Our strategy is based on serving niche markets well. The world is full of small and medium-sized businesses that provide good products and services apart from the major vendors who focus on high-volume orders only.
Our marketing strategy will be to use a combination of targeted media and public relations executions to stimulate direct sales to the end users of our product. Since the product and its application are new, the task is one of education. Education and change are very expensive when they are directed at a mass audience. Thus, it is to our great advantage that our audience can be segmented into a small group and reached with more inexpensive (and even free!) media strategies.
The long-range goal is enough visibility to leverage the product line into other more expensive media with more reach and into other regions and generate interest for evolution into retail channels. To do that::
We need to establish a corporate identity, logo, design of brand name, packaging, and standard media copy and executions. It is estimated that a budget of $15,000 initially with any overage coming out of the advertising allotment of $5,000 per month will be sufficient.
All marketing decisions with regard to specific media choices, frequency, size, and expenditures will be conducted on an on-going basis with careful considerations of returns generated.
We believe that our focused marketing strategy will work with targeted distribution. We will use direct-response marketing and UPS shipping to reach a targeted audience throughout the country.
We will utilize one retail-oriented special event coordinated with local TV and print media. This will encompass a "truckload sale" of merchandise in conjunction with an appearance by Greg McMichael of the Atlanta Braves. We will need to sell this concept to a local retail store. This will also serve to test the salability of the product at retail.
In addition we will test at least two direct sales programs to parents through participating league endorsement programs at the beginning of the baseball season in 1997. It is expected that one league in the Anytown market will be targeted. The Anytown league should be middle income families.
Three sizes of Body Armor will be available, priced as follows:
Sales are expected to be skewed 50% small, 25% medium, and 25% large. Thus, weighted average unit revenue at full retail is pegged at $26.95.
These prices are considerably higher (30% to 50%) than brand name catcher's chest protectors available in retail stores. This price is low enough to encourage impulse buying, experimentation, and repeat buying. The price is also high enough to suggest quality and effectiveness. The overall goal is to price for value. Management believes that the impulse to purchase is a psychological one and that a concerned parent will spend this price (and perhaps more) for the protection the product offers while a price-sensitive customer may not buy even at a lower price.
In order to effectively market this product without the initial advantages of large production runs, and in order to have sufficient funds available for media, these prices dictate minimums for test marketing. A lesser price will not yield enough margin to properly promote the product.
Shipping and handling expense on drop shipments will be charged to the customer. Thus, in this plan these figures are not included in either revenue or expense projections.
Initially all sales are direct response. At the beginning of year two we will look to expand to other channels which will entail the hiring of a sales manager and investigation and decisions on rep organizations. Actual retail sales will not take place until year three. It is estimated that one full year of pre-sell with the major chains and participation in industry trade shows will be required to penetrate retail channels.
In addition, this expansion will be coordinated with a strategic plan to raise more capital in order to insure media, co-op, and endorsement programs.
The following table and related charts show our present sales forecast. We are projecting sales at $242,000 in test year 1 which represents 9,000 units sold via direct marketing. We are forecasting sales to increase to $4,042,500 in year two with expanded media expenditures and reach. This reflects an increase to 25,000 units sold via direct marketing and 125,000 units sold in initial retail penetration. The direct cost of sales is not margin adjusted here but it is adjusted on the P & L statement.
The first milestone for Professional Athletic Equipment, Inc. is design and prototype production of a fully functional product. This has been achieved with founder funding. The prototype was developed in 1994.
The second milestone is to test the effectiveness of the product. This has been completed at the University of Tennessee at the Southern Impact Research Center, L.L.C. The product tested favorably vs. any commercially available "competitive" product. The test results are included in an addendum to this plan. Test costs were also founder funded. Testing was completed in January 1996.
The third milestone is to obtain a U.S. Patent on the product. Patent application is currently pending. Legal fees have been born by the founder. Patent application was filed in December 1995 and revised in April 1996.
The next significant milestone to be achieved for Professional Athletic Equipment, Inc. will be the successful subscription to the private placement offering. Initial capital of $250 to $500K enables the implementation of the test market. All costs of marketing the private placement are to be born by the founder. Target date for completion of the offering is August 1996.
The subsequent milestone will then be product production. Start-up production costs are expected to be $65,000 for depreciable molds and manufacturing equipment. An additional $25,437 will be spent to produce the initial inventory of 1500 small units, 850 medium units, and 850 large units. Molds are to be ordered by September 1996.
Corporate identity executions will take place in November 1996. This will include logos, trademarking, package design, and advertising and promotion copy executions. Expenditure is estimated at $15,000.
The next, and most significant milestone, will be the sale of initial inventory through test market executions. The successful sale of product will then launch the expanded production and marketing efforts with significant confidence for success. Sales success will also trigger additional small production runs to enable marketing and sales efforts to continue. Cash flow needs will be addressed by additional debt/equity offerings as conditions dictate. Banking relationships will also be established at that point. Initial sales are expected in February or March 1997.
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