Salesforce needs to reinvigorate its growth. It has restructured to increase profitability, and is relying on AI to push growth back up. Will it work? Let’s look at the four facets of a good strategy.
- Choosing a challenge: Who are the customers? Salesforce knows who its core customers are – companies who need to manage their customer relationships. Their share in the CRM software market is 21.7%, so they can still grow by finding new customers. However, their current push on AI, which is sold as an add-on, fits better with upselling to existing customers.
- Choosing a solution: What is their strategic choice? Salesforce positions itself as being extremely customer-centric. Its actual strategic choice is to stay ahead on innovation and push new product features to its customers. It started with Cloud-based CRM in 1999, launched Einstein AI in 2016, and added Einstein GPT in 2023. Its most recent annual report states that they will continue leading their customers into the new AI era.
- Executing the plan: What is the action plan? Salesforce summarises its strategy in its annual report under five key priorities: upselling existing customers, expanding internationally, focusing on specific industries, leveraging partner apps, and reducing customer attrition. These are quite broad areas that don’t sound as focused as the title of the report ‘Asking more of AI’. The first priority is upselling, which is where AI comes in.
- Making money: Is there sufficient investment? Salesforce has reduced its spending on R&D, marketing and sales as part of its restructuring. Of the five priorities above, international expansion and focus on industries may be less well-resourced than before. The top priority is likely to be well-resourced, leveraging partner apps relies on other companies’ work and reducing customer attrition is critical to prevent decline so not likely to be under-resourced.
Is this a good strategy? It is a clear one with a strong choice, with a potential risk of under-resourcing in sales and marketing limiting growth. Salesforce is expecting lower growth this year, so they are expecting it to AI adoption to take time.
Will Salesforce’s customers pay for AI? In the most recent quarter Salesforce saw its highest growth in Integration and Analytics, 25% vs 10-11% for its other services. I&A includes Mulesoft (integration) and Tableau (analytics). Einstein AI has been added to these services, but the big AI push is in the core services. This difference in growth rates is consistent with the expectation that AI adoption will take time.
We don’t know yet whether Salesforce will succeed with this strategy. It will depend on its ability to sell its customers on the added benefits of its AI.
© Veridia Consulting, 2024
