Intellex Marketing Business Plan

©Intellex Marketing, All Rights Reserved
Business Overview
by
Vivek Lath
Founder
CIRCA 2008

©Intellex Marketing Private Limited, All Rights Reserved
Introduction
➢ At present, there is no communication medium, which delivers true contextual advertising
or promotions based on each consumers’ buying patterns. Marketers have no way to reach
the target segment based on actual behavior. Also, due to exorbitant costs of marketing,
local and small businesses are unable to afford the traditional communication mediums.
➢ Our service allows brand owners/advertisers & local business owners to reach consumers
at the point of sale in a retail store and pinpoint their target segment based on their
purchase patterns.
➢ This is a new initiative and no such model exists in India at this time. Our unique approach
gives marketers the ability to reach consumers at the place and time of actual spending.
➢ Our strength lies in the expertise of the founders in unlocking consumer behavior from
transaction data. Having managed loyalty programs for some of the largest retailers in US,
our founders have a keen understanding of drivers that affect consumer behavior
➢ The model is about reaching the maximum consumers with the smallest marketing budget
making it extremely useful for marketers during economic downturns. It is a win – win for
all entities involved – brand owners spend less with better reach, retail store owners share
our revenue of advertising and most importantly consumers get what most interests them.

Outline
• Leadership
• Business Model
• What Is Our Value Addition
– For Brand Owners and Advertisers
– For Retailers
• Revenue Model
• Market Size
• Competition
• Challenges
• Current Status
• Funding Requirements

Leadership
Vivek Lath, Founder
Vivek brings over 6 years of experience covering technology, media, FMCG and retail. He is chiefly
responsible for strategy, service offerings and alliances.
Vivek has a Bachelor’s in Electronics Engineering from Mumbai University and MS in Computer
Science from University of Southern California. He also attended the Business Bridge program at
the Tuck School of Business at Dartmouth College.
He started his career with the shopper insights group at Cannondale Associates, a boutique
consulting firm providing consulting services to Retail and FMCG companies in US. While at
Cannondale, he helped Fortune 50 FMCG firms create their marketing and sales strategy. He also
created new products for unlocking shopper behavior.
After Cannondale, Vivek moved back to India and joined Tata Sky as Manager for Business
Development & Content Acquisition. He was responsible for all aspects of content acquisition such
as channels and movies. He was also responsible for exploring new businesses and revenue
streams.

Create an advertising and promotion medium
“SHOPSENSE” at the point of sale in a retail store
• Deliver high impact advertisements and promotions at the point
of sale in a modern retail store.
• Each communication is generated by a sophisticated algorithm,
which analyses every individual’s current and any available
past purchase data and delivers a targeted communication
• Communication is delivered as
printed coupons to consumers.

ShopSense adds an additional layer over the
current modern retail transaction system
Items are scanned at
the POS counter.1
Transaction Data is sent to
the ShopSense server2
ShopSense
analyses the
transaction data
3
5
ShopSense sends a
print command to a
printer near the POS
counter
4
6
Printer placed near
the POS terminal
prints the
communication
Cashier delivers the
coupon/advertisement
print to the shopper

Communication Format

Sample Coupons

Examples of few simple communication
decisions by ShopSense
ShopSense can be configured to reach more complex targets and fulfill more complex
objectives
Transaction Findings ShopSense Reaction Objective
Basket consists of products of category
X
Coupon/Advertisement for a Brand A in
category X
Isolate category buyers of your own brand
Basket consists of Brand X in category
A
Coupon for Brand Y in Category A in
the next purchase
Enable brand switching. Target only non brand
buyers
Basket consists of back to school
products such as notebooks and pen
Advert for the new kids television
channel
Identify a target group for a targeted communication
Transaction is from a store in a high
income locality. Alternatively, loyalty data
identifies the consumer as a high value
customer
Advert for the new range of watches
from Rolex
Pinpoint location and behavior to deliver a
customized communication to a group
Based in loyalty data, it is identified that
a consumer always purchases one unit
of corn flakes
Discount coupon for purchase of 2
units of corn flakes
Increase purchase quantity and thereby increase
consumption. Avoid subsidization by pinpointing only
those who purchase less of a product.
Based on loyalty data, it is identified that
a consumer only purchases less
premium, low margin products
Discount coupon for a premium, high
margin product with in the same
category
Induce product trial and trade consumers up on the
value. Also pinpointing only buyers of low margin
products, spending from those who already buy the
premium product is not subsidized.

How does it help the Brand owner
Problem Solution
• Increased cost of marketing and
advertising due to intense
competition. Reaching the
largest number of customers
with the smallest budget
• ShopSense analytics allow you to target a very
small subset with specific advertising and
promotions and thereby avoid marketing waste.
Unlike television ads with high production budget,
ShopSense is much cheaper because the
advertiser only pays for communication to the target
segment.
• No direct channel to reach own
category/brand consumers and
correctly identify their target
audience
• ShopSense pin-points shoppers' specific buying
behaviors, enabling brands and retailers to uncover
the consumer truth, and create the most relevant
and compelling targeted advertisements,
promotions and communications.

How does it help the Brand owner
Problem Solution
• Globally the biggest issue for
marketers is the clutter in the
advertising space with “the
average person exposed to 3000
a d v e r t i s i n g m e s s a g e s a
day” (The Economist, June 26,
2004).
• Touches the consumer at the point of consumption.
Unlike other mediums, communication through
ShopSense is delivered to the consumer at the
right place i.e. location of spending and at the right
time i.e. the time of spending
• A d d r e s s i n g m a r k e t i n g
accountability i.e. knowing and
measuring what works and does
not work
• Behavior-based marketing allow you to make
decisions based on actual consumer purchase
behavior, linking the effectiveness of targeting with
cost per performance to provide marketers with a
measurability that previously never existed.

Brand owners can selectively target each
communication to each consumer
• Generate Trail
• Induce repeat trip and purchase
• Induce increased purchase
• Enable brand switching
• Reinforce brand image
• Communicate new product/brand in a category
• Enable cross category communication

Comparison with other media vehicles
Share of
Consumer
Attention
Reach
Location
Awareness
Behavior
Awareness
Targeting
Capability
Cost
Television
Advertising
Very High Very High National/State None None Very High
Print Advertising High Very High City None Low Very High
Radio Advertising Medium High City None Low High
Out-of-home
Advertising
Low High Locality None Low High
Online Advertising Low
Low ( Function
of Internet
Penetration)
City Medium Medium
Low (Pay only for
leads)
ShopSense High
Low (Function
of Modern
Retail
Penetration)
Locality Very High Very High
Very Low  
(Media buyer pays
only for the targeted
segment in a target
location)

Problems faced by a retailer engaged in
modern retail store
• Erosion of margins due to high cost of supply chain and real
estate
• Ensuring loyalty is difficult due to the ubiquity of kirana stores.
• Unlocking the consumers behavior and needs is a challenge
for most retailers. They have no tools to understand the
consumer’s need and influence them directly at the point of
sale

ShopSense adds to the retailers bottom line
at no cost
• ShopSense is a revenue sharing program. Retailers share a percent of revenue
earned for reaching their shoppers. This adds to their bottom line.
• Loyalty is ensured because coupons incentivize customers to return back to the store.
• Store Coupons ensure frequent trips due to the presence of the expiry period.
Coupons encourage repeat trips sooner and thereby shorten the purchase cycle at the
store
• By selectively unlocking consumer behavior, coupons can induce increased spending
only in those who spend less.
• Stores can drive temporary category volume by category specific incentives to only
the category shoppers.
• Due to the presence of an advanced analytics engine and a seasoned team of
analysts, ShopSense program also allows retailers to tap consumer insights at little
additional cost.

Main revenue model for ShopSense is to charge advertisers, brand
owners and local business owners for each communication.
Based on robustness of the loyalty program at the retailer, additional revenues can be
recognized by sending contextual messages to the consumer’s mobile phone or email.
Objective Cost Per Print (Rs)
Advertisement 1
Promotion 1
Lead Generation 40

From a comparable study of per view cost of various
communication mediums, ShopSense is priced at Rs 1 per print
Advertising Medium Cost Per Viewer (Rs)
Television 1
Newspaper 1
Radio 0.07
Outdoor 0.7
Internet
8
($0.2) per click
SMS 0.2
Email 0
Flyer
3
including postage
ShopSense 1
Cost for per view reach of ShopSense is much less in absolute
numbers since the advertiser only pays for the target segment

Financials Per Store
REVENUES Year 1 Year 2 Year 3 Total
Average # transactions in each store each day 1,000 1,200 1,440
# of Transactions/Annum 360,000 432,000 518,400
AD Prints
Revenue Per Print 1.00 1.00 1.00
Target Selectivity 10% 10% 10% 10%
Revenue from AD Prints 36,000 43,200 51,840
Coupon Prints
Revenue Per Coupon 1.00 1.00 1.00
Target Selectivity 40% 40% 40% 40%
Revenue from Promotional Prints 144,000 172,800 207,360
Total Revenues 180,000 216,000 259,200 655,200.00
EXPENSES
Direct Expense
Retailer Share 50% 50% 50%
Retailer Fee 90,000 108,000 129,600
Printing Cost Per Print 10% 10% 10%
Total Printing Cost 18,000 21,600 25,920
Total Direct Cost 108,000 129,600 155,520 393,120.00
Margin 72,000 86,400 103,680 262,080.00
Margin % 40% 40% 40% 40%
Capital Expense
Average # Counters/Store 4
Cost Per Printer 15,000
Coupon Printer Cost/Store + Server @ 15k 75,000
Balance (3,000) 86,400 103,680 187,080.00

1.04
2.46
5.16
8.13
12.80
2009f 2010f 2011f 2012f 2013f
Market size for our solution is estimated to
grow at a CAGR of 65%
282 341 396 453 535
0.4% 0.7% 1.3% 1.8% 2.4%
Size of
Indian
Advertising
Industry*(R
s Bn)
% Share
Market Size (Rs Bn)
* PWC 2008 Media and Entertainment Report

Outline
• Leadership
• Business Model
• How Does It Work
• What Is Our Value Addition
– For Brand Owners and Advertisers
– For Retailers
• Revenue Model
• Market Size
• Competition
• Challenges
• Current Status
• Funding Requirements

Competitive Landscape
• At present there is no direct competition to ShopSense.
• Retail application manufactuers might decide to replicate the model and run
a standalone operation.
• FutureGroup’s media arm FMIL operates in the retail advertising space, but
their focus is not on contextual communication based on consumer
behavior.
• Digital signage companies such as TAG Media or DSN with presence in
retail media space might venture in to this form of marketing as an
extension to their current offering.

Sustaining the Competitive Advantage
• Invest in research and development of more robust targeting algorithms.
– Targeting capabilities ensure high redemption rates and thereby better bang for
the client’s marketing buck
• Create scale by signing deals with as many retail stores as soon as possible
– Larger footprint across the nation enables better bargaining power with the
media buyers
• Ensure exclusivity with retail stores through long term deals.
• Replicate the model across web and mobile, and developing an ability to
offer an all round package to the customer

Challenges
• Highly dependent on retailers. Modern retail in India is still evolving with
retailers trying different formats and facing various operational challenges.
Given the rampant re-organizations and constant overhaul in operations,
this opportunity might take a backseat for sometime.
• Dependent on the promotional spending of our manufacturer and retail
partners, which may be effected by seasonal, economic and other factors
over which we have no control.
• Delivery of communication in local languages
• Expensive technology upgrades as communications get more complex and
regional

Current Status
Retail Partners
• Pilot running in Hypercity, Malad, Mumbai
• In talks with Reliance, Wadhwan Retail, Trent & Spencers.
Brand/Advertiser Partners
• Current Customers: Glaxo, Marico, Britannia, Golds Gym,
Health Total
• Pipeline Customers: HUL, Pepsi, KFC, Cadbury and many
others.

Seed Funding Requirements
• Year 1 – Assuming penetration in 50 stores for the first year.
– SG&A: 1 Crores
– Spending on Equipment & Supplies: 50 Lakhs
• Equipment spending will be required in phases as the business
scales up.

Revenue projections show a CAGR of 191%
In thousands ('000) Year 1 Year 2 Year 3 Year 4 Year 5
# Stores 50 1500 2500 4000 5000
REVENUES
Revenue from AD Coupons 1,800 129,600 259,200 497,664 746,496
Revenue from Promotional Coupons 7,200 194,400 388,800 746,496 1,119,744
Total Revenues 9,000 324,000 648,000 1,244,160 1,866,240
EXPENSES
Variable Expense
Retailer Share 4,500 129,600 194,400 373,248 559,872
Cost of Printing 900 32,400 64,800 124,416 186,624
Fixed Cost
Hardware Cost (4 Media Printer/Store at Rs 15k each and
1 Computer Server at 15K each) 3,750 79,000 79,000 118,500 79,000
Total SG&A 11,200 20,000 40,000 60,000 80,000
Total Costs 20,350 266,000 378,200 676,164 905,496
Income (11,350) 58,000 269,800 567,996 960,744
Income % -129% 18% 42% 46% 51%

SG&A Financials – Year 1
Salaries 7,000,000
Office Rent 300,000
IT Equipment 300,000
Office Equipment and Supplies 100,000
Utilities 300,000
Travel 3,000,000
Accounting services 100,000
Legal services 100,000
Total SG&A 11,200,000

Initial Team Structure

Appendix

Comparison with SMS and Internet
• SMS can only deliver text
• Limitation on the text length allows limited communication with the consumer
• Most SMS messages are perceived as spam and deleted right away
• Attention span to a SMS message is low. Consumer is not necessarily in the frame
of mind to make a purchase
• Targeting is limited to demographic segmentations only. High spillage makes SMS
an expensive medium.
• Internet has limited penetration in India.
• Effectiveness of an internet campaign is at 1% click thru rate on average.
• Contextual advertising is connected to keywords and content being accessed.
• Location awareness is at best to the city level.
• Difficult to determine the socio-economic class of the user.
Internet and SMS are less effective as compared to ShopSense but easy to operate and
manage as compared to ShopSense.

Research Findings
• AC Nielsen Shopper Trends 2007
– Modern Trade has grown 90 percent across India’s eight key metros
– Spending at supermarkets has also seen a growth of 50 percent
– Shoppers generally use the Modern format for their weekly and monthly shopping
needs and use traditional stores for “top-up” shopping.
– Increasing choice within the Modern format has resulted in shoppers flirting across
store banners. The store repertoire – the number of supermarkets visited in past
four weeks - has gone up from an average of 1.61 to 2.03. In addition, fewer
shoppers say ‘they continue to shop at the same store they always shop at’.
– As modern retail formats expand, they are no longer catering only to the upper
socio-economic groups. The SEC A demographic now comprises less than half of
the customer base, with both SEC B and more so SEC C seeing an increase in
proportion. The young male, when he shops, prefers the supermarket to the
neighbourhood store.

Intellex Marketing Business Plan

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (17)

Similar to Intellex Marketing Business Plan

Similar to Intellex Marketing Business Plan (20)

Recently uploaded

Recently uploaded (20)

Intellex Marketing Business Plan