Mba Thesis David Collado

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Mba Thesis David Collado

  1. 1. A BUSINESS PLAN FOR FLIGHT SEAT ADVERTISING BY DAVID COLLADO MSM 445 INDIANA WESLEYAN UNIVERSITY NOVEMBER 2008 1
  2. 2. Table of Contents Executive Summary 4 Vision and Mission 7 Vision Statement……………………………………………………………….............7 Mission Statement……………………………………………………………...……… 8 Goals………………………………………………………………………….……….. 9 Present Situation…………………………………………………………...………..… 10 Industry Assessment…………………………………………………………….…….. 16 Situational Analysis…………………………………………………………….…..….19 Organizational Overview 21 Legal Business Description……………………………………………...…………….. Business Name………………………………………………………………………… Organizational Structure……………………………………………………………..... Personnel Issues……………………...………………………………………………... Strategic Alliances…………………………………………………………...………... Service Strategy 25 Proposed Services ………………………………………………………………….…. Legal Contracts ……………………………………………………………………….. Market Analysis 26 Target Market…………………………….……………………………………………26 Competition……………………………………………………………………..……..28 SWOT Analysis………………………….…………….………………………………29 Business Risk…………………………………………………………………………..29 Market Plan 30 Sales Strategy…………………………………………………………………………..30 Advertising and Marketing…………………………………………………………….32 2
  3. 3. Public Relations…………………………………………………………………..…… Distribution Channels………………………………………………………………….37 Pricing………………………………………………………………………………….38 Financial Plan 44 Start-Up Budget………………………………………………………………………..44 Operating Budget……………………………………………………………………… Sales Forecast………………………………………………………………………….. Balance Sheet………………………………………………………………………….. Income Statement……………………………………………………………………… Statement of Cash Flow……………………………………………………………….. Financial Analysis……………………………………………………………….…….. Funding 47 Funding Sources……………………………………………………………………….. References………………………………………………………………………………… 48 3
  4. 4. BUSINESS PROPOSAL Flight Seat Advertising Tray is a strong and dependable means of advertising for maximizing passenger interaction during flights. This unique form of advertising can be described as a new delivery method of traditional advertising. The composition of the product will be an adhesive large enough to occupy the entire tray located behind the seats in an airplane. Other advertising strategies have been implemented that make it easy to catch the attention of a captive audience. Advertising is already found on the doors of restroom stalls, on top of taxis, and in elevators. However, no advertising form has evolved to enable brand owners to capture their target audience’s attention for long periods of time. It is logical to presume long viewing periods will increase product recall and message retention. Backseat ads will be placed on the tray tables of all intercontinental and domestic flights. Advertising can be customized to cater to differing demographics between economy, business, coach and first-class passengers. Flight Seat Advertising presents an additional source of revenues for airlines. The current economy is challenging the viability of airline’s profitability. Fuel costs are rising. Competitive pressure to lower ticket prices are cutting profit margins and recent security breaches have lead to government mandated security 4
  5. 5. measures further increasing costs and prices. An A737 aircraft burns more than 885 gallons per hour. At this rate of gasoline consumption, even a marginal increase in gasoline prices makes a significant difference in profits. Fleet maintenance is also a significant cost. Due to low profits and high machinery costs, most airlines operate heavily depreciated, older model planes, which require more maintenance. Airlines are struggling to balance costs and safety concerns. Given the current environment, we believe Flight Seat Advertising Trays will be well received by airline companies as an easy source of additional revenue. Airlines are creating new ways of cutting costs and increasing revenue. Most recently, passengers are being charged $20 to $50 to check more than one bag. In- flight snack have been curtailed, except for peanuts and soda. Meals are now offered for sale. Pillows and blankets are no longer given to all customers and may only be available upon request. Airlines have converted costs into a source of additional profit by selling items previously given free of charge. If fuel costs continue to rise and airlines do not find an alternative way to increase revenue then flying will become a luxury for many consumers. Flight Seat Advertising seeks to offer airlines an additional source of revenue by taking advantage of a pre-existing feature: food trays located on the back of all passenger seats. To assess the whether passengers will respond positively to the new marketing technique, Flight Seat Advertising plans to conduct 5
  6. 6. a marketing survey called Countdown Packages. Passengers on flights will be surveyed via questionnaires handed out though the airline personnel during the flight. Questions will cover the perceived benefit of lower ticket costs versus amenities. The questionnaire will also attempt to uncover how passengers spend their airtime (reading magazines provided on the airplane or reading their own material, watching TV, playing games, doing computer work, sleeping, or doing nothing.) Questions will also ask the respondent what images they find most agreeable (pictures, puzzles, or word messages.) We would also like to discover what type of products, services, and information travelers find most useful and entertaining, such as destination hotels, entertainment, dining, local attractions, or consumer products. It is important to assess whether or not the passenger will pay attention to what is in front of them and what sort of advertising they find useful. The surveys will be analyzed by our marketing department to assess the effectiveness of a backseat image. 6
  7. 7. VISION AND MISSION Vision Statement The core values of the company are articulated and described in the vision statement. The vision statement will serve as a focal point and reminder of purpose as the company matures and expands its services to a larger client base and geographical region. The vision of the company is a reference for employees to find guidance for planning future activities. It is important to craft a clear vision that anchors the purpose of the business, articulates future goals, and serves as a source of inspiration. The vision of Flight Seat Advertising is to: Leave an advertising footprint that will be remembered through time.   Continually seek to reinvent and innovate new ways of advertising that will leave a lasting impression on passengers Demonstrate dedication to our clients by delivering results-oriented  advertising and total marketing support. Provide products and services that benefit both our advertising clients and  our airline partners. Enhance the flight experience by providing useful and engaging  information in creative and unique formats. Create a financially sound, growth-oriented company by following ethical  business practices and accounting standards. 7
  8. 8. Mission Statement Flight Seat Advertising regards every assignment, regardless of size, with equal importance. Our mission states the company’s role in terms of the customers’ need to obtain positive results and community impact. In addition to providing customers with a custom tailored advertising package that best meets their advertising needs, Flight Seat Advertising has crafted a mission to go beyond expectations by: Providing best-in-class creative ideas and high quality  promotional resources. Continually strive to improve our product through frequent  passenger surveys and analyzing the effectiveness of the marketing campaign. Guide the customer in identifying advertising trends in their  particular market.  Display ethical advertising messages that positively impact a diverse target audience ranging from young to old. Contribute to the viability of the airline industry while increasing  traffic and results for advertising clients. 8
  9. 9. GOALS Year One ▪ Build a team of professional and enthusiastic employees and managers. ▪ Instill company values and mission through monthly employee seminars and training courses ▪ Create strong relationships with airlines and introduce them to our innovative advertising strategy. ▪ Build sales pipeline and obtain first airline contract. ▪ Expand our business by meeting sales goals and growing current accounts. ▪ Advertise our company and product thru multi-media targeting both airlines and advertisers seeking new channels to deliver their message. Year Three ▪ Establish a solid reputation as a major advertising agency specializing in niche- market placement. ▪ Gain recognition as an advertising agency specializing in the airline industry. ▪ Post positive annual returns making Flight Seat Advertising financially attractive venture capital investors. ▪ Earn a reputation of innovation with vision for the future. ▪ Expansion of sales force with high quality, proven sales representatives. Year Five ▪ International expansion to multi-national airline carriers. ▪ Introduction of our advertising concept to foreign clients wishing to reach international passengers. ▪ Raise sufficient assets and capital to launch Flight Seat Advertising globally. 9
  10. 10. PRESENT SITUATION Other more traditional advertising strategies have been implemented in today’s society making it easy to capture the audience. However no advertising form has the capacity to allow brand owners to communicate individually to a captive passenger for long periods of time ensuring high recall. Flight Seat Advertising proposes a plan to capture the attention of a highly desirable demographic for extended periods of time. Demographics A higher than average socio-economic group uses airlines as a common means of transportation and a convenient way to travel. An airport demographic study posted by Airtron shows the typical airline passenger. Demographic Profile: All Airlines MEN 53% WOMEN 47% MARRIED 71% SINGLE 29% AGE 18-49 69% 25-54 74% 35-49 41% 35-54 51% MEDIAN AGE 43.7 years COLLEGE EDUCATED 85% GRADUATED COLLEGE OR FURTHER 57% POST GRAD DEGREE 23% FULL TIME EMPLOYEMT 73% 10
  11. 11. PROFESSIONAL / MANAGERIAL 48% TOP MANAGEMENT 15% OWNS A HOME 81% VALUE OF HOME OWNED $200,000+ 43% $500.000+ 11% MEDIAN HOME VALUE $299,099 HOUSE HOLD INCOME $75,000+ 64% $100,000+ 45% $150,000+ 20% MEDIAN HOUSEHOLD INCOME $104,235 INDIVIDUAL EARNED INCOME $75,000+ 31% $100,000+ 21% $150,000+ 8% MEDIAN INDIVIDUAL EARNED INCOME $68,358 The typical passenger has a higher than national average income and is more likely to be a homeowner with college education. Almost half of travelers are in managerial positions and 3/4th hold full time employment. Flight Seat Advertising offers a unique opportunity to capture the attention of a high-net worth demographic known to have disposable income. Social Cultural Considerations The influence of culture on different communications methods is well documented. One of the main obstacles that most advertising agencies come across 11
  12. 12. is delivering the message to people of diverse cultures. Reaching diverse cultures can be more difficult in a market like the United States where many multi-cultures coexist. Each culture has a different value system and perceptions. The communication of individuals and groups are shaped or influenced by culture. (Samover & Porter, 1991; Tan, 1986). Advertising is a form of social communication and dissemination of social norms. Advertising reflects and is also influenced by various elements of the originating culture (Frit & Wesson, 1991; Tangsey, 1990). Cultural values may determine different meanings that people interpret the same advertising message. (Hornik, 1980; Onkvisit & Shaw, 1983). Flight Seat Advertising seeks to break the traditional barriers to advertising to multi-cultural passengers. People’s acceptance of this form of advertising will generate positive reaction, creating an expected form of communication between the messenger and the audience. Economics “Economics is the study of the economy. Classic economics concentrates on how the forces of supply and demand allocate scarce product and service resources.” (www.answers.com, 2008). Classical economics seeks to explain the movement of price through equilibrium of supply and demand factors. Current factors affecting supply include: 12
  13. 13.  High costs lead airlines to cut back on routes and only fly to high demand destinations. Air carriers are struggling to maintain old aircraft and find financing  to purchase new equipment. Current factors effecting demand include:  Real household incomes are under pressure from rising costs.  Recessionary environment is limiting business and leisure travel.  Elasticity of demand is high for short distances. Travelers are substituting auto travel or reducing travel frequency. The environment facing today’s economy is putting the current airline business model to the test. If fuel costs continue to rise and airlines do not find an alternative way to increase revenue, then flying will become an impossible luxury for many travelers. “It is evident that the airlines' future looks vague.” (www.spacefuture.com, 2007). In an effort to avoid bankruptcy many airlines have been forced to raise prices, but the impact of higher prices has lead consumers to reduce the frequency of airline travel. Air travel is somewhat elastic. Travelers can choose to travel by car, public transportation, or forego unnecessary trips. Business cut costs by implementing video-conferencing, web casts, and electronic communications. This trend has required airlines to shut down short-distance commuter routes in an 13
  14. 14. effort to sustain their most popular long distance destinations. Long distance travel is less price elastic since auto travel becomes more expensive and less convenient. As a result, travelers are faced with more hassles when going to the airport, often facing over-booked flights, cancellations, and delays due to maintenance issues. Airlines cannot afford to absorb the opportunity cost of flying with empty seats. Price is the most important factor when choosing a flight. Today’s traveler can easily shop around on online search sites such as Expedia, Orbiz, or yahoo. Online engines increase the ease of price discovery and increase competitive pressure on suppliers. A small five dollar difference can sway a traveler to a different carrier. To continue to attract passengers, airlines must price their flights similar to their competitors regardless of differences in supplier costs. In an effort to maintain profit margins airlines are cutting costs on freebies such as meals, pillows, extra luggage, and staffing. This trend shows that travelers derive greater utility from lower prices than from unnecessary amenities. No one seems to miss the poor quality airplane meals anyway. The business model for the airlines has changed. In the past airlines increased business by providing plush services and extra perks. Today, an airline survives by being the low-cost provider and maintaining profit margins by cutting all unnecessary expense while searching for new sources of revenue. Flight Seat Advertising applies a forward thinking concept to a new airline business model. 14
  15. 15. Location Flight Seat Advertising’s will have a home base near LaGuardia and JFK airports in New York City. However, sales staff will be required to travel to different locations depending on prospect opportunities. Flight Seat Advertising is mobile. The product will be installed at the airline carrier’s hub, but the product itself will reach multiple destinations. So the concept is virtually everywhere. The product located on the back of passenger seats on tray tables.  The product is an adhesive large enough to occupy the entire tray.  The size of the tray will determine the size of the promotional sticker.  Advertising will be available in business, economy, and first-class  seating. 15
  16. 16. INDUSTRY ASSESMENT In terms of achieving a high level of passenger interaction, plane tray advertising offers a strong and dependable means of advertising. This unique form of advertising can be characterized as a new form of traditional advertising. The composition of the product will be an adhesive large enough to occupy the entire tray. Other non-traditional advertising strategies can be found in unconventional spots such as restrooms, taxis, and elevators. However no print advertising currently enables brand owners to directly target a captive passenger for long periods. We believe long exposure improves recall and advertising results. Backseat ads will be placed on back of all intercontinental and domestic flights. The product will be placed on all trays in business, economy, coach and first-class allowing the advertiser to tailor the message to different socio-economic groups. Flight Seat Advertising presents an additional source of revenues for airlines. The current economy is challenging the viability of airline’s profitability. Fuel costs are rising. Competitive pressure to lower ticket prices are cutting profit margins and recent security breaches have lead to government mandated security measures further increasing costs and prices. An A737 aircraft burns more than 885 gallons per hour. At this rate of gasoline consumption, even a marginal increase in gasoline prices makes a significant difference in profits. Fleet 16
  17. 17. maintenance is also a significant cost. Due to low profits and high machinery costs, most airlines operate heavily depreciated, older model planes, which require more maintenance. Airlines are struggling to balance costs and safety concerns. Given the current environment, we believe Flight Seat Advertising Trays will be well received by airline companies as an easy source of additional revenue. Airlines are creating new ways of cutting costs and increasing revenue. Most recently, passengers are being charged $20 to $50 to check more than one bag. In- flight snack have been curtailed, except for peanuts and soda. Meals are now offered for sale. Pillows and blankets are no longer given to all customers and may only be available upon request. Airlines have converted costs into a source of additional profit by selling items previously given free of charge. If fuel costs continue to rise and airlines do not find an alternative way to increase revenue then flying will become a luxury for many consumers. Flight Seat Advertising seeks to offer airlines an additional source of revenue by taking advantage of a pre-existing feature: food trays located on the back of all passenger seats. To assess the whether passengers will respond positively to the new marketing technique, Flight Seat Advertising plans to conduct a marketing survey called Countdown Packages. Passengers on flights will be surveyed via questionnaires handed out though the airline personnel during the flight. Questions will cover the perceived benefit of lower ticket costs versus 17
  18. 18. amenities. The questionnaire will also discover how passengers spend their airtime (reading magazines provided on the airplane or reading their own material, watching TV, playing games, doing computer work, sleeping, or doing nothing.) Questions will also ask the respondent what images they find most agreeable (discount code offers, pictures, puzzles, versus word messages.) It is important to assess whether or not the passenger will pay attention to what is in front of them and what sort of advertising they find useful. The surveys will be analyzed by our marketing department in assess the effectiveness of a backseat image. Countdown Packages will be the name of the marketing survey. Passengers on Airplane flights will be surveyed via questionnaires handed out though the air plane by the airline personnel during the flight. The surveys will then send to our Marketing department to correlate answers with new and better marketing strategies. 18
  19. 19. SITUATIONAL ANALISYS The survival of the company will be dependent upon the opportunity of creative solutions. Advertising is a highly competitive market, and the survival of the company depends upon delivering innovative solutions for customers and meeting sales goals. According to a document written on The Future Lab, “Agencies that survive the inevitable bubble will focus less on quot;viral marketing,quot; and more on three key deliverables: 1) campaigns built on authentic community interests; 2) social and vertical search optimization; and 3) integrated measurement services that tie CGM back to ROI. These are the value dimensions that will determine natural selection in this environment.” (http://futurelab.net, 2005). It is crucial for the introduction of Flight Seat Advertising to target innovative airlines that seek new sources of revenue and see the value of creating an informational passenger experience. Given the large corporate structure of the airline industry, we anticipate a long sales process to negotiate an initial contract with an airline for use of their tray space. However, we see faster growth as more and more airlines catch on to the idea as a new way of generating revenue. Compared to cutting amenities, adding advertising is a painless way for airlines to improve profits and keep ticket prices low. Some industries have come up with alternative solutions to cut cost such as eliminating their food service. “Northwest Airlines today became the second U.S. airline to begin testing an onboard pay-for- 19
  20. 20. food program, following in the footsteps of America West, which began charging for food this month.” (www.allbusiness.com, 2008). Strategic forward thinking is critical to the airline industry future. Flight Seat Advertising believes airlines will see the value in our proposal. The investment to begin Flight Seat Advertising is low. Until an initial contract with an airline is won, the only costs will be creating a demonstration for winning the confidence of decision-makers at airline companies. We are aware of the long time frame required to establish relationships with decision makers at large companies and the lengthy decision making process. Our first goal is to aggressively market our strategy to smaller airline carriers such as Frontier, Jet Blue, and Southwest. Not only do we anticipate easier access to decision makers, but these small airlines often have agreements with larger carriers, which may open doors for new and larger opportunities in the future. Once a contract is won, sales representatives will work to sell space to potential advertisers. Space will be segmented and sold in parcels depending on location (economy vs. first-class), route (vacation vs. business destinations). 20
  21. 21. ORGANIZATIONAL OVERVIEW Legal Business Description Flight Seat Advertising will initially be organized as a sole proprietorship. A sole proprietorship is a low cost structure which puts up few legal hurdles and costs almost nothing to establish. More than 75 percent of all businesses are sole proprietorships. (Service Corps of Retires Executives, 2001). Flight Seat advertising is a start-up company organized as a sole proprietorship advertising company specializing in flight advertising. “As a sole proprietor you have absolute authority over the business and you own all the assets” (Stanton, 1996). Flight Seat Advertising will begin as a sole proprietorship for the following reasons: ▪ The federal government does not require any sort of legal paperwork making it easier to start the company. ▪ The simplicity of this type of business makes sense for the size of our business. ▪ An insignificant fee will have to be paid. “Proprietorships usually have to pay local licensing fees and may need to file a business name statement.” (www.bankrate.com). ▪ Filling government documentation is much simpler than other forms of businesses, creating a far less expense and saving time. ▪ The costs of setting up and operating the business are low. Moreover, starting small minimizes overhead and the risk of failure until the level of confidence to succeed in the marketplace is reached. ▪ There are several hotlines were the government can attend with any questions, including forms etc (http://www.irs.gov/contact). 21
  22. 22. Business Name “When choosing a business name, there are two things to consider; the business name’s marketing potential and its legal elements.” (sbinfocanada.about.com, 2008) Flight Seat Advertising was chosen as the final name for our business because it best describes the company’s line of business. The easy association of the name of the company with what it delivers creates an easy to remember link between product and organization. “As part of your business identity, the basic objectives of a new company name are to identify your company and to distinguish it from the competition.” (www.edforiwriter.com, 2008). Organizational Structure In order for the company to survive, a simple and explicit organizational structure must be part of the business plan. The structure must identify the decision making process and update the employees of the business ladder. The structure must be simple enough to eliminate red tape, making problem solving easy and effective. Another important quality of a simple organizational structure is ease of communication. Employees can quickly identify who to go for advice. A unilateral structure between the managers and the front line associates will serve as a tool of recognition and appreciation as well as increment motivation. 22
  23. 23. Owner ↓ Sales Rep Sales Rep Sales Rep The sales team is the most important element for the success of Flight Seat Advertising. Creating a strong front line with well developed relationship building and sales skills will generate new business. The ideal candidates will be college educated individuals with strong communication skills and a passion for laying an advertising footprint. Sales representatives will need to be flexible and willing to travel to presentation our strategy and win new business. The Sales staff will develop a quality pipeline. The owner/manager is responsible for gaining new contracts with airlines and the sales reps are responsible for selling the space. The manager/owner will have graduate degree with experience in multicultural markets as well experience negotiating large contracts with Fortune 1000 companies. Experience in entrepreneurial ventures is valuable. Strong leadership skills will help guide the company to success. The manager will oversee the sales representatives, develop new initiatives and sales strategies, and serve as mentor. The Manager will also hold weekly meetings with employees to assure compliance with the company’s vision and mission statements. Due to the small size of the company the owner/manager will be the only employee until a contract 23
  24. 24. is won with an airline. Business expansion will begin when sales reps are needed to sell advertising space. When a company agrees to advertise, Flight Seat Advertising partner’s with the company’s advertising agency to obtain formatting for their campaign. A freelance crew will be hired to install the product. The installation crew will differ depending on the airport’s geographical location. 24
  25. 25. SERVICE STRATEGY Proposed Services There are many promotional products and advertising campaigns that are being launched daily through different forms of media. The initial interaction between product and consumer is what identifies the success of the promotional placement. “An advertising strategy is a campaign developed to communicate ideas about products and services to potential consumers in the hopes of convincing them to buy those products and services. This strategy, when built in a rational and intelligent manner, will reflect other business.” (www.answers.com, 2008). Flight Seat Advertising has a key advantage over other advertising agencies, which is the location where the promotional product will be placed. The consumer will be captive by the product for a long period of time. Installation The product will be a large adhesive ad/logo that will be installed by a freelance crew onto all trays. The ads/logos will be created by the customer’s own marketing department or advertising campaign managers. Flight Seat Advertising is responsible for installation, not ad design. Quick installation between plane schedules is critical to maintaining a good relationship with the airlines. Airlines will not be willing to let their planes sit idle waiting for a crew to finish. Airlines already struggle to keep on-time flights. Slow installation is a risk we must advert. 25
  26. 26. MARKET ANALYSIS Target Marketing “Today, most advertising strategies focus on achieving three general goals, as the Small Business Administration indicated in Advertising Your Business: 1) Promote awareness of a business and its product or services; 2) Stimulate sales directly and quot;attract competitors' customersquot;; and 3) Establish or modify a business' image. In other words, advertising seeks to inform, persuade, and remind the consumer (www.answers.com, 2008). Flight Seat Advertising is aware of the issues facing airlines and seeks to be an asset to airline companies through constructive product placement. Helping airlines maintain low cost fares to passengers is important. We will initially target smaller, regional airlines because of easier access to decision makers. We see small carriers such as Southwest, Jet Blue, and Frontier as key entry points to gain credibility with larger carriers such as United, American, Continental, Delta, and U.S Airways. Small carriers often maintain relationships with larger carriers who may catch onto the idea. We are confident Flight Seat Advertising has a product that not only helps airlines easily increase revenues, but also modernizes the flight experience for their passengers. The target market for Flight Seat Advertising Tray product is all airline 26
  27. 27. companies, but small regional carriers will be targeted first but we will also simultaneously establish relationships with large carriers. We believe the small carriers will be able to make quicker decisions than large carriers. Additionally, small carriers have already exhibited innovative ideas to lower costs and improve profitability. The market segment that Flight Seat Advertising will use is: “Undifferentiated Marketing: the firm might ignore market segment • differences & go after the whole market with one market offer. It focuses on what is common in the needs of buyers. It relies on mass distribution & mass advertising.” (I. Mootee, 2001) Flight Seat Advertising begins at the initial stage or educational stage of advertising by implementing airport campaigns such as “What is that on my tray?”, and contacting airlines as well as the customers’ pipeline. “Concentrated marketing: instead of going for a smaller share of a larger • market, the business goes for a larger share of one or more smaller groups”. (I. Mootee, 2001) Concentrated marketing will be used when the company is young. Flight Seat Advertising believes the smaller airlines will be quicker to adopt new ideas. Within one year, Flight Seat Advertising hopes to have negotiated a contract with an airline and begin selling advertising space. 27
  28. 28. Competition Although innovative, non-traditional advertising placement is catching on, we have found no agency who promotes placement on airline trays. Some airline industries have tried to implement a similar idea but they had unsatisfactory results. Flight Seat Advertising believes the failure of previous airline advertising ventures was due to poor campaign strategy, second-rate ads, and irrelevant choice of product to passenger demographic. In past attempts, no advertising agency was responsible for the idea. Rather, airlines offered their space like a billboard with no coordinated strategy. We believe that a dedicated effort by an advertising agency specializing in airlines and experience and knowledge of brand strategy will make this venture a success. SWOT Analysis Strengths upon Business Start-Up: • High Costs are driving airlines to seek new solutions. Low marginal cost for company start-up • Knowledgeable and skilled employees • No cost for production, only distribution. • Weaknesses upon Business Start-Up • Owner’s lack of direct prior experience in running a business. Earning Initial credibility with airlines • Difficulty getting approval from airlines with complex corporate structure. • 28
  29. 29. Decision making process may be long and involve multiple decision makers. Business Risk Flight Seat Advertising must convince two parties of the value of the Tray Table idea. If an airline will not agree to rent tray space, Flight Seat Advertising is not viable. Alternatively, if an airline does agree to rent space, Flight Seat Advertising must attract high quality advertisers who are willing to invest in an unproven idea. If the owner/manager is unable to negotiate favorable terms with the airline the costs to advertise will be too steep to entice wary advertisers to a new idea. MARKET PLAN 29
  30. 30. Sales Strategy A sale is the pinnacle activity involved in selling products or services in return for money or other compensation. It is an act of completion of a commercial activity. (Oxford Dictionary). In order for the deal to be closed, or the customer implementing the Flight Seat Advertising product service, several steps must be taking into consideration. A contract between Flight Seat Advertising and the airline carrier must be negotiated. We anticipate obtaining a contract to take 6 months to 1 year. The Flight Seat Advertising owner/manager will negotiate the terms of the contract including price for space on designated planes and number of seats. A timeline for the product placement will also be negotiated. For example, a contract is won to rent tray space on a fleet of 100 planes each containing 250 seats for a period of three months or one fiscal quarter. We suggest the airline charge 0.25 cents per passenger seat per flight. We assume each plane makes 4 flights per day, 7 days per week, for 12 weeks, or 336 flights per plane on a quarterly basis. Each plane carries 84,000 passengers per quarter, so an advertiser will have exposure to 8.4million passengers over the course of the quarterly campaign. At 25 cents per seat, the airline would negotiate a favorable contract for $2.1million per quarter, or $8.4 million in extra revenue per year. If the idea is a success and the airline’s tray space becomes highly demanded, the 30
  31. 31. price per seat may be increased. Flight Seat Advertising will suggest the airline charge a higher rate for first-class seats and for planes operating on longer flight routes to major destinations. Once the placement contract is negotiated with the airline, the Flight Seat Advertising sales representatives will jump into action. “The primary function of professional sales is to generate and close leads, educate prospects, fill needs and satisfy wants of consumers appropriately, and therefore turn prospective customers into actual ones.” (Rumbauskas, 2006). Each sales agent will be equipped with a full paper scale presentation. It will contain informational literature as well as visuals of the promotion already in action. Although it is possible a high profile client will want to rent the entire airline fleet, Flight Seat Advertising is initially planning on parceling out space to correspond to different target audiences. For example, the most experienced sales rep will call on large luxury companies like Hilton Hotels, Mercedes Benz, and Chanel as potential candidates for first-class seat space to popular destinations such as New York City, Los Angeles, and Miami. Other reps will target companies catering to business class travelers such as Brooks Brothers, Sprint, and Sony. We will also target clients wishing to capture the economy traveler such as JCPenny, Outback Steakhouse, or Best Western hotels. During weekly sales meeting, sales reps and the manager will review best- 31
  32. 32. ideas and successful techniques. Idea sharing will help send a clear and consistent message to all clients we contact. Advertising, Marketing, Promotions Marketing and Sales are very different, but both have the same goal: to increase revenue. Marketing improves the selling environment and plays a very important role in sales. If the marketing department generates a potential customers list, it can be beneficial for sales. The marketing department's goal is increase the number of interactions between potential customers and the sales team using promotional techniques such as advertising, sales promotion, publicity, and public relations, creating new sales channels, or creating new products. (Career Sales Managers, iseek.org, 2007) At Flight Seat Advertising there is no segregated marketing department due to initial small size. The owner/manager’s background in marketing and design will be used to create a demonstration ad/logo. The manager will find an airplane (possibly private) to visually demonstrate the product to carriers. The demonstration will include a web cast video of a plane equipped with Tray Table Advertising. Pictures will be taken the product for use in sales demonstrations. The sales Representatives are the most efficient marketing tool that Flight Seat Advertising will have to be recognized within the advertising market. Proper business conduct and attire is expected from every sales representative that reflects 32
  33. 33. the values of the company. The owner/manager of Flight Seat Advertising will conduct weekly sales meetings to develop quality sales techniques: It is essential that a prior study of the market be executed by the sales representative to ascertain the target demographic group of the advertising client. Flight Seat Advertising will advertise in “Sky Mall Magazine” and hold promotions “What’s that on the tray?” to generate leads. The sales process both for obtaining airline contracts and for renting advertising space is lengthy process. Flight Seat Advertising seeks to develop long term relationships with prospects and clients. Relationship marketing recognizes the long term value to the firm of keeping customers. (Berry, 1983). “Advertising is the life blood of any business, no matter how big or how small. No Advertising usually means no business” (Baird, 2007). Flight Seat Advertising will place promotional stickers in unsold tray space and in the corner of client ads/logos. The sticker will not only have the Flight Seat Advertising logo, but it also will have a small print informing passengers how to find out more about Flight Seat Advertising. • www.flightseatadvertising.com • Leaving an advertising footprint that will be remembered thru time. • Phone number • Email • Questions Sticker labels are a low cost way of branding Flight Seat Advertising world 33
  34. 34. wide. As a new company with a limited budget, Flight Seat Advertising must find creative ways to attract attention. Promotion is viewed as a link between product/service and marketplace that is focused on capturing the attention of customers and persuading them to purchase the products/services. In contrast, for a new start-up business, advertising is mainly used to announce the business opening and provide information to the public and even competitors about the business and its services. Flight Seat Advertising will host promotional events at different airports to inform the public about our product. This specific promotional campaign will be named “What’s that on the Tray?” “The critical part of making an advertising campaign is determining a champion theme, as it sets the tone for the individual advertisements and other forms of marketing communications that will be used. The campaign theme is the central message that will be communicated in the promotional activities. The campaign themes are usually developed with the intention of being used for a substantial period but many of them are short lived due to factors such as being ineffective or market conditions and/or competition in the marketplace and marketing mix.” (Belch, 2004). The specifics of the promotion are: Three groups with two representatives each.  Promotion booths set up for three months.  The dress code for representatives will be in dress slacks with a shirt  that reads FlightSeatAdvertising.com. The company wants to reflect a 34
  35. 35. campaign filed with energy. The promotion booths will be located in high traffic airports such as  New York Kennedy Airport, LAX and Miami International.  The versatile booths will fit in a 10x10 space. It will include countertops giving enough room to display literature. Example; (http://www.popsource.net). The literature handed out by the representatives will consist of a 1.0  × 1.5 laminated page. It will contain a full size color picture of a tray, with a brief description at the bottom. The company’s contact information will also be reflected Website The link to the company’s website is www.flightseatadvertising.com. A website is critical to placing your company in the map. It serves as a credible reference current promotions or even future opportunities. Creating a website is easy and in does not require a large time investment. In can also serve as a sales tool by creating easy access to any document needed to finalize a sale. Flight Seat Advertising website will contain several crucial points. www.flightseatadvertising.com ↓ Link 1 Link 2 Link 3 Link4 Link 5 35
  36. 36. Accountability Partners Clients Testimonials Downloads • Accountability: Through our in flight survey, Flight Seat Advertising can offer independent research from a 737 Boeing with 124 seat capacity to a 764 Transatlantic with 285 total seat capacity. • Partners: We have several partnerships with a variety of companies raging from sales, airlines and researchers. The following is a list of advertising companies working as sale agents: 1. Leo Burnett Company; 2. Adrants 3. Ogilvy@ 4. DDB 5. 360i 6. Monster Worldwide 7. Tenagra 8. Young and Rubicam Advertising 9. Saatchi & Saatchi 10. Dentsu 11. Identity Group, The 12. Coda Creative 13. Multi Ad Services 14. Sky Mall Magazine • Clients: We’ve had the pleasure of working with the following clients; 1. Gillette 2. Michigan Resorts 3. Budweiser 4. Nestle 5. Chase • Testimonials: “Flight Seat Advertising is a unique way of branding. With such a 36
  37. 37. large area covered with our logo it made the presence truly noticeable. We are always looking at knew ways to communicate with our consumers.” (David Collado, 2008). • Downloads: demonstrations of Tray Table Advertising in action on a downloadable web cast. Sky Mall Magazine Sky Mall is a catalog that is already distributed to airline passengers in the pocket in front of their seat. Customers can order from the magazine using the on board airplane telephones or after leaving the aircraft. The catalog distributes products from a number of luxury good and specialty manufacturers (www.skymall.com). Flight Seat Advertising will use the magazine’s broad reach to inform passengers about what Flight Seat Advertising is all about. The article will mostly contain brief articles about surveys, future clients, expanding information as well as other promotions taking place. Distribution Channels “The market uses distribution channels to display or deliver the physical products or services to the buyer” (Kotler, 2003). Flight Seat Advertising uses an indirect distribution channel. An outsource logistics source will be contracted by project in order to eliminate cost. The distribution company will be Schneider National. Schneider’s low rates align with Flight Seat Advertising budget. “The 37
  38. 38. largest fleet in North America backed by the best customer service under the sun that’s Schneider for you.” (www.Schneidernational.com). The tray adhesive will be designed by the customer. Flight Seat Advertising will sub-contract with print shops to screen the designs onto custom adhesive labels. The customer covers the cost of printing in the flat rate negotiated for the space. After printing, Schneider National will pick up the product and deliver it to the airport where the plane is located. At the location of the airport a trained installation team will replace the old tray stickers with the new ones. We plan on using trained union labor workers to install the product. “Distribution is all about getting your product/service to the right people at the right time with special consideration for profit and effectiveness” (BizHelp24, 2006). Our installation team will instructed to work quickly and to complete projects early and at the latest, on-time. Pricing Flight Seat Advertising believes in the importance of revenue but when starting a company it is also important to have an affordable service. If the product gains popularity and is a success, Flight Seat Advertising will be able to obtain a larger profit percentage. The final price will be influenced by the negotiated contract with the airline. We have prepared a suggested offering rate. For example, a contract is won to rent tray space on a fleet of 100 planes 38
  39. 39. each containing 250 seats for a period of three months or one fiscal quarter. We suggest the airline charge 0.25 cents per passenger seat per flight. We assume each plane makes 4 flights per day, 7 days per week, for 12 weeks, or 336 flights per plane on a quarterly basis. Each plane carries 84,000 passengers per quarter, so an advertiser will have exposure to 8.4million passengers over the course of the quarterly campaign. At 25 cents per seat, the airline would negotiate a favorable contract for $2.1million per quarter, or $8.4 million in extra revenue per year. The cost of the custom adhesive labels is estimated to be $3 per label (which includes shipping costs). Printing costs to transfer design layouts are estimated at $1each. So, if an advertiser wishes to rent 1/3 of the business class seats on 100 planes, then the advertiser will have approximately 36 seats per plane (or 3,600 seats of exposure). We assume each plane has 110 business class seats, 110 economy seats, and 30 first class seats. The cost to produce each label is $4, so product costs are $14,400. The crew that installs the labels will be paid union rate labor at $12 per hour. We estimate 20 labels can be installed per hour, per worker. Labor hours will be 180 hours at $12 per hour, for a total labor cost of $2,160. The airline charges $84 per tray space per quarter (each plane makes 336 flights on a quarterly basis at a negotiated 25cents per passenger). The cost to rent 3,600 seats at $84 each is $302,400. The costs are summarized as follows: - $302,400 - 3,600 seats 39
  40. 40. - $ 14,400 - label/print/shipping costs $ 2,160 - installation labor - = $318,960 - preliminary cost Flight Seat Advertising will charge 10% of the preliminary cost as commission for services. This advertising space generates $31,896 of revenue for Flight Seat Advertising. This revenue is split 70/30 between the owner/manager and the sales rep respectively. The owner manager plans on re-investing 20% of each sale into Flight Seat Advertising. Flight Seat Advertising presents only the total cost for space to the advertising client. The proposal for 3,600 business class seats would be for $350,856 per quarter. Due to the scale of Tray Table advertising and high profile exposure, potential advertising clients will be large Fortune 1000 companies. Small local companies will not have a sufficient advertising budget to allocate to the niche marketing strategy offered by Flight Seat Advertising. If the idea is a success and the airline’s tray space becomes highly demanded, the price per seat may be increased. Flight Seat Advertising will suggest the airline charge a higher rate for first-class seats and for planes operating on longer flight routes to major destinations. In the world of advertising customers are always trying to get the best deal. Flight Seat Advertising will leave a flexible margin window for negotiations. In the 40
  41. 41. case of a start up company like Flight Seat Advertising obtaining initial clients and gaining exposure is more important than revenue in the first year. If a large client like Gillette or Sprint decides to try our marketing strategy, we will make concessions on percentage commission to make the deal more attractive. A high profile client will build our reputation as a major player in the advertising industry. Flight Seat Advertising is willing to sacrifice at first in order to put our footprint in the advertising world. If the customer is satisfied with the results the price tag for the placement can be increased. A well chosen price should do three things: 1) Achieve the financial goals of the company and increase profitability. 2) Fit the realities of the marketplace by addressing the question: “Will customers buy at set price?” 3) Support a product's positioning and be consistent with the other variables in the marketing mix. (Estelami, 1997) Our clients will be able to choose between three separate packages valued at different prices. Standard Package: The Standard Package includes a one time distribution to five Boeings 737 for a three month period. The in flight survey will include three standard questions which include: • Brand Recall. 41
  42. 42. • Did they look at the Tray adhesive? • One sponsor awareness question • 2-3 Demographic Questions Silver Package: The Silver package includes a one time distribution to five Boeings 737 and one transatlantic 764, for a six month period. • Brand Recall. • Did they look at the Tray adhesive? • One sponsor awareness question. • 3-4 Demographic Questions. • One extra question which can be chosen by you. Gold Package: The Gold Package includes a one time distribution to five Boeings 737 and one transatlantic 764, for a twelve month period. • Brand Recall. • Did they look at the Tray adhesive? • One sponsor awareness question. • 3-4 Demographic Questions. • One extra question which can be chosen by you. Pricing will be presented as a flat fee, reflecting the total cost for product placement, printing, delivery and installation. Flight Seat Advertising will require 60% of total cost upfront and the 40% balance upon completion. Airline Seat Mapping 42
  43. 43. The following blue print shows the number and order of seats that are in a typical Boeing 737. ( http://www.seatmaestro.com) FINANCIAL PLAN 43
  44. 44. Start Up Budget The idea behind Flight Seat Adverting was to create an innovative advertising concept during flight time. The initial low financial investment is what makes the idea a reality. The initial success of the venture depends upon the owner/ manager’s ability to negotiate a contract to rent tray space on an airline carrier’s fleet. Until an initial contract is obtained, no sales representatives will be hired. The owner/ manager plans on operating the business from a home office. Travel expenses are the main cost. The owner/manager plans on having a busy meeting schedule within the first year to secure a contract deal. However, the owner/manager’s location in New York City and proximity to airline and advertising prospect headquarters will reduce long distance travel expenses. The owner/manager also expects to need an adequate entertaining budget. Executives from large airlines will expect to be taken to dinner while discussing business deals. Flight Seat Advertising wants to develop long term relationships with the decision makers and make a lasting impression. Flight Seat Advertising also needs to budget for their advertising expense in Sky-Mall magazine and web-site design services. Office Furniture and Office Supplies Besides entertainment, travel, and advertising expense, Flight Seat 44
  45. 45. Advertising projects initial expenses for equipment. The owner/ manager will need a laptop for designing demo materials, maintaining the website, managing business processes and keeping an organized pipeline. The owner/ manager will have a land-line telephone in addition to a cell phone for keeping contact during travel. The owner/manager will also purchase a desk, chair, and other office furniture and basic supplies. • 1 desk and 1chair $ 1,000 • 1 HP Laptop and Printer and MS office software $ 2,500 • Telephone and Wireless Internet $ 100 per month • Cell phone service $ 75 per month Advertising Promotions • Full color business cards (2 x 4 inches) printed on one sides (1000) $100 • Full color plastic bags with company logo printed on both sides (1000) $300 Working Capital Flight Seat Advertising estimates an initial need of $20,000 to cover the first year of travel, entertainment, advertising, expenses. An additional $5,000 is needed for office equipment and supplies. This amount will also serve as a cash cushion until the company emerges into the market. Salaries Wages 45
  46. 46. The business owner/manager will be compensated upon successful implementation of the strategy. The owner/manger will split all commissions 70/30 with the sales representatives. The owner/manager plans on re-investing 20% of each sale into Flight Seat Advertising to fund expansion. Sales representatives will not be hired until the owner/manager secures as contract. All sales positions are compensated on a commission only basis. As the company expands, Flight Seat Advertising plans on being able to offer sales reps a monthly salary of $4,000 per month as a draw versus commission. Sales obtained over the $4,000 per month level will be extra compensation. Balance Sheet The balance sheet (Appendix I) is a snapshot of the company’s financial standing at the present time. Future financial changes will affect the accuracy of the present statement. Distribution prices might be affected by the increase or decrease of shipping costs. The balance sheet keeps track of capital put into the business, how much cash and equivalent the business possesses, and reveals important information regarding the company’s abilities to generate revenue and manage inventory. FUNDING 46
  47. 47. An initial bank loan for the amount of $20,000 will be needed in order to make Flight Seat Advertising a reality. Flight Seat Advertising plans to work with the SBA in obtaining this loan. Also family members have agreed to be Angel Investors and will raise $5,000 for equipment expenses. Both debts will be paid from the cash flows from sales. As the business grows from seed-stage to start-up, Flight Seat Advertising hopes to attract venture capital investors to fund a global expansion. REFERENCES Bibliography. 47
  48. 48. 1 William J. Stanton, Michael J. Etzel y Bruce J Walker, Fundamentos de Marketing, décima edición, Mc Gram Hill, 1996, P7, 12, 33 retrieved August 8th 2008. 2 Daniel S. Janal, Marketing en Internet, Primera edición, Prentice Hall, 2000, P14, 16-20, retrieved August 9th 2008 3. Air Travel – Greener by Design, The Technology Challenge, 2001, retrieved August 8th 2008 4 World Commission on Environment and Development, Our Common Future, 1987, retrieved August 2nd 2008. 5. US Department of Energy, International Energy Outlook 2002, retrieved August 12th 2008 6. Airbus Industrie, CO2 Issues, 2001, retrieved August 18th 2008 7. Doganis Rigas, the Airline Business in the 21st Century, 2001, Routledge, ISBN 0-415-20883-1, retrieved August 20th 2008 8. Webster Ben, Tax on flights will cost up to £ 50.00, 9th April 2002, Transport Correspondence for Times Newspapers Ltd, retrieved August 21th 2008 9. Air Transport Action Group, Air Rail Links – Guide to Best Practice, 1998. retrieved August 22nd 2008 10. Air Travel – Greener by Design, Improving Operations & Market-Based, Options, 2001, retrieved August 11th 2008 11. Campbell C.J., The Coming Oil Crisis, 1997, Multi-Science Publishing, Company & Petroconsultants S.A., ISBN 0-90652-211-0, retrieved August 3rd 2008 12. Airline marketing and management. By Stephen Shaw Publisher: Aldershot, England; Burlington, VT: Ashgate, ©2004, retrieved August 9th 2008 48
  49. 49. 13. Air transport; a marketing perspective by Stephen, Publisher: London; Marshfield, Mass.: Pitman, 1982, retrieved August 8th 2008 14. Airline marketing news by LexisNexis (Firm); publisher Miamisburg, OH: LEXIS-NEXIS, Division of Reed Elsevier, retrieved August 13th 2008 15. Handbook of airline marketing by Gail F Butler; Martin R Keller; Publisher: [Washington, D.C.]: Aviation Week Group, ©1998. Retrieved September 8th 2008 16. Marketing costs pose major challenge to airline profitability: airlines are seeking new ways to fine-tune the cost of luring passengers aboard their airlines. By Joan M Feldman, Article Publication: Air transport world. Vol. 24, no. 1 (Jan. 1987), retrieved September 8th 2008 17. Knowing your customer; many regulars air travel as a hassle, according to Professor Nawal Taneja, who says airlines could learn a lot about marketing from the likes of American Express or P&G by Mark Lyon; Nawal K Taneja, Publication: Airline business. March 1990, retrieved September 9th 2008 18. The future development of airline marketing: an International Air Transport Association (IATA) study. By Philip Shearman, Publication: Handbook of airline marketing, retrieved September 12th 2008 19. Airline marketing in regulatory context, by John C Driver, Publication: Marketing Intelligence & Planning, 19, no. 2 (2001): 125-135, Publisher: 2GT Business Plan 44 MCB University Press, Database: Article First. Retrieved September 20th 2008 20. Airline marketing a great future, but different. By Philip Shearman, Publication: Handbook of airline marketing. . Retrieved September 1rst 2008 21. beyond the friendly skies: an integrative framework for managing the air travel experience. By Jordan L Le Bel, Publication: Managing Service Quality, 15, no. 5 (2005): 437-451, Publisher: Emerald Group Publishing Limited, Database: ArticleFirst. Retrieved September 8th 2008 49
  50. 50. 22. Marketing airline services to the business; advertising content passenger preferences and the organizational buying process. By Karin Holstius; Svenska ̈ handelshogskolan (Helsinki, Finland), Publisher: Helsingfors: Swedish School of Economics and Business Administration, 1985. Retrieved September 11th 2008 23. Air everything: what will the multimega airlines of tomorrow look like? By Louis Gialloreto, Publication: Airline business. Mar. 1993. . Retrieved September 10th 2008 24. Brand new targets: branded airline products are the latest competitive marketing tool, while carriers are taking a fresh look at direct marketing. By Trevor French, Publication: Airline business. Nov. 1988. . Retrieved September 12th 2008 25. In-flight services: an expanding world. By Bill Coker, Publication: Airline executive. Vol. 8, no. 9 (Sept. 1984). Retrieved September 15th 2008 26. Air transport: a marketing perspective. By Stephen Shaw, Publisher: London: Pitman, 1982. Retrieved September 13th 2008 27. Integrating airline strategy and marketing. By Frank Bernardino, Publication: Handbook of airline marketing. Retrieved September 22nd 2008 28. Winning their hearts and minds: it takes special fares, costly advertising and well-planned service to win a passenger. By Douglas W Nelms, Publication: Air transport world. Vol. 28, no. 4 (Apr. 1991). Retrieved September 23rd 2008 29. Airline planning and marketing decision support: a review of current practices and future trends. By Barry C Smith; Jim Barlow; Ben Vinod, Publication: Handbook of airline marketing. Retrieved September 25th 20008 Appendix A—Start-Up Budget 50
  51. 51. Sources of Capital Owners’ Investment (Cash) $ 20,000 Other Liabilities (Family Investment) $ 5,000 Total $ 25,000.00 Startup Expenses Capital Equipment and Opening Inventory Furniture and office supplies $ 5,000 Total $ 5,000 Location and Admin Expenses Utility deposits $ 200.00 Business name registration (application fee) $ 11.00 Total $ 211,000 Advertising and Promotional Expenses Advertising, Sky Mall magazine $ 350.00 Three 10X10 booths $1200.00 Business cards (2 x 4inches) $ 100.00 Plastic Bags with company’s logo $ 120.00 Total $ 1,670 Working Capital $ 20,000.00 Summary Statement Total Sources of Capital $ 25,000.00 Startup Expenses $ 5,200 Appendix B—Operating Budget 51
  52. 52. Business Expenses Advertising $ 1,670 Office Expenses $ 5,000 Telephone $ 100 Supplies $ 400 Total Business Expenses $ 7,170 52

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