Why Salesforce chose Wealth Management as first vertical market

By Bernard Lunn


Marc Benioff, Founder and CEO of Salesforce.com is one of the great thought leaders in the software business. He invented Cloud. So when he decides to make his first big move from horizontal to vertical and chooses Wealth Management as his entry point, we should all pay attention.

During 2010 I created a series of Quarterly Reports on publicly traded pure-play SaaS companies called SaaS Insights. My objectives were to:

  • Understand SaaS from the investor perspective (adding to my long operating experience in the software business).
  • Learn how investment analysts do their stuff as input to some new technology ideas to automate fundamental analysis using XBRL.
  • See if there is any significant market selling research reports to small investors.

The answer to 3 was no, and I learned what I needed from 1 and 2, so I discontinued this.

One takeaway from this was:

Don’t bet against Salesforce.com.

Their stock always seems expensive. Waiting for it to get cheap has been a losing strategy.

That chart tells short traders “go ahead, make my day”.

Salesforce chart

The recent move by Salesforce.com into vertical markets, starting with Wealth Management, is the third of a series of brilliantly executed strategic moves:

Move # 1. Take a simple feature – contact records for sales people – and move them into something that they called cloud. Benioff is a thought leadership sales genius. Their No Software logo was an inspired way for an upstart software company to tap into customer frustration with the software incumbents. Then Salesforce created the Cloud logo and the whole Cloud concept. They first invented, then defined, then branded and led a new market. The disruption is still playing out and Big Tech is now defined primarily by how well they are making the transition to Cloud (think how investors rate companies like Microsoft, Adobe, Oracle, SAP and IBM by how advanced their Cloud transition is).

In our terminology at Daily Fintech, first Salesforce won Mindshare and then they won Marketshare. The Salesforce story is one of three (the other two come from my personal experience) that illustrates the chapter entitled How To Define And Lead Your Own Market (which you can read in this extract on Daily Fintech).

Move # 2. Not content with just the Sales department, Salesforce expanded horizontally into marketing, customer service and business analytics. All of these – sales, marketing, customer service and business analytics – had three things in common:

  • Understanding the “customer journey”. This phrase has replaced CRM in their marketing lexicon because the Relationship in CRM became forgotten as Sales Managers used CRM to control sales people while telling sales people to control the customer. Customer journey denotes an understanding that the customer is in control.
  • Sales, marketing, customer service and business analytics are all about growth and growth is what keeps the CXO folks up at night (cutting costs and buybacks alone are not enough).
  • Sales, marketing, customer service and business analytics are all driven by data; all job descriptions are morphing into Chief Data Officers.

Salesforce needed to make this horizontal move for two reasons:

  • Consumers became the growth driver during the last decade. You do not sell to consumers, you market to them. Sales is really for B2B markets. So the Sales department lost some importance and that meant that revenue growth from the Sales Department (still the core of Salesforce) started to lag the other areas (Marketing, Customer Service and Business Analytics).
  • Many people became disenchanted with the value proposition of CRM. Once it had moved to the Cloud, the issue was no longer about the implementation hassle, it was more to do with the core value proposition of a CRM system.  In my days as a Sales Manager, I never cared which CRM system we used. I knew we needed one, but it was like knowing we needed an accounting system, it was not something that made any significant difference to the key mission of growth and low Customer Acquisition Cost.

Salesforce needed a market where Sales would be key. Wealth Management fits. The target clients are consumers but very rich consumers. You still sell to individuals and their families. Yet if you target a family with $10m to invest at an average AUM of 1%, you deal size is $100k pa. Assume you keep them for 10 years, which is pretty conservative and that is a $1m Life Time Value (LTV). That is like a B2B sale in end result.

Software is eating the world. Salesforce agrees and is saying with this move that the first part of the world that it will eat is Financial Services. That is the market thesis on which Daily Fintech was founded, so we clearly agree. Yesterday’s post was about how Banks will have to focus on the same core metric as Fintechs – CAC/LTV. Salesforce is now bringing it’s huge resources to bear on this challenge.

In their Press Release, Salesforce focused on the NetGen challenge as Wealth Managers call it:

“In the next five years, more than $2 trillion in wealth is expected to transfer between generations. Today’s financial advisors need to meet the needs of clients set to inherit this wealth, and who are increasingly social, mobile, connected and seeking significantly more collaboration.”

A vertical move is tough. The needs of the Wealth Management industry are complicated by regulation and a complex value chain that works differently in different countries. Yet, as I learned from my SaaS Insights days, betting against Salesforce is usually unwise.

Daily Fintech Advisers provide strategic consulting to organizations with business and investment interests in Fintech.


3 thoughts on “Why Salesforce chose Wealth Management as first vertical market

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