Products and Services
The proposed project intends to offer several products and services that are tailored to meet individual and corporate customers interested in recreational activities within the park, adjacent library, and a mini shop. Specifically, the park will offer sporting services such as football, volleyball, and basketball pitches. Moreover, the project will offer professional coaching and training on a need-basis at an extra fee (Goodman 43).
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The sporting facilities were designed to meet the needs of corporate institutions such as schools and private businesses in need of an all-inclusive private park. The other services within the establishment include a library where books and sports journals can be purchased or leased at a fee. A section of the library will host a sports apparel shop where different sporting equipment and souvenirs are retailed. The park will also offer event hosting services for special occasions such as weddings, family reunions, and private camps. In addition, the park will introduce a massage service hosted in one of the changing rooms. These products and services will be priced according to current market demand.
Despite the existence of 400 housing units within the gated residential estate, there is no recreational facility to serve their leisure needs. At present, residents in need of recreational services have to move for several miles to use the pay-as-you-use private facilities (Subramanyam 51). At present, there are only three facilities of this type within the region. Customers often complain of high fees and poor quality services in these establishments. Although the market for recreational facilities is expansive, the current providers cannot meet consumer demand due to limitations such as space, local government regulations, and safety concerns.
For instance, recreational facilities within the local schools can only be used during weekends with a time limit of between 8.00 am and 6.00pm. Other private recreational facilities such as the MM Private Club can only host registered members, who must pay an exorbitant membership fee every year. Apparently, the existing facilities cannot meet the basic recreational needs of low or middle-income families who desire a weekend fun day in a public or private park. The market trends suggest that the proposed residential park is likely to reap optimal returns since it appeals to mid-size families and small to medium organizations (Kotler and Keller 19). In addition, the park is likely to appeal to event organizers in search of an ideal venue for hosting different functions.
Summary of Market Needs (Customer Opportunities)
The current market consists of 400 housing units hosting at least three persons per house. In addition, there is a ready market from within the region, such as corporate and government institutions, event organizers, and health club activities. Most of the targeted clients fall within the middle-income bracket and can afford to pay for recreational services. Since the park is within a gated residential community, its service charter will be tailored to conform to the customers’ demand for a safe recreational park where their children can freely play with minimal exposure to insecurity (Bolman and Deal 31).
The individual customer segment forms the majority of the recreational services clients because of their willingness to support its construction. Other customers consist of corporate organizations in need of recreational services within a private park for bonding and team-building sessions. The third category of clients is the event organizers in search of a good venue to host private and social functions. Since the proposed project is unique and one of its kind in the entire region, it is likely to tap into the market spilling beyond the gated residential estate (Cavusgil et al. 15). For instance, the establishment of a health club within the facility might attract customers beyond the estate.
The market is segmented into individual and corporate clients. The individual customer segment consists of families from within the gated residential estate in the search for affordable, safe, and private recreational facilities. This segment is the largest since the park’s market coverage is a radius of five squared miles. The segment is further divided into fractional-owner and outsider groups. The fractional-owner group consists of the families within the gated residential estate that contributed towards the building of the park (Scarborough 32).
The outsider group consists of other families from within the region. The second market segment is made up of corporate clients such as local institutions and event organizers in search of an ideal venue for hosting different functions. This market segment is further categorized into small business and medium business (Kotler and Keller 28). The small business category includes corporate organizations or event organizers wishing to host less than fifty people per function. The medium business segment is made up of corporations planning to host between 50 and 500 people per function. As per the gated residential association regulations on population density in the park, it would not be possible for the business to host functions with more than five hundred external attendees.
The main competitors of the recreational facility are local institutions and the MM Private Club. These facilities offer perfect substitute products and services. However, the private club has a high price tag for each service in addition to an exclusive membership regulation. The local institutional facilities can only host recreational services over the weekend when the learning section is closed. Fortunately, the recreational facility will gain from these challenges by offering affordable services every day of the week on a 24-hour notice.
The proposed residential, recreational facility will be managed by a board of directors consisting of three officials from the resident association, a professional business manager, and twenty support staff members. This team will operate within the linear management model where major decisions are made by the board, and the support staff personnel are compelled to comply (Scarborough 18).
Projected Annual Net Income
The cost and revenue projections at the end of the first financial year were calculated with estimated returns after every four months (see Tables 1 and 2). The costs were equally estimated using the same formula. This was followed by profit estimation by getting the difference between estimated costs and revenue after every four months.
Table 1. Estimated annual revenue and costs.
Table 2. The annual cost of doing business.
|Expenses||Expected Monthly Cost ($)||Expected Yearly Cost ($)|
|Salaries and Wages||3,650||44,000|
|Technological Equipment and Furniture||1000||12,000|
|Advertising and Other Promotions||500||4,800|
|Utilities: Heat, Electricity, etc.||300||3,600|
|Telephone and Internet||300||300|
The business targets to offer recreational services to nine thousand customers by the end of the first financial year at the cost of $18 per service bundle. This means that the business will be able to collect $162,000 at the end of the first year of operation.
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Expected revenue= Number of customers * cost of each laundry service
Return on investment = Gains – Investment costs
Return on investment for the business
Investment cost $106,500
Gains – Investment costs $55,500
Therefore, return on investment is 43,500/106,500 = 16.199%
From the above projections, the residential park recreational business is expected to break-even before the end of the first financial year (see Tables 3 and 4 in the appendix). Therefore, through healthy financial planning, the business may be in a position to correctly forecast future costs and profits associated with daily operations and asset depreciation.
Table 3: 12-Month income statement. The Residential Park Recreational Business.
|Forecast Monthly Cash Flow Budget Statement for the Year 2019|
|Estimated Sales Units||200||200||300||350||400||400|
|Electricity and Utilities||300||300||300||300||300||300|
|Other Admin expenses||600||600||600||600||600||600|
|Property, Plant, and Equipment||40,000|
|Total (B)||40, 000||5,700||5,700||6,100||800||6,600||7,400|
|Net cash (A) – (B)||47,000||-1,700||-1,700||-1,100||800||1,200||600|
|Opening balance||47,000||45, 300||43, 400||42,300||43,100||44,300|
|Closing Cash||240,400||45,300||43, 400||42,300||43,100||44,300||44,900|
|Estimated Sales Units||400||500||500||600||800||400||5,000|
|Accounts Receivable||8,000||10,000||10,000||12,000||16,000||8,000||100, 000|
|Electricity and Utilities||300||300||300||300||300||300||3,600|
|Other Admin |
|Property, Plant, and Equipment||40,000|
|Net cash (A) – (B)||-1,700||-1,700||-1,100||800||1,200||-1000||45,500|
|Opening balance||47,000||45, 300||43, 400||42,300||43,100||46,500|
|Closing Cash||45,300||43, 400||42,300||43,100||44,300||45,500|
Table 4: Balance sheet. The Residential Park Recreational Business. As of 30th December 2019.
|Cash in Bank||2,000|
|Cash Value of Inventory||25,000|
|Prepaid Expenses (insurance)||4,800|
|Total Current Assets||31,800|
|Machinery & Equipment||4,800|
|Furniture & Fixtures||7,200|
|Real Estate / Buildings||–|
|Total Fixed Assets||12,000|
|Liabilities & Net Worth|
|Notes Payable (due within 12 months)||–|
|Total Current Liabilities||4,000|
|Bank Loans Payable (greater than 12 months)||1,000|
|Less: Short-Term Portion||–|
|Total Long-Term Liabilities||1,000|
|Owners’ Equity (Net Worth)||37,800|
|Total Liabilities & Net Worth||45,500|
Bolman, Lee, and Terrence Deal. Reframing Organizations: Artistry, Choice, and Leadership. 3rd ed., John Wiley & Sons, 2013.
Cavusgil, Tamer et al. A Framework of International Business: The New Realities. 4th ed., Prentice Hall, 2016.
Goodman, Gail. Engagement Marketing: How Small Business Wins in a Socially Connected World. John Wiley & Sons, 2014.
Kotler, Philip, and Kevin Keller. Marketing Management. 15th ed., Pearson Prentice Hall, 2016.
Scarborough, Norman. Effective Small Business Management: Pearson New International Edition. 10th ed., Pearson Education, Limited, 2013.
Subramanyam, John. Financial Statement Analysis. 11th ed., McGraw-Hill Education, 2013.