Brilliant Points' marketing and sales strategies are discussed in the following individual topics.
Brilliant Points' sales strategy is to price our technology at a level which makes it attractive in terms of value and features added and insignificant in cost compared with the core units of a presentation system, the computer and projector. These can run from a low of around $4,000 to as much as $30,000 or more depending largely upon the kind of projector selected.
A presentation seat is defined as a computer and a business projector. Placing Brilliant Points technology into this seat requires addition of a camera (high-quality webcam, approx. $100 to $200), an optical pointer (approx. $50), and Brilliant Points software (approx. $50 to $150), for a combined total ($200 to $400) which is a small fraction of the cost of the computer and projector combined ($4,000 to $30,000). As an additional upgrade path, users who already posess a camera and pointer will be able to purchase and download the software from the Brilliant Points website, generating the same net revenue without the work of processing a complete upgrade kit.
We are confident that pricing our technology in this range will enable us to rapidly penetrate the presentation systems market, first through upgrade kits, and second through licensing deals with manufacturers/resellers of presentation system sub-units. Many corporate boardrooms and conference rooms already have camera technology installed for video conferencing, and in many cases those same devices can become dual-use, further reducing the net cost for upgrading to a Brilliant Points presentation system.
The Sales Forecast table shows net after cost of goods, which is why the "Direct Cost of Sales" section of the table is empty. This is due to the variability of what comprises an "upgrade" kit. Some customers will need the full set of camera, pointer, and software, while others will need only pointer and software, or download the software alone from the Brilliant Points website. To account for this variability, we assume that all sales will cover the cost of goods and shipping/handling, plus a minimum of $50 revenue to Brilliant Points. Note that all company expenses other than cost of goods are accounted for against this revenue stream. The only "hidden" variable is the cost of goods sold which will be bundled into the price of the upgrade kits.
We expect upgrade kit sales to ramp up from zero to a total of approximately 13,000 kits sold the first year. In the second year, upgrade kits sold are expected to increase to approximately 70,000, and in the third year to approximately 100,000 kits. We expect upgrade kit sales to plateau and begin to fall, perhaps significantly after the fourth year, as licensing penetration increases.
While shipping as many as 6,000 upgrade kits per month (approximate rate at the end of second year) with a staff this size may seem aggressive, this is a rate of 300 units per day with 20 shipping days per month. Since an upgrade kit consists of off-the-shelf camera, pointer, and Brilliant Points software, assembly is simple. This rate is readily attainable with four people working fulfillment, 5 hours each day, assembling and stacking one box every 4 minutes. Self-stick labels are pre-printed, shipping is handled by outsource to one of the common shipping houses. With part-time assistance this is feasible within the 2-year staffing projections.
Licensing revenues are not expected to be realized until the second year of operations. We project reaching 1.5 percent penetration of the potential presentation seat market by end of second year of operations, with 2.5 percent penetration by end of third year. We expect licensing penetration to continue to increase year over year through the duration of the patent protection (15 years). It is expected that we will achieve at least 50 percent penetration of this market before the patent expires.
Sales forecasts will be impacted by overall economy, as well as user acceptance of the Brilliant Points technology. Preliminary user tests have shown extremely favorable response, so we do not anticipate any significant negative response. While the forecast presentation market growth may not materialize, the installed base will still need to upgrade and/or replace failed equipment, providing on-going revenue even if this should occur.
Note that in the Sales Forecast table as provided by the Business Plan Pro® software being used, all row entries are treated as dollar amounts and summed into the total. Because of this, and in order to show both total net on sales as well as total units sold, the first row contains the number of units sold, which is treated as $1 per unit, and the second row shows the remaining net on sales ($49 per unit), with a minimum of $50 net target per unit sold. This approach, while somewhat "clunky" allows us to quickly see both the dollar amount and the unit volume for each entry.
Further market analysis by the VP of Marketing will determine whether the revenue target can be increased above $50 without significantly impacting demand. In preliminary (small sample) surveys, every presentation-using respondent indicated willingness to pay at least $50 for access to this technology, a good indicator that a higher figure may be attainable.
We make no attempt to forecast or project sales and penetration into the Home Entertainment or Gaming markets, nor the Military or optical pointer markets, but significant potential exists in these areas. Refer to section 7.5, Projected Balance Sheet for additional comments regarding this decision.
Brilliant Points has developed a "market expanding" technology, and protected it with patents, both domestic and international. This patent protection will expire in approximately 17 years, in 2019. We intend to capitalize on this "government sanctioned monopoly" time frame to rapidly establish Brilliant Points as the source for this technology.
The patents alone present a formidable barrier to entry for competitors, but we intend to also position ourselves as the source for high-quality value-priced technology related to our patent so that in the future we are in a position to capitalize on our already significant market presence as the patent expiration date approaches and competitors consider entering the field.
The full marketing strategy will be developed by the VP of Marketing so as to quickly establish market awareness of the Brilliant Points technology. This will be the primary task of the VP of Marketing during the first quarter of operations. Sample demonstrations of the Brilliant Points technology have made it clear that we will be able to close a significant number of sales without having a marketing plan and campaign in place, but the plan and its implementation will improve the success of the sales force.