Renovation Nation

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Marketing Management Final Paper MBA Program - August 2009

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Renovation Nation

  1. 1. Marketing Plan Denise Cook Allison MacDonald Tara McKay Brian Ramos Betty Seed
  2. 2. Fitchburg State College Master of Business Administration Marketing Management Final Executive Summary Founded in 2004, Renovation Nation operates as a successful tool rental business in the Boston-metropolitan area. With three locations, we gross $1.5 million in revenue per year. We have achieved success in this market by offering specialty products, providing exceptional customer service and serving a local clientele. We are a proud member of the American Rental Association (ARA). Renovation Nation is guided by our value proposition: convenience, value and expertise. We provide our homeowner and contractor customers with delivered rented tools at a reasonable cost, in-home consultants to help plan projects, in-store and online courses to learn new skills, and licensed handymen. Renovation Nation supports the community through several partnerships including donations to Habitat for Humanity and our own Renovation Nation Foundation which donates 2% of net revenue to hurricane relief efforts in the United States. Renovation Nation plans to expand to the Raleigh, North Carolina metropolitan area – an area of projected growth with a significant percentage of homeowners. One of our principals will relocate to the area to oversee the purchase and development of three stores in Raleigh, Durham and Cary to mirror the success of our Boston-area stores. Introduction The home center and hardware store industry (home improvement retailers) includes about 30,000 stores with combined annual revenue of about $200 billion. Major companies include Home Depot, Lowe's, True Value, and Ace Hardware. Home Depot and Lowe's account for more than half of overall sales in the United States. In 2007, the U.S. general tool market generated $8.8 billion in revenue. In 2008, revenue declined 3.8% as a result of the contracting construction market to $8.4 billion. According to a recent report, the general tool segment averaged a compound annual growth rate of 9.4% between 1998 and 2008. By 2009, the general tool rental business was $8.8 billion in the U.S.. General tool rental has been the fastest growing U.S. market segment during the past decade, with 11.6% compounded annual growth from 1998-2007. 2|P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  3. 3. Fitchburg State College Master of Business Administration Marketing Management Final The West South Central region saw double-digit growth in 2008 as hurricane recovery efforts required large amounts of tools. Continued rebuilding in 2009 will hold losses in the region well below the national average, but in the long run, the fastest growth will revert to the Pacific, Mountain, and South Atlantic regions. The share of the market attributable to do-it-yourselfers fell from 47% in 2007 to 44% in 2008, as residential improvement activity lagged from falling home values and tighter credit. However, recent reports forecast more revenue declines in 2010 and 2011 before rebounding strongly in 2012 and 2013. Home remodeling, repair and new homebuilding drive demand. The profitability of individual companies depends on low-cost purchasing, effective merchandising, and competitive pricing. Large companies can offer wide selections, supply high-volume goods to builders, and have advantages in purchasing, finance, distribution, and marketing. Small companies can compete by offering specialty products, providing superior service, or serving a local market. Competition includes building supply distributors and wholesalers, mass merchandisers, warehouse clubs, and internet retailers. Situation Analysis Market Summary Market Demographics The current industry is made up of three nationally recognized competitors: Home Depot, Lowe's, and True Value. They have smaller subsidiary companies that specialize in tool and equipment rentals. The subsidiaries are: Sunbelt Rentals (Lowe’s 90 stores), Taylor Rental (True Value 400 stores) and Home Depot (500 stores). All have stores located throughout the United States and carry strong name recognition. Marketing Trends & Growth Growing do-it-yourself Market With the growing popularity of home renovation television shows (HGTV), the do-it-yourself market has expanded. Consumers are willing to attempt renovations from painting to installing plumbing. In addition, do-it-yourself projects can be more cost effective than hiring contractors for small projects. 3|P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  4. 4. Fitchburg State College Master of Business Administration Marketing Management Final South-Atlantic Region Research indicates that the South Atlantic region is a growth area with families relocating at a rapid rate. North Carolina Real Estate Market North Carolina’s real estate market has experienced slower growth compared to the past ten years. Since homeowners are staying in their homes longer or can’t sell their homes, many are renovating to meet their needs. Information about Renovation Nation Mission Statement Renovation Nation is a complete tool rental company providing products and services to meet the needs of homeowners and construction professionals. Our goal is to provide the highest level of service and expertise in the home improvement business. Through our Renovation Nation Foundation, we fund many local activities that support social and economic growth. Value Proposition: Convenience, Value & Expertise Our direct market research indicates that by focusing on convenience, value and expertise, we are able to meet our customer’s renovation needs. Objective Renovation Nation's objective is to serve as a resource to new homeowners, do-it- yourselfers, and contractors in the community. We provide customers with tools, expertise and resources. Strengths & Weaknesses Renovation Nation has a well formulated strategy with a proven management team that provides customers with convenience, value, and expertise. We successfully operate three retail locations in the Boston-metro area. One of our principals is relocating to the new market area and will oversee implementation of the expansion. 4|P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  5. 5. Fitchburg State College Master of Business Administration Marketing Management Final Renovation Nation understands that there will be challenges in hiring and training consultants and management staff to translate our service philosophy to this new area. nts Other concerns to be addressed include lack of name recognition, start-up costs and up understanding the market and culture of the South. Market Share In 2009, the general tool rental business generated $8.8 billion in revenues in the United States. Renovation Nation aims to n capture 2.5% of the market share by targeting local customers and promoting our core competencies. By staying true its value proposition, Renovation Nation can be successful competing with big-box competition. SWOT Analysis 5|P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  6. 6. Fitchburg State College Master of Business Administration Marketing Management Final Competition Home Depot The world’s largest Home Improvement chain store. Represents 44% of the tool rental market. Strengths: Rents a wide range of tools and equipment including wood tools, machining tools and small power tools. Weaknesses: Staff may have limited knowledge or training in the use of tools and may not be able to provide expert support for all products. Tool rental departments are not available in all locations. Lowe’s The second largest Home Improvement chain store. Represents 2% of the tool rental market. Strengths: Sunbelt Rental owns and operates the tool rental department in 90 Lowe’s locations. Weaknesses: Primary customers are contractors. True Value Represents 33% of the tool rental market. Strengths: Able to rent heavy equipment to as well as home renovation tools. Weaknesses: Diverse rental service. They offer a wide range of rental items including party supplies, tents, tables and chairs. Critical Issues The critical issues for Renovation Nation’s success are:  Hiring knowledgeable and enthusiastic staff.  Offering top of the line tools that are meticulously maintained.  Offering innovative communication technology to customers.  Provide competitive rates relative to big-box retailers.  Sub-contract only with Handymen who are licensed, reliable and reputable.  Create an aggressive marketing and advertising campaign to gain visibility. Pricing Strategy Products available in this type of business include electric power tools; ladders, lifts and scaffolding; painting and decorating; manual tools and home and garden equipment. Setting the right rental rates require fine tuning of time and dollar utilization. Time utilization calculates how long the item will be rented while dollar utilization is calculated by dividing twelve months of revenue by the acquisition costs. Rental terms are usually a minimum of four hours but can be daily, weekly or longer. Other costs that need to be examined are fixed costs, labor and equipment costs, competitor pricing, and overhead. Still another set of costs to be considered are the expected lifespan of the equipment and maintenance costs. 6|P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  7. 7. Fitchburg State College Master of Business Administration Marketing Management Final Using a combination of these factors depends on the size of your business and your position in the marketplace. It is recommended that prices not be discounted. Generally, discounting is only done when a piece of equipment is being rented weekly or longer. Supply and demand should be factored into the decision to discount an item. Keys to Success Convenience Maintain optimal inventory levels to meet demand. Hours of operations will meet the needs of customers and will include evening and weekend hours. Renovation Nation is unique in that we offer on-site delivery. According to our research, customers’ needs will be met by offering multiple methods to communicate with us (e.g. phone, online support, iPhone application). Value Renovation Nation offers quality rental tools that are competitively priced. Expertise Staff is extensively trained in the areas of customer service, tool usage and the renovation process. Staff is knowledgeable in best practices in completing both large and small projects. Marketing Strategy Marketing Objectives Renovation Nation has the skills, knowledge and products to exceed the needs of the growing number of do-it-yourself homeowners as well as contractors. Competition is strong in this market. The objective is to reach the identified target segments by emphasizing the unique attributes of Renovation Nation. The marketing strategy and plan must be creative and innovative, providing each segment with something unique while focusing Renovation Nation’s value proposition; convenience, value and expertise. 7|P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  8. 8. Fitchburg State College Master of Business Administration Marketing Management Final Target Markets Demographics The Raleigh/Durham/Cary, North Carolina area has a combined population of approximately 750,000 permanent residents. The population swells during the school year when colleges are in session. The population between 25 and 64 years of age in Raleigh is 55%, Durham is 53.7% and Cary is 59%. The median income for the area is as follows: Raleigh $46,612, Durham $41,160 and Cary $89,702. Approximately 50% of residents in Raleigh and Durham are homeowners. The number of people who own their own homes in Cary is significantly higher at 73%. Marketing Research - Survey Results In July of 2009 Renovation Nation conducted a non- scientific market research survey and received 230 responses. Results show that most respondents have completed at least a couple of home improvement projects. Only 9.6% of the respondents identified that they did not complete a project. Of the projects attempted, painting and gardening/landscaping were at 80.4% and 75.7% respectively. When asked if they experienced any problem or challenges during the project, not having the right knowledge/skills was number one at 46.2%, not having enough time was second at 43.9% and not having the proper tools/equipment was third at 40.8%. 8|P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  9. 9. Fitchburg State College Master of Business Administration Marketing Management Final Strategies This plan will require different strategies targeted to the specific segment. In addition to the standard marketing methods i.e. direct mail, a newsletter, advertising in print media and directories, the plan is to offer services and expertise not offered at other places. Homeowner Marketing Plan  Web Site – create and maintain web site that would offer online assistance in addition to a complete listing of services.  In-Home Consultants – heavily advertise that Renovation Nation will supply in-home consultants.  Create “DIY” DVD’s – customers could take them home at the time of rental or view online.  New Homeowner Packet – send new homeowners a welcome packet and include a small gift or discount coupon.  Partner with Realty Company – obtain referrals for handyman services.  Community Involvement – renovation “how to” workshops at local schools and civic organizations.  Business Networking – participate in Rotary Club and other appropriate organizations.  Articles – write advice articles for local papers discussing home renovation.  In Store Workshops – create “how to” workshops also develop specific workshops for woman and families. Contractors Marketing Plan  Advertise in trade journals.  Participate in local and regional trade shows.  Offer after work workshops on new equipment – bring in vendors to provide training and “free” gift. Break-even Analysis Renovation Nation has contracted to purchase a three store chain located in the identified demographic area. The current owner is financing the purchase to be paid back over a five- year period. Based on financial projections, our new venture will break-even in the second quarter of year two (2011). At this point, Renovation Nation will be positioned to capitalize on the projected growth of the tool rental industry and the rebounding real estate market. 9|P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  10. 10. Fitchburg State College Master of Business Administration Marketing Management Final Break Even Analysis $1,200,000 $1,000,000 Break Even Point $771,964 $800,000 $600,000 $400,000 $200,000 $- 2010 2011 2012 2013 2014 Revenue Fixed Costs Total Costs Appendixes Sources of Information  Ace Tool Rental [http://www.toolrental.com]  All Seasons Rental [http://allseasonsrental.net]  American Rental Association [www.ararental.org]  Business Nation [http://www.businessnation.com]  Financial Statements [http://moneycentral.msn.com]  First Research [http://www.firstresearch.com]  Home Depot Tool Rental [http://www.dexknows.com/business_profiles/the_home_depot_tool_rental-b897063]  Lowe’s Tool Rental [http://findarticles.com/p/articles/mi_m0VCW/is_8_26/ai_62597811/?tag=content;col1]  North Carolina tax information [http://www.ncse.org/?pd=pagedata-building-cost&key=business]  Rental Management Magazine [http://www.rentalmanagementmag.com]  Salary Information [http://www.cbsalary.com]  Solon Hardware [http://www.solonhardware.com]  Taylor Rental [http://www.taylorrental.com]  U.S. Bureau of Labor Statistics [http://data.bls.gov/cgi-bin/print.pl/oco/ocos117.htm] 10 | P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  11. 11. Fitchburg State College Master of Business Administration Marketing Management Final Financials 11 | P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  12. 12. Fitchburg State College Master of Business Administration Marketing Management Final 12 | P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  13. 13. Fitchburg State College Master of Business Administration Marketing Management Final Website 13 | P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed
  14. 14. Fitchburg State College Master of Business Administration Marketing Management Final 14 | P a g e Denise Cook, Allison MacDonald, Tara McKay, Brian Ramos, Betty Seed

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