University Cycle Works
Strategy and Implementation Summary
Information on our sales and marketing efforts are discussed in the following sections.
5.1 Competitive Edge
The foremost competitive advantage of University Cycle Works is our university location. The State University at Metroburg is over 100 years old and as it has grown, Metroburg has grown around it. Parking is almost nonexistent, with all campus parking permit or meter controlled, and local streets filled to capacity with the vehicles of residents. Bicycles are an obvious and popular transportation solution.
Our location, in the first block off campus in a commercial area featuring the university Bookstore, a private bookstore, bank, cafes, coffee shops and popular watering holes is ideal. We get constant, daily visual exposure. Students and staff throng the sidewalk outside our door, and we reap the benefits. Our nearest competitor is almost a mile away. For the student customer, on foot, in a hurry, University Cycle Works is the immediate solution to their needs.
After that first parking ticket, we are the first bike shop the new pedestrian sees. We are conveniently located when a cyclist gets a flat tire on the way to class. The first time a rider gets to class with a wet back they come in at lunch for a set of fenders and a rain jacket.
The negotiations of the past two years also brings the advantage of continued financial agreements with major suppliers. This is an advantage over a start-up bicycle shop, but, is more a leveling of the bike path when compared to other established shop in Metroburg. Traditionally a start-up store will be placed on a Cash On Delivery (COD) status by bicycle manufacturers and parts/accessories suppliers. The COD status stays in effect until the new shop demonstrates its ability to manage its orders and cash flow. This also means the new shop must have more funding to be able to write checks on a moments notice, for large amounts.
University Cycle Works will be continuing an established system of dating programs, ordering, delivery, and invoicing/accounts payable, stabilizing our funding needs and monthly cash flow.
5.2 Marketing Strategy
Our marketing strategy seeks to optimize our advantage of prime location. We want the university population to see us as their bike shop, even our name says so, University Cycle Works. We want them to see us as part of their daily experience, and a shop they can depend on for quick repair and maintenance service.
5.2.1 Marketing Programs
Our marketing programs are locally focused, where we can effect our main target market.
Back to school specials, at the beginning of each term, including perhaps a free Kryptonite lock with a new bike purchase. We will try to have a special purchase of an economy value bike for each term.
Spring special. This coincides with the beginning of spring term, but we will direct some of our advertising at the wider population as people hang up their skis and tune up their bikes.
Coupons. Once every other month we will run a coupon for a service special in the university newspaper, the Daily Hyperbole. We also run this coupon as a banner ad in the Daily Hyperbole Online.
Website. Our content site will also serve as a marketing medium. We offer downloadable maps of the city bike routes, maps of rides outside the city area, give information about the store, and announce sales. We believe that cyclists will regularly access our site for the valuable information we will provide, and this will reinforce their of awareness of University Cycle Works, and we will become their bike shop of choice.
Print advertising. In addition to our coupons, we will keep a small 3 column inch ad appearing on a recurring schedule in the Daily Hyperbole. To boost citywide awareness of our sales specials we will also run slightly larger ads in the Metroburg Bombast-Obfuscator during the weekends prior to the sale.
5.2.2 Web Plan Summary
University Cycle Works’ website is designed to be a content site. We have neither the desire nor the time to attempt a full-blown e-commerce site. There are several large mail order/e-commerce companies, such as Performance, Bike Nashbar, and REI, and many smaller companies who are well established in the marketplace. We could never compete successfully against them.
Our target markets are immediate. They are within cycling and walking distance of us, so we are providing locally topical information to them. We are using HooDaThunkIt Search Engine Consultants for the design and upkeep of our site, and especially for their expertise in gaining favorable listings of our website in the Internet search engines. Just putting up a website is not enough. Without the proper coding and search engine linking, a website will never appear in a Yahoo! or Hotbot search. We don’t have the money to buy our way to a top three listing on every search, but HooDaThunkIt can get us into the search engines, and appearing higher than our local competitors.
First, we will have our store information: hours, location, phone number, brands sold, etc. Sales and current promotions will also be featured.
- University bike paths, parking areas and campus bike rules, provided by the University Security Office.
- Metroburg city bike path map.
- DMV/Statutes synopsis of rules of the road for bicyclists.
- University bike map and rules.
- Monthly maps and directions for both a road and a mountain bike ride.
- University Security Office-Bicycle information
- Metroburg Parks Department-Bicycle information
- Department of Motor Vehicles/State Laws about bicycles on the public roads.
- National Forest Bike Trails
- Bureau of Land Management Bike Trails
- Bicycling Magazines
5.2.3 Pricing Strategy
Pricing of bicycles is very tight with a markup of between 30% and 40% depending upon the brand and model. Many people believe that bicycles are priced like automobiles and are open for negotiation, and make almost insulting offers. The shops have little leeway here.
Parts and accessories are generally keystone priced. Some small items cost more in handling and sales than they do to buy from supplier. These can be double and triple keystoned, because customers won’t buy them if they don’t have a minimum perceived value. On the plus side, these are great “throw-in” items used to close the sale of a bike. When new technology arrives in bicycles, and if the supply is limited, almost any price can be demanded. This was the case in the mid-1990s when RockShox introduced suspension forks for mountain bikes. The bike nobs would pay whatever was asked just to get those forks. Of course, in this type of situation the price, both wholesale and retail, lowers.
Other accessories, such as step-in pedals, pannier racks, helmets, or headlights are sometimes heavily marketed by the manufacturers. While this drives demand and brings people into the shop to get these items, the suggested manufacturer’s retail price may limit markup.
The markup on clothes, shoes, jackets, gloves can vary from keystone to triple keystone, depending upon product, manufacturer, country of origin, and customer perception of value. Pearl Izumi and Burley Design rainwear can demand premium prices as top-of-the-line garments, but many budget conscious students can only afford a $35 nylon windbreaker. It has been and always will be a demanding job for us to adequately stock garments at the various price points.
We try to maintain a basic “Hourly shop rate” at $45/hour. Standard repairs are then priced based upon an average time for completion. Some repairs, such as a flat tire, are limited by customer perception of difficulty. Examples:
- Flat Tire — $7.50
- Install Fenders — $10.00
- Brake Adjustment — $25.00
- Tune-up — $65.00
- Overhaul — $100.00
All parts used in repairs are priced at keystone, and added to the labor service charge.
With several other bicycle shops in the city, there are some price constraints based on competition. Coupons and specials can balance price ceilings by drawing in customers.
5.3 Sales Strategy
Sales vary season to season and with the academic school year. Surprisingly, summer is the slowest season because there are fewer students in town. Business picks up in August with the return of the students and staff, and flourishes in September. Accessories and rainwear sales increase in the autumn and early winter. Repairs and maintenance are steady. Holiday sales are brisk, though generally leaning again to accessories, parts, rainwear, gloves, helmets, headlights, etc. Winter sales are moderate, and then pick up in springtime as people put away their skies and look forward to local outdoor activities, longer daylight hours, and drier weather.
We have three large sales promotions each year.
- Back to school in August/September. This is our biggest sale of the year. New bicycles, locks, helmets, racks, fenders, backpacks. We always search for a special purchase of good quality, but value priced bikes for this sale such as year end models, slow sellers, new line looks to break into the market. These bikes will almost always sell out to students seeking great values.
- Year-end holidays. This also overlaps the beginning of Winter term. The retail market demands some participation in this annual buying frenzy, yet, this sale produces lower revenue than our other two events. We sell fewer bikes, and more accessories and clothing.
- Spring. This coincides with both the return of nice weather, and beginning of Spring term. We feature new bicycles, and repair/maintenance/tune-up specials. It is important to us to have a good selection on hand at this time. When people decide they want that new bike, they want it now. If we don’t have the bike then, and make the sale immediately, many riders will decide that they really can get another season out of their old bike, and will spend their discretionary income on some other purchase.
Additionally, we have some special buys available for June graduation.
We get some small monthly revenue from these sources:
- Sale of used bicycles taken in on trade.
- Repair classes taught at the University Outdoor Center, once a term.
- Monthly service contract for repairs and parts with the University Security Office.
|Year 1||Year 2||Year 3|
|Accessories and Parts||$150,000||$172,500||$198,375|
|Repair and Service||$166,000||$190,900||$219,535|
|University Patrol Service Contract||$1,200||$1,380||$1,587|
|Direct Cost of Sales||Year 1||Year 2||Year 3|
|Accessories and Parts||$75,000||$86,250||$99,188|
|Repair and Service||$0||$0||$0|
|University Patrol Service Contract||$0||$0||$0|
|Subtotal Direct Cost of Sales||$177,680||$204,332||$234,982|
5.4 Strategic Alliances
- Bicycle manufacturers – continuation of dating programs and financial agreements.
- Accessory suppliers – continuation of financial agreements.
- Metroburg Parks Dept. – we sponsor printed map of city bike paths to publish on our website.
- University Security Office – maintenance, supply service contract for cycle security.
- HooDaThunkIt – website design and maintenance, search engine placement.