Inline Skating

Executive Summary

Pegasus Sports International is a start-up aftermarket inline skating accessory manufacturer.

In addition to the aftermarket products, Pegasus is developing SkateTours, a service that takes clients out, in conjunction with a local skate shop, and provides them with an afternoon of skating using inline skates and some of Pegasus' other accessories such as SkateSails. The aftermarket skate accessory market has been largely ignored. While there are several major manufacturers of the skates themselves, the accessory market has not been addressed. This provides Pegasus with an extraordinary opportunity for market growth.

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Skating is a booming sport. Currently most of the skating is recreational. There are however a growing number of competitions, both team orientated such as skate hockey as well as individual competitions such as speed skate racing. Pegasus will work to grow these markets as well as develop the skate transportation market, a more utilitarian use of skating. Several of Pegasus' currently developed products have patents pending and local market research indicates that there is great demand for these products.

Pegasus will achieve fast, significant market penetration that will be achieved through a solid business model, long range planning, and a strong management team that will able to execute on this exciting opportunity. The three principals on the management team have over 30 years of combined personal and industry experience. This extensive experience provides Pegasus with the empirical information as well as the passion to provide the skating market with much needed aftermarket products.

Pegasus will sell their products initially through their website. This "Dell" direct to the consumer approach will allow Pegasus to achieve higher margins and maintain a close relationship with the customers which is essential for producing products that have a true market demand. By the end of the year, Pegasus will have developed relationships with different skate shops and will begin to sell some of their products through the use of retailers.

Situation Analysis

Pegasus is entering their first year of operation. The products have been well received and marketing will be key to develop brand and product awareness as well as grow the customer base. Pegasus International offers several different aftermarket skating accessories, serving the growing inline skating industry.

Market Summary

Pegasus posesses good information about the market and knows a great deal about the common attributes of the most prized customer. This information will be leveraged to better understand who is served, their specific needs, and how Pegasus can better communicate with them.

Market Needs

Pegasus is providing the skating community with a wide range of accessories for all variations of skating.

Pegasus seeks to fulfill the following benefits that are important to their customers:

• Quality craftsmanship: The customers work hard for the money and do not enjoy spending it on disposable products that only work for a year or two.
• Well thought out designs: The skating market has not been addressed by well thought out products that serve skaters needs. Pegasus' industry experience and personal dedication to the sport will provide Pegasus with the needed information to produce insightfully designed products.
• Customer Service: Exemplary service is required to build a sustainable business that has a loyal customer base.

Market Trends

Pegasus will distinguish themselves by marketing products not previously available to skaters. The emphasis in the past has been to sell skates and very few replacement parts. The number of skaters is not restricted to any one single country, continent, or age group, so there is a world market. Pegasus has products for virtually every group of skaters. The fastest growing segment of this sport is the fitness skater. Therefore, the marketing is being directed to service this group. BladeBoots will enable them to enter establishments without having to remove their skates. BladeBoots will be aimed at the recreational skater, the largest segment; however SkateAids are great for everyone.

There is one more way the sport of skating will grow, and that is through SkateSailing. This sport is primarily for the medium to advanced skater. The growth potential for this sport is tremendous. The sails Pegasus' has manufactured so far have ended up in Europe. The same thing happened with windsurfing. It started out here in Santa Monica but did not take off until it had already grown big in Europe. More and more groups are getting together on skate excursions in cities all over the world. For example, San Francisco has night group skating that numbers in the hundreds of people. The market trends are showing continued growth in all directions of skating.

Market Growth

With the price of skates going down due to competition by so many skate companies, the market has had steady growth throughout the world, with 22. 5 million in 1999 to over 31 million in 2002. The growth statistics for 2003 are estimated to be over 35 million. More and more people are discovering, and in many cases rediscovering, the health benefits and fun of skating.

SWOT Analysis

The following SWOT analysis captures the key strengths and weaknesses within the company, and describes the opportunities and threats facing Pegasus.

Strengths

• In-depth industry experience and insight.
• Creative, functional product designers.
• The use of a highly efficient, flexible business model utilizing direct customer sales and distribution.

Weaknesses

• The reliance of outside capital necessary to grow the business.
• A lack of retailers who can work directly face to face with the customer to generate brand and product awareness.
• The difficulty to developing brand awareness as a start-up company.

Opportunities

• Participation within a growing industry.
• Decreased product costs through scales of economy.
• The ability to leverage other industry participants marketing efforts to help grow the general market.

Threats

• Future/ potential competition from an already established market participants.
• A slump in the economy that could have a negative effect on people's spending discretionary income on fitness/ recreational products. The release of a study that calls into question the safety of skating or the inability to prevent major skating induced traumas.

Competition

Pegasus Sports International is forming its own market. While there are a few companies that do make sails and foils that a few skaters are using, Pegasus is the only one that is truly designed for and by skaters. The few competitors' sails are not designed for skating, but for windsurfing or for skateboards. In the case of foils, storage and carrying are not practical. There are different indirect competitors who are manufactures of the actual skates. After many years in the market, these companies have yet to become direct competitors by manufacturing accessories for the skates that they manufacture.

Product Offering

Pegasus Sports International now offers several products:

• The first product that has been developed is BladeBoots, a cover for the wheels and frame of in-line skates, which allow skaters to enter places that normally would not allow them in. BladeBoots come with a small pouch and belt which converts to a well-designed skate carrier.
• The second product is SkateSails. These sails are specifically designed for use while skating. Feedback that Pegasus has received from skaters indicates this could become a very popular sport. Trade marking this product is currently in progress.
• The third product will be referred to as SkateAid and be in production by December.

Other ideas for products are under development, but Pegasus must hold back until they can protect themselves through pending patent applications.

Keys to Success

The keys to success are simply designing and producing products that meet market demand. Additionally, Pegasus must ensure total customer satisfaction. If these keys to success are achieved, Pegasus will become a profitable, sustainable company.

Critical Issues

Pegasus is still in the speculative stages as a start-up business. The critical issues are:

• Establish themselves as the premier skating accessory company.
• Pursue controlled growth that dictates that payroll expenses will never exceed the revenue base. This will help protect against recessions.

Constantly monitor customer satisfaction, ensuring that the growth strategy will never compromise service and satisfaction levels.

Marketing Strategy

The key to the marketing strategy is focusing on the speed, health and fitness, and recreational skaters. Pegasus can cover about 80% of the skating market since they produce products geared towards each segment. Pegasus is able to address all of the different segments within the market because although each segment is distinct in terms of its users and equipment, Pegasus' products are useful to all of the different segments. Mission Pegasus Sports International's mission is to provide the customer with the finest skating accessories available. We exist to attract and maintain customers.

With a strict adherence to this maxim, success will be ensured. Our services and products will exceed the expectations of the customers.

Marketing Objectives

• Maintain positive, strong growth each quarter (not withstanding seasonal sales patterns).
• Achieve a steady increase in market penetration.
• Decrease customer acquisition costs by 1. 5% a quarter.

Financial Objectives

•  Increase the profit margin by 1% per quarter through efficiency and scale of economy gains.
• Maintain a significant research and development budget (as a percentage relative to sales) to spur future product developments.
• A double to triple digit growth rate for the first three years.

Target Markets

With a world skating market of over 31 million and steadily growing (statistics released by the Sporting Goods Manufacturers Association), the niche has been created. Pegasus' aim is to expand this market by promoting SkateSailing, a new sport which is popular at both Santa Monica and Venice Beach in California.

The Sporting Goods Manufacturers

Association survey indicates that skating now has more participation than football, softball, skiing, and snowboarding combined. The breakdown of participation of skating is as follows: 1+% speed (growing), 8% hockey (declining), 7% extreme/aggressive (declining), 22% fitness (nearly seven million--the fastest growing), and 61% recreational (first-timers).

Our products are targeting the fitness and recreational groups, as they are the fastest growing. These groups are gearing themselves towards health and fitness, and combined, they can easily grow to 85% (or 26 million) of the market in the next five years. Positioning Pegasus will position themselves as the premier aftermarket skating accessory company. This positioning will be achieved by leveraging their competitive edge: industry experience and passion. Pegasus is a skating company formed by skaters for skaters. They are able to use their vast experience and personal passion for the sport to develop innovative, useful accessories for a broad range of skaters.

Strategies

The single objective is to position Pegasus as the premier skating accessory manufacturer, serving both the domestic market as well as international market. The marketing strategy will seek to first create customer awareness concerning the offered products and services and develop the customer base. The message that Pegasus will seek to communicate is that they offer the best-designed, most useful skating accessories. This message will be communicated through a variety of methods. The first will the use of their robust website. As well as a rich source of product information, the site will also be used for purchasing. A lot of time and money will be invested into the site to provide the customer with the perception of total professionalism and utility for Pegasus' products and services.

The second method will be advertisements placed in numerous industry magazines. The skating industry is supported by several different glossy magazines designed to promote the industry as a whole. Additionally, there are a couple of smaller periodicals that serve the smaller market segments within the skating industry. The last method of communication is the use of printed sales literature. The two previously mentioned marketing methods will create demand for the sales literature that will be sent out to customers. The cost of the sales literature will be fairly minimal as it will use the already compiled sales information from the website.

Marketing Mix

Pegasus' marketing mix is comprised of the following approaches to pricing, distribution, advertising and promotion, and customer service.

• Pricing: This will be based on a per product retail price.
• Distribution: Initially Pegasus will use a direct to the consume distribution model. Over time Pegasus will use retailers as well.
• Advertising and Promotion: Several different methods will be used for the advertising effort.
• Customer Service: Pegasus will strive to achieve benchmarked levels of customer care.

Marketing Research Pegasus is blessed with good fortune of being located in the center of the skating world, Venice, CA. Pegasus will be able to leverage this opportune location by working with many of the different skaters that live in the area.

Pegasus was able to test out all of their products, not only with the principals who are accomplished skaters, but also the many other dedicated and "newbie" users located in Venice. The extensive product testing by a wide variety of users provided Pegasus with valuable product feedback and has led to several design improvements.

Financials

This section will offer the financial overview of Pegasus as it related to the marketing activities. Pegasus will address Break-even Analysis, sales forecasts, expense forecast, and indicate how these activities link to the marketing strategy. Break-even Analysis The break-even analysis indicates that $7,760 will be required in monthly sales revenue to reach the break-even point. Pegasus feels that the sales forecasting is conservative.

Pegasus will steadily increase sales as the advertising budget allows. Please refer to the Sales Forecast Chart. Please note that while in the market segmentation section all of the potential customers have been broken down into separate groups, for the sales forecasts, the grouping has been changed Recreational and Competitive. By reducing the number of categories it allows the reader to quickly discern information, making the chart more functional.  Expense Forecast The expense forecast will be used as a tool to keep the department in target and provide indicators when corrections / modifications are needed for the proper implementation of the marketing plan.

Controls

The purpose of Pegasus' marketing plan is to serve as a guide for the organization. The following areas will be monitored to gauge performance:

• Revenue: monthly and annual.
• Expenses: monthly and annual.
• Customer satisfaction.
• New product development.

Implementation

The following milestones identify the key marketing programs. It is important to accomplish each one on time and on budget.

Contingency Planning Difficulties and Risks

• Problems generating visibility, a function of being a internet-based start-up organization.
• An entry into the market by an already established market competitor.

Worst Case Risks Include

• Determining that the business cannot support itself on an ongoing basis.
• Having to liquidate equipment or intellectual capital to cover liabilities.

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