3rd Product Level
- Offline Game that incorporates our clients logo and web site, that facilitates online ordering/purchasing
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At this level we can also seek to charge our clients on a fee per use basis as well as a percentage of sales made through the application
- Starting at 2000E depending on complexity + a monthly fee starting at 200E per month
Competitive Advantage
Hill and Jones states that there are 4 cornerstones to competitive advantage: Superior Quality, Superior Innovation, Superior Customer Responsiveness, and Quality. The cornerstones we will focus on are superior innovation, in terms of how we develop our applications and our customer responsiveness in respect to adapting our price to suite the market.
We the first mover advantage as we are going to be the first company to specifically target mid range companies, will use this early advantage to build on other aspects of competitive advantage.
- By retaining the rights to our applications we will be able to make small changes and rebrand them for multiple clients. This will significantly reduce our costs which will allow us to be a cost leader in the industry.
- Externally we will work hard to develop relationships with our clients and provide an unmatched level of service at our price point. By developing a loyal customer base we will be able to grow our brand through word of mouth and establish a network of repeat customers.
- Internally we will strive to encourage effective communication and creativity. By fostering an environment of creativity we will be able to develop applications that are fun, functional, and effective. This will guarantee that our applications are an effective method of advertising for our clients.
Marketing Plan
Smart Phones Sales
To prove the relevance and potential effectiveness of our advertising method we must be able to demonstrate to potential clients that Smartphone’s have adequate market penetration.
Worldwide Smartphone Sales to End Users by Operating System in 3Q10 (Thousands of Units)
Source: Gartner (November 2010)
Potential Growth
This is an enormous growth industry, the Apple store has surpassed 1 billion downloads worldwide. These numbers are only going to increase. The trend in the cellular industry is an increase in smart phones sales with double digit increase in market share in each of the last 3 quarters, 35% total growth in the past year. Smartphone sales now make up 19.3 percent of the total market (Gartner, 2010). By being an early entry into the market we would like to establish a strong brand presence. As the Mobile Advert grows we will be able to expand market beyond Ireland to include all of Europe. We will also be able to offer more services and attempt to secure contracts with larger companies that will provide a consistent stream of revenue.
According to IDC, sales of Smart phones equipped with the android designed by Google jumped 50%. He has sold 63 million of these phones in the second quarter 2010, making a total of 118.3 million since the beginning of the year, an increase of 54% in one year. Google CEO Eric Schmidt told CNBC television channel that he was selling over 200,000 units per day under the Android operating system designed by Google.
2. Customers
2.1. Target Market
There are so many SME businesses in Ireland and Europe that we only need to capture a small percentage of the market to become profitable. As our company expands we will have the opportunity to expand our target market to include Europe which will further increase our business and profits.
We anticipate demand to increase significantly after we prove our advertising concept with our early clients. The largest barrier to our company is educating potential clients of the importance of having advertising presences in this emerging market. Based on sales of smart phones we believe that a mobile application will become as necessary as a webpage for companies.
Our largest threat will be new entrants into our market. Once this business model is proved profitable it is likely to be copied. To combat this we will have to “get big fast” allowing us to offer our clients a wider range of services at a lower price than new entrants would be able to offer.
2.2. Market Segment Acquisition
Our target is SME (Small and Medium Enterprise). L’OECD (organization for economic co-operation and development) divided firms in three parts: micro-enterprises, small enterprises and Medium enterprises. Micro-enterprises are the societies of less of 10 employees. Small firms are society between 10 and 49 employees. Medium firms take on from 50 to 249 persons.
Industry: Our product can be effective for any type of company. The business sector of SME can be in catering, culture, sport, ready-to-wear clothing and all sectors which can be interested in our business.
Location: At first, our strategy aims the local market with Dublin. Our team will begin with companies within the city to generate market awareness and networks with potential clients. Our second stage of expansion will be to advertise nationally, with a strong push to attract business in Galway and Cork. After proving our business concept at the national level we will seek to expand to the rest of Europe. We have a strong advantage during this phase as the ownership group has members from Poland, France, and Slovakia.
Key Markets in Ireland
In year two we will work to establish a national presence. We will be able to use our contacts and success to expand to Cork and Galway. This will represent centers of 3 areas to conquer the national market. And finally we explore Europe with our different languages.
We will discuss in greater detail the costs of our marking plan. The key to our strategy will be low cost effective marketing. Being a young ownership group we will use our knowledge of social networking and marketing to establish low cost and free advertising models.
Sales are expected to vary with the types of businesses requiring more advertising at different times of the year. For example retailers will be more likely to purchase our product in the months leading up to Christmas, or accounting firms may want to release and application to correspond with tax season. We will account for this by tailoring our advertising method specific to each industry.
The majority of our costs will be labor as there are essentially no variable costs and extremely low fixed costs associated with our business models. The majority of our advertising will be through free or low cost means. However, we reserve some budget for leaflets, advertisements in trade journals, the creation of letterhead, brochures, and for the ongoing management of the business.
.
2.1.1
Economics
There are over 80,000 SME (Small to Medium Enterprise) companies in Ireland and Europe that we only need to capture a small percentage of the market to become profitable. As our company expands we will have the opportunity to expand our target market to include Europe which will further increase our business and profits.
We anticipate demand to increase significantly after we prove our advertising concept with our early clients. The largest barrier to our company is educating potential clients of the importance of having advertising presences in this emerging market. Based on sales of smart phones we believe that a mobile application will become as necessary as a webpage for companies.
Our largest threat will be new entrants into our market. Once this business model is proved profitable it is likely to be copied. To combat this we will have to “get big fast” allowing us to offer our clients a wider range of services at a lower price than new entrants would be able to offer.
Competition
We have no direct competition within our target market segment. However our closest competitor is Brandwith Marketing based in the United Kingdom. They are a division Brand Activation. They offer mobile applications as part of complete marketing strategies (TV, Print, and Radio) campaigns. They have provided Iphone application support for numerous large companies including Guinness World Records, Lexus, and University of London. Their services start at 13,000E at current exchange rates (November 25, 2010). They have had great success with their applications with early research showing 10x great audience engagement when compared to standard advertising methods.
Our company will not compete with them directly as we cannot offer the expanse of services as Brandwith. Instead we will focus our approach only the mobile application allowing us to minimize our cost and provide our service to a wider client base. The quality of product we provide to our client will equivalent. But to keep our costs down we will have less differentiation then they provide.
Brandwith Advertising
7 High Street
Windsor SL4 1LD
0173 868 4444
Product Niche
Our market niche is that we will provide our customers with a unique level of affordability and function. Applications with a similar level of complexity would normally cost three to five times as much to produce. By using easily customizable templates will be able to achieve significant cost savings. In addition to affordability we will seamlessly integrate their brand message with a functional game or utility designed to target their desired market.
Example A: A pizza company would have an application in which the customer could build their pizza virtually.
Example B: An accounting company could have an application in which the clients could track their purchase.
Both of these examples could be altered to customer specifications by making small changes in templates based around Iphone SDK software and then ported across to all smart phone platforms.
Strategy: Low Cost Advertising Methods
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Some companies have a customer files. With their agreement, we will recover data to create a “Mailing Lists”. With this method, we will send a “welcome e-mail” with links of our website and facebook page. On our web site, there will examples of applications that we have already created.
- To participate in show/competitive of youngest entrepreneur.
- To take an active part in trade show, telecom show, SME show to canvass new customers.
- The word of mouth is more effective means/way to promote our business. To stimulate the word of mouth. We can offer a reduction companies which sponsored another company.
We want to give a dynamic and young image of our business. We want to demonstrate that is possible to work of excellent quality and effective and to realize this work with low cost price.
Customer Contact
- The phoning consists to call companies. This technique allows a first contact to obtain an appointment.
- The door to door consists in going to canvass one by one companies to announce it our service and afterward if the company is interested, to obtain make any meeting.
- An advertising in Professionals’ reviews because many companies are subscribed to these reviews.
- Facebook, the number one of social network. We can create one page to promote our business. In addition, we put a link towards our website.
Expanding Our Client Base
There are effective means of promoting our business without spending a large portion of capitol.
- Some companies have a customer files. With their agreement, we will recover data to create a “Mailing Lists”. With this method, we will send a “welcome e-mail” with links of our website and facebook’s page. On our web site, there will applications already creates.
Increasing Our Market:
- To participate in show/competitive of youngest entrepreneur.
- To take an active part in trade show, telecom show, SME show to canvass new customers.
- The word of mouth is more effective means/way to promote our business. To stimulate the word of mouth. We can offer a reduction companies which sponsored another company.
We want to give a Dynamic and young image of our business. We want to demonstrate that is possible to work of excellent quality and effective and to realize this work with low cost price.
Promotional Budget Chart
Pricing Structure
Our pricing will be based on estimated development time of the applications. We will estimate the amount of time it will take to develop the application for our clients. We will then give them a flat quote, this amount is what the customer will be required to pay regardless of actual time spent on the project
Customers will be required to place a deposit of 25% before any work takes place. Upon completion of the app the client will have the opportunity to inspect the application and request modifications. Once the design is approved the balance of the fee is required. At that time we will submit the applications to Apple for approval and distribution, as well as any other application distribution channels.
Proposed Location
Our company will be located in central Dublin. Ideally it will be in the eighth zone. This is a very good location because of good communications and proximity to parking. This location also has access to broadband Internet which is one of the most important factors in choosing our location. This location will also place us near many SME businesses which will assist in our networking and developing a client base
Distribution Channels
We will distribute our applications ported across all online application stores including: Apple Store, Google Apps, and Blackberry Connect. By making our applications available across all platforms our clients will be able to reach an extremely wide client base.
Proof of Concept
The use of mobile applications for advertising is relatively new to Ireland but early adopters are experiencing a high level of success and satisfaction. MacMillan Cancer Support created an “augmented reality” Iphone application that simply helped users to find and locate coffee shops. They used the application as part of a larger strategy to extend fundraising and broaden appeal. MacMillian coordinator Hanna Kowszun acknowledged that “engagement is the most important thing to lead people to donate”. (Marketing Week, 2010)
This supports our belief that creating interactive applications will be effective advertising and increase sales. As more companies become aware of the effectiveness of Smartphone application advertising our market will grow. Word of mouth will be a key method in establishing a strong network of clients among early adopters.
Sales Forecast
Our team would like to start up our business first in Dublin and in first year we would like to sales 96 applications on this market. Our sales forecast shows our realistic projection for first year. We expect to sale 51 applications of 1st level product and 45 of 2nd level product. Of course, number in our forecast can increase or decrease during the year. After first year of providing our business we expect turnover 105 000 euro.
Sales forecast for first year:
The second year should bring a growth of sales. The turnover (includes 1st and 2nd level products) should increase from 105 000 euro to 189 000 euro. These numbers presents the 180% grow of turnover. In second year we start also to sell 3th level product. This product should earn 110 000 euro. Our total turnover in second year is 299 000 euro.
The third year will see the introduction of our third product level which should greatly increase our revenue and deliver consistent cash flow regardless of sales.
Operational Plan
Production Time
The production time of our product will vary significantly based on the wishes of the clients and the skill of our programmer. It is estimated that 40 hours will be needed for a standard application from start to finish (Iphone SDK Development Forum, 2010). In an effort to reduce cost each application will be saved at several stages in the development process this will allow us make minor changes as needed to suite future clients. This will drastically reduce the amount of time needed to less than 4 hours. Based on this calculation after a database of shell programs is created one programmer will be able to tailor up to 10 programs per week for unique clients.
Personnel
Accounts Receivable
We will not extend credit to any first time customer. Due to the intangible nature of our product we cannot release our applications for distribution until 100% payment is received. For updates and pay per use payment we will extend a 30-day grace period. After that the outstanding balance will be billed at the rate of 12% APR. After 90 days of nonpayment we will file a grievance with the courts.
Accounts Payable
One of the main aims of our company will be to pay our invoices just in time. We would like to provide business based on credit and to have very friendly relationships with others our partners. We want to pay every invoice to the end of month. This paying process helps us to improve our accounts payable and also to help us in the future, in case our company will have some problems with liquidity.
Management and Organization
As a startup up salaries will be our single biggest expense. In an effort to minimize costs we will only have 3 full time employees. We will encourage communication and team work to ensure they function as efficiently as possible.
CEO (40 000E +bonus based on profitability)
As a startup company this position will require flexibility and knowledge in many areas of business management, including Human Resources, Payroll, Accounting, and Finance. We have elected Bradley Rutledge for this position as he has education in both Accounting and Business management. In addition he has obtained over 100 PMU credits in the past 3 years which will allow him to oversee operations during the production life cycle.
Sales (35 000 E + 5% commission on sales)
Initially the sales staff will consist of one member of the ownership group. This person must be driven, energetic, and knowledgeable in the fields of marketing and customer communications. We have nominated Kevin Brefort for this position as his educational background is in the area of Advertising and Marketing. In he is fluent in both English and French which will allow him to reach out to other markets as our company expands.
Designer (80 000E)
The designer will be an outside hire. He must be skilled in C++ programming as well as Flash graphics. The ideal candidate will have 3 or more years of industry experience. He must also be creative and artistic. These skills are important to ensure that our programs have high quality standards and are appealing to the users. The salary we are prepared to offer is about 10% higher than the current market offers, and we will also allow the employee a great deal of freedom, including the flex-time work hours, and 4 weeks of vacation time.
Startup Expenses and Capitalization
We will require 90000E to start up our company. This amount of money includes investment 10 000 euro of each member (80%) and 40 000 euro of investor(s) (20%). Each founding member must also sign an agreement to sell up to half of their shares should the need arise for future capital investment.
For starting-up we calculated with 2 monthly payments for rental, salaries or leasing.
Before starting- up we need to buy software and some equipment. Some part we prefer to lease for 18 months. We added also a special Reserve of funds for Contingencies. We estimate that with this type of business so our assumption is 200 euro for reserve for contingencies for every month in 1st year will be adequate. Once the business is operational we can adjust the figure as needed. Our total Start-up expenses are 119 900 euro.
Financial Plan
12-Month Profit and Loss Projection
In 12-Month Profit and Loss Projection we try to show all our profits from sales and all our expenses which a providing our business require. The providing our business is not very difficult for many sources of expenses. Our start-up capital helps us to set up business over live the first year, because after first year our business reaches a loss.
In the first year our business reaches the loss. In 2nd and 3th year our company becomes profitable. In the second year we are assuming an increase in sales because we will have established our brand and expanded through Ireland. The significant jump in sales from year 2 to year 3 is based on the introduction of our new product service which will allow online ordering and tracking.
Projected Cash Flow
Cash Flow projection we divided to 12-Month projection and 3year projection. Our start-up capital is 90 000 euro. This capital helps us to stay afloat in the 1st year in which our cash decrease from 88 515 to 29 831 euro. After 1st year cash flow is improved and at the end of 2nd reaches 148 773 euro. After this period we make up a decline of equity in 1st year.
Cash Flow (Year 1)
Cash Flow (First 3 Years)
Opening Day Balance Sheet
An opening balance sheet shows that equity of our business present 90 000 euro. This amount of money includes investment 10 000 euro of every member (50%) and 40 000 euro of investor(s) (20%). 30% equity will remain unsold to allow for the reissuing of shares when our company becomes profitable. Before starting-up business we have to buy some equipment (1484 euro). Others equipments we lease this will minimize our costs as well as risk to the investor.
Break-Even Analysis
Break-Even Analyses shows that we need to earn 14 612.12 euro every month if we want to pay our invoice just in time. This equates to just 14 basic applications sold per month.
Appendices
10.1 Equipment and Space needed
Office space consists of:
- Desk space for two people.
- Broadband
City centre 15 minute walk.
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Office space: around 40-50m2
- Office is furnished without Electronically Staff
- Power and other utilities: standard
Price: €195 pcm
Equipment needed for startup:
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PC IBM ThinkCentre C2D 1.83 1GB with a 17” monitor is just €26 per month over 18 months.
-
Mac A 24” Imac is €65 per month to rent over 18 months
- Design hardware
- Server (pending)
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Microsoft Windows 7 Professional Edition Upgrade DVD €197.93
- Office Home and Business 2010
€379, 01
- Mac OS X v10.6. iOS 3.2-4.2
- Pdk development tool
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Software for graphic design ADOBE PHOTOSHOP CS5 EXTENDED ( MACINTOSH ) NEW SEALED €890
10.2 Ad spend in Ireland per year 1995-2006
Total amount spent in 2006 surpass 1.4 billion.
10.4 Advertising Costs Assessment
Cost of advertising in the Irish national newspapers (per circulation). Our product can reduce the amount of runs needed to achieve the same market penetration.
STANDARD RATE MONO COLOUR
€ €
The Independent
Full Page 29,425.00 36,955.00
Half Page 14,710.00 18,475.00
Front Solus 8,850.00
Guaranteed Positions +20% +20%
Inserts 1-8 pages 86.50 per 1,000 (larger sizes on application)
The Herald
€ €
Full Page 10,430.00 12,365.00
Half Page 5,210.00 6,190.00
Guaranteed Positions +20% +20%
HQ
€
Full Page 7,805.00
Outside Back Page - 8,360.00
Half Page 4,130.00
TV Strip Ad 1,225.00
National Advertising in Ireland online:
Where will my add appear: Your add will appear across all home pages of Independent.ie:- News, Business, Sport, Entertainment, Health, Lifestyle, Education and Travel
Size
120x240
Duration
1 month
Page Impressions guaranteed
500,000 impressions per month
Cost
€500.00 per month
Our Advantage: Our is one-time fee with only small update fees, once the application is in the iTunes or other application store it is permanent, and will only be removed if asked by the owner of the application.
10.5 Potential Advertisement
Sources
Brandwith Marketing
Date Retrieved October 24, 2010.
The Irish Independent
Date Retrieved October 27, 2010
The Gartner Group Analysts. Ben Tudor. November 10, 2010.
Date Retrieved November 15, 2010.
Iphone Programmers Development Forum
Date Retrieved: Multiple Retrievals October 15- November 25, 2010
Apple Website: Press Releases
Date Retrieved: October 30, 2010
Marketing Week. September 30, 2010
http://www.marketingweek.co.uk/