|Commission Per Trip||$0.50|
|Advertising Boards on Apps Per Spot||$50-2000|
The assumptions used to arrive at these prices are several and they include: 1) that costs do not exceed current estimates and do not vary significantly across different states, counties, and cities. 2) That there will be significant and rapid growth in demand that will enable economies of scale and achievement of the breakeven point. This is because the low prices of the products cannot be achieved in the absence of a mass market for the products.
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|Product/service||Year 1||Year 2||Year 3|
|InstaTAXI Apps purchases @ $0.99||$3,960,000||$9,900,000||$13,860,000|
|Trips Commissions @ $0.50||$35,790,000||$58,600,000||$90,000,000|
|AppsUpgrade @ $0.50||$0.00||$1,000,000||$2,000,000|
|VIP Status @ $25||$250,000||$500,000||$250,000|
According to the Department of Education, there were 18.2 million students in colleges in the US in 2007 up from 14.5 million in 1997 (Nces.ed.gov). Assuming a linear rate of growth, then in 2011, there should be approximately 20 million students in US colleges today. Insta TAXI assumes that due to the significant importance of the new products to students regarding safety at night, avoiding drink driving situation it will quickly be adopted by students. Additionally, the low cost of the apps which is pegged at $0.99 is sufficient to allow impulse and peer-influenced purchases. Insta TAXI also plans to partner with renowned and reliable taxi companies and this is expected to add to the credibility of the product.
The company estimates that 40% of all students will sign up in the first year and increase gradually in the next two years. New enrollment of college students every year will provide a massive influx of new customers each year. The company expects non-students such as high school students, and slightly older people to also purchase and use the apps due to its practicality and usefulness. Regular upgrades of the Apps to include social networking ability will fuel upgrade purchases. Due to financial constraints, a limited number of students will be allowed to sign up for VIP status.
Advertising revenues are expected to grow rapidly and significantly as firms seize the opportunity to access the youth market through similar apps. Advertisement will be compromised of local companies such as restaurants, bars, cinemas, hotels, national advertisers such as beers, soft drinks, electronics, and computers amongst many other products popular with young adults.
Cost of Product
|Product/service||Year 1||Year 2||Year 3|
|Taxi Commissions – Records &Tracking||$100,000||$150,000||$250,000|
|VIP Status – Cards, Communication |
|Advertising per ad @ $10-500||$1,000,000||$ 3,000,000||$5,000,000|
|Total cost of goods sold||$ 1,950,000||$4,160,000||$7,300,000|
Fundamentally, the business will be lucrative as the cost of input will be low and the most critical cost is the development of the Apps but this has already been done for $800,000 used in research and development as well as market testing. Marketing research has also been done that revealed the viability of the product. The company plans to carry out a regular upgrade of the apps to add more useful features to keep up with the IT trends in the industry. The company intends to have advertisers bring their advertising materials and thereby limit its involvement in advertising to reduce costs.
Three Years of Marketing Expenses
|Marketing expenses||Year 1||Year 2||Year 3|
|Salaries & wages – marketing||1,500,000||3,200,000||3,800,000|
|Benefits & taxes – marketing||360,000||520,000||1,200,000|
|Commissions, reps & contractors||800,000||1,800,000||2,000,000|
|Advertising – broadcast||2,000,000||3,500,000||5,000,000|
|Advertising – brochures/ posters||700,000||1,900,000||3,800,000|
|Advertising – direct mail||500,000||1,300,000||1,500,000|
|Advertising – web & social media etc||960,000||2,520,000||4,000,0000|
|Marketing – print||1,200,000||2,400,000||3,400,000|
|Marketing – samples/trade shows||680,000||1,360,000||1,200,000|
|Other marketing expenses||1,000,000||1,500,000||2,000,000|
|Total marketing expenses||9,700,000||20,000,000||27,900,000|
The company believes that marketing is the most critical function that will determine the success of the new product. Because of this, the company will deploy most of its resources towards marketing activities.
|Administrative expenses||Year 1||Year 2||Year 3|
|Salaries & wages||2,400,000||5,600,000||7,600,000|
|Benefits & taxes||1,000,000||2,200,000||3,400,000|
|Meals & entertainment||400,000||740,000||960,000|
|Dues & subscriptions||380,000||380,000||380,000|
|Other administrative expenses||2,170,000||1,680,000||2,400,000|
|Total administrative expenses||7,350,000||13,500,000||19,340,000|
|General expenses||Year 1||Year 2||Year 3|
|Credit card fees||120,000||400,000||680,000|
|Repairs & maintenance||24,000||360,000||800,000|
|Taxes & licenses||100,000||800,000||960,000|
|Other general expenses||500,000||3,200,000||4,800,000|
|Total general expenses||4,500,000||13,140,000||22,020,000|
These expenses do not include depreciation, interest, and taxes. The costs of maintenance and repair are expected to increase with time while overheads are also expected to increase due to organizational complexity and growth.
Three Years Operating Statement
|Product/service||Year 1||Year 2||Year 3|
|– Cost of goods sold||1,950,000||4,160,000||7,300,000|
|– Marketing expenses||9,700,000||20,000,000||27,900,000|
|– Administrative expenses||7,350,000||13,500,000||19,340,000|
|– General expenses||4,500,000||13,140,000||22,020,000|
|= Gross profit*||26,500,000||49,200,000||79,550,000|
*Before taxes, amortization, and depreciation.
|Start-up costs||Year 1|
|Opening inventory:- supplies||240,000|
|Rent (last month’s)||23,340|
|Other deposits and start-up costs||236,700|
|Total start-up costs||1,000,000|
|Capital expenditures||Year 1||Year 2||Year 3|
|Total capital expenditures||4,240,000||5,040,000||5,760,000|
Evaluation and Control Metrics
The following measures will be established to guide the implementation of the InstaTAXI marketing plan.
Formal Controls: these include, Input controls and output controls. These controls define the quality and quantity of input to be used by the firm in its operations. These standards will also specify the acceptable cost of inputs at each stage; process controls will define what is required to be done to implement the marketing plan. The other category is the output controls which specify the quality of products.
Overall performance controls are the measures that will be used to determine the level of success of the whole organization. They include turnover, profitability, costs, market share, and customer retention amongst others. These financial standards are stated in the financial projections above.
Product performance standards are another control measure; these controls define the specification of the product and service of the Insta TAXI product and specify both the quality of the core product that is the apps and augmented product which includes social networking, maps, user information among others. Product performance standards will outline branding and positioning standards for the InstaTAXI apps.
Distribution standards are controlled that will determine the efficiency of the distribution network of the new apps. The apps will be distributed through mobile technology or the internet; this will be done from centrally located servers located at the company’s headquarters. Distribution standards will also outline supply chain operation and customer relations management through customer and company interaction.
Integrated marketing communication will specify the desired objectives and strategies for the company’s marketing communication activities. These include the media channels to use, budgets, level of brand awareness, and recognition that should be achieved. In addition to formal controls, informal controls will be established that will outline the desired and expected individual and group behavior as well as the organization culture. Finally, regular audits will be carried out to monitor performance to provide feedback on progress and guide planning activities.
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Ferrell, O.C. & Hartline, D. M. “Marketing Strategy 5th Ed.” Ohio: South-Western. 2011. Print.
Nces.ed.gov. “U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics, 2008.” Web.