'Pedals In Motion' (PIM), a cycle rental centre appealing to students
Pedals In Motion (P.I.M.)
IBC Assignment
4/3/2009
BT
Laurance Bowett and Josh Newman
Executive Summary
In light of the economic pressures affecting our society to date, we propose to set-up up
‘Pedals In Motion’ (P.I.M), a cycle rental centre appealing to students in the Sheffield region. We aim to fulfil the gap in the market that has been opened up due to the cancellation of bus routes from the university to the town, but also due to the rising fuel costs affecting all modes of transport.
A loan of £2000.00 will be required, in conjunction with £2000.00 obtained from our trusting parents. This capital will go towards the purchase and expenses needed in startingup and running P.I.M. We are looking to charge £2.80-£3.20 (inclusive of equipment) per day renting cycles, and between £18.0 0-£18.50 if our customers rent per week.
We are looking to advertise through (student) magazines and leaflets and posters specifically targeted toward student housing. We have carried out extensive market research from our target audience to distinguish what our customers want; we have based our business around our findings. We are market orientated and not product orientated.
We will look at the performance and future intentions of our competitors. Through past research, we have discovered that our business falls into a niche market, with no direct competition. Therefore with a poor economy, awareness in environmental concerns, and an increase in government funding in cycling in cities, we can remain confident that our company will establish itself successfully in a future booming market before competitors
(that will undoubtedly enter) threaten our position.
We will look for future expansion within this market, and target other universities close by.
We are confident with our success having only to successfully target a small percentage of the student populous to turn a big profit.
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Contents
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1.
Business overview
Introduction
Pedals in motion LTD is the business that me (Josh Newman) and my partner (Laurance
Bowett) intend to start up providing bike rental to students in Sheffield. The idea originated when the buses going from Sheffield Centre to the University reduced their frequency dramatically and heavily inflated their prices. We believe there is now a gap in the market as students need something more frequent and flexible that will rival bus prices; this is what we intend to do. Our Warehouse is based just off Ecclesall Road. Our research shows that a great number of students who catch buses to and from university on a daily basis live in and around this area and many of these people expressed a great interest in renting bikes as an alternative to both catching buses and walking.
We are here
Sheffield University
Sheffield Hallam
Univeristy
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We will provide the bikes at a very reasonable price that rivals buses as well as lights and locks for a small extra fee. We will also offer a delivery and pickup service to people living within half a mile of Ecclesall Road free of charge and all bike maintenance will be taken care of by Pedals in motion LTD.
Current position
So far the business has not yet been registered and we are still in the process of sourcing all of our capital of which we currently have £2000. However we have done vast amounts of research into our competition, our target market, location, pricing, advertising, purchasing trends, business names and timing and seasons. We now feel we have a very good understanding of the market and through surveys with the closest thing to competitors that we have as well as with our target market, we now are now confident that this business has the potential for great profit and growth.
We believe that this industry is only just emerging in the more practical fashion of weekly rentals instead of just renting a bike for a day for a bit of fun and it is a relatively new idea with literally no direct competition in Sheffield. The industry has huge potential for growth and there is also the possibility of support from the Sheffield City Council as they are constantly trying to encourage the use of bikes with projects such as ‘pedal ready and bike doctor’ to decrease congestion and pollution. ( http://www.sheffield.gov.uk/roads-andtransport/cycling-and-walking-and-prow/cycling/useful-contacts )
Competitive advantage
In our research of our competitors, we found that there were no companies in existence that provided the same service as we plan on providing. The closest thing to direct competition for ‘Pedals in motion’ LTD are businesses selling bikes. Due to this we carried out questionnaires on three of the most successful bike retailers in Sheffield to find out whether they targeted students, whether they offered deals to students, who their main competition was along with many other details.
Of the three businesses we spoke to, only the most highly priced one offered discounts to students giving them 10% off. However this company sells bike at an average price of £1000 and they are more focused on people with a serious interest in biking, not people with an interest in getting around.
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We believe our competitive advantage is that we offer a solution to students for getting around at all times of the day, without having to spend a large amount of money at one time and without any real commitment. We will be the only one of our kind in Sheffield at this moment in time and we will be appealing to a target market that up until now have had to either walk or catch a bus.
The advantage we have over buses is not only the fact that these buses heading to
University will be less frequent, if not stopped altogether; it is also the fact that people are not limited to one route, they can go anywhere they want as long as they give the bike back in the time delegated.
The niche market we have identified is the market for people who already spend money on buses, which are becoming more expensive and are now also being limited by the change in the buses frequency. Therefore these people are looking for an alternative which does not require them to spend much more money than they would on the buses and that do not limit them to only being able to go to one place at one time of the day. They also still have no commitments, as they can stop renting at any time they want and they don’t have to spend one big lump sum like they would if they were to buy a bike.
As concern for the environment increases, people are constantly looking for alternative ways to get around. This is not a 5 year fashion, where it’s cool to be concerned, the fact is that the environment is getting worse and people will only do more to stop this; never less.
Therefore as a bike rental business, as time goes on interest in us will only increase as we are an eco friendly business. Prices on buses will also continue to rise as fuel continues to run out and eventually it is likely that we will be able to charge lower prices than the bus services. This will become even more possible as we continue to grow because we will be able to use our economies of scale to get cheaper supplies and therefore charge less keeping the same/similar profit margins.
We believe that by targeting students we can focus our marketing in a particular area and we are also able to offer delivery and pickup in the area that most of these people will live.
We are also able to assess the competition easier and find out exactly what our target market wants. In doing all of the above, we feel we have a very effective business model that allows us to reach the our target market and allows us to satisfy them in many different ways.
Growth plan
As any small business our aims for the first year are very simple; survival. 50% of new businesses liquidate or go out of business in their first year, our aim is to stay out of this statistic by keeping our cash flow running so that we can pay all of our bills and debts on time and stay out of the death valley.
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To give the business every chance of survival and growth, we will not be taking a wage from the revenue for the first 3 years until we have paid back the business loan.
After the first year our plan is to reinvest our retained profit to purchase 20 bikes in order to bring in more revenue and increase our profits.
Once we have established ourselves in this niche market and we feel we have enough capital to expand we will then look into opening another Pedals in motion LTD.
By the end of year 3 we plan on having 96 bikes available for rental from our current premises. We also want to begin our plans for another ‘Pedals in Motion LTD’ so that we can target more students in a different area, either on the other side of Sheffield or in another city altogether. We intend to have the second ‘Pedals in Motion LTD’ open for business no later than the beginning of year 5.
In our third year we will also start looking into purchasing a van in order to provide door to door deliveries and pickups to people anywhere in the city. We will have to hire a driver who will be working 7 days a week on a split shift; 8am-11am and 6pm-9pm. Although this idea will cost us quite a lot, it will allow us to meet with demand a lot easier. It will also allow us to target a wider consumer base as it means people who live too far away to pick up the bikes themselves and do not want to walk to pick it up, can still rent from us.
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2. Business strategy
Our strategy for the first year is to rent our bikes out through delivering them to students and also allowing them to pick them up from our warehouse. We will start off with 30 bikes and they will be available to rent for either a day or a week. We will provide two different rental types; basic and extras. Basic means that they will rent only the bike and it will cost them £2.80 for a days rental and £18.00 for a weeks rental. Extras means that they are also provided with a lock, lights and a helmet and it will cost them £3.20 for a days rental and
£18.50 for a week. Using this pricing strategy we are able to keep our cashflow in positive figures and have enough to survive the first year with a reasonable amount of reatined profit to reinvest for the next year.
If our first year plan works out as we hope, we will use the retained profit to purchase a further 20 bikes. If we have marketed the business correctly over the first year, then the demand should be high enough to have all 50 of our bikes rented out almost everyday of the year. This will increase our revenue and in turn will increase our profits.
In the next 3-5 years our aims are more ambitious, if we meet our targets and keep our positive cash flow for the first two years, then in the third year we will begin to look at growing.
To do this we have two different possibilities;
First of all there is the possibility of opening another ‘Pedals in Motion’ on the other side of the city where a lot of student accommodation is located. This would give us a fresh target market but it would mean we remained in a city that we know and that we have contacts in.
The second possibility would be to open another ‘Pedals in motion’ in a completely different city. If we were to do this we would have access to an entire cities worth of new students who may or may not have come across this opportunity before. However it would mean starting fresh research on the city and the students and it would also require us to make a lot of new contacts that we already have in Sheffield.
By the end of our 5 th year we hope to have a second ‘Pedals in Motion’ open on the opposite side of Sheffield. We plan to stock it with 30 bikes to start with and all of the same extra equipment that our other shop has. Prices will be the same; however we will have to hire a manager to run this shop for us, who we will have to pay an ordinary salary.
We plan to expand into other cities within the next 10 years, however we feel we need to do a vast amount of research into a number of different cities to find out which city provides the best opportunity for high returns.
Tactics
The first thing we need to do as a new business that needs to keep costs low is to find a number of people that are willing to work short irregular hours that they will not receive huge benefits from. Ideally we need to find a number of students who are willing to just work when we need them too and will be happy with any hours that they get.
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If we are too meet our 3 year targets, we need to establish our brand and create customer loyalty and in turn repeat business. This way we will have a constant demand for rentals over quieter seasons (winter and autumn) because the students will still be here to rent our bikes to get too and from University. Once our brand is established, it will not only be our advertising that will increase our demand. Word of mouth among students can have a profound effect and if the students that rent from us recommend us, we believe we will see a rise in demand.
We must invest in the correct forms of advertising at the correct times in order to appeal to our target market. If we provide the service that we offer, we believe that with the correct marketing, we will achieve the net profit for the first year that we have forecasted.
This will allow us to purchase more bikes and this is our overall plan for growth; market our business correctly, allow word of mouth to increase demand further, meet demand as it increases using retained profit.
Strategic issues
Short term threats-
Economic slowdown may cause students too just walk everywhere.
People may treat the bikes badly or be careless and get them stolen.
We may not get the demand that we expect.
Buses may decide to lower their prices.
Long term threats-
Cash flow may run dry and we may be unable to pay back debts resulting in liquidation.
We may try to expand too quickly resulting in lack of cash flow.
We may buy too many bikes when expanding resulting in more supply than demand.
Competitors may emerge in the market.
Rising energy costs will result in higher fixed costs and less profit.
Short term opportunities-
Increased bus prices and less buses on the University route.
Increased interest in getting fit among students.
Long term opportunities-
Oil prices continue to rise.
Cycling is being encouraged by the Council and Government.
Potentially low inflation in the next 3-5 years will mean cheaper supplies and the possibility of buying premises for much cheaper than they will be worth in the future.
Core values
Strive for perfection.
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Customer satisfaction.
Keep Sheffield green and clean.
Go that extra mile.
Our core values shape the way that we plan our business and will run our business, we believe that these core values are the difference between success and failure. It is not just having a good idea that creates a good business; it is the running of the business and the people that run it.
Striving for perfection is something that we will incorporate to everything that we do within our business, whether it is getting products or executing our marketing, we will not accept anything but the best and there will be no compromise.
Customer satisfaction is something that we must constantly strive for, we must never allow a customer to walk away without feeling that they have had the best service that they possibly could have had. They must feel that all of their needs were met and that they were left wanting for nothing (in terms of bike rentals).
Keeping Sheffield green and clean is a motivating factor behind why this business exists and why people will come to us. People should be proud to live in this city and Pedals in Motion
LTD and all that purchase from us and work with us are helping to make Sheffield cleaner and greener.
We believe that to deliver a service that is as close to perfection as possible and that delivers customer satisfaction, we must go that extra mile that most people wouldn’t be willing to go. We will make exceptions when they must be made and find work arounds when they must be found, to make sure that all customers are treat fairly and receive the perfect service where they get exactly what they need.
These values ensure that our customers are kept happy and always want to come back to us. They also make us (the owners), the staff and any partners feel good about what we do and know that we are doing something for this city and eventually for England, if not the
World.
Together we will get students off the buses and on to bikes to make a cleaner and greener
Sheffield that we can be proud of.
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3. Team Management a) Job Description b) Structure c) Training
Store opening hours 8:00am – 5pm
Delivery times 8:00am – 10am or 3pm – 5pm
Store open 7 days a week
Staff: Part-time (lees than 35 hours per week) – 2 people required (job sharing) a) Job Description:
In-Office :
Opening and closing the business, answer telephones, read and answer emails,
Operating the cash till, stock checks, dealing with change deliveries, help deal with any problems or issues a customer may have, promote the company in the best light, minor repairs on cycles e.g. puncture repairs, oil chain, minor dents.
At all times employees must be enthusiastic, helpful, excellent communication skills, hard working, vigilant, courteous, honest, and a team worker.
Collections and Deliveries :
Collection and delivery of bikes within 2 mile radius, inspection and monitor of bikes
(minimise rust and erosion) and mark down any damage incurred,
Must hold a clean valid UK driving license, efficient, aware, courteous, hard working, problem solving, good communication skills, presentable, those with a keen interest in bikes would be beneficial though not essential. b) Structure:
Our initial plan is to use students part-time for ‘Collections and Deliveries’ out of office hours, despite the increased staff costs that will occur. It is our assumption that students are more likely to work within these hours due to the education commitments. Our customers may also be happier to receive or prepare for collection bikes at these times.
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It is up-to Josh and I to run the business during office hours. Equally we will work 5 days each which we’ll alternate. Amongst the responsibilities outlined, we’ll look to make better negotiations amongst our suppliers, attain a better working relationship with the University for Promotion and minimise impact of competition, pay close attention to the market for any opportunities or pitfalls, process reports generated from sales, loss, etc.
Though our company may not have the most attractive propositions for students, we are confident our wages are competitive with most other companies. Our position and times remain flexible, exciting, increased responsibility, problem solving, and supportive. With the short hours and high wages, we feel that we can minimise absenteeism and turnover, whilst work hard on improving productivity. Our biggest challenge would be to retain staff during the summer holidays. We hope to negotiate weeks for when we can use them, and look to hire Temp student staff for the weeks when this is not possible.
In the future, we will look to expand and shift responsibility to staff to run the office. We will utilise students to the best of our ability, and look for those with admin and bike experience. This would remain part-time, though a negotiation during certain days and the holidays would need to be attained. It may also be possible to look for a bike mechanic amongst the student populous, to ensure reduced costs on maintenance and repairs. We’ll hope to target other universities with the same idea, and expand to Newcastle, Leeds and
Manchester in the following years. c) Training
Since our staff will be in contact with our customers face-to-face, it is essential that customer services skills and presentation is developed. We’ll look to improve on customer courteously, body language, building a rapport, dealing with disagreements or tricky situations, protection and security, health and safety, and up-selling.
Our training will be in house, but will follow the legal requirements documented, such as the
Health and Safety at Work Act (1974).
For the first 6 months, we will look to outsource our major repairs and maintenance. After this time, we’ll look to develop our staff into fixing these for us. We’ll look at training courses held on bike maintenance, and select an employee to repair our bikes. We’ll possibly use that employee to train others. If staff turnover has increased, we may look to train either myself or partner on bike maintenance. We may then train the individuals ourselves.
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4. Marketing a) SWOT and critical success factors b) Marketing research c) Market survey results d) Market Survey (competition) e) Bike Research f) Bike Accessories g) Distribution channels h) Tactical Marketing Plan
“Home to two universities with more than 50,000 students, plus Europe's largest further
education college” taken from Sheffield Hallam Website http://www.shu.ac.uk/university/campuses.html
. a) SWOT Analysis :
Strengths
Market Gap (students not aimed at directly, no other business in the area
rents bikes)
Prime location/large reach (2 universities)
Large resource (approx 50 000 students)
Innovative - Renting as opposed to selling
Cheap rentals on standard quality bikes.
– direct to students
Inexpensive to set-up, not many staffing hours needed/website easy to set-up and host, free business software available.
Marketing aimed directly at target audience – student magazines and radio
Only a small percentage of rentals needed from student populous for success
Minimal administration – website will mainly handle rentals – though phone and workshop will be administered by partnership.
Lake District – tourism and excellent selling point (USP)
Supportive Government schemes – help combat global warming/anti-pollution and congestion in cities.
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Weaknesses
Renting has not been done before in the area – reliability on expected income is
based on estimates.
Limited experience of bikes; delivery and timings may change.
Not very flexible - may not be able to cater for high demand.
Competitively against big brand names;
reputation is low (invest heavily in marketing).
Limited finance for investment in marketing and large number of products.
Product loss or damage could increment large loss in profits due to limited number of bikes.
Mainly seasonal product offered – spring and summer would need large number of rentals.
High commitment in partnership is critical to success (stable)
No management cover included, partners to run business during operating hours, students required outside of operating hours.
Reliability on students renting/returning the bikes in the condition they were delivered.
Require £4,000 loan in order to make a profit from our rentals.
Opportunities
Market has had limited impact from recession
Environmental awareness has encouraged people to cycle to work/university/leisure
Government support has increased investment in safe riding for cyclists in cities.
Excellent cycle routes close by – lead to Lake
District, Manchester, and series of hills/mountains for the more sport orientated.
Competitors do not offer many services to students e.g. discounts, rentals, or services.
A small company – appeal directly to local needs. Not obscured by objectives of a
large corporation.
Seasonal – Spring/Summer best. Expect high return due to weather, leisure and cultural influences.
Reasonable demand – result from surveys.
Could expand to larger target audience –
open stores at other universities or cater toward children/adults/tourists.
Possible Cycle school/training/club open for autumn and winter seasons – increase income at quieter periods.
Threats
Health and Safety – riding in cities, reputation could be damaged should anyone suffer serious injury or death.
Weather – Rain and Cold could deter customers.
Competition could change their strategy toward students – better services, greater financial backing, higher reputation, larger reach.
Face-to-Face has been obscured by technology
– may not build rapport.
Further recession - may impact further rentals; could threaten survival of business due to increased costs, cash flow issues during winter seasons, etc.
Reliability on students for supervising and securing bikes when being rented.
Keep secure reputation with university and
students – quality service and availability of product essential.
Limited range and number of products.
Contracts with suppliers – negotiate better rates for small number of product
Excellent public transport routes – trams, free bus services, trains, and cheap taxis available.
Market demand may not be as high as predicted – rentals never offered to students in this area before.
From the SWOT analysis, it is clear there is a large amount of risk associated with setting up a cycle rentals company. The demand is limited though available; competition strategy could overshadow a small company such as ours, and their intentions are widely unknown as this moment; the weather could have severe consequences with a seasonal business such as ours; and the reliability on students to survey/secure/return the bikes when being rented could prove hazardous.
On the other hand, there is a large resource to tap into in Sheffield that has seemingly gone unnoticed. Only a small percentage from this populous is needed to become successful, and the potential for expansion is fairly high too. Furthermore, with government support, environmental awareness, excellent location, a reassuring market gap, limited competitive intervention, and a confident market, there is much to be positive about in setting up our partnership.
It is important to look on improving our market position through marketing, building up a rapport amongst the university and students, build a strategy for retaining our customers
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and bikes, keep close attention on competition intentions, look to expand our array of products during peak seasons/fluctuations of demand, promote the excellent locations and benefits of our products, and keep our costs/overheads as low as possible. b) Marketing Research:
Sheffield Hallam University http://www.shu.ac.uk/
Telephone: 0114 225 5555
Their marketing is outsourced!
Exposed Magazine (Student magazine) http://www.exposedmagazine.co.uk/exposed_main.html
si@exposedmagazine.co.uk
Monthly distribution of 35000 (25000 within the city) covering Sheffield and
Doncaster
Available at ‘Hotspots’ such as pubs, cafés, student accommodation, supermarkets, and even hairdressers.
22% are students readers, 71% are professionals.
60% have bought a product or service as a result of an exposed article or advert.
FREE magazine available everywhere.
Rates:
Position
Premium Back Cover
Cost colour (£)
1250
Inside Front Cover 1144
-
-
Cost mono (£)
Other rates
Page 3 1144
Inside Front Cover 1144
Double Page Spread 1872
-
-
-
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Full Page
Half Page
Quarter Page
Eighth Page
1040
520
260
130
936
468
234
117
Discounts:
1.
12 issues 35%
2.
6 issues 25%
3.
3 issues 15%
4.
Charities 10%
5.
Pre-payment 10%
The Mercury Newspaper http://www.mercurynewspaper.co.uk
sales@mercurynewspaper.co.uk
Readership of over 80000, and distribution of 40000.
Printed each week
Offers a full design and print service (even full colour brochures) and an advertising and management service.
Web design and hosting from £99 – professional custom page including hosting
& domain registration, we can create simple web sites to full ecommerce and content management website
Advertising can cost as little as £5 per week.
Hallam FM (Radio) http://www.hallamfm.co.uk/sectional.asp?id=20893
Telephone: 0114 209 1082
Contact: Alex
13 weeks advertisement recommended
2 weeks every month, cross section throughout the day
£800-£1500 a week
370000 student listeners per week. 15-24 years old
Discount for longer term £800 for 13 weeks
On website and broadcast
Commercial writers, print marketing. £350
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Refreshers fair promotions
Galaxy 105 (Radio) http://www.galaxyyorkshire.co.uk/
Galaxy Yorkshire is the biggest commercial radio station outside of London, with 960,000 listeners tuning in each week.
Out of that 960,000 Galaxy reaches:
525,000 WOMEN 15+ - 23% of Yorkshire
435,000 MEN 15+ - 20% of Yorkshire
We also reach a staggering 656,000 homeowners – 20% - most with mortgages
Almost half of our audience have children under the age of 14
– that’s 1 in 3
(32%) of those individuals across Yorkshire - so lots of families (430,000)
Source: RAJAR Q2 2008
Ratecard prices based on a 30 second commercial
TIMEBANDS
WEEKDAYS WEEKENDS EAST
TRANSMITTER
SOUTH &
WEST
TOTAL
AREA
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0500-0700 N/A
0700-1100 N/A
1100-1600 N/A
1600-2000 N/A
2000-0200 N/A
0200-0500 N/A
N/A 0500-0700
£7
£14
N/A
N/A
0700-1600
1600-0200
£49
£20
N/A 0200-0500 £7
0500-0500 0500-0500 £42
0500-0200 0500-0200 £47
0500-2000 0500-2000 £61
£28
£97
£80
£52
£15
Leaflets/Flyers
£50
£176
£125
£97
£34
£12
£20
£84
£36
£12
£75
£85
£105
£66
£230
£170
£125
£42
£15
£23
£111
£47
£15
£98
£110
£139
DL
A5
A4
Size
A6
Front Reverse
80
80
99
85
105
140
160
1000
65
95
105
115
110
120
160
180
2000
80
Shared Leaflet (Distribution)
From £25 per 1000
Your leaflet alongside other non competing leaflets. A cost effective way to promote your business.
Jax Premium (Distribution)
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From £35 per 1000
Your leaflet plus a maximum of 2 other leaflet delivered to the areas of your choice. Free paper days avoided to maximise impact.
Sparkle (Website Design) http://www.causeconsultancy.co.uk/ info@sparkle.co.uk
Prices by Richard Byford (rough guide though can get direct quote by submitting exact details of what we require).
£300-400 website design
£17.50 two years (.co.uk) domain
Hosting £100 per year, first year free – though possible to do ourselves
Update by software package ‘cs3’ contribute which will update the server directly (£200)
WebcreationUK (Website Design) http://www.webcreationuk.com/ info@webcreationuk.com
Contact: Sam Griffin
“Dear Laurence,
All our work is custom made and we have proven ourselves now on over 3000 projects world-wide.
Our own site is ranked on page 1 under major search terms such as "website design" amongst millions of results which proves we know what we are doing and can do the same for you.
We offer unlimited design revisions, really! We will keep working until you are 100% happy.
WebCreation UK are a profitable business with years of experience and therefore we are here to support your business as it expands.
We will try to match any quote you receive whilst still offering the most professional and skilled web design service in the UK.
• No Ongoing Website Costs,
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Cost: £795 + VAT
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Please note that in order to have the ability to content manage products, pricing, description plus more, you will need to upgrade to our ecommerce online store solution at
£1395 + VAT
Estimated lead time for 1st design: 1 Week
TV Advertisement
This screen shot demonstrates the estimated costs of advertising on TV, although it is not massively accurate, we only required a vague idea of the costs. Using this ‘planning cost calculator’ we were able to gather that it would costs over £1000 per week to launch any sort of advertising campaign on television. As our turnover is not that much higher than this, we have realised that this is well beyond our budget and we have looked into alternative forms of advertising. c) Market Survey Results- Analysis
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Survey Results
Would you require extra equipment?
Do you visit a gym for fitness purposes?
Ride a bike to and from Uni?
No
Yes
Bus to uni?
0 10 20 30 40
As this chart shows, of the 50 people that took part in our survey, 29 people said that they took a bus to University whilst 21 people said that they did not. Whilst no proper conclusions can be drawn from this one result, it at least shows that a reasonable number of students live far enough away to require a bus which could easily be replaced by a bike.
It gives a much better idea of the number of potential customers however. Of the 50 people, 31 of them would be willing to ride bikes, this included people who walked to
University, however some of the people who rode buses were not willing too because they lived too far away.
We asked “Do you visit a gym for fitness purposes?” simply to see whether we could use the fitness aspect as part of our advertising campaign; students paying to go to the gym can pay to travel to University and get fit at the same time. Thirty one people did visit a gym whilst
19 people didn’t, this means that it is definitely worth including the fitness aspect of bike riding in our advertising campaign because well over half of the people we asked are interested in their fitness and are willing to pay to stay fit.
To get an idea of whether there is an opportunity to make money through even more than just renting bikes, we asked people if they would require other equipment such as helmets, lights etc. 40 of the 50 people said that they would require this equipment and so we will be purchasing other stock besides bikes to meet with the potential demand.
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3. What is the most important aspect of a bike?
Styling
Comfort
Speed
Safety
Size and manouverability
Weight
For us to get a better idea of what students would want from a bike, we questioned them about what they felt was the most important aspect in a bike. This way if we have to compromise our variable costs due to insufficient capital, we can ensure that the cheaper bikes we buy at least satisfy the most important criteria to the target market. This means that if our budget restrains us from buying the bikes that fulfil all/most of the criteria, then we will focus on getting comfortable bikes because comfort received 22 votes while the closest to this were safety and styling both receiving 9. The conclusion drawn from this is that people will most likely be more concerned with comfort than any other aspect of a bike. However if possible we will fulfil as many of the criteria as possible.
4. What area of Sheffield do you live in
25
20
15
10
5
0
Series1
Area
To get an idea of where most of the students were living, and in particular where the students who caught buses and would be willing to ride a bike instead were living, we asked them what area of Sheffield they lived in. Ecclesall Road was the most common area of
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residence with 20 of the 50 people living there, however this is not all that we were looking at. Thirteen people lived in The City Centre and ten people didn’t live in Sheffield making these the second and third most popular options, however we discovered through talking to these people that the people in The City Centre didn’t live far enough away from University to need a bike, whilst most of the people who didn’t live in Sheffield lived too far away from the University to be able to bike there.
In contrast to this, almost all of the people who lived on Ecclesall Road took the bus to
University and said that they would be willing to ride a bike to University. These people are the perfect target market because they live local enough to ride a bike to University, they are willing to ride a bike to University and because they ride a bus daily, they are already paying costs for travel.
5. Which of the following bikes would you most like to ride to
University and lectures?
25
20
No. of people
15
10
5
Series1
0
Road Bike Hybrid Mountain
Bike
Folding BMX
Type of bike
We asked this question to get a better insight into what bikes students really wanted. Although they told us what they felt were the most important aspects of a bike, they won’t necessarily pick a bike based solely on the most important aspect. Many people may be willing to compromise in many different ways to get the best overall bike e.g. They may prefer a moderately comfortable bike that looks good and goes fast to an extremely comfortable bike that is slow and looks awful. Overall by asking this question we get a better idea of the actual bikes that people want, not just the most important aspects.
From the result, we found that the most popular bikes were Hybrids and Mountain bikes, these two types of bike incorporate all key aspects to create the best overall bikes. Whilst folding bikes are the probably the most comfortable and road bikes are the fastest, they both leave a lot to be desired in other areas and so the people didn’t want them.
Overall it is evident that people want good all round bikes and not bikes that specialise in one area, therefore the majority of our stock will be made up of either Hybrids and
Mountain bikes or possibly to cut costs primarily only mountain bikes as these are the cheapest but are still popular.
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6. How far would you be willing to go to pick up a bike?
Up to 1 mile
Up to 1/2 a mile
Up to 500m
Up to 100m
Less than 100m
Series1
0 5 10 15 20 25 30
No. of people
By seeing how far people would be willing to g to pick up a bike, we got a better idea of where we were able to locate and the ideal method of distribution. If the majority of our target market was based in town and we were based 4 miles from the city centre, we would lose the majority of those people to the fact that it would not be worth walking all that way when they could get to university quicker than that.
As it stands however, we have discovered that the majority of our target market is based on
Ecclesall Road, we have located premises based on Ecclesall Road well within a mile of the majority of Ecclesall Roads student accommodation meaning that we are able to deliver the bikes to the majority of our target market.
7. Would you want to rent a bike for-
18
16
14
12
No. of people
10
8
6
4
2
0
Series1
1 day 5 days 1 week 2 weeks 3 weeks 1 month
Period of time
To get an idea of the rental periods we would provide and the potential special offers that people would be interested in, we asked how long people would want the bikes for at any one time. One week and one month both received 18 peoples interest and so, however to rent for a month people will have to rent on certain days as the bikes will be taken in to be
25
checked and maintained on a certain date each month and so we will only be offering weekly rentals. However we know that some people will not want to commit for more than one day at a time and so we will also be offering 1 day. Ideally we could offer a much larger range of times that people could rent for, however because we have to take the bikes in for maintenance each month for a day, things become more complicated and using this method avoids confusion and things going wrong.
8. How much (approx) do you spend on travel per week?
£15-20
£10-15
£8-10
£6-8
Series1
£2-4
£0-2
0 5 10 15
No. of people
As well as researching the bus services to see the deals they currently offer to students, we also thought it would be a good idea to see how much students actually spent in a week on travelling. If we know how much they spend at the moment, it gives us a much better idea of how much we will be able to get away with charging. If people are catching buses five times a day, even with the cheap bus prices the cost will add up; however with the bikes, the students can rent them, pay once, and go anywhere they want with no route or time limitations. The price for the bikes will most likely be overall more expensive; however the perks of having their own transport will hopefully cause people to overlook this extra cost.
Overall the results were extremely scattered, the people living out of Sheffield were mainly paying between £15- £20 whilst the people in the city centre were paying between £0 and
£2.
The majority of people living on Ecclesall Road were paying between £6- £10 per week on average, however many people said that they often paid more as they often had to catch more than two buses per days.
26
Also as the case study says that the bus prices will be rising, this puts us at less of a disadvantage in terms of pricing and means students may start to look for alternative forms of travel as it is their route that is being the most negatively affected.
10. What form of advertisement influences you the most?
200
180
160
140
120
100
80
60
40
20
0
Series1
TV
W eb si te s
P ost er s
R ad io
B illb oa rd s
M ag azi ne s
N ew sp ap er s
Forms of advertisement
In this question we asked people to rate each form of advertisement from 1-5 with 1 being the least influential on them and 5 being the most influential on them. This way we can gain a better idea of what types of advertisement are the most influential and therefore worth looking into and we can then weigh up the benefits of each form of advertisement against the costs. As expected TV is the most influential form of advertisement, however it costs thousands of pounds for a thirty second advertisement in peak time and requires far more capital than we have.
Websites were a close second to TV and to advertise on many websites costs a lot less money; however the websites that we would want to advertise still cost well above our budget and so we’re going to have to rule this form of advertising out also. As we must advertise to a budget, we have made a compromise. We would like to advertise through the most affective means, however at the present time we will be using posters, leaflets and a magazine because these still have a profound effect and cost a lot less.
27
11. What local radio stations do you listen to?
Other
Rush Radio
Radio Sheffield
Hallam FM
Galaxy 105
Forge Radio
Sure Radio
0 5 10 15 20
No. of people
25 30 35
Series1
To help us devise a good marketing plan, we thought it would be sensible to get an idea of the kind of stations the student listened too, this way if we found that radio was a big influence, we would know which radio stations to look at trying to advertise on. As it is, radio does not appear to have as much influence as both Websites and Posters which will both be a lower cost than radio. However if we were too look into advertising on radio, we now know to advertise on either Hallam FM or Galaxy 105.
12. What magazines or Newspapers do you read?
Other
Daily Star
Exposed Magazine
Stiletto
Route 57
Mens Health
Mens Fitness
0 5 10
No. of people
15 20
Series1
28
We also thought we should look at the kind of magazines students read, once again the reason for this was that if we found magazines or newspapers to be a big influence on people then we would have an idea of what magazines or newspapers to try and advertise in. We found that most of the ‘other’ magazines or newspapers were not local and definitely would not be worth advertising in. However Exposed Magazine and Route 57; the two
University magazines both receive some viewing and it is still definitely worth looking into advertising through these as the cost should be low.
13. What times would you want to pick up and drop off the bike?
6pm-9pm
2pm-6pm
10am-2pm Series1
7am-10am
0 5 10
No. of people
15 20
To give us an idea of the best opening hours for us, we asked people when they felt would be best for them to pick up/drop off their bike. We found that the earlier times were more popular; however there were people that felt as late as 6-9pm would be best for them. The best thing for us to do is weigh up the possible costs and the possible benefits of staying open later i.e. the increased cost of labour against the increased rentals.
29
14. During what seasons would you use this service?
All
Summer
Spring
Winter
Autumn
40
35
30
25
20
15
10
5
0
This question gave us an idea about two important things; first of all it allowed us to weigh up how many people would be using the service more on an entertainment/temporary basis and would not be a loyal and reliable customer base. It also allowed us to predict the less profitable seasons so that we can safeguard ourselves in order to avoid having negative cash flow by trying to retain some capital and cut spending and costs in times such as winter e.g. by closing earlier, advertising less etc.
We may also have to consider taking on more labour during the summer months and vice versa during winter and perhaps even renting extra bikes during the summer to meet the higher demand that the hot weather will bring with it.
16. If you needed extra equipment, would you prefer to;
Series1
Rent Buy
Rent/Buy
30
We also asked everyone whether they would prefer to rent equipment at a small extra cost or buy it straight from us. The majority of the people who said they would buy it were the people who already owned equipment, however there is no harm in both selling and renting our equipment out and so we will make both options available.
17. Which of the below names is your favourite for a student bike rental shop?
Student Cycles
The Cycle lane
Buses to Bikes
Student Travel
Pedals in Motion
To get the opinions of the students, we decided to shows all of the best names we could think of to them and asked them what name was their favourite for a student bike rental shop. ‘Pedals in Motion’ came first in this vote with 19 people preferring this name; we have decided to go with popular demand and have decided to call ourselves ‘Pedals in Motion’. d) Market Research Results
31
32
33
34
35
36
Introduction
Assessing the market was paramount to ensuring we had a gap in the market, but also to ascertain whether this was sustainable. I had decided to review three of the big direct competitors in terms of success, their future aspirations for the market, cliental, and how
37
they differentiate. This will hopefully spawn new ideas in how we should run our business, but also evaluate what opportunities they have missed toward their target audience.
Market performance:
Having interviewed some of the key competitors in the market it was clear some were benefiting more substantially than others. The economic downturn/recession has had an impact on all the competitors, whether positive or negative. The impact this has had on society means that people are less likely to pay for leisure or luxury products, such as bikes.
On the other hand, 2008 saw a 26% increase in bike sales (reported by ‘Black Horse’). It seems that in light of the current climate “cycle retailers were able to benefit from offering finance facilities to their customers in order to drive higher value sales” 1 . Results taken in
June 2008 were particularly impressive as they showed a 33% increase in sales compared to the previous year. This isn’t truly reflected in the results taken from the competitors I had questioned, though this may be due to a number of reasons such as varied target audience such as ‘JE James’, who have been able to profit from the higher end of the market.
However, assuming the economy will remain the same in the next 6-12 months, the rising fuel costs from our indirect competitors such as personal cars, buses, and trams, have increased costs, and may allow students to search for cheaper ways to travel locally.
Environmental Impact:
In line with environmental awareness, the government injected £140 million in January
2008, aimed at increasing the awareness in cycling safely 2 . Since then, the government has invested £100 million in ‘Cycling Cities’ 3 , and cycling has been highlighted by the
‘Environment Agency’ as an essential way of reducing carbon emissions and congestion across the UK 4 .
I am confident cycle market has a strong, positive future ahead, and for more generations to come. ‘JE James’, ‘Decathlon’ and ‘Halfords’ representatives have all claimed the environmental awareness has in some way made a beneficial impact to their businesses. A combination of cities becoming more user friendly, the government aiming to reduce carbon emissions, more children being taught cycle safety and cycling being a cheaper alternative to the rising cost of fuel will enable cycle shops to profit from this - if focused correctly. This will inevitably affect sales to students in the future who will have adopted a greater interest in cycles and the environment.
1 http://cms.actsmart.biz/uploaded_files/cycles-files/BH%202008%20figures.pdf
2 http://www.direct.gov.uk/en/Nl1/Newsroom/DG_072169
3 http://news.bbc.co.uk/1/hi/england/bristol/7462791.stm
4 http://www.environment-agency.gov.uk/research/library/position/41181.aspx
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Competitive advantage:
Between the three direct competitors there isn’t too much difference on service, range and delivery. All three companies meet the market demand for cycle sales, and there is no key significant product that seems to make customers biased, except in how they cater toward their target audience.
‘Halfords’ has its own workshop and staff, catered directly to casual customers searching for bikes. Within the workshop are a repair centre and repair team, sales team, and insurance information. Adjacent to this is a display of all the bikes they currently sell. The staff are experienced, knowledgeable of the market and trends, and great at tailoring to customer’s needs. The bikes are clearly stacked, clean and tidy. From this, ‘Halfords’ have appealed to fast, efficient customer service, to increase productivity, and limit confusion and mistakes on both parties.
‘Decathlon’ have rivalled a similar approach, but also provides a workshop, which is separate to its sales team. This has created more space to display the bikes on sale, and has also reduced queues at the same time as keeping the attention focused on the sale, and not on anyone reporting faulty or damaged bikes. I was also able to analyse the ‘sales team’s’ working knowledge of the market, specific trends, and any experience they have in this sector. It was thorough, attentive, and again, efficient.
‘JE James’, who specifically only deals with bikes, is a specialised store that caters to all areas, with attention to high-end bikes that ‘Halfords’ and ‘Decathlon’ are exempt. The store is split into two buildings, across the road from one another, one containing retail team, and the other focussing on the sport and specialist side. Their workshop is based in the specialist area, to draw attention to the services they offer. The manager I spoke to have a great understanding of bikes, events, trends, customers, and what was essential to the buyer. The shop staff present seemed to reflect this in their technique when speaking to customers. As a result, ‘JE James’ appeals to a greater range and caters custom bikes to the customer compared to standard.
All three stores also had a great array of equipment on show, including helmets, locks, lights and clothing. ‘JE James’ however, provided a far greater range of accessories and carry big brand names with its products. Although more heavily priced compared to ‘Decathlon’ and
‘Halfords’, they appeal to the more fashion conscious and those more knowledgeable of the product. However, with its flexibility, it can also stretch to the lower end. Its advantage is its knowledge and experience which are reflected through its sales team. Since all three stores are national chains, they have invested a lot into marketing consisting of websites, posters, leaflets, and billboards. ‘Decathlon’ even has a vehicle circle the city with its brand name in view. Their location is also essential, all centred close to the city, and the universities, which make them, direct competitors with each other. It is also where the general populous is and so is a prime location where to base our business.
39
Other competition:
That fact that all three stores, chose each other as main competitors, and did not name any local cycle stores, tends to acknowledge that they only consider each other as the greater threat. However, I feel it prudent to look at some local stores that would be more adaptable to local needs and offer something the bigger stores can not. As the business we propose to set up will start off a small local cycle store, I have also taken a look on the websites of local stores in the area.
‘Foster’s Cycles’ 5 located on the outskirts of Sheffield sells a wide range of bikes, at all prices, catering for all customers. Although not as well known as the larger competitors, it provides a varied range and all the services you could find at the larger stores. It is also flexible to local needs, and can adapt its range accordingly. It is, however, located a considerable distance from the universities themselves, and even from the city centre.
Upon Searching ‘Foster’s Cycles’ website, I could not identify any student offers, bike rental services or even anything increasingly appealing compared to the larger stores. Though it does sell equipment and has a bike repair service which enables it to remain competitive in all areas.
‘Langsett Cycles’ found at http://www.langsettcycles.co.uk/ may seem a greater threat due to its location (nearer to the city), and its offer of ‘family cycling’ (in the form of a trail gator bar). The store equally caters for all groups; price ranges from £84 to £999.98, accessories, and a workshop. Accessories and equipment are available, as well as a repair shop in store.
On the other hand, there are no student offers, no exact target audience, and no noticeable distinction that will separate it from the other cycle stores. More importantly, ‘Langsett’ does not rent bikes and so is only concerned with selling.
Student Market:
The most important element to this research was how the three companies catered directly at students. From the survey, it was clear that there is a demand from the student market.
However, it was integral to our business if this market was targeted correctly.
What ‘Halfords’ and ‘Decathlon’ have noticed is the most popular bike they sell amongst students. Identifying the key products is essential to exploiting the student market.
‘Halfords’ have claimed their ‘Apollo XC 26.5 Black’ 6 and ‘Decathlon’ has chosen the ‘5.2
Rock Rider Sport MTB’ 7 . Both are mountain bikes, both black in colour, and both under
6
5 http://www.fosterscycles.co.uk/ http://www.halfords.com/webapp/wcs/stores/servlet/SearchCmd?srch=apollo+mountain+bike&action=search&s toreId=10001&catalogId=10151&langId=-1&x=36&y=6
7 http://www.decathlon.co.uk/EN/sport-mtb-3962638/
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£200. This will be a good starting point in assessing what type of bike we need in our stores in terms of range and style.
‘JE James’ surprisingly didn’t notice a particular trend amongst students but claimed it varied for each person, and declined to group people.
On the other hand, although a product had been selected there were not many offers to entice students from either company. ‘JE James’ offers a 10% discount, but as the majority of its bikes are highly priced anyway, this could deter students purchasing from them. This was the only significant discount offered to students from any of the stores, and ‘JE James’ were more than aware of this.
‘Halfords’ have become aware of when sales peak through the year with students, and offer deals accordingly. However, these sales aren’t highly focused, as made clear by the results.
No ‘student’ card has been made available, and no real market sector has been developed by either company.
‘Decathlon’ offers a wide selection at low price, and gave a rough estimate as to how much market they think they have from the student body. They have a deal with the Alumni staff which offer a small discount (and wouldn’t say in exchange for what) and so are better equipped to deal with students. But, as far as I can see this hasn’t been pushed, and when visiting the university, no deals or advertisement was clearly displayed.
We can see from the results the exploitation of the market has not been pushed to the full extent. Although we would have to tread carefully with our company in suitable offers, we have the flexibility to offer more to students if we want to. This makes our target audience even more ideal.
Conclusion:
Overall, the results have given me a clear picture of the market, its condition, and future prospects. It seems that although there are competitors within the industry, though may not be specifically focused toward our target audience. Nor are they particularly connected with the university or student populous. They do not ‘hire’ bikes, and so technically, there is a gap within the market we can exploit and use to our advantage. The environment and market is also with us, with critical focus on bike safety, roads being implemented in cities, and the Sheffield countryside which has many cycle lanes. More importantly, the competitors do not seem particularly worried about future sales or competition, except
‘Decathlon’. With this in mind, we shouldn’t come under too much hostile pressure or constraint to deliver our product to the market. As a result, this has reinforced our decision to provide a service in the (push) bike industry.
Evaluation:
Assessing the results gathered, there are a few factors that could weaken the validity of the sources and the strength of the research in general. First, it would have been more fair and
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equal to have interviewed a person in the same position in all three stores. A ‘manager’ would have market information, figures, KPI’s, P&L, SWOT analysis sheets, and yearly results that a ‘sales assistant’ may not have access to. On the other hand, ‘sales assistants’ deal with customers everyday, know they sales they make on bikes, would recognise trends, and number or customers they sell to each day. From this, I can see that there is no balance between the stores, and it is hard to rule one opinion out against another. I feel it would have been better to have interviewed all ‘sales assistants’ to get a fairer view, even if this risks compromising the result. Secondly, although I did some background research on some of the smaller stores, it would have been more thorough and detailed to have interviewed staff from the local stores. My assumption of the market is based upon information gathered from employees at those stores, and it would have been more complete to have questioned some of the staff at the local stores. I originally dismissed this due to the larger stores not seeing the local shops as a direct threat. In hindsight, I feel it was a mistake to dismiss this so easily as they may prove to be our greatest threat. Finally, the information gathered may not be entirely accurate due to have no hard evidence from the competitors.
Although they were happy to talk to me about personal business information, nothing was provided to reaffirm their points; it may be possible that some of the sources may have not wanted to divulge true information on the questions due to trust or sensitivity of the market. From this, the information I have gathered we should use with care and not take the facts for word. It has however, given us an indication into how our business should start and target our audience. Also, what we can offer over our competitors to become number one within the industry for universities. e) Bike Research
Bike Cat Brand Bike Name Price Site
1
2
3
4
7
BMX
BMX
BMX
BMX
Hybrid
Dawes
Dawes
BeOne
Perv
Claud
Street BMX 2009
Grind BMX 2009
Twice 2007
Shackle BMX
Urban 100 gents
£134.99 link
£129.99 link
£159.99 link
£174.99 link link
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8
9
11
13
14
15
16
17
18
Hybrid
Hybrid
Hybrid
Folding
Folding
Folding
Hardtails
Hardtails
Hardtails
19 Hardtails
20
Mountain
Bikes
21
Mountain
Bikes
22
Mountain
Bikes
23
24
25
Tandem
Tandem
Tandem
Butler
Saracen Venturer 0.5 Ladies
Saracen Venturer 0.5 gents
Electra
Dahon
Dahon
Dawes
Viper
Viper
Viper
Raleigh
Optima
Cruiser 1sp Ladies
Espresso 2008
Jack 2008
Kingpin Folder
TR 0.0 Hardtail Bike 2008
Crazy Boy Hardtail Bike
2007
TR 1.0 Hardtail Bike 2008
Saracen Element 2 2008
Destiny
Bear Trap
Scorpian Cult
Dawes
Reflex
Viking
Duet Twin 2009 Tandem
Bike
Timberline 17/15 Tandem
Black
Saratoga Tandem Bike
£145.99
£159.99 link
£159.99 link
£209.99 link
£299.99 link
£339.99 link
£280.00 link
£129.99 link
£149.99 link
£159.99 link
£168.00 link
£136.99 link
£144.99 link
£147.99 link
£561.99 link
£399.99 link link
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£399.99
£341.57 link 26
27
Road
Road
Dawes Giro 300
Iron
Horse
Transit 0 Fixed 2008
Hybrid Bike £319.99 link
£279.99 link 28 Road BeOne Briza 2.0 2008
Different bike varieties:
Mountain Bikes - Suitable for rough terrain, dirt roads, steep hills, etc. All surfaces. Front and rear suspension, wide tyres, and flat handle bars. 21sp
Cruisers - Wide tyres, wide seats, and often just a single gear.
Most commonly seen at the beach. Flat terrain comfort bike.
BMX - Stunt Bike. Not really suitable for roads or paths. 1sp
Tandem - on and off road riding. Can go very fast with experienced cyclists.
Hybrid – the characteristics of both road and mountain bike -
Sturdy, comfortable and fast, and ideal for riding on streets and bike paths.
Road - road bicycles have drop handlebars and multiple gears, although there are single and fixed gear varieties. It is also used less formally for any bicycle designed for use primarily on paved roads, as opposed to off-road terrain.
8
Gents Dual Suspension DISC Mountain Bike FREE P&P http://stores.channeladvisor.com/fellia/Items/dis26sd?&caSKU=dis26sd&caTitle=26%22%2
0Gents%20Dual%20Suspension%20DISC%20%20Mountain%20Bike%20FREE%20P%26P
Price: £90.00
8 http://en.wikipedia.org/wiki/Road_bicycle
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Ladies Hi-Spec Mountain Bike - FREE P&P http://stores.channeladvisor.com/fellia/Items/227sd?&caSKU=227sd&caTitle=Dunlop%20
26%22Wheel%20Ladies%20Hi-Spec%20Mountain%20Bike%20-%20FREE%20P%26P
Price: £80.00 f) Bike Accessories:
Brand Type Cost
Catered for Site Equipment
Anti-pollution
Masks
Anti-pollution
Masks
Anti-pollution
Masks
Helmets
Helmets
Helmets
Light Set
Light Set
Light Set
Light Set
Pump
Pump
Pump
Pump
Lock
Respro
Respro
Respro
Bell
Respro
Reelight
Cateye
LOX
Techno
Bandit Scarf Anti-pollution
Metro
Specialized Air 8
£29.35 all
£18.59 image
£15.80 image
£27.99 all
£30.00 Men
Venture
Hi-Viz Helmet Nitesite £13.94 all
Dynamo and Self Charging kit
£26.42 all
EL135 & LD130 £19.57 all
Smart
Bspoke n/a
LED 1/2 Watt set
Light set 4032
£20.45 all
£12.99 all
£11.73 all
Innovations Microflate Nano Pump
Wrench
Force ATB Pump for force £15.00 all
£9.78 all
Blackburn Mountain Air Pump
Specialized Windpipe Frame/Shock Pump £24.95 all
Combi Flex 400 Combination lock
£13.99 all
Link
Link
Link
Link
Link
Link
Link
Link
Link
Link
Link
Link
Link
Link
Link
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Lock
Lock
Magnum CCL3 3017 Coil Cable Lock
£14.99 all
ABUS
ABUS
Primo 590-180 Coil Cycle lock
BUFFO 34 230mm
£9.95 all
£19.12 all
Lock
Cycle Tour Maps
UK
National Cycle Network Maps £5.86 all
Link
Link
Link
Link
Lights: http://www.cyclestore.co.uk/productDetails.asp?productID=7948&categoryID=108
Cateye HL-350/LD170 LIGHTSET CLEARANCE PRICE 47% OFF
Our price: £7.77
Locks: http://stores.channeladvisor.com/fellia/Items/lk0001b?sck=4040854&caSKU=lk0001b&caTi tle=Cycle%20Bicycle%20Lock%20%20for%20your%20Bike
Bike Lock-
Price £9.00
Cycle Helmet: http://www.cyclexpress.co.uk/products/HiViz_Helmet_band_Nitesite.aspx
Cycle Helmet
Price - £10.18 g) Distribution Channels:
Internet
Sales:
Advantages
Wide Reach – large audience, anyone with internet access is able to purchase from our company.
Flexible – open 24/7 product can be ordered anytime, any day.
Cost effective – relatively cheap to set-up and run. Free business software is available to keep track
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Disadvantages
Shuns away those without internet access
Difficult to attract customers - will have to rely on word of mouth and search engines to drive rentals.
Internet crime – may be relatively hard to protect against hackers, viruses, and internet thieves, and
Telephone: of business departments, and it is quick and easy to change and update information.
Advertisement – Customers are able to explore products in much more detail with audio/video clips, references, ratings, comparisons, and downloads. This would allow for more marketing.
Feedback – can be gained much faster and easier using the internet. Surveys on customer service, site information, and recommendations may persuade customers to fill these out online more readily.
Service – new products, availability, prices, and deliveries can all be posted and updated immediately. This allows for faster access and minimal loss of service.
Immediate Service – can answer any questions or queries immediately, and process transactions.
Security – an avenue for those not comfortable submitting their card details online, is not subject to hacking or internet fraud, and personal questions can be asked to identify the user.
Increased flexibility – can cater directly to special requests e.g. hire for longer periods, other products, certain days, etc.
Possible to establish a rapport – project personality through phone call. First contact customer has through business.
Face-to Rapport – most important and
47 may be increasingly expensive in providing software to ensure security. This will also make people more wary about submitting their card details online.
Minimal business to client contact – hard to encourage customers back with no extensive rapport being established. New marketing strategies may need to be investigated.
Longer transaction cycle – and element of notice will be needed to act upon request. Customers will need to process in advance which could deter our students.
Subject to human error – make mistakes, double book, or misunderstand the customer’s demands.
Still a victim of fraud – stolen card details could be used, or a transaction can be made in another person’s name.
Operation – only available during business hours. May conflict with other timetables.
Business lines may prove costly – extra staff may need to be hired to handle calls.
Reliant on the staff to give excellent customer service – training, hard to find suitable candidate for position, reputation can be damaged by a bad call.
Increased traffic – other businesses, sales groups, or questions can hold up the line for transactions.
Products cannot be viewed or inspected.
Staffing hours – extra costs
Face successful process of building a rapport amongst students.
Inspection – students will be able to view the bikes and know exactly what they are renting.
Cater – towards individual needs.
More flexible in understanding and supplying to the customer.
Immediate transactions – students can rent bikes immediately (if available).
Attractable – easy access to those that don’t want to use technology.
Impulse buy – customers may not be aware of company, more inclined to re-visit
Easy marketing – centre for customer attention.
generated on staffing desk.
Reliant on staff being presentable, pleasant, and knowledgeable of products. (excellent customer service)
Reaches to a small audience – appeals to local needs only.
Hard to generate any feedback from the rental – students may not want to spend their time filling out forms within the shop.
Over/shorts – balancing cash flow within the business. Losing money by giving the customer the wrong change, short changing them, or forgetting to put through a transaction. Also, subject to theft from staff.
We have decided to use the above distribution channels in order to appeal to all sectors in the market. This will give us the flexibility and accessibility to successfully rent bikes without a delay or missed customer. We can also focus on the customer demands immediately in order to build a rapport and generate future rents. h) Tactical Marketing Plan
Using the Marketing Mix (Product, Price, Place, and Promotion) and having identified the direct and indirect competitors within the market, we can produce a clear marketing strategy.
Customers are able to rent bikes at a cheap rate catered mainly on leisure, with the option of using it as an alternative to local transport. Based in an excellent location, renowned cycle lanes with the option of catering toward two universities, it is the only cycle shop in the area that will rent bikes to students. This will make an exciting, healthy alternative and affordable activity for everyone, regardless of fitness or experience.
With the many students in the city, we initially hope to successfully target around 0.02%
(around 14 a day) of the student populace, with the expected marketing and word of mouth to increase steadily to around 30 rentals a day. Our main focus is breaking-even in the first year, after we hope to clone our idea for other universities close by.
Place:
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We have chosen Sheffield because of the surroundings it offers and because of the increased chances for success indirectly targeting two universities. Our main focus is on
Sheffield Hallam University; however, as most of our advertisement will be in student magazines (Exposed) and leaflets, we are sure to take some people from Sheffield University too.
With more than 50 000 students 9 occupying the area, it is possible to target a small percentage and in return make a profit. Though this assumption is based on laws of averages, that at least 1 per 1000 students would want to rent a bike once we’re established, our survey has confirmed that there is a demand for such a product, and we have confidence this will enable us to expand.
Product:
Since we will rent our bikes as opposed to selling them, the lifecycle of the bikes will be dependant upon repair, style, and upgrades available. It would not be necessary to purchase High-Tec bikes due to their exhaustive use, and the equipment is provided for the use of protection and accessibility only.
We have chosen the ‘Gents Dual Suspension DISC Mountain Bike’ and ‘Ladies Hi-Spec
Mountain Bike’ for their durability and price in the local region. The equipment themselves are also pretty low priced, and look to expand on this in the future years to come.
We estimate it will take between 2-3 years before new bikes will need to be sourced.
Promotion:
It is important that students recognise the difference and opportunities that are open to them. Our ability to recognise what students pay attention to, and what will target the largest audience is key to becoming successful in the vital first few months we become operational.
We will use the following to promote our products
‘Exposed Magazine’ (quarter page, Colour, 12 issues)
Leaflets distribution
Word of Mouth
Rapport with University – future possibly to advertise on their internal network.
We will focus our advertisement on
‘Cycle rentals’ any day you want, just for students!
Our cheap price – equipment included, a
9 Taken from Hallam Universities website http://www.shu.ac.uk/university/campuses.html
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Benefits - leisure, work or lectures, fitness, and exploration.
Having these key strategies in place, we should maximise advertising to our target group, with the minimum of costs.
Price:
Having researched all areas, we have found magazine and leaflet distribution to be the most effective. Not only because they directly target our audience, but because they are cheap avenues.
Having looked at the average price per bike of our direct competitors, we are charging between 2.8% to 4% of the cost to buy a bike. This is excellent value for money, and allows us to under-cut our competition without the need for ‘skimming’ the market.
Since price in relation to local transport is our major selling point, we must remain as low as possible to the student, but in turn make a profit. Our prices will rise with inflation, but suitable low in comparison to buying. Also, with expansion we’ll look to develop our range and quantity. This will increase flexibility in our pricing and essentially generate more capital.
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5. Financial budgets and forecasts
Variable Costs
Men’s bike - £90.00 per unit
Women’s bike - £80.00 per unit
Lights- £7.77 per unit
Locks- £9.00 per unit
Helmets- £12.99 per unit
Puncture repair kit- £2.93 per unit
Fixed Costs
Warehouse rental- £2400 PA
Business Insurance- £1000 PA
Labour- £8825.00 PA (£6.00/£7.00 ph)
Posters- £90 PM
Leaflets- £65 PM
Distribution- £25 PM
Exposed Magazine- £2028
Maintenance- £60 PM
Electricity- £33.33 PM
Gas- £25.00 PM
Water- £16.50 PM
Business registration- £23.99
Prices-
One day basic rental- £2.80
One week basic rental- £18.00
One day extras (lock, lights, helmet) rental- £3.20
One week extras rental- £18.50
The Cash flow Forecast-
We have tested out various ‘What if’ scenarios in order to discover what may happen in different circumstances. Through this we decided that our original cash flow did not look as good as it had the potential to and we had to make some changes to the way we planned on spending. First of all we realised that we required a loan in order to afford enough bikes to bring in a high enough revenue to turn a profit. We also needed to charge slightly higher prices in order to make a profit and not end up unable to pay our creditors. Finally we decided were able to hire staff on a more regular basis without going into the red as we decided not to pay ourselves a wage and also to charge the slightly higher prices.
The cash flows discussed below have been edited to reflect these changes.
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Our cash flow forecast shows that if we start off slowly and begin to make a reasonable amount of rentals for a few months before the end of the year, our closing balance for year 1 w ill be £15,130.53. This will be reinvested for year 2 and with it we will buy another 24 bikes, if demand meets our expectations then by the end of year 2 we will have a closing balance of £37,549.85.
Once again we will reinvest and we have forecasted that by the end of year 3 we have the potential to have a total of £85,271 in our business account with no creditors remaining.
We have also done a pessimistic cash flow forecast for three years where we have imagined a scenario where sales are very low for the first two years and are still not outstandingly high by year 3. In this scenario we would still manage to break evening year 1, however only in the tenth month with a resulting closing balance of £565.07. As there is not really any money to reinvest, and in this scenario demand is not meeting supply, we would not purchase any more stock in the second year. As a result our overheads would be lower and at the end of year 2 we would have a closing balance of
£7,502. With a slightly more successfully year an d more money to reinvest, we would purchase a further twelve bikes in year 3 for £1020; our closing balance for year 3 would be £25,670.31.
Business loan- In order to have enough capital to pay our bills and purchase enough bikes to make a decent profit, we have decided that a loan of £2,000 is required. On a loan of this size we expect to pay approximately 13% interest (see appendix) which will result in us paying £808.68 a year for three years.
We have decided on £2000 for two reasons; First of all it is because we have £2000 of our own start up capital and we know that banks are usually only willing to lend out whatever a business can match.
Secondly we believe that £2000 is enough money to buy all the stock we need and keep us out of the Death Valley without it being so much that we can only afford to pay the interest on it without actually getting rid of the loan.
After forecasting this decision it looks to be a good decision and with our realistic cash flow we are managing to stay in the black.
The Profit and Loss account
The profit and Loss account shows that if we make the sales that are expected in the first year then we should take in a revenue of £31,983. From this we would make a gross profit of £27,746.16 and a net profit of approximately £10,016.62. This would be a gross profit margin of 86.75% and a net profit margin of 31.32%.
In year 2 we would expect our revenue to be around £43,231. From this we would make a gross profit of £40,476.76 and a net profit of £21,957.17. This is a gross profit margin of 93.63% and a net profit margin of 50.79%.
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In year 3 we forecasted a revenue of £73,912. This would turn a gross profit of
£69,570 and a net profit of £49,695.58. This is a gross profit margin of 94.13% and a net profit margin of 65.88%.
Net profit for first 3 years (realistic forecast)
60000
50000
40000
30000 Ряд1
20000
10000
0
Year 1 Year 2
Time
Year 3
However we have not only looked at what will happen in the ideal situation, we have also created a pessimistic profit and loss account to match the pessimistic cashflow forecast.
In year 1 of our pessimistic scenario, our revenue would be around £18,315.
This would turn a gross profit of £14,078.66 and an overall net loss of £3650.88. This is a gross profit margin of 76.87% but it gives a net profit margin of -19.93%.
In year 2 we would start to turn a profit. Our revenue would be £25,846. This would gi ve us a gross profit of £25,846 which is a 100% gross profit margin as we would not require any more current assets because our supply for the first year was exceeding the demand. From this we would turn a net profit of £7326.41 with a net profit margin of
28.35%.
Year 3 would give us a revenue of around £38,514 with a gross profit of £37,136.88 and a net profit of £19,057. This gives us a gross profit margin of 96.42% and a net profit margin of 49.48%.
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Net profit for first 3 years (pessimistic forecast)
25000
20000
15000
10000
5000
0
Year 1 Year 2 Year 3
Ряд1
-5000
Time
To conclude; whether we do as well as expecting or we do relatively badly, within 3 years we will begin to turn a profit with health profit margins. However we may be unable to avoid ‘death valley’ if the pessimistic scenario occurs as we may not have enough money to pay our bills at the right time and may end up going into liquidation.
Break even analysis
As we will be charging different amounts depending on what people want to rent and for how long, I will be providing four break even points for the four different offers available.
1 day basic rental - We would need to hire out 17 basic bikes per day in order to break even at the end of the month through basic bike rentals only.
1 day extras rental - We would need to hire out 15 bikes with extras per day to break even at the end of the month through only renting out bikes with extras.
1 week basic rental- We would need to get 20 weekly rentals each week to break even at the end of each month through this type of rental only.
1 week extras rental- We would need to get 19 weekly rentals each week to break even at the end of the month through this type of rental only.
(All figures do not include business tax)
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