4.1 Initial market - The first year
Picture 4.1 Marketing Plan Year 1 1
In our first year we will focus on forming a partnership with the YMCA of South
Hampton roads. This organization offers member ship to fitness clubs at 15 different facilities,
and members can use any of these facilities. The YMCA was chosen as it is a major national
chain of fitness centers with a large market to sell our product to. Furthermore, the YMCA takes
a very rounded approach toward health and fitness. They have a variety of programs that show
they are willing to focus on anything that will make a person healthy. Also, they are willing to
embrace new technologies. Their website (http://www.ymcashr.org/programs/registration/), for
instance, contains information on a product they use called "FitLinxx." This is a company that
makes monitoring devices (measuring heart rate etc) for people and uploads the information to
the internet where customers can then look at the data and receive feedback.
During our initial year we will be collecting data that will be useful in further selling our
product. This data will include customer satisfaction with our product, what percentages of
South Hampton Roads members actually made use of our product, and for customers who
continued their memberships how many identified our product as one of the reasons to continue.
This data will not only help us provide future facilities with information but give us valuable
feedback that will help refine our product.
4.2 Beyond the first year
Ultimately, our goal is to tap into the entire United States market and possibly beyond.
After all everyone should be interested in eating healthier. Our initial 4 years however will
continue to focus on the health club industry as means of reaching people. After our first year
we will reach out to all Virginia health clubs using our data and recommendations from our first
year. Virginia makes a good market as it is number 7 in health club memberships compared with
other states. By the third year we will focus on the states with the top 10 health club
memberships. In our fourth and final year we will reach the entire country with our health club
partnership program.
One advantage to this program is our advertising is covered by the health clubs. It will be
in their interest to highlight our product in their Ads, websites, brochures etc, to bring in new
members. However, our product will not ultimately be limited to health club members. During
our fourth year when we are focusing on national coverage we will also focus on non-health club
memberships. Online advertising makes the most sense to sell our product since our product is
itself online. We may also go full circle and use our health club contacts to make deals where
people who sign up to our program get a discount or free trial at these health clubs.
Picture 4.2 Marketing Plan Year 2 1
Picture 4.3 Marketing Plan year 3 1
Picture 4.4 Marketing Plan Year 4 1
5. Profit overview
Picture 5.1 Break Even Analysis 1
Our estimated initial costs will be $1,012,000, of which SBIR funding will cover the first
2 phases, leaving us with a phase 3 cost of $396,000. These costs include hardware and staffing.
We have determined that we will charge a monthly fee of $4, or $48 a year. This price point was
arrived after looking at other online services to find out what people would be willing to pay.
Pandora, a successful online music radio streaming site was one such service. The service
charges $36 for a year, and the result is you get a higher quality stream and no advertising.
Adding in the cost for credit card transactions (3%) we will make $3.87 per month per
subscription.
In order for us to break-even we will need to sell 102,367 units (or months worth of
subscriptions). Our estimates are that after the first year in the markets (fitness clubs) we work
on we can convince 30% to sign on. In the first year, when we are doing a lot of our beta-testing
we aim to hit 5,000. This means at the end of year one we will have sold 60,000 units. In year 2
we are looking to reach 432,000 subscribers in the state of Virginia, or an addition of 428,000
subscribers. On average that would mean 35,000 new subscribers per month. This would put us
at having sold 100,000 units by the end of the first month in year 2 and we would cross over our
break even point by month 2. Assuming a 30% sign up rate after year two (when we focus on
Virginia) we should have 432,000 subscribers or a revenue of $1,700,000 per month. Year 3,
when we focus on the top ten health club membership states, will have us at 5,000,000
subscribers or a revenue of $20,000,000. Finally year 4, when we are focusing on the entire U.S.
will be 15,000,000 subscribers or a revenue of $60,000,000. Assuming a 20% cost to servicing
an increased customer base (bandwidth costs, support staff, new servers as we grow) our profit in
year 2 will be $1,360,000 per month, year 3 will be $16,000,000, and year 4 will be $48,000,000.
Picture 5.1 Break Even Chart 1