Dayton Software Inc.
Dayton Software Inc. was started in 2010 by college friends Peyton Miller and Becky McPherson. Peyton
was an undergraduate business major, while Becky studied computer science. They first discussed the
idea of starting a company when they ran into each other at the University of Dayton’s reunion weekend
in 2008. Peyton was working for a small business that was having a difficult time navigating the
transition to the digital economy. She kept pushing her boss to purchase new software to help automate
some processes the company used. However, her boss was resistant to change and worried that
automated processes would be less reliable. Meanwhile, Becky worked for a university laboratory that
utilized multiple software packages that automated almost all of their processes. Becky’s issue was that
the lab kept adopting new software every couple of years and the staff had to figure out how to make
the different software packages speak to each other.
Becky and Peyton dreamt of creating an integrated software solution for all of a company’s different
processes (think employee records, payroll, etc.). In January of 2010 Peyton was sick and tired of
pushing her boss to automate. Exasperated, she called Becky. Peyton said, “Becky, I can’t do this any
more. I have to quit my job and I’m not sure what I want to do next. Do you remember that integrated
software solution we talked about a few years ago?” As fate would have it, Becky was entering her last
week of maternity leave, after giving birth to her first child, Ryker. Becky loved caring for her new son,
but she didn’t want to be a stay-at-home mom. However, she also wanted a job with more flexibility
than her current role at the lab. “Peyton, I would love to start a company with you,” Becky said. “But do
you think we can be profitable?” The two friends spent the next two hours discussing the commercial
uses for their potential software package. The call ended with a tentative agreement to start a new
company.
Five months later Dayton Software Inc. was born, and development began on Integrated, their allencompassing,
integrated software solution for businesses. Today they serve four main consumers:
large corporations, university laboratories, consultants, and small businesses. Integrated has been a
huge commercial success. But with success comes imitators. New software packages with similar
features have been eating away at their market share. Becky and Peyton are now considering
developing two different versions of Integrated, one version would allow complex interactions between
numerous automated processes and another version would only allow minimal interactions between a
few processes. To help them decide whether or not to undertake this new strategy, they hired K2
Research Solutions to do a market research study.
K
2 met with developers and sales managers at Dayton Software Inc., then lead focus group sessions with
current Integrated users and finally conducted a conjoint analysis with potential users of the two new
software packages, tentatively being called “Integrated – Standard Edition” and “Integrated – Enterprise
Edition.” The different segments were determined by the number of features and processes that need
integration. Generally speaking, large corporations have complex needs and automate virtually all of
their internal processes, whereas small business only need integration of a very small number of
automated processes.
The worksheet title “Table 1” in the Excel file “Dayton Software Inc Table 1” provides an overview of the
market research data K2
generated. The table shows the four market segments, the anticipated size of
each segment, and each segment’s willingness to pay for the two different versions of Integrated. It also
includes projected costs of production and marketing. You can see the estimated production completion
cost for each version, the variable cost per unit sold for each version and the segment development
costs for each market segment.
After looking at Table 1, Peyton and Becky realized they had multiple, dynamic questions to answer.
Should Dayton Software Inc. keep only one version of integrated? If so, which one? How should they
price the products if they offer multiple versions?
Assignment:
Answers to questions 1 and 2 (below) should be typed into a Word document. The tables for question 3
are in the Excel file in the worksheet titled “Q3.” Both files should be uploaded to Isidore before the due
date.
1. Does the data in Table #1 simplify reality? In what ways? How might that make the firm’s
decision difficult?
2. Articulate (in jargon-free English) what are the factors affecting the pricing decision for
Integrated – Standard Edition. How do these factors affect the pricing decision (don’t use
numbers)?
3. Calculate the profit Dayton Software Inc. will realize from each “Willingness-to-pay” (price)
listed in Table 1, for each version of Integrated, assuming only that version is offered. Please
place these calculations into the tables included in the worksheet titled “Q3” within the Excel
file “Dayton Software Inc Table 1.” Hints: (i) the prices will be different for the Standard and
Enterprise versions of Modeler; (ii) assume the firm is unable to price discriminate within a given
version of the software.