Shares of

Salesforce.com

(CRM) - Get Report

were being hammered Tuesday, as investors reacted to a steep price cut on the on-demand software company's low-end offering.

In recent trading, shares were off $2.25, or 7.6%, to $27.50 on heavy volume.

The stock started its downward move after the company sent out an email blast headlined "Fifty Percent Off Team Edition."

Citigroup analyst Brent Thill, who rates the stock a buy, called the market's reaction "overblown" and said in a note to clients: "We view this move

the discount as an attempt to drive more entry-level users into the system, and then cross-sell those users to higher price-point offerings."

He noted that the company's overall average selling price increased a bit in the last quarter to $75 from $73 a year ago. Citigroup does not have an investment-banking relationship with Salesforce.com.

Team Edition is the company's entry-level product. A spokeswoman for Salesforce said the email blast and discount were part of a standard marketing campaign. She added that the 50% discount applies to existing customers wishing to add seats and to new customers buying subscriptions for at least 10 seats. The discount expires at the end of July.