PART C - Advertising & Promotions
J&B recognizes the key to our success is through extensive promotion. In year one, we have budgeted $130,000 in advertising and promotions, $150,000 for year two and $170,000 for year three. These budgets will be distributed among newspapers, magazines, radio stations and the Internet. Below provides details on each of the selected media. Newspapers
$90,000 in year one, $105,000 in year two, and $120,000 in year three has been allotted for newspaper advertising. In the United States, many of the 6,500 newspapers have sections called "Books, Tapes, and Software" and "Business Opportunities". It is under these sections that J&B plans to spend its newspaper advertising budget. The decision to use newspaper advertising as our primary media is the result of several factors which include; * The "Business Opportunities" section of the newspaper has its own established clientele - (i.e. usually individuals who want to start a home-based business); * The "Books, Tapes and Software" section of the newspaper has its own established clientele (i.e. usually individuals who are interested in self-directed learning); * Pre-testing of newspaper advertising proved highly profitable (.07% of all households reached during the testing phase purchased the tested product); * Newspaper advertising provides flexibility in terms of price (unlike magazine advertising and other media, newspaper advertising allows us to change our pricing strategies quickly and without prospective customer knowing), message (unlike magazine advertising and other media, newspaper advertising allows us to quickly change and promote new advertising messages), and market coverage ( unlike magazine advertising and other media, newspaper advertising allows us to target a specific area or geographic region, rather than reaching a national market, thus eliminating the need to hire an additional in-house selling staff to accommodate time zone differences); * Newspaper advertising allows us to directly reach the end consumer, thus eliminating all distribution channels. The result is higher margins and lower costs; * Newspaper advertising allows us to compete away from major competitors and against insignificant ones; * Newspaper advertising allows us to reach a large numbers of individuals; * Easy to monitor the success rate of each advertising effort; * Newspapers advertising initially allows us to operate undetected by major competitors; and * Newspaper advertising is an extremely inexpensive media (low cost per thousand);
In year one, the first two months (March and April - 200W) will act as a Test Phase. During this period we plan to spend $5,000 per month to evaluate various ad messages. The purpose is to create and determine several ads that result in a response or call. The remaining ten months will see the Company invest $8,000 per month into its newspaper advertising campaign. In year two and three, our forecasted monthly cash outflow for newspaper advertising is expected to be $8,750 and $10,000 respectively. The newspapers we have selected have a daily cost per thousand ranging between $0.41- $0.75 and a weekly (IE 6 days) cost per thousand ranging between $2.46 - $4.50 . (To be objective, however, the Company has used a $4.50 weekly cost per thousand in its forecasted financial statements and we will continue using this assumption in the figures below). A total first year newspaper advertising budget of $90,000 is expected to reach 20 million U.S. households ($90,000 / $4.50 per thousand x 1,000 persons = 20 million people). The exposure, however, has a capacity of 120 million (20,000,000 @ 6 possible viewings per week = 120 million exposures). We estimate the majority of potential customers will require between 3 or 4 exposures to the ad before calling to inquire about our business training product. As a result,...