This document proposes marketing a new modular backpack called the MOD. It is designed for college students and has three compartments that can be used together as a large backpack or separately. The marketing plan targets "busy bees" college students who value usability, appearance, and capacity. Positioning emphasizes the MOD's high capacity and stylish design compared to competitors, as well as its unique modularity. An integrated marketing communications plan uses online ads, magazine ads, billboards, transit ads, and campus ambassadors to build awareness over five years.

1. Marketing Product Proposal
Gabrielle Forman & Mallory Macdonald

2. Introduction
Our product, the MOD backpack is a multifunctional, modular backpack for the busy
college student. At the core of the MOD’ design is the idea that less is more. To make student’s
lives less complicated and so they don't have to constantly alternate bags we designed one
backpack that fits all. It consists of three compartments that can be attached and used as a larger
backpack or can be used separately, allowing for versatility. The first compartment is a thin
“tech” backpack, which is perfect for carrying around your laptop and a few notebooks. The
second compartment is a messenger style bag, which can be used to increase capacity when
connected to the tech backpack. When detached, it can be used for anything from textbooks, to a
place to put your resume during an interview. The last compartment is a small pouch which can
be used for food or any small items you may need throughout the day. All three compartments
can be zipped together to create a traditional backpack, or can be taken apart to use individually,
allowing for flexibility in the everyday college student’s life. Ultimately what differentiates the
MOD from your average backpack, and puts it a step above its competitors is its duality and
multi-functionality. The bag has high capacity, but on less busy days, it gives the user an option
to detach the larger or smaller compartments and carry a more compact bag. Its transformability
addresses student's unmet need for an all in one bag.
The MOD exploits several key market trends, the first being a minimalistic lifestyle.
There is a general trend toward minimalism among students, ages 18-26.1
In line with this trend,
our design offers users the option to have a backpack with fewer compartments and at the same
time maintain the capacity of the backpack. The decreasing demand for more compartments is, in
effect, increasing demand for multi-functionality.2
Our primary research confirmed that a
majority of college students, when purchasing a backpack for school, desired a high capacity bag
with fewer compartments (See Appendix MK 4). This lead us to believe that a major attribute
students are looking for in their backpack is flexibility and space efficiency. They want a bag
that fits just the essentials, but they also want the option for extra capacity when needed. Due to
it’s modular design, the MOD capitalizes on this social trend.
1
Weinswig, Deborah. "Millennials Go Minimal: The Decluttering Lifestyle Trend That Is Taking Over." Forbes.
September 07, 2016. Accessed April 12, 2017.
https://www.forbes.com/sites/deborahweinswig/2016/09/07/millennials-go-minimal-the-decluttering-lifestyle-trend-
that-is-taking-over/
2
Segran, Elizabeth. "Found: The Perfect Work-Life Bags For Women." Fast Company. July 14, 2016. Accessed
April 12, 2017. https://www.fastcompany.com/3060745/looking-for-the-perfect-womens-work-bag.

3. Minimalism coincides with the growing technological trend. Almost all college students
today are “digital natives,” and almost 87% of students in the United States carry a laptop to
class.3
As a result, textbooks are to a large extent being replaced with gadgets. While a trend
towards minimalism and digital lifestyles may be a threat our competitors in the backpack
industry, to MOD it is a major market opportunity. Students still have a load to carry, they just
have a lighter, more digital load. Our inclusion of a removable tech backpack compartment
allows us take advantage of this trend.
Another key trend driving demand for our product is an increase in time spent “shuttling
through third spaces.”4
This on the go lifestyle is catalyzed by the use of smartphones and wifi.
From our primary research we found that stationary studying has, to a large extent, become
outdated because students are no longer confined to stationary computers. Instead, study spaces
have become ubiquitous, allowing students to study on the go. With students constantly on the
go there is more demand for a backpack, but not just a standard backpack, one that light and
space efficient.
A huge economic trend affecting demand for our backpack is an increase in disposable
income.5
A backpack is considered a “discretionary,” “non essential good” and demand for these
types of goods are heavily influenced by per capita disposable income.6
This trend of rebounding
disposable income, after the recession, has increased consumers likelihood of purchasing
discretionary items like a backpack.
The MOD Backpack is competing in backpack and courier product category. Some major
competitors we face within this category are North Face, Jansport, and Herschel, who are all well
established brands in the industry. (See Exhibit Intro1: Competitor Analysis Table).
3
Poll , Harris . Student Mobile Device Survey 2015. Report. June 15, 2017. Accessed April 12, 2017.
http://www.pearsoned.com/wp-content/uploads/2015-Pearson-Student-Mobile-Device-Survey-College.pdf.
4
Tabuchi, Hiroko. "Backpack Makers Rethink a Student Staple." The New York Times. September 02, 2015.
Accessed April 12, 2017. https://www.nytimes.com/2015/09/03/business/backpack-makers-rethink-a-student-
staple.html?_r=0.
5
"Industry Performance ." IBISWorld . February 1, 2017. Accessed April 12, 2017.
http://clients1.ibisworld.com/reports/us/industry/currentperformance.aspx?entid=4958#KED
6
Ibid.

4. Exhibit Intro1: Competitor Analysis Table
Competitor Analysis Table
Competitor Price
Differentiating Characteristics
(Strengths)
Weakness
North Face $45-$70 Durable, High Capacity Nonessential Capacity
Jansport $50-$150 Classic Design No innovation
Herschel $60-$100 Stylish Low capacity, Not multifunctional
The MOD $80
Multifunctional, Modular Design,
Stylish
Complexity

5. MARKETING

6. Marketing Objectives
To ensure an effective marketing plan, we have established three measurable goals that
will help secure our place in the backpack market: maintaining solid revenue growth, expanding
distribution, and generating sufficient awareness to boost sales. Our first goal is to achieve an
average annual growth rate of greater than 40% for revenue in years 1 to 5, with over 8 million
dollars in sales by year 5 (See Appendix MK 1). In order to boost sales, we need to place our
product strategically by attaining ample distribution through several channels, ensuring that our
backpack reaches our target consumers. Therefore, we would like to achieve an All Commodities
Volume (ACV) of nearly 25% by year 5. With that ACV we will be able to sell over 126,000
units in the same year (See Appendix MK 1). Lastly, through both push and pull mediums, we
want to build strong awareness, aiming to generate close to 30% awareness by year 3 (See
Appendix MK 1).
Segmentation and Targeting: The Busy Bee’s
After thorough primary and secondary research, and after exploring several alternatives,
we found the most demand for our product to be in the “Busy Bees” segment. The “Busy Bees”
comprises both undergraduate and graduate students, ages 18-25, that consider themselves to be
busy. We chose to target this group of consumers for several reasons. For one, our survey results
indicated that out of all our respondents in our target market 53% were interested (See Appendix
MK 6). The respondents in the Busy Bees segment also indicated the highest purchase intent.
These same college students also value usability, appearance, and capacity the most when asked
which attributes they prioritized when buying a bag. Our product capitalizes on these three
attributes which matches “the busy bees” needs with the MOD’s key capabilities. Most of the the
students we interviewed also showed a preference towards a cost effective backpacks. They
wanted a bag that was not just durable but one that allowed them to get the most for their money,
as they were on a tight budget. For that reason, they liked the idea of owning one transformable
bag rather than having to purchase several different bags for different purposes. We further
found from our research that a higher percentage of college students are on a budget than parents

7. of high school students, or young professionals7
. These led us to assume that a higher percentage
of college students are also looking for a cost effective bag.
While there is a large percentage of high school students who consider themselves active,
research indicates that on average, high school students do not spend as much time shuttling
between class as college students do.8
This may stem from the fact that many high schoolers
likely have all their classes in the same building, and many likely have lockers. We further found
that while there is a large percentage of working professionals who are active commuters and
shuttle through third spaces, there is a trend towards the use of messenger bags that may be a
significant threat if we chose to target yuppies.9
Concentrating on just the Busy Bees segment
further allows us to utilize our resources more efficiently being that we are a small start up. (See
Appendix MK 2).
Positioning
Based on our primary research, we decided that in order to break into the backpack
market we would have to position ourselves with attributes that differentiate our backpack from
our competitors (See Appendix MK 4). In order to capture consumer attention, we needed to find
a gap in the market, and capitalize on unmet needs in the industry. Competitors in the backpack
industry tend to focus on capacity and durability.10
In order to gain competitive advantage we
will meet these industry standards while emphasizing modularity, a new element our
competitor’s lack.
We also found in our primary research, that a majority of backpack innovators struggle to
create backpacks that are both practical and stylish, a typical tradeoff for designers.11
Our
infusion of a stylish backpack a with modular design sets our product apart from its competitors.
Therefore, our positioning strategy focuses on appealing to a segment of consumers that value
7
Sharpe, Rochelle. "How Much Does Living Off-Campus Cost? Who Knows?" The New York Times. August 05,
2016. Accessed April 12, 2017. https://www.nytimes.com/2016/08/07/education/edlife/how-much-does-living-off-
campus-cost-who-knows.html.
8
"Charts by Topic: Students." U.S. Bureau of Labor Statistics. Accessed April 12, 2017.
https://www.bls.gov/tus/charts/students.htm.
9
"Industry Outlook." IBISWorld . February 1, 2017. Accessed April 12, 2017.
http://clients1.ibisworld.com/reports/us/industry/industryoutlook.aspx?entid=4958#IO
10
"Competitive Landscape." IBISWorld . February 1, 2017. Accessed April 12, 2017.
http://clients1.ibisworld.com/reports/us/industry/competitivelandscape.aspx?entid=4958
11
Segran, Elizabeth. "Found: The Perfect Work-Life Bags For Women." Fast Company. July 14, 2016. Accessed
April 12, 2017. https://www.fastcompany.com/3060745/looking-for-the-perfect-womens-work-bag.

8. capacity and style but are also looking for versatility. Currently there is no product that is
adequately serving this group of consumers, which presents a significant market opportunity for
the MOD.
We have positioned our self against three of our biggest competitors, Jansport, The North
Face (both of which are owned by VF Corp), and Herschel.12
Our first positioning map illustrates
the MOD’s ability to meet the needs of consumers who want a high capacity backpack but with a
modular element (See Exhibit MK1: Modularity by Capacity Positioning Chart). Both Jansport
and Herschel’s bags only contain standard capacity. The North Face is a industry leader in
capacity. Yet despite their popularity,
their backpacks lack the modular element
MOD gives our consumers.
Our second positioning map
illustrates the MOD’s ability to meet the
needs of customers who are looking for a
backpack with both high capacity and
style. Despite Jansport dominating market
share in the industry, the company has
used the same design for years and has not brought innovation to the industry.13
Further, after
reading Amazon reviews we also found numerous customer complaints concerning a lack of
capacity.14
For these reasons we positioned Jansport as low-style- low capacity on our map. The
North Face, on the other hand, is known for bags with high capacity but with average standards
of style. The North Face’s backpacks are designed with utility in mind rather than aesthetics.
Herschel, known for their trendy bag designs, dominates in the style compartment.15 Yet their
bags only contain average capacity, which points to a significant gap. The MOD takes advantage
of this gap, and positions itself as a high capacity backpack with high standards of style. (See
Exhibit MK2: Stylish by Capacity Positing Chart)
12
These are our biggest competitors in terms of market share
13
"JanSport, Inc." History of JanSport, Inc. – FundingUniverse. Accessed April 12, 2017.
http://www.fundinguniverse.com/company-histories/jansport-inc-history/.
14
"Emilie L.'s review of JanSport Womens Superbreak Pink Spots Back..." Amazon.com: Emilie L.'s review of
JanSport Womens Superbreak Pink Spots Back... Accessed April 12, 2017. https://www.amazon.com/gp/customer-
reviews/R3B4CZHLW48P9E/ref=cm_cr_arp_d_rvw_ttl?ie=UTF8&ASIN=B00WG0JVQQ.
15
Cave, James. "Say Goodbye To The Hipster Backpack." The Huffington Post. February 21, 2016. Accessed April
12, 2017. http://www.huffingtonpost.com/entry/herschel-supply-apexknit_us_56c749d2e4b0928f5a6b9f5e.
Exhibit MK1: Modularity by
Capacity Positioning Chart

9. Exhibit MK2: Stylish by Capacity Positioning Chart
Our positioning as both a stylish and high capacity backpack gives us a competitive
advantage over competitors who only have one of these attributes. Ultimately, it’s the modular
component of our bag that will allow us to break into the market. Our product surpasses all of
our competitors in modularity because even though other bags may have multiple zipper
compartments, they only provide the utility of one backpack. The MOD offers the utility of the
traditional bag, with the added benefits of three separate bags
Promotion: Generating Awareness through IMC
Exhibit MK3: Summarized IMC Schedule
Summarized IMC Schedule
Year 1 2 3 4 5
Total IMC Cost $232,350 $246,378 $1,150,215 $969,893 $990,529
% of Manufacturer Sales 15.68% 11.27% 18.05% 11.89% 10.89%
Awareness 7.13% 28.99% 28.99% 33.22% 35.90%
Starting in year 1 we begin using online ads as a component of our IMC plan,
adding value for our customer and our company. Not only does it have lower overall
costs, but through our interviews, surveys, and focus group, we saw a clear trend in
preferences towards online purchasing (See Exhibit MK3: Summarized IMC Schedule). This

10. element of our IMC schedule generates 25% of our awareness annually, increasing revenue
and making this a valuable component of our strategy.
In year 3 we plan to target our consumers through the magazine, GQ. Although this
component of our IMC schedule is the most expensive it also generates the most awareness due
to the large population of our target market that would view the advertisements (see exhibit ).16
We made the decision to place our ads in GQ because of the reputation and brand
identity. GQ has a reputation for (something like advertising or writing about) cutting edge
concepts and products, allowing us to further develop our brand and positioning. We also plan to
target consumers in the lower age range of GQ readers who potentially see GQ as a trustworthy
source of new and fashionable products, allowing us to increase purchase intent by positioning
ourselves alongside a brand with our intended identity.
We also plan to use billboards and transit advertisements in cities with large universities
in order to have the most possible viewers be in our target segment. By placing billboards in
cities with high college populations all across the country we not only focus on our target
segment, but also create national awareness of our brand. We chose these two forms of outdoor
advertisements because they were affordable and would be viewed by our “on the go” target
market as they commute in the city (See Exhibit MK3: Summarized IMC Schedule).
In order to increase awareness in our target market, we plan to hire college ambassadors
to promote our brand. We carefully chose the five of the largest universities in different regions
across the United States (See Exhibit MK4: University Population). This creative element that
we chose to include in our IMC schedule is valuable not only because it is relatively inexpensive,
but also because it will help us to communicate the unique value that our product directly to our
target customers. College ambassadors create a form of showrooming, although on a much
smaller scale, as potential customers will be able to see a physical bag and understand how it can
be useful to them. We also believe college ambassadors will help us to establish our brand
identity. When potential customers see peers using a unique new product, they may begin to
view it as trendy and popular. Furthermore, this strategy has the potential to initiate word of
mouth advertising on college campuses, engaging our target market.
16
"GQ - Audience." GQ - Audience | Condenast.ru. Accessed April 12, 2017.
https://www.condenast.ru/en/portfolio/magazines/gq/circulation/.

11. Exhibit MK4: University Population
University Student Population
Southeast - University of Central Florida 63,016
Great Lakes - The Ohio State 58,663
South West - University of Southern
California
46,174
North West - University of Washington 45,800
Mideast - New York University 50,027
We have scheduled several trade shows in order to facilitate retailer interest in our
product. In comparison to the pull marketing strategies above that we will implement, we plan on
attending trade shows as a push marketing component of our strategy. We plan to attend several
trade shows starting from year 1. By attending trade shows we have the opportunity to have our
sales force promote our product to potential business
partners. This is a valuable component of our IMC plan
because it also establishes our brand and company identity. Push marketing uniquely establishes
awareness, by communicating with retail representatives one-on-one. We are able to create
relationships that will serve our firm and, hopefully, increase our sales for years to come (See
Appendix MK 3)
Exhibit MK5

12. Retail Packaging
During our retail observations, we noticed
that although most backpacks on the shelves did not
have packaging, almost all backpacks had a tag describing their unique feature (See Appendix
MK 4). This allows the customers to decide whether the backpack they are looking at will meet
their needs. We plan to use a tag to clearly
communicate the features of our backpack that
would create value for our customers (See Exhibit
MK5: Retail Packaging).
Advertising Tone Message & Unique selling
Proposition
The tone of our advertising campaign focuses
on the busy lifestyle of our target market. By using
cityscapes in our ads, we evoke a sense of adventure
and energy that our target market, busy college
students, can identify with. By using visuals of
zippers as a consistent theme throughout our
advertisements, we create an understanding of our product without having to show our backpack
in every ad, especially if there is limited print space.
We communicate the value of our product by emphasizing our slogan “We’ve got your
back!” We anticipate that the supportive and positive tone of our slogan will help to establish our
brand as reliable, even as a newcomer to the industry. We ensure the clarity of our message
through continuity of visuals (cityscapes, zippers, color schemes, and our logo), as well as
through the text we include in each advertisement. We are able to communicate our unique
selling points by highlighting the modularity and low price of our product in our advertisements.
By using the phrase “3 bags, 1 price” we are able to send a message of the efficiency and cost
effectiveness of our product, as well as the modularity. (See Exhibit MK6: Advertisements). We
highlight the modularity of our backpack by using the phrase “your new favorite modular
backpack” and showing visuals of all three compartments of our bag (See Appendix MK 5). By
keeping a consistent, encouraging tone throughout our advertising campaign, and highlighting
Exhibit MK5: Retail Packaging

13. our unique modularity features, we use our advertising to entice potential customers to purchase
our backpack.
Exhibit MK6: Advertisements
Measuring Communications
In order to justify the cost of annual marketing efforts we need to measure its cost
effectiveness. We can do this by using several market metrics. We can first use the click through
rate, bounce rate, and conversion rate to determine if our increase in online advertising
expenditures coincide with an increase in awareness. A high click through rate would indicate
high attractiveness of our advertisements because potential consumers are not just viewing our
ads but also clicking on them. If we have a high bounce rate it would indicate that our
advertisements lack appeal and are failing to generate ample awareness. A high conversion rate
would indicate that a high percentage of people who view our advertisements actually end up
purchasing our backpack. To measure the effect of billboard advertising on awareness we can
put out post testing surveys in the areas where the billboards are located. Another valuable
method of measuring the effectiveness of our advertisements is examining how frequently target
consumers are exposed to our advertisements. More frequent exposure to advertisement usually
drives greater purchase intent. We could combine the frequency of exposure with reach (the
portion of our target consumers that are exposed to certain elements of IMC at least once) to

14. calculate our total gross rating points (GRP).17
A high GRP would indicate high effectiveness in
our advertising strategy. The last and perhaps the most obvious metric to measure the
effectiveness of our marketing endeavors is an increase or decrease in sales revenues. It is
important to measure the effectiveness of IMC elements so that our firm discontinues
investments in ineffective elements before they experience a loss in sales.
Distribution Channels
A good distribution strategy is crucial to our success as a company as it leads to greater
customer responsiveness, and in effect, brings in more sales. When deciding on what methods of
distribution to pursue we took several factors into consideration, the most important being reach
and the types of customers each channel attracts. We wanted to distribute our product through
channels that give us the best direct access to our target customers, and through channels whose
image aligns with our brand.
The means of distribution in the bag industry has become increasingly versatile.18
No
singular distribution channel accounts for a majority of backpack industry sales. However, nearly
30% of backpack sales come from mass merchandisers and almost a quarter from chains retailers
17
Integrated Marketing Communications: Chapter 18 Marketing, Fifth Edition by Grewal, Levy, 2016
18
Dholakia, Utpal, Kahn E. Barbara, and Randy Reeves. "Consumer Behavior in a Multichannel, Multimedia
Retailing Environment." Journal of Interactive Marketing 24 (2010): 86-95. Accessed April 12, 2017.
Online
13%
Sporting Goods
11%
Chain Retail
25%
Mass Merchandiser
29%
Other
22%
Exhibit: MK7 Distribution Channels

15. (See Exhibit MK7: Distribution Channels).19
Although mass merchandisers comprise the greatest
market share in the backpack industry, because our price point for our backpack ($80) runs in the
medium to high price range, we decided to not pursue mass merchandisers as a means of
distribution.20
Furthermore, in light of an exponentially growing online retail environment we were
surprised to find that only 13% of backpack sales come from online mediums (See Exhibit MK7:
Distribution Channels). From our survey we found that, on average, the number of students who
purchased their backpack in stores is greater than those who purchase online. We infer that this
has to do with the nature of the product. Consumers may want to try on the backpack and thumb
through compartments before purchasing. (See Exhibit MK9: Manufacturing Price to Channel).
Exhibit MK8: Where Consumers Buy Backpacks
Where Consumers Purchase Backpacks
People purchase in: Count Percentage
Online 105 68.63%
In-Store 127 83.01%
Total Respondents 153
Exhibit MK9: Manufacturers Price to Channel
Manufacturer Selling Price
Year 1 2 3 4 5
Independent $68.00 $68.00 $68.00 $68.00 $68.00
Online $68.00 $68.00 $68.00 $68.00 $68.00
Chain - - $63.28 $63.59 $63.59
19
"Industry At a Glance." IBISWorld . February 1, 2017. Accessed April 12, 2017.
http://clients1.ibisworld.com/reports/us/industry/ataglance.aspx?entid=4958
20
"Industry At a Glance." IBISWorld . February 1, 2017. Accessed April 12, 2017.
http://clients1.ibisworld.com/reports/us/industry/ataglance.aspx?entid=4958

16. Exhibit MK10: Retail Selling Price
Retail Selling Price
Year 1 2 3 4 5
Independent $80.00 $80.00 $80.00 $80.00 $80.00
Online $80.00 $80.00 $80.00 $80.00 $80.00
Chain - - $68.80 $68.80 $68.80
Our distributon strategy is to start with few channels in years 1 and 2 and expand into
larger channels in years 3, 4, and 5. In year 1 we intend to distribute through small independent
stores throughout the country, and online, both on our website and through Amazon. Our online
sales will be split evenly with a 50% distribution for each respectively.21
We expect our ACV to increase substantially in years 3 to 5 because of our penetration
into chains (See Appendix MK 1). Three chains dominate the school backpack industry in terms
of market share - Target, Macy’s, Nordstrom.22
While it seems like a profitable opportunity, we
assume that at the inception of our company, distributing through Target is probably unfeasible.
Accepting our backpack may be a risky venture to Target because of our lack of reputation in the
industry at that point. For that reason, in year 3 when we expand into our first chain, it will be
Macy's, the second leader in industry market share. The first year we are accepted into Macy’s,
we expect to be carried in 50% of their stores. This is because, when chains take on new brands
they usually only carry them select stores. Our penetration rate into Macy's will grow to 70% in
year 4. Macy’s is a good choice for distribution because not only does Macy’s carry products
complement to the MOD but it attracts customers looking to pay a small premium for the quality
and modularity of our product.23
21
We plan on targeting 80% of the independent stores but assume only 30% will accept the MOD, We do not plan
to distribute through chains until year 3 due to associated high costs of doing so.
22
"JWN's Competition by Segment and its Market Share." Nordstrom Competition Market share by Company's
Segment - CSIMarket. Accessed April 12, 2017. http://csimarket.com/stocks/competitionSEG2.php?code=JWN.
23
Krueger, Julie . "Omni-Channel Shoppers: An Emerging Retail Reality." Think with Google. March 2015.
Accessed April 12, 2017. https://www.thinkwithgoogle.com/articles/omni-channel-shoppers-an-emerging-retail-
reality.html.

17. In year 4 we expand into two more chains: Target and Nordstrom's. As with Macy's, we
believe these chains are good outlets of distribution because of their reach and because their
customers on average have a high willingness to pay for accessories. Because Target has the
highest market share of all chains in the backpack industry, we anticipate ACV to grow
substantially in year 4. Assuming penetration of 50% in all three chains, our ACV should grow
by nearly 5% in year 4.
In year 4, we continue to distribute through the same chains, however, due to channel
conflict a smaller proportion of our unit sales come from independent retailers. This is because as
we enter new and larger channels of distribution, and sell our backpack at a lower price point, we
expect that independent retailers will be less inclined to carry our bag. Thus, as a result of
channel conflict, in years 4 and 5, we expect a large proportion of sales to shift from online and
independent channels to chain retailers
Retail and Manufacturing Selling Prices
After choosing a hybrid distribution strategy through multiple channels, we decided on an
appropriate price for each channel of distribution. Our retail price in years 1 and 2 to independent
retailers and through Amazon, is $80. This price allows us to remain competitive in the medium-
high end backpack market but at the same time reflects the added premium value of our modular
design. We lowered our price by 14% for chain stores to remain competitive as we fight for shelf
space. This markdown to $69 better aligns our backpack with existing complement products in
Target, Macys, and Nordstroms.
In years 1 and 2 we determined that our
channel margins for Amazon and for our
independent stores will be 15% respectively.26 In
year 3, when we first distribute through Macy's,
we determined our channel margin to be 8% (See
Exhibit MK11: Retailer Margins).27
In years 4
and 5, as we expand into 2 more chains,
24
"Nordstrom Affiliate Program." VigLink. Accessed April 12, 2017.
http://www.viglink.com/merchants/408/nordstrom-affiliate-program
25
Target Affiliates : Join Today and Start Earning. Accessed April 13, 2017. http://affiliate.target.com/
26
The markups and margins tutorial required us to assume a 15% margin for independent stores
27
"Macy's Affiliate Program." VigLink. Accessed April 12, 2017. http://www.viglink.com/merchants/421/macys-
affiliate-program.
Exhibit MK11: Retailer Margins
Retailer Margins
Retailers Margin
Macys 13%
Nordstrom 6%24
Target 8%25

18. Nordstrom's and Target, we calculated an average margin of 8% between all three chains
(Exhibit MK11).
Sales Force
In years 1 and 2 we do not have ample capacity and do not generate enough revenue to
justify the expense of an in house salesforce (See Exhibit MK12: Sales Force Salary Expense).
As a result, in those years, we decided to pursue a more affordable alternative and hire third
party manufacturer representatives to help with independent distribution. Manufacturer
representatives are paid a 10% commission out of unit sales from independent retailers (See
Exhibit MK13: Commission Costs). We do not have to pay them a full time salary. In terms of
online distribution, Amazon will provide us
with a salesforce.28
This way we can focus our
budgeting efforts on generating more awareness
. In years 3 and 4, because we penetrate into
chain retailers, there is a greater need for a sales
force, as establishing relationships throughout
our growing supply chain becomes increasingly
more important. Further, by year 3 we will have
sufficient revenue to support our own full time
sales force. In fact, with an increase in capacity,
we predict that it will becomes more cost
effective to take on our own sales force than to outsource.
Exhibit MK13: Commission Costs
Commission Costs
Year
Commission % Manufacturer Rep.
Compensation
1 10% $25,104.57
2 10% $57,730.02
3 10% $160,223.77
28
"Innovate faster with Salesforce and Amazon Web Services." Salesforce.com. Accessed April 12, 2017.
https://www.salesforce.com/campaign/aws/.
Exhibit MK12: Sales Force Salary Expense
Sales Force Salary Expense
Year Sales Force Expense
1 $50,000
2 $51,500
3 $53,045
4 $54,636

19. Exhibit MK13: Commission Costs
Commission Costs
Year
Commission % Manufacturer Rep.
Compensation
4 10% $165,260.37
5 10% $206,765.22
Purchase Intent: Pricing
Exhibit MK14: Purchase Intent Curve
The results of our consumer survey led us to an optimal retail price of $80. Using the
demand curve we calculated that this price indicated the greatest purchase intent of 17.95% when
adjusted for CSR (See Exhibit MK15: CSR Posse, Exhibit MK16: CSR Blue Ribbon). Our
purchase intent will grow annually, especially as we enter into chains in year 3-5 (See Exhibit
MK14: Purchase Intent Curve). Our penetration into chains requires us to lower our retail price,
however, a corresponding rise in purchase intent offsets the cost of lowering our price. In other
words, as our average retail price decreases with chain penetration, our purchase intent increases.
Although maximizing revenue gives us a best price at $68.02, maximizing revenue does
not mean maximizing net income and cash flow. When running solver to maximize net income

20. and cash flows our optimal price increased to $80.62. Although setting our price at $80.62 does
decrease our net income, it also results in lower inventory costs due to smaller demand,
eventually reducing our net working capital for each year. By reducing net working capital and
the change in net working capital we are able to increase our cash flows, and thus net present
value of the company. As a result, we decided to set our price at $80, since we consider this
price to seem more appealing to our consumers than $80.62.
Exhibit MK15: CSR Posse
1st CSR (Posse Foundation)
Responses Response % CSR Impact Increase in Purchase Intent
Significant
Increase
24 16% 4% 0.64%
Slight
Increase
80 52% 2% 1.04%
Would not
Change
49 32% 0% 0%
Total 153 100% 6% 1.68%
Exhibit MK16: CSR Blue Ribbon
2nd CSR (Blue Ribbon Project)
Responses Response % CSR Impact
Increase in
Purchase Intent
Significant Increase 26 16.8% 4% 0.67%
Slight Increase 78 51.2% 2% 1.02%
Would not Change 49 32% 0% 0%
Total 153 100% 6% 1.7%

21. BASES Model
At the base of our marketing strategy is sales forecasting. The assumptions made in our
sales forecast impact both our financial planning and manufacturing planning. The foundation of
our sales projection is a growing target population of 12.15 million, projected to grow over 14%
over 5 years.29
(See Exhibit MK17: Summarized BASES) This growth is crucial, as a growing
target population increases potential to increase demand. At the root of our target market
calculation was 18 million students in the United States who use backpacks. A final
psychographic segmentation based on “busy lifestyles” led us to our target market of
approximately 12.15 million students (See Appendix MK 4).
We assume no repeat units in our BASES model due to the expected durability of our
bag. We gathered from our survey that most consumers do not buy more than one backpack
annually. With our projected IRR of 22.7% and predicted market penetration in year 3, we
expect that competition will enter and take 20% of unit sales. Our competitors’ share will grow
year over year as we penetrate further into the market. We multiplied our total projected units
sold by our manufacturers selling price to calculate yearly revenue. A huge key takeaway from
our BASES model is the effect of awareness on revenue growth in year 3. This peak in sales is
associated with an increase in advertising expenditures in the same year.
29
"Fast Facts." Fast Facts. Accessed April 13, 2017. https://nces.ed.gov/fastfacts/display.asp?id=372.

22. Exhibit MK17: Summarized BASES
Summarized BASES Model
YEAR 1 2 3 4 5
Target Market Size 12,150,000 12,307,950 12,467,953 12,630,037 12,794,227
ADJUSTED Purchase
Intent (average
weighted retail price)
18% 18% 18% 19% 18%
Awareness 7% 9% 29% 31% 36%
ACV 14% 16% 18% 23% 24%
Units at Trial 1 1 1 1 1
Repeat Units 0 0 0 0 0
BASES Units 21,968 32,402 118,940 123,643 126,774
Competition
Adjustments
0 0 20% 30% 35%
Total Units 21,968 32,402 95,152 123,643 126,774
Average WEIGHTED
Manufacturers Selling
Price to Channel
$68.00 $68.00 $68.00 $68.00 $68.00
Manufacturer Sales
($)
$1,493,814 $2,203,303 $6,431,496 $8,258,473 $8,470,521