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Independent Video Store Business Plan

Market Analysis Summary

ICF will be focusing on two distinct groups that utilize movie rental stores.  These groups can be differentiated by age, a younger group and and older group.  Although both of the groups enjoy non-commercial releases, they have different tastes in movies which are not being addressed by the current offerings of the "corporate" movie stores. 

4.1 Market Segmentation

ICF's customers can be divided into two general groups that are differentiated by age, over 30 and under 30.

  • Under 30: this market segment has a diverse interest that certainly overlaps with the over 30 crowd.  The under 30 movies might have more of a concentration on action, violence, drugs, sex, etc.  This is not to say that the movies are about these subjects solely, it is just that these topics might relate better to someone under 30 than over 30.
  • Over 30: this market segment has a bit more mature tastes, the humor may be more sophisticated, they are more likely to enjoy a foreign film relative to the under 30 group.  Generally the topics of the movies will reflect issues that this group is most used to or closer to their experiences.
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Under 30 12% 36,000 40,320 45,158 50,577 56,646 12.00%
Over 30 9% 28,500 31,065 33,861 36,908 40,230 9.00%
Total 10.70% 64,500 71,385 79,019 87,485 96,876 10.70%

4.2 Target Market Segment Strategy

ICF is focusing on these two groups because they are underserved in Eugene.  Currently, there are two large corporate rental chains, Hollywood Video and Blockbuster that hold the majority of the market.  In order for them to be successful, they must concentrate on the middle of the market, the mean.  This allows them to use economies of scale to drive down the costs of operating a movie rental business.  While this works for the general population, it does not address the fringes at all.  ICF is addressing the fringe movie rental market.

Please note that while the term fringe market sounds almost derogatory or abnormal, in Eugene it really is not.  The alternative market in Eugene is thriving, particularly relative to most other cities.  Eugene, demographically, is also a much higher educated population than most cities.  Alternative movies generally appeal to a more educated crowd.  The masses can have their commercialized movies, they generally appreciate movies where they can watch without thinking.  This is evidenced by the general popularity of television, mindless entertainment of no real thematic value and little cultural value.

Through targeted advertising, ICF will reach the crowd that appreciates these type of movies and turn then into long term customers.  After the advertising brings in customers, new customers will be generated through word of mouth referrals.  Our target markets are particularly vocal when it comes to referrals, because they like to spread good news/services around when it occurs because it does not occur that often in today's mainstream society.

4.3 Service Business Analysis

ICF is a specialty movie rental store that competes in the broader movie rental business.  The industry can be characterized as the "big two,"  Hollywood Video and Blockbuster.  To be sure, there are some independent video rental stores, generally in small neighborhoods and towns, but in general the big gorillas control everything and target the middle, the mainstream. 

The movie rental business can be further characterized by selection and rental turnover.  If a store offers a good selection and has a large number of rental turnovers, then it is likely going to be successful.  This is the gorilla's strategy.  They support this strategy even more by selling of some of their rentals as they become less popular to be able to reinvest the money into the newest releases.  This last strategy only works with the mainstream market and not ICF's market because the mainstream market is attracted to what is new, the current releases.  Once something has been out for a while, interest wanes.  With ICF customers, the age of the video is irrelevant, it is the thematic quality, irrespective of popularity and newness that dictates acceptance.

4.3.1 Competition and Buying Patterns

Currently in Eugene there are two different types of competitors:

  1. The industry gorillas: This refers to Hollywood Video and Blockbuster.  For all intents and purposes these two are indistinguishable.  Both are large and very corporate in the sense that every store is the same, just like a McDonald's.  Both stores compete on location, there is little that differentiates them.  One guarantees that new releases will always by in stock, but you only get them for a two day rental.  The other does not guarantee them in stock, but you get them for five days.  For the gorillas, they concentrate the most energy on the new releases, this is what their customers seem to want.
  2. Local video rentals: These stores are small, locally owner companies that typically cater to a neighborhood.  Generally, they do not specialize in any one thing, they usually have a wide range of offerings and the bulk of their customers live within blocks of the store.  Eugene has several of these.

People make video rental decisions based on a few factors, typically selection and convenience.  If they want selection of the latest and most popular movies they go to the gorillas.  If they do not rent movies that often and are more interested in convenience then they might visit the local video store.