Coupon Executive Summary
ScanZ Technologies
Coupon eCompanion®
Marketing Plan
 
Table of Contents
Executive Summary 5
Product Description 7
Customer 7
Value Proposition: 7
Product Features: 8
SWOT Analysis 9
Strengths: 9
Weaknesses: 9
Opportunities: 9
Threats: 9
Target Market 10
Competitive Analysis 12
Pricing 14
Channels 16
Sales Channel 16
Delivery Channel 16
Warehousing Channel 16
Marketing Communications 18
Budget 21
 
Executive Summary
Of the 300 Million citizens in the United States it is estimated that there are approximately 150 million (50%) people that consistently shop using coupons. , Our product, the Coupon eCompanion© is targeted at these shoppers by providing and easy to use, convenient, …show more content…
solution to enhance their coupon buying experience and improve their discount purchasing power through the use of an integrated barcode scanner and expandable filing system for coupons. The primary source of revenue is not from the sale of the eCompanion unit itself, but from the monthly recurring service fees that will be charged to update the unit. Two service offerings have been developed that address two levels of value add, that carry two different price points. The services are: Basic Savings service at $4 per month and Extended Savings services at $7 per month.
With the completion of our product development initiative, we at ScanZ Technologies are preparing to execute the second phase of our project with product launch and strategic market initiatives presented in this marketing plan for your review.
We seek approval for funding to support the 2007 initiatives and operations.
The key targeted consumer has been identified as the adult female shopper ages 35 to 44, with an average annual household income of $50 - $75k. This accounts for the largest segment of coupon users based on data from Promotion Marketing Association Coupon Council's coupon statistics for year 2000.
Our Marketing communications strategy developed to penetrate this market includes a structured program of Print (web and tradition ad), Public Relations, and Word of Mouth initiatives. While the first year's investment funding the proposed marketing strategies is an estimated 19% of sales, we believe the investment is required to aggressively fund the product launch and support the product awareness initiatives outlined above. After the first fiscal year you will see marking investments pull back over the next two years, where it is forecasted to settle around 6% - 7% of sales in 2008 and …show more content…
beyond.
As a result of our marketing programs, we have estimated a conservative 30,000 customers in the first users. This represents less than 1% (.0002) of the estimated 150 million customers that consistently use coupons. This will fall short of funding operations for the 2007 fiscal calendar, but with the requested funds to cover the shortfall ($2M), our operations and management will be empowered to execute on our marketing initiatives that will produce positive results in 2008 and 2009.
Forecasted Results (3 year):
In conclusion, through the approved funding to support our structured marketing program of print, Public Relations and Word of mouth initiatives, we believe we can capture a profitable percentage of estimated 150 million consumers that regularly shop with coupons. By providing a combination product and service offering, ScanZ Technologies will produce sustainable annual revenues of an estimated $1.6M by EOY 2009.
Product Description
Customer: Of the 231 million people estimated to use coupons, it is estimated that fifty percent or 150 million people consistently use paper coupons each year. Consumers spends hours cutting, organizing, and retrieving paper coupons each year. Significant time is spent within grocery and retail outlets while the consumer sorts through their stack of coupons in hopes they do have the coupon, and at the same time are not maximizing their buying potential. The ability to cut, organize, and retrieve coupons, to date, has been greatly limited to a simple expanding file folder. While this provides an organized way to file coupons, it provides no advantage to the user, by letting them know if the consumer has the coupon within their inventory of coupons.
Value Proposition: Utilizing the Coupon eCompanion© provides the consumer two valuable features that empowers the smart coupon buyer to improve the coupon buying experience and improve the discount potential. First, the eCompanion has the ability to scan the barcodes available on every coupon and checks the coupon into "inventory" and assists by stating where to file the coupon. More importantly, when in the retail outlet, the consumer can scan the barcode of the product on the shelf the eCompanion instantly confirms if the consumer has a coupon in their possession or not.
The second feature which delivers additional value to the consumer is provided, through the same interface, the original and the locally advertised discounted price to help ensure the consumer is purchasing the product at its optimal discounted price. In addition, the unit will identify the coupon within the inventory the best discount available.
Product Features: The Coupon eCompanion© is an integration of technology and coupon management for the average consumer. The USB attachable scanner downloads all the latest coupon and market information from the internet and provides a user friendly interface to manage their coupon inventory. The small handheld computer or personal digital assistant (PDA) with integrated barcode scanner allows the user to scan the coupon to accept into the inventory. Once scanned, the coupon can be filed in the accordion style filing system. The exciting, cost cutting feature of the Coupon eCompanion© is the time it will save the average users in a grocery/retail store who shops with coupons. With a simple scan of the product's barcode, the application instantly returns market information covering the original price, locally advertised discounted price, and the associated coupon discount value IF the coupon is in the consumer's inventory of coupons. The information and coupon lookup is provided from a simple scan of the barcode that is provided on the product itself.
In addition, to the current product/service offering available today, ScanZ Technologies' handheld personal digital assistant (PDA) is expandable and provides a platform for additional revenue generating applications. This future potential is identified by targeting the marketing and coupon advertisers seeking direct marketing funds from them for electronic coupons' direct to our consumers. Second identified future revenue generator is the sale of additional applications developed for the eCompanion handheld PDA. While some applications are available free with the unit like a standard calculator, and a conversion calculator, the potential future application is another opportunity for revenue. Some conceptual applications include a calendar to organize the busy professional, and recipe database engine that can contribute to a shopping list.
SWOT Analysis
Strengths:
No Direct Identical competitors in marketplace. No competitor exists that provides both a product and service proposition that address both coupon management and pricing data
Compelling and innovative product that provides value and features, and is extendable to deliver future applications
Weaknesses:
New Product/Service with limited or no national visibility
Monthly service fee might be difficult to sell
Opportunities:
The number of coupons distributed each year continues to grow. 2006 hit record levels at 253 billion coupons distributed.
Threats:
Coupon redemption has posted declines in recent years and 2006 show same results. There was a 13% drop in redemption from 2005
Despite the year over year growth of number of distributed coupons (record levels in 2006) there remains a threat the obsolescence and use of coupons.
The U.S. economy is currently experiencing steady growth, but consumer confidence is relatively flat to slightly negative.
Target Market
The target market for Coupon eCompanion product and services is the educated coupon shopper within the United States. Today there is an estimated 142 million consumers that are identified as shoppers the have used coupons in the past 12 months within the United States. While opportunity exists outside the US, our current strategy is to secure profitability domestically, and then move internationally. The typical user will be female as studies show that women continue to use coupons more than men (85.3% to 68.6%), according to Marketing Association Coupons Councils coupons statistics for 2000. In addition coupon use remains high across all education levels, with 73% of high school graduates, 80% of college graduates and 80% of postgraduates reported as users, which we believe contributes to targeting the educated coupon shopper. We intend to target the 35 44 age group with average annual household income around $50k - $75k. The two demographics highlighted above, age and annual income, we believe, are important components in identifying our target audience (See figures 1 and 2 to the right.) The combination of the income and age bracket maximizes the largest percentage use within the coupon shopping demographics. While we do recognize a potential challenge as the technology might deter some consumers. In addition, we believe that the higher income level will contribute to the decision to purchase the monthly recurring services fee. We believe we will overcome the technology impact in our market communications strategies.
In order to maximize our consumer base, ScanZ Technologies developed two levels of service to address the two segments in which we recognize our customers. The first segment would address the needs of a user looking for basic organizational advantages using our product. In addition, we felt compelled to deliver a service at a lower price point to grab a lower segment in the market. This "Basic Service" would be provided at a lower price point as it only requires the updating of barcode coupon information.
The second segment of users of our product is for not only the organizational benefits, but the value added service ScanZ Technologies will provide around pricing information (e.g. list price and current advertised price.) This service would allow the consumer to maximize their purchasing or more accurately, is discount power. This service does come with a higher monthly fee.
Competitive Analysis
Despite the unique advantages of the Coupon eCompanion competitive pressures will be present from similar traditional coupon organizational tools as well as service providers. These threats, including some small start -up companies are described below:
ScanAps Corporation is a similar product competitor that provides a small barcode keychain that eliminates the need for coupons. The consumer scans in coupons they want, and then redeems them at checkout via a specialized interface at the retail store. One innovative component of their product is the use of a complete Electronic Coupon Clearing (ECC) solution for all coupons (paper coupons, online coupons, mobile coupons, in-store coupons, electronic coupons and coupons scanned into coupon scanner) in real time at point of sale (POS.) ScanAps validates all coupons prior to redemption. While ECC is identified as a strength, we identified the ECC as a weakness as well. The challenge for ScanAps product is in the fact the technology requires an investment by grocery and retail stores (ScanAps computer interface) before the consumer can take advantage of the device. In addition, another weakness is the device is rather limited in functionality, with a maximum capacity of 150 coupons saved. ScanAps has completed two tests as of May 2007. They conducted the tests at the Green Hills supermarket in Syracuse, N.Y in 2004, and Paw Paw Shopping Center in Michigan in October, 2006. We have found no evidence of any deployments to date.
Thegrocerygame.com and Centsoff.com are both web-based service providers that are similar product competitors, on the services side of our offering.
Thegrocerygame.com provides, for a monthly fee, a website users can log into to view the current weekly advertised prices for a grocery store/retailer based on the customers zip code. While this provides an excellent interface to valued information, it is not portable like the product and service the Coupon eCompanion will provide. In addition, thegrocerygame.com and centsoff.com both offers its subscribers access to its list of inexpensive items and provides them with manufacturers' coupons. One key advantage with this product offering and model is these services are competitively priced. The average cost for this web-based service is around $5 per
month. Coupon Organizer (file folder) a direct similar competitor to our product would be the use of a standard coupon organizer. This organizer categorizes coupons in expandable pouch using tabs for labeling specific items, shopping sections, stores and more. The strength lies within its cost, with a onetime purchase at an average cost of $15 dollars. Its weakness lies within its overall functionality. There is no additional value add from the organizer other than a place to file the coupons.
In addition to direct competition, there will also be indirect pressures as economic conditions continue to improve within the United States. It has been studied that coupon redemption is lower during times of economic growth. Another indirect competitor is the attractiveness or potential decline in the response consumers have to paper coupons. Consumer response to coupon promotions fell 6% in 2005 compared to 2004. The key to the Coupon eCompanion is it takes the three similar competitors product/service offerings above and provides them all together in one convenient, easy to use, scanner organizer.
Pricing
The Coupon eCompanion product and service will be priced much the same way the pricing of cellular phones and accompanying services are provided. The cost of the scanning unit and coupon filer will be subsidized based on the service model and duration of contract the consumer chooses to sign up for.
The scanner and filer production and packaging has been negotiated and has a fixed cost for the next three years. The per unit cost for the Coupon eCompanion unit is $250, which includes the PDA scanner, and the nylon coupon filer. As a result of the fixed cost, we can offer the unit to the consumer for $199 on a one year service commitment and $99 for a two year service commitment. It will be critical to keep these costs to a minimum to ensure the monthly sales from service returns revenue over the duration of the consumer's service contract.
As for the monthly service offering, we plan to offer two service plans for the customer to choose from "Basic Savings" and "Enhanced Savings" service plans. The basic savings service plan offers weekly updates that will deliver only product and barcode information for coupons. There are no additional services provided other than having a dynamic source to update the scanner as new coupons are introduced to the market. This service offering will be provided at $4 per month.
The second service offering, Enhanced Savings, will provide a better value proposition as it will deliver weekly updates on the lowest advertised pricing, as well as, the updates to the coupon database that is provided in the Basic service. We look to price above a competitor, THEGROCERYGAME.COM, which currently provides their service at $5 per month. Their service only provides the lowest advertised pricing and does not provide any tools for portability or coupon management enhancements. We believe with the added features the eCompanion scanner provides, this unique product mix, will support charging a premium over the competitor pricing. The pricing for the "Enhanced Savings" service will be $7 per month.
We will need to leverage our partners to ensure we are providing dynamic content and ensure we continue to provide value to the shopping experience.
Considering our strategy to manage our fixed unit costs, lack of comparable product and competition in the marketplace, and economic opportunity of the target market (Females with household income between $50k - $75k), we believe the two price points for the Basic and Enhance Services of $4 and $7 per month respectively will provide revenue to generate further development and growth for the organization.
Channels
Sales Channel- Considering the Coupon eCompanion is both a physical product and a specialized service based product, we have selected two channels for sales that include the direct sales channel and through third party direct mail order channel. Our primary channel will be through Direct Sales. Through our marketing strategies we will aggressively target and go after our defined customer to generate sales, that will be outlined in the marketing communications section.
Our secondary sales channel will be through specialized mail order companies that address the unique needs of shoppers around kitchen and house wares. Some identified partners include Vermont Country, Heartland America, Kitchen Universe, and Grande Portal.
Distribution Channel - we have secured a two year negotiated discount schedule from FedEx for our product shipping needs. Through leveraging FedEx's resources we can provide options for the customer around how they prefer to ship their Coupon eCompanion product. These options include ground, express next day, and express 2nd day. After our selection of our logistics partner was completed focus was turned to sourcing our warehouse partner.
Warehousing Channel Considering ScanZ Technologies has a specialized computer product, we do require warehousing services. Management decided to leverage a channel partner as opposed to performing these services in house. For our warehousing requirements, management decided to engage Memphis based, Ozburn-Hessey Logistics for the warehouse and order fulfillment requirements of our business operations. There were three reasons for selecting Ozburn-Hessey logistics as a strategic channel partner:
1. They bring competitive advantage and economies of scale through specialized services around E-Commerce order fulfillment. Ozburn-Hessey Logistics was selected because of its proven ability to ship small items consistently on time while maintaining inventory accuracy throughout the shipping and receiving process.
2. Through our sourcing activities we have secured a 3 year, shared warehousing space and E-commerce order fulfillment contract at a competitive rate that beats market benchmarks for like service. More importantly, we believe this allows our resources to focus on our core competencies.
3. Lastly, Ozburn-Hessey was selected as they could provide required warehouse space within the greater Memphis area. This was critical as we identified our logistics channel partner as FedEx, which operates their primary hub in Memphis. This decision helped to remove operational costs normally associated with the logistics of product from warehouse to distribution.
Marketing Communications
September is national coupon awareness month and will be the apex of most of our marketing effort. While product identity and word of mouth references will be the strongest marketing tool, we believe we will need to invest in other key marketing communications in the next fiscal year to accomplish our goal of product introduction and product awareness.
Our initial marketing campaign will be slotted for September 2007, with full marketing communication utilizing print, web advertising, Public Relations, and Word of Mouth strategies.
Our print initiative consists of leveraging two traditional print strategies. The first print ad is through the use of magazines. Within a short list of magazines targeted at our targeted consumer, females with income between $50k - $75k income, we have identified three magazines in which we will advertise. Better Homes and Gardens, Women's Day, and Family Circle have been identified as our targeted magazines. We have developed a two color, 1/3 page, print ad to be placed and run for three months July, August, and September. Better Home and Gardens has 3.8 million readers and the Reader Profile is Female 80% Male: 20%, Median Age 34, and Median Household Income of $59,187. All three magazines fall within these demographics listed above in which of the average reader falls within our targeted consumer.
Our second print marketing initiative is to leverage the advertising vehicle where 79% of coupons are distributed; directly in the printed coupons section of the weekly Sunday newspaper. We will advertise monthly for a year leading up to September 2007 to provide for market awareness and directly target the coupon user. We completed our sourcing activity and have Valassis as our vendor for Free Standing Inserts (FSI) marketing.
Much like traditional print strategies in magazines and newspaper, we have targeted marketing communications for the web as well. We will leverage websites that help focus our communication to the desired our audience. From Google to FrugalUser.com, considering we are a technology based organization we believe an aggressive marketing and advertising campaign online will capture the targeted consumer that would most use technology to help improve their coupon shopping process.
Our second marketing communications strategy will leverage public relations marketing. We will dedicate a resource to establish communications with the editorials of magazines, and webzines that cover topics around consumer savings, smart shopping and home economics. Currently we have identified the following print and webzines we will target the first 12 months after product launch. Sampling of websites/webzines includes about.com, frugalshopper.com, and major news media associations.
Lastly we will engage in Word of Mouth marketing strategies to establish our third means of marketing communication to facilitate product launch and awareness. We will focus on the following forms of word of mouth marketing:
1. Community Marketing in which we will support niche communities that are likely to share interests about coupon shopping and our product. We will focus on female based user groups and discussion forms by providing tools, content and ideas to support the effective use of coupon shopping. We have targeted a couple strong national user groups to focus our Community Marketing efforts. For example, Mothers of Multiples is a national user group of mothers with twins, triplets, etc. They routinely have coupons available to members and even have a session on how to organize and shop more effectively with coupons.
2. Viral Marketing in which we will target the electronic email medium to develop exciting and constructive messages that will be designed to passed along. We have identified the email subject as "What will they think of next????" and the email will proceed to describe how you can save an additional $100 in groceries if only you organized and knew the best time to purchase products with coupons.
3. Referral Programs that we will create a program as part of the monthly services that if a customer refers a new customer, we will credit one month for customers that are subscribed to Basic Savings monthly services and credit 2 months free for Extended Savings monthly services. The Referral program is developed and part of the online website staged for deployment this year.
We believe through the effective execution of our four key marketing communication strategies including Print, Web, Public Relations, and Word of Mouth, Scanz Technologies will successfully accomplish its 2007 goals of a successful product launch and customer awareness. From this successful launch we feel it will position us to capture our forecasted 30,000 customer in which we prepare to look at the 3 year budget next.
Budget
Revenue Assumptions: In the first year of operations we are targeting to capture a forecasted 30,000 customers. We flattened the monthly revenue rate (accounting for the two pricing options of $4 and $7 per month) from service at $5.50 per month, including gross sales from sales of the eCompanion unit at $199. Over the next two years we forecast to add an additional 25,000 customers in 2008, and an additional 50,000 in 2009. This is an estimated annual customer growth rate of 108% per year. While an impressive growth rate, this is still less than 1% market share of the estimate number of U.S. coupon shoppers.
Cost of goods sold Cost of goods sold covers those expenses of the equipment and personnel required to maintain the IT infrastructure, advertising information, and barcode information interchange with manufactures. In addition it covers the fixed unit cost of the barcode scanner and filer at $250 per unit.
Marketing Communications Expense - The overall marketing budget is 19% of sales in 2007 and 12% in 2008. While these percentages may appear high, we believe this funding is required to support the product launch and awareness campaigns. In 2009, we reduce our overall initial product launch and product awareness initiatives and the marketing budget is reduced to 6% of sales.
These costs were derived working the Object-Task method for developing the marketing expense budget. Below you will find the detailed budget we forecast will be required to accomplish our goals of product awareness.
Print ads were estimated $88,000 for a 1/3 2 color print add. We look to advertise in three (3) magazines for three consecutive months of July, August, and September. Again September is National Coupon Month. We then reduce funding 33% per year in 2008 and 2009 by where we change our initiative to advertise in four (4) magazines only in the month of September. While we reduce spending in our print initiatives, we believe it is important that these marketing dollar shift to increase our focus on website ads and Press relations. For Public Relations, we look to get write-ins for editorials and develop steady flow of press releases to support our marketing efforts. We feel the investments for Press relations is required early in the fiscal year, with the goal that we have 2 editorials in the first year, during the month of September, and steady growth in media and editorials in 2008 and 2009. This requires annual budget to cover headcount and an operation budget of roughly $10k.
While we estimate 2007 sales to fall short of covering operational expenses, we believe with your approval to cover these shortfall funds, the forecasts that are supported by revenue estimates, and our strategic sales and marking programs, we are confident ScanZ Technologies will realize steady growth in our customer base in years two and three and produce profits accordingly.
Coupon eCompanion®
Marketing Plan
 
Table of Contents
Executive Summary 5
Product Description 7
Customer 7
Value Proposition: 7
Product Features: 8
SWOT Analysis 9
Strengths: 9
Weaknesses: 9
Opportunities: 9
Threats: 9
Target Market 10
Competitive Analysis 12
Pricing 14
Channels 16
Sales Channel 16
Delivery Channel 16
Warehousing Channel 16
Marketing Communications 18
Budget 21
 
Executive Summary
Of the 300 Million citizens in the United States it is estimated that there are approximately 150 million (50%) people that consistently shop using coupons. , Our product, the Coupon eCompanion© is targeted at these shoppers by providing and easy to use, convenient, …show more content…
solution to enhance their coupon buying experience and improve their discount purchasing power through the use of an integrated barcode scanner and expandable filing system for coupons. The primary source of revenue is not from the sale of the eCompanion unit itself, but from the monthly recurring service fees that will be charged to update the unit. Two service offerings have been developed that address two levels of value add, that carry two different price points. The services are: Basic Savings service at $4 per month and Extended Savings services at $7 per month.
With the completion of our product development initiative, we at ScanZ Technologies are preparing to execute the second phase of our project with product launch and strategic market initiatives presented in this marketing plan for your review.
We seek approval for funding to support the 2007 initiatives and operations.
The key targeted consumer has been identified as the adult female shopper ages 35 to 44, with an average annual household income of $50 - $75k. This accounts for the largest segment of coupon users based on data from Promotion Marketing Association Coupon Council's coupon statistics for year 2000.
Our Marketing communications strategy developed to penetrate this market includes a structured program of Print (web and tradition ad), Public Relations, and Word of Mouth initiatives. While the first year's investment funding the proposed marketing strategies is an estimated 19% of sales, we believe the investment is required to aggressively fund the product launch and support the product awareness initiatives outlined above. After the first fiscal year you will see marking investments pull back over the next two years, where it is forecasted to settle around 6% - 7% of sales in 2008 and …show more content…
beyond.
As a result of our marketing programs, we have estimated a conservative 30,000 customers in the first users. This represents less than 1% (.0002) of the estimated 150 million customers that consistently use coupons. This will fall short of funding operations for the 2007 fiscal calendar, but with the requested funds to cover the shortfall ($2M), our operations and management will be empowered to execute on our marketing initiatives that will produce positive results in 2008 and 2009.
Forecasted Results (3 year):
In conclusion, through the approved funding to support our structured marketing program of print, Public Relations and Word of mouth initiatives, we believe we can capture a profitable percentage of estimated 150 million consumers that regularly shop with coupons. By providing a combination product and service offering, ScanZ Technologies will produce sustainable annual revenues of an estimated $1.6M by EOY 2009.
Product Description
Customer: Of the 231 million people estimated to use coupons, it is estimated that fifty percent or 150 million people consistently use paper coupons each year. Consumers spends hours cutting, organizing, and retrieving paper coupons each year. Significant time is spent within grocery and retail outlets while the consumer sorts through their stack of coupons in hopes they do have the coupon, and at the same time are not maximizing their buying potential. The ability to cut, organize, and retrieve coupons, to date, has been greatly limited to a simple expanding file folder. While this provides an organized way to file coupons, it provides no advantage to the user, by letting them know if the consumer has the coupon within their inventory of coupons.
Value Proposition: Utilizing the Coupon eCompanion© provides the consumer two valuable features that empowers the smart coupon buyer to improve the coupon buying experience and improve the discount potential. First, the eCompanion has the ability to scan the barcodes available on every coupon and checks the coupon into "inventory" and assists by stating where to file the coupon. More importantly, when in the retail outlet, the consumer can scan the barcode of the product on the shelf the eCompanion instantly confirms if the consumer has a coupon in their possession or not.
The second feature which delivers additional value to the consumer is provided, through the same interface, the original and the locally advertised discounted price to help ensure the consumer is purchasing the product at its optimal discounted price. In addition, the unit will identify the coupon within the inventory the best discount available.
Product Features: The Coupon eCompanion© is an integration of technology and coupon management for the average consumer. The USB attachable scanner downloads all the latest coupon and market information from the internet and provides a user friendly interface to manage their coupon inventory. The small handheld computer or personal digital assistant (PDA) with integrated barcode scanner allows the user to scan the coupon to accept into the inventory. Once scanned, the coupon can be filed in the accordion style filing system. The exciting, cost cutting feature of the Coupon eCompanion© is the time it will save the average users in a grocery/retail store who shops with coupons. With a simple scan of the product's barcode, the application instantly returns market information covering the original price, locally advertised discounted price, and the associated coupon discount value IF the coupon is in the consumer's inventory of coupons. The information and coupon lookup is provided from a simple scan of the barcode that is provided on the product itself.
In addition, to the current product/service offering available today, ScanZ Technologies' handheld personal digital assistant (PDA) is expandable and provides a platform for additional revenue generating applications. This future potential is identified by targeting the marketing and coupon advertisers seeking direct marketing funds from them for electronic coupons' direct to our consumers. Second identified future revenue generator is the sale of additional applications developed for the eCompanion handheld PDA. While some applications are available free with the unit like a standard calculator, and a conversion calculator, the potential future application is another opportunity for revenue. Some conceptual applications include a calendar to organize the busy professional, and recipe database engine that can contribute to a shopping list.
SWOT Analysis
Strengths:
No Direct Identical competitors in marketplace. No competitor exists that provides both a product and service proposition that address both coupon management and pricing data
Compelling and innovative product that provides value and features, and is extendable to deliver future applications
Weaknesses:
New Product/Service with limited or no national visibility
Monthly service fee might be difficult to sell
Opportunities:
The number of coupons distributed each year continues to grow. 2006 hit record levels at 253 billion coupons distributed.
Threats:
Coupon redemption has posted declines in recent years and 2006 show same results. There was a 13% drop in redemption from 2005
Despite the year over year growth of number of distributed coupons (record levels in 2006) there remains a threat the obsolescence and use of coupons.
The U.S. economy is currently experiencing steady growth, but consumer confidence is relatively flat to slightly negative.
Target Market
The target market for Coupon eCompanion product and services is the educated coupon shopper within the United States. Today there is an estimated 142 million consumers that are identified as shoppers the have used coupons in the past 12 months within the United States. While opportunity exists outside the US, our current strategy is to secure profitability domestically, and then move internationally. The typical user will be female as studies show that women continue to use coupons more than men (85.3% to 68.6%), according to Marketing Association Coupons Councils coupons statistics for 2000. In addition coupon use remains high across all education levels, with 73% of high school graduates, 80% of college graduates and 80% of postgraduates reported as users, which we believe contributes to targeting the educated coupon shopper. We intend to target the 35 44 age group with average annual household income around $50k - $75k. The two demographics highlighted above, age and annual income, we believe, are important components in identifying our target audience (See figures 1 and 2 to the right.) The combination of the income and age bracket maximizes the largest percentage use within the coupon shopping demographics. While we do recognize a potential challenge as the technology might deter some consumers. In addition, we believe that the higher income level will contribute to the decision to purchase the monthly recurring services fee. We believe we will overcome the technology impact in our market communications strategies.
In order to maximize our consumer base, ScanZ Technologies developed two levels of service to address the two segments in which we recognize our customers. The first segment would address the needs of a user looking for basic organizational advantages using our product. In addition, we felt compelled to deliver a service at a lower price point to grab a lower segment in the market. This "Basic Service" would be provided at a lower price point as it only requires the updating of barcode coupon information.
The second segment of users of our product is for not only the organizational benefits, but the value added service ScanZ Technologies will provide around pricing information (e.g. list price and current advertised price.) This service would allow the consumer to maximize their purchasing or more accurately, is discount power. This service does come with a higher monthly fee.
Competitive Analysis
Despite the unique advantages of the Coupon eCompanion competitive pressures will be present from similar traditional coupon organizational tools as well as service providers. These threats, including some small start -up companies are described below:
ScanAps Corporation is a similar product competitor that provides a small barcode keychain that eliminates the need for coupons. The consumer scans in coupons they want, and then redeems them at checkout via a specialized interface at the retail store. One innovative component of their product is the use of a complete Electronic Coupon Clearing (ECC) solution for all coupons (paper coupons, online coupons, mobile coupons, in-store coupons, electronic coupons and coupons scanned into coupon scanner) in real time at point of sale (POS.) ScanAps validates all coupons prior to redemption. While ECC is identified as a strength, we identified the ECC as a weakness as well. The challenge for ScanAps product is in the fact the technology requires an investment by grocery and retail stores (ScanAps computer interface) before the consumer can take advantage of the device. In addition, another weakness is the device is rather limited in functionality, with a maximum capacity of 150 coupons saved. ScanAps has completed two tests as of May 2007. They conducted the tests at the Green Hills supermarket in Syracuse, N.Y in 2004, and Paw Paw Shopping Center in Michigan in October, 2006. We have found no evidence of any deployments to date.
Thegrocerygame.com and Centsoff.com are both web-based service providers that are similar product competitors, on the services side of our offering.
Thegrocerygame.com provides, for a monthly fee, a website users can log into to view the current weekly advertised prices for a grocery store/retailer based on the customers zip code. While this provides an excellent interface to valued information, it is not portable like the product and service the Coupon eCompanion will provide. In addition, thegrocerygame.com and centsoff.com both offers its subscribers access to its list of inexpensive items and provides them with manufacturers' coupons. One key advantage with this product offering and model is these services are competitively priced. The average cost for this web-based service is around $5 per
month. Coupon Organizer (file folder) a direct similar competitor to our product would be the use of a standard coupon organizer. This organizer categorizes coupons in expandable pouch using tabs for labeling specific items, shopping sections, stores and more. The strength lies within its cost, with a onetime purchase at an average cost of $15 dollars. Its weakness lies within its overall functionality. There is no additional value add from the organizer other than a place to file the coupons.
In addition to direct competition, there will also be indirect pressures as economic conditions continue to improve within the United States. It has been studied that coupon redemption is lower during times of economic growth. Another indirect competitor is the attractiveness or potential decline in the response consumers have to paper coupons. Consumer response to coupon promotions fell 6% in 2005 compared to 2004. The key to the Coupon eCompanion is it takes the three similar competitors product/service offerings above and provides them all together in one convenient, easy to use, scanner organizer.
Pricing
The Coupon eCompanion product and service will be priced much the same way the pricing of cellular phones and accompanying services are provided. The cost of the scanning unit and coupon filer will be subsidized based on the service model and duration of contract the consumer chooses to sign up for.
The scanner and filer production and packaging has been negotiated and has a fixed cost for the next three years. The per unit cost for the Coupon eCompanion unit is $250, which includes the PDA scanner, and the nylon coupon filer. As a result of the fixed cost, we can offer the unit to the consumer for $199 on a one year service commitment and $99 for a two year service commitment. It will be critical to keep these costs to a minimum to ensure the monthly sales from service returns revenue over the duration of the consumer's service contract.
As for the monthly service offering, we plan to offer two service plans for the customer to choose from "Basic Savings" and "Enhanced Savings" service plans. The basic savings service plan offers weekly updates that will deliver only product and barcode information for coupons. There are no additional services provided other than having a dynamic source to update the scanner as new coupons are introduced to the market. This service offering will be provided at $4 per month.
The second service offering, Enhanced Savings, will provide a better value proposition as it will deliver weekly updates on the lowest advertised pricing, as well as, the updates to the coupon database that is provided in the Basic service. We look to price above a competitor, THEGROCERYGAME.COM, which currently provides their service at $5 per month. Their service only provides the lowest advertised pricing and does not provide any tools for portability or coupon management enhancements. We believe with the added features the eCompanion scanner provides, this unique product mix, will support charging a premium over the competitor pricing. The pricing for the "Enhanced Savings" service will be $7 per month.
We will need to leverage our partners to ensure we are providing dynamic content and ensure we continue to provide value to the shopping experience.
Considering our strategy to manage our fixed unit costs, lack of comparable product and competition in the marketplace, and economic opportunity of the target market (Females with household income between $50k - $75k), we believe the two price points for the Basic and Enhance Services of $4 and $7 per month respectively will provide revenue to generate further development and growth for the organization.
Channels
Sales Channel- Considering the Coupon eCompanion is both a physical product and a specialized service based product, we have selected two channels for sales that include the direct sales channel and through third party direct mail order channel. Our primary channel will be through Direct Sales. Through our marketing strategies we will aggressively target and go after our defined customer to generate sales, that will be outlined in the marketing communications section.
Our secondary sales channel will be through specialized mail order companies that address the unique needs of shoppers around kitchen and house wares. Some identified partners include Vermont Country, Heartland America, Kitchen Universe, and Grande Portal.
Distribution Channel - we have secured a two year negotiated discount schedule from FedEx for our product shipping needs. Through leveraging FedEx's resources we can provide options for the customer around how they prefer to ship their Coupon eCompanion product. These options include ground, express next day, and express 2nd day. After our selection of our logistics partner was completed focus was turned to sourcing our warehouse partner.
Warehousing Channel Considering ScanZ Technologies has a specialized computer product, we do require warehousing services. Management decided to leverage a channel partner as opposed to performing these services in house. For our warehousing requirements, management decided to engage Memphis based, Ozburn-Hessey Logistics for the warehouse and order fulfillment requirements of our business operations. There were three reasons for selecting Ozburn-Hessey logistics as a strategic channel partner:
1. They bring competitive advantage and economies of scale through specialized services around E-Commerce order fulfillment. Ozburn-Hessey Logistics was selected because of its proven ability to ship small items consistently on time while maintaining inventory accuracy throughout the shipping and receiving process.
2. Through our sourcing activities we have secured a 3 year, shared warehousing space and E-commerce order fulfillment contract at a competitive rate that beats market benchmarks for like service. More importantly, we believe this allows our resources to focus on our core competencies.
3. Lastly, Ozburn-Hessey was selected as they could provide required warehouse space within the greater Memphis area. This was critical as we identified our logistics channel partner as FedEx, which operates their primary hub in Memphis. This decision helped to remove operational costs normally associated with the logistics of product from warehouse to distribution.
Marketing Communications
September is national coupon awareness month and will be the apex of most of our marketing effort. While product identity and word of mouth references will be the strongest marketing tool, we believe we will need to invest in other key marketing communications in the next fiscal year to accomplish our goal of product introduction and product awareness.
Our initial marketing campaign will be slotted for September 2007, with full marketing communication utilizing print, web advertising, Public Relations, and Word of Mouth strategies.
Our print initiative consists of leveraging two traditional print strategies. The first print ad is through the use of magazines. Within a short list of magazines targeted at our targeted consumer, females with income between $50k - $75k income, we have identified three magazines in which we will advertise. Better Homes and Gardens, Women's Day, and Family Circle have been identified as our targeted magazines. We have developed a two color, 1/3 page, print ad to be placed and run for three months July, August, and September. Better Home and Gardens has 3.8 million readers and the Reader Profile is Female 80% Male: 20%, Median Age 34, and Median Household Income of $59,187. All three magazines fall within these demographics listed above in which of the average reader falls within our targeted consumer.
Our second print marketing initiative is to leverage the advertising vehicle where 79% of coupons are distributed; directly in the printed coupons section of the weekly Sunday newspaper. We will advertise monthly for a year leading up to September 2007 to provide for market awareness and directly target the coupon user. We completed our sourcing activity and have Valassis as our vendor for Free Standing Inserts (FSI) marketing.
Much like traditional print strategies in magazines and newspaper, we have targeted marketing communications for the web as well. We will leverage websites that help focus our communication to the desired our audience. From Google to FrugalUser.com, considering we are a technology based organization we believe an aggressive marketing and advertising campaign online will capture the targeted consumer that would most use technology to help improve their coupon shopping process.
Our second marketing communications strategy will leverage public relations marketing. We will dedicate a resource to establish communications with the editorials of magazines, and webzines that cover topics around consumer savings, smart shopping and home economics. Currently we have identified the following print and webzines we will target the first 12 months after product launch. Sampling of websites/webzines includes about.com, frugalshopper.com, and major news media associations.
Lastly we will engage in Word of Mouth marketing strategies to establish our third means of marketing communication to facilitate product launch and awareness. We will focus on the following forms of word of mouth marketing:
1. Community Marketing in which we will support niche communities that are likely to share interests about coupon shopping and our product. We will focus on female based user groups and discussion forms by providing tools, content and ideas to support the effective use of coupon shopping. We have targeted a couple strong national user groups to focus our Community Marketing efforts. For example, Mothers of Multiples is a national user group of mothers with twins, triplets, etc. They routinely have coupons available to members and even have a session on how to organize and shop more effectively with coupons.
2. Viral Marketing in which we will target the electronic email medium to develop exciting and constructive messages that will be designed to passed along. We have identified the email subject as "What will they think of next????" and the email will proceed to describe how you can save an additional $100 in groceries if only you organized and knew the best time to purchase products with coupons.
3. Referral Programs that we will create a program as part of the monthly services that if a customer refers a new customer, we will credit one month for customers that are subscribed to Basic Savings monthly services and credit 2 months free for Extended Savings monthly services. The Referral program is developed and part of the online website staged for deployment this year.
We believe through the effective execution of our four key marketing communication strategies including Print, Web, Public Relations, and Word of Mouth, Scanz Technologies will successfully accomplish its 2007 goals of a successful product launch and customer awareness. From this successful launch we feel it will position us to capture our forecasted 30,000 customer in which we prepare to look at the 3 year budget next.
Budget
Revenue Assumptions: In the first year of operations we are targeting to capture a forecasted 30,000 customers. We flattened the monthly revenue rate (accounting for the two pricing options of $4 and $7 per month) from service at $5.50 per month, including gross sales from sales of the eCompanion unit at $199. Over the next two years we forecast to add an additional 25,000 customers in 2008, and an additional 50,000 in 2009. This is an estimated annual customer growth rate of 108% per year. While an impressive growth rate, this is still less than 1% market share of the estimate number of U.S. coupon shoppers.
Cost of goods sold Cost of goods sold covers those expenses of the equipment and personnel required to maintain the IT infrastructure, advertising information, and barcode information interchange with manufactures. In addition it covers the fixed unit cost of the barcode scanner and filer at $250 per unit.
Marketing Communications Expense - The overall marketing budget is 19% of sales in 2007 and 12% in 2008. While these percentages may appear high, we believe this funding is required to support the product launch and awareness campaigns. In 2009, we reduce our overall initial product launch and product awareness initiatives and the marketing budget is reduced to 6% of sales.
These costs were derived working the Object-Task method for developing the marketing expense budget. Below you will find the detailed budget we forecast will be required to accomplish our goals of product awareness.
Print ads were estimated $88,000 for a 1/3 2 color print add. We look to advertise in three (3) magazines for three consecutive months of July, August, and September. Again September is National Coupon Month. We then reduce funding 33% per year in 2008 and 2009 by where we change our initiative to advertise in four (4) magazines only in the month of September. While we reduce spending in our print initiatives, we believe it is important that these marketing dollar shift to increase our focus on website ads and Press relations. For Public Relations, we look to get write-ins for editorials and develop steady flow of press releases to support our marketing efforts. We feel the investments for Press relations is required early in the fiscal year, with the goal that we have 2 editorials in the first year, during the month of September, and steady growth in media and editorials in 2008 and 2009. This requires annual budget to cover headcount and an operation budget of roughly $10k.
While we estimate 2007 sales to fall short of covering operational expenses, we believe with your approval to cover these shortfall funds, the forecasts that are supported by revenue estimates, and our strategic sales and marking programs, we are confident ScanZ Technologies will realize steady growth in our customer base in years two and three and produce profits accordingly.