companies such as SuccessFactors (by SAP) and Oracle Taleo (by Oracle) cost a lot as a result of

brand effect and some other functions.

However, from the aspect of cost, Moxie’s Re:View can be quite outstanding. Moxie’s low

development cost derives from its strategic focus on only core functionalities: evaluation and

review. That focus allows Moxie to achieve cost goals without having to compromise on quality.

Low development cost can be easily translated into low price for customers, which would help

Moxie gain great advantage in competition. Also, the simplicity of Re:View also indicates less

installing and training cost on clients’ end. Therefore, it is highly advisable for Moxie to enter

talent management market with its cost advantage as well as its accumulated knowledge and

experience in information technology over the decade.

This report focuses on both qualitative and quantitative business model of Re:View, including

SWOT analysis, pricing strategy, demand overview, cost structure, profit linear model and some

further suggestions for the product. A dynamic Excel spreadsheet is also created to simulate a 12-

month sales cycle based on the financial model established in this report. Information provided in

this report would help Moxie’s management arrive at a reasonable decision in terms of pricing and

distributing Re:View through its product lifecycle.

Contents

I. SWOT Analysis ............................................................................................. 1

II. Product Development ................................................................................. 1

Minimum Viable Product (MVP) Functions .................................................................... 1

Suggested Changes for Pivoting .................................................................................... 2

III. Price ........................................................................................................... 2

3.1 Overall Pricing Strategy ........................................................................................... 2

1. Price Skimming ................................................................................................................... 2

2. Price Penetration ............................................................................................................... 2

3.2 Available Price Offerings ......................................................................................... 3

1. Pay-per-user ....................................................................................................................... 3

2. Pay-per-employee .............................................................................................................. 3

3. Pay-Per-Appraisal ............................................................................................................... 3

3.3. Product Types ........................................................................................................ 3

1. Free Trial ............................................................................................................................. 3

2. Monthly/ Annual Subscription (Basic)............................................................................... 4

3. Business Subscription (Premium, Main Income Source) ................................................. 4

IV. Demands ................................................................................................... 4

V. Cost Structure ............................................................................................. 5

5.1 Development cost ................................................................................................... 5

5.2 Maintenance cost ................................................................................................... 5

5.3 Promotion cost ....................................................................................................... 6

VI. Conclusions ................................................................................................ 6

VII. Quantitative Modeling .............................................................................. 6

7.1. Estimate Customer Ratings .................................................................................... 6

Discussions ............................................................................................................................. 7

Limitations .............................................................................................................................. 7

7.2. Estimate Profits ..................................................................................................... 7

Scenario 1. Two Versions for SMBs and Large Businesses................................................... 8

Scenario 2. One Single Version for All Users ........................................................................ 8

Discussions ............................................................................................................................. 9

Limitations ............................................................................................................................ 10

VIII. Reference .............................................................................................. 12

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I. SWOT Analysis

Strength Weakness

Easy to learn and use

Multi-platform support

Low development cost means low price for

customers --- highly competitive

More intuitive UI than competing software

New to the market, no reputation

accumulated in this field for quickly

acquiring new customers.

The dev team may have less knowledge in

providing maintenance and support

compared to competitors.

Opportunities Threats

Talent management market is growing

rapidly

Propagation of Saas platforms

Modern SEO, SEM, SMM allows for more

efficient product promotions

Competing products are with more

functions, which may outweigh Re:View’s

simplicity.

Competitors are mainly companies

specializing in software developing, they

may easily gain advantages when

competing with us.

II. Product Development

This section is written from the perspective of Lean process in order to eliminate resource waste

and maximize investment efficiency in Re:View’s development phase.

Minimum Viable Product (MVP) Functions

It is crucial for Moxie’s management and development team to have a clear understanding of

what Re:View should be like. Although Re:View, as any other products, will be continuously

updated and improved over time, we should always be aware of what functions are indispensable

for the MVP.

MVP functions are highly focused on Re:View’s core customer values as follows.

1. Clean and intuitive user interface (Pay attention to usage of plain texts), clear navigation

2. Easy to register for and use

3. Integrations with other software (Does not require many integrations for MVP)

4. Evaluation data history review and some other related statistics

5. Reasonable and affordable price for customers

6. Responsive design

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7. Help/ Technical Support

Suggested Changes for Pivoting

Besides what we have known about what functions the MVP should have, we should also

explore new possibilities by encouraging pivot (Ries, 2011) and boldly testing any hypothesis we

have about the product. From that Lean’s point of view, the following changes/experiments are

suggested. We can either apply the changes now or hold these changes until we have acquired

clear feedbacks from our customers.

Use a more objective evaluation method by calculating final performance ratings based on

both manager's and colleagues' ratings, but with different weights. This can be a test about

whether managers believe more of his or her own judgement or they prefer to listen to

others’ judgements as references.

Offer different product types to target different customers (Differentiated targeting). For

SMBs managing performance is relatively easy while it becomes difficult for large

businesses. Therefore, large businesses with more complex human resource hierarchy may

be willing to pay more for this innovative way of managing performance of its team

members. Different product types are strongly suggested by McLean & Company

according to its research in 2014.

UI themes and layout A/B testing. This is less related to core customer value but may still

significantly affect customers’ ratings on the product.

III. Price

3.1 Overall Pricing Strategy

Two overall pricing strategies are available for selection. Our final choice depends on how we

want to acquire market share.

1. Price Skimming

Set price higher than competition and lower price over time. In this way it will allow us to

quickly recoup investment before we are forced to lower price due to increasing competition.

Lowering price over time can also serve as a way to attract price-sensitive markets.

2. Price Penetration

Set low price when entering the market. This method helps increase brand awareness quickly

but is slower in generating profits.

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3.2 Available Price Offerings

According to the research, three pricing methods are typically used for performance evaluation

platform. The price can be based on either number of users (monthly), number of employees

(monthly) or the total number of evaluations (one-time).

1. Pay-per-user

User is defined as any employee that is registered on the software, inactive employees are not

counted.

Price Range: $3-$10/user/month, with setup fees in the $800-$1,500 range.

Performance software with this pricing model includes: ManagetoWin, TriNet Perform,

Trakstar, Appraisd.

2. Pay-per-employee

Fee is based on employee whether they are registered in the system or not. This is usually

compensated for by lowered per-unit pricing but these solutions may still have one-time setup fees

or extra costs for support and training. Higher employee numbers typically result in a lower cost-

per-employee.

Price Range: $1.50-$5/employee/month, implementation fees can range from $800-$2,000 one

time.

Performance software with this pricing model: Reviewsnap, WorkForceGrowth.

3. Pay-Per-Appraisal

Less popular. paying one-time for individual or packs of employee evaluations. Rarely are

there setup fees with this model.

Price Range: $15-$40/appraisal.

Performance software with this pricing model: 20 Dollar Eval, Primalogik 360.

3.3. Product Types

To target more potential clients with different attributes, we can also diversify our product

offerings. It is commonly seen that Saas platforms often provide three types of products: free trial,

individual/SMB subscription and business subscription. Therefore, we can also follow the trend

and offer three product selections.

1. Free Trial

Alternative 1

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30-day trial of any version and then ask for further service subscription otherwise the service

will be terminated.

Alternative 2

Permanent trial of a limited version. E.g. limited integration, member number, frequency of

evaluation and info presentation methods.

2. Monthly/ Annual Subscription (Basic)

For small teams and SMBs. Fee is based on total number of people on the team. The maximum

number of people allowed for this version can be 10. However, not all functions will be provided

in this version.

3. Business Subscription (Premium, Main Income Source)

This version is designed for large customers and provides full functionality. Fee depends on

attributes of each client (the most important attribute would still be size).

IV. Demands

The market for corporate talent management software continues to expand. Research shows

that this market grew by 17% in 2013 and is now over $5 billion in size (Bersin, 2014). There is

no doubt that companies have now realized the importance of “talent optimization”. Also, it has

been reported that the global talent management market is expected to grow from $5,270.3 million

in 2014 to $11,367.0 million by 2019, at a Compound Annual Growth Rate (CAGR) of 16.6%.

The TMS software market is expected to grow from $3,618.9 million in 2014 to $7,222.6 million

by 2019, at a CAGR of 14.8% during the forecast period. The Talent management services market

is expected to grow from $1652.0 million in 2014 to $4,144.4 million by 2019, at a CAGR of 20.2%

during the forecast period.

Current market trend requires third-party software to be highly integratable to other productivity

software. Besides integratability, modern and easy to use are also important characteristics of

corporate solutions that buyers are looking for (Bersin, 2014).

According to the research, advanced reporting and analytics functionality that allows the

integration of data points from separate modules has become a point of differentiation for some

vendors. However, only organizations with sophisticated reporting needs will be drawn to this

functionality; basic functionality should be able to serve the needs of a majority of organizations

(McLean & Company, 2014). Therefore, this conclusion indicates that it is necessary for Moxie to

offer different products types to SMBs and large businesses.

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When evaluating talent management suite, clients usually evaluate different products and

vendors from several aspects. In terms of product, clients mostly consider features, usability,

affordability and architecture; in terms of vendor, they usually evaluate viability, strategy, reach

and channel (McLean & Company, 2014). The weight of each attributes is shown in the pie chart

in the picture below.

V. Cost Structure

Our final offering price should be determined by both theoretical pricing strategies and the

actual costs associated with the product. Below are three types of the most significant costs that

will be incurred in Re:View’s product lifecycle.

5.1 Development cost

Investment in Re:View’s development phase. Includes study costs, employee’s salaries,

development tool licenses, equipment, etc. It is estimated that the initial development cost is

between 25k to 30k.

5.2 Maintenance cost

Investment in Re:View’s post-launch phase. Includes costs incurred when we maintain

background mechanisms and provide customer support to clients. This part of cost is typically

maintenance tool licenses, various management tools licenses, employee salaries, etc. The estimate

of maintenance cost is $7,500 per month.

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5.3 Promotion cost

We may also launch various marketing campaigns to increase public exposure of Re:View.

Costs that will incur would include but not limited to SEO, SEM, SMM and generic advertising

costs. This part of cost will be determined after Moxie’s rebranding is completed and we have

selected certain marketing tools to deploy.

VI. Conclusions

Given Moxie’s cost advantage and its abundant experience and knowledge accumulation in

information technology, it is viable for Moxie to launch Re:View in talent management market.

Excellent product performance is also highly expected.

In terms of product, it is suggested that Moxie develop different product types for SMBs and

larger business because of their different demands. Basic version for SMBs can be less expensive

but with limited function; Premium version for larger business would cost more but provides full

functionality. This strategy would allow Moxie to target different market segments and eliminate

consumer surplus as much as possible. However, a 30-day free trial of each version is suggested

for prospects to better understand the products.

In terms of price, pay-per-employee can be a better choice. Because this would get more people

involved in the evaluation, which means more revenue for Moxie. This method can also bring

client enterprises benefits by encouraging them to conduct more holistic evaluation that includes

more of its employees each time. Based on the costs, we can probably set the basic price at around

$2/employee/month. Additionally, it is worth mentioning that price skimming and price

penetration strategy can also greatly affect Re:View’s price. If Moxie is to acquire customers as

fast as possible, it should price it low regardless of the development cost; if Moxie is to recoup

investment before competition intensifies, it should price Re:View higher regardless of its cost

advantage.

As for promotions, Moxie should first make full use of its social websites, which have been

quite idle for a long time. Also, SEO and SEM should also be carefully designed and tweaked over

time to achieve the best product performance while also ensuring the most economical investment.

VII. Quantitative Modeling

7.1. Estimate Customer Ratings

Besides advertising and other SEO or SEM efforts, word of mouth can also significantly affect

Re:View’s sales. Word of mouth is actually a form of customers’ ratings. Therefore, it is crucial

for Moxie to estimate customers’ ratings so that the development team can pay different level of

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attention to each attributes of the product. According to McLean & Company’s research in 2014,

we can create a linear formula to estimate customers’ ratings.

Please note that because of Moxie’s cost advantage, we can assume every potential customer

can afford Re:View. Therefore, we can give affordability a weight of 0. However, that only means

affordability will not affect customers’ rating, it does not mean affordability does not affect

demand.

According to the weight of product and vendor, we have 𝑅 = 0.8𝑃 + 0.2𝑉. Furthermore, with

the breakdown weight of each attribute of product and vendor, we can then have

𝑃 = 0 ∗ Affordability + 0.2 ∗ Architecture + 0.4 ∗ Features + 0.4 ∗ Usability

𝑉 = 0.15 ∗ 𝐶ℎ𝑎𝑛𝑛𝑒𝑙 + 0.25 ∗ 𝑅𝑒𝑎𝑐ℎ + 0.3 ∗ 𝑆𝑡𝑟𝑎𝑡𝑒𝑔𝑦 + 0.3 ∗ 𝑉𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦

Therefore, putting P and V into the formula of calculating R, we have a breakdown function

to calculate customers’ ratings:

𝑅 = 0 ∗ 𝐴𝑓𝑓𝑜𝑟𝑑𝑎𝑏𝑖𝑙𝑖𝑡𝑦 + 0.16 ∗ 𝐴𝑟𝑐ℎ𝑖𝑡𝑒𝑐𝑡𝑢𝑟𝑒 + 0.32 ∗ 𝐹𝑒𝑎𝑡𝑢𝑟𝑒𝑠 + 0.32 ∗ 𝑈𝑠𝑎𝑏𝑖𝑙𝑖𝑡𝑦

+ 0.03 ∗ 𝐶ℎ𝑎𝑛𝑛𝑒𝑙 + 0.05 ∗ 𝑅𝑒𝑎𝑐ℎ + 0.06 ∗ 𝑆𝑡𝑟𝑎𝑡𝑒𝑔𝑦 + 0.06 ∗ 𝑉𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦

The meaning of the function is to help the development team focus differently on each

attributes of Re:View so that this product can achieve the best customer rating with the highest

development efficiency.

Discussions

The coefficient before each variable indicates the variable’s weight. The higher the value, the

more important the attribute is. For example, Features and usability with coefficient of 0.32 are

the most important attributes affecting customer’s rating for a talent management product,

followed by architecture with 0.16 and then viability and strategy with 0.06.

Limitations

The function above provides a rough reference in terms of how to strategically develop

Re:View. However, the way we acquire the function has also its limitations as follows.

First, this model is using criteria for the talent management suite to estimate employee

performance evaluation system, which is only a part of the whole suite.

Second, although linear model is the most commonly used method for data estimation, it may

not fit the real situation of Re:View.

7.2. Estimate Profits

8

According to product development plan, Moxie will spend around 20-30k for the development

of MVP and about 5000-10,000 per month to maintain and grow (sales, hosting, support,

marketing, R&D).

Let n denote the number of month since product launch, total cost can be calculated as

𝐶𝑜𝑠𝑡 = 25000 + 7500 ∗ 𝑛

Based on Moxie management’s plan, Re:View would either have two different versions for

SMBs and large businesses or simply have one version for all users. Therefore, there are two

scenarios to consider. However, according to the research, having two different product types is

highly suggested.

Scenario 1. Two Versions for SMBs and Large Businesses

When Re:View’s three types license fee is charged monthly, the total revenue for Moxie at

the end of nth month is

∑(0 + 𝑃𝐵𝑎𝑠𝑖𝑐 ∗ ∑ 𝑄𝐵𝑎𝑠𝑖𝑐_𝑖

𝑛

𝑖=1

+ 𝑃𝑃𝑟𝑒𝑚𝑖𝑢𝑚 ∗ ∑ 𝑄𝑃𝑟𝑒𝑚𝑖𝑢𝑚_𝑖

𝑛

𝑖=1

)

𝑛

𝑖=1

Hence, Moxie’s total profit after product launch is

Profit = Revenue − Cost

= ∑(0 + 𝑃𝐵𝑎𝑠𝑖𝑐 ∗ ∑ 𝑄𝐵𝑎𝑠𝑖𝑐_𝑖

𝑛

𝑖=1

+ 𝑃𝑃𝑟𝑒𝑚𝑖𝑢𝑚 ∗ ∑ 𝑄𝑃𝑟𝑒𝑚𝑖𝑢𝑚_𝑖

𝑛

𝑖=1

)

𝑛

𝑖=1

− 25000 − 7500 ∗ 𝑛

Therefore, if Moxie charges $2/employee/month for basic version and $4/employee/month for

premium version, the function becomes

𝑃𝑟𝑜𝑓𝑖𝑡 = ∑(2 ∗ ∑ 𝑄𝐵𝑎𝑠𝑖𝑐_𝑖

𝑛

𝑖=1

+ 4 ∗ ∑ 𝑄𝑃𝑟𝑒𝑚𝑖𝑢𝑚_𝑖

𝑛

𝑖=1

)

𝑛

𝑖=1

− 25000 − 7500 ∗ 𝑛

Scenario 2. One Single Version for All Users

In this scenario the calculation is simpler. Since there will only be one price, the total revenue

for Moxie at the end of the nth month is

∑(0 + 𝑃 ∗ ∑ 𝑄𝑖

𝑛

𝑖=1

)

𝑛

𝑖=1

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Hence, Moxie’s total profit after product launch is

Profit = Revenue − Cost

= ∑(0 + 𝑃 ∗ ∑ 𝑄𝑖

𝑛

𝑖=1

)

𝑛

𝑖=1

− 25000 − 7500 ∗ 𝑛

Therefore, if Moxie set price at $2/employee/month as is suggested before, the function

becomes

Profit = ∑(0 + 2 ∗ ∑ 𝑄𝑖

𝑛

𝑖=1

)

𝑛

𝑖=1

− 25000 − 7500 ∗ 𝑛

Discussions

Again, for simplicity reasons, we usually use linear expression to model the relationship

between price and demand for basic and premium Re:View products as 𝑃 = 𝐴 − 𝐵 ∗ 𝑄, where A

and B are positive constants. However, finding out parameter A and B is not very meaningful as

they can be easily changed when Moxie adjusts its advertising, SEO and SMM efforts. Therefore,

the meaning of the two functions above is more of allowing Moxie to set different sales goals and

see what the results(profits) are.

An Excel has been created to perform a simulation of a 12-month sales cycle in Scenario 1.

Moxie can set different sales goals for each month to calculate a rough estimate of the profit at the

year end.

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Simulation of a 12-month Sales Cycle

Please also note that there can be infinite combinations of n (time period) and Q (sales goal) to

determine the profit, theoretically. Thus, Moxie must set realistic values (goals) for this model to

make sense.

Limitations

The limitations mostly derive from assumptions underlying this model.

First, this model is assuming linear price-demand relationship, which is usually the case.

However, there can still be exceptions. Therefore, linear relationship may not necessarily fit the

real situation of Re:View. To acquire the most accurate predictions, it is highly suggested that

Moxie conduct a survey specifically for this product.

Second, this model assumes that no customers will unsubscribe from Re:View when

calculating revenues, which is probably not the case in real life. To ensure the accuracy of the

model without considering this limitation, Moxie must make sure there is the least number of

customers quitting the service. One way is to keep eyes on customer ratings as discussed before.

Third, the fixed cost and monthly cost are just rough numbers and is subject to change as the

development cycle continues. Price of the service are also likely to be changed as Moxie

understand more about the market.

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VIII. Reference

Bersin, J. (2014). The Talent Management Software Market Surges Ahead. Forbes Leadership.

Retrieved from

http://www.forbes.com/sites/joshbersin/2014/06/26/the-talent-management-software-

market-surges-ahead/

Medved, P. (2014). How much does performance appraisal software cost? Capterra Talent

Management Blog. Retrieved from

http://blog.capterra.com/much-performance-appraisal-software-cost/

McLean & Company. (2014). Vendor Landscape: Talent Management Suites. Retrieved from

https://www.hrsmart.com/sites/default/files/campaigns/product-

sheets/McLean%20%26%20Co%20-%20Talent%20Management%20Vendor%20Landscape

%20Report.pdf

Newstex Blog Editors. (2015). CompaniesandMarkets.com: Global talent management software

market is forecast to total US$11.4bn in 2019. Newstex Trade & Industry Blogs. Retrieved

from

http://search.proquest.com/docview/1659726595?accountid=11752

Ries, E. (2011). The Lean Startup. Retrieved from

http://www.stpia.ir/files/The%20Lean%20Startup%20.pdf

Wikipedia Editors. (2015). Pricing Strategies. Wikipedia. Retrieved from

https://en.wikipedia.org/wiki/Pricing_strategies

Zale, N. (2014). Setting the Right Price for Sustainable Profit. The Strategy and Tactics of Pricing

--- A Guide to Growing More Profitably, 131- 135.