Section B3, Team Five, Spring 2013

Professor Freedman, Professor Griner, Professor Morrison, & Professor Utter

April 18, 2013

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Authenticity Statement and Intellectual Property Statement: This business plan is the original work of the undersigned. All facts and figures are authentic. All contributions from others have been appropriately acknowledged. We have not read, reviewed or used any past Core plans in any way in the development of our plan. We did not misrepresent ourselves to suppliers or to anyone else who contributed information to this plan. We each understand that the ideas, analysis and text contained in our plan are the collective intellectual property of our team. ________________ ________________ ________________ Jacqueline Akinade Charlotte Altirs Nick Boccuzzi ________________ ________________ ________________ Joyce Chong Bryan Hansen Aysu Otova ________________ ________________ ________________ Scott Roth Edmond Santoso Stephanie Stoisits

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Exhibit Page Exhibit 1: Target Segment 4 Exhibit 2: Income vs. Purchase Intent 5 Exhibit 3: Concerned Tipping 6 Exhibit 4: Stroller Design Evolution 8 Exhibit 5: Perceptual Map #1 9 Exhibit 6: Perceptual Map #2 10 Exhibit 7: Coloring Book Ad 11 Exhibit 8: Stable Baby Logo, Slogan, and Message 13 Exhibit 9: Sample Advertisement 13 Exhibit 10: Packaging 14 Exhibit 11: Profile of the Retail Environment 15 Exhibit 12: Base Case ACV 16 Exhibit 13: Revenue Maximizing Margins 17 Exhibit 14: Yearly Prices and Margins 18 Exhibit 15: Hospital Locations 20 Exhibit 16: Year 1 Sales Breakdown 20 Exhibit 17: Year 5 Sales Breakdown 21 Exhibit 18: Comparison of Sales Forces Salary Scenarios 22 Exhibit 19: Purchase Intent vs. Price 24 Exhibit 20: Bases Model Year 5 Sales 25 Exhibit 21: Sales Projection Line Graph 25 Exhibit 22: ACV Optimistic 27 Exhibit 23: Pessimistic BASES Model 27 Exhibit 24: ACV Pessimistic 28 Exhibit 25: Website Landing Page 32 Exhibit 26: Website HTML Meta Tags 35 Exhibit 27: Website HTML Meta Tags For Crawlers 35 Exhibit 28: Stable Baby Facebook 36 Exhibit 29: Google Analytics Acquisition Report 38 Exhibit 30: IS/IT Annual Costs 39 Exhibit 31: Decision Matrix for ERP 41 Exhibit 32: House of Quality 43 Exhibit 33: Direct Materials (Cost & Quantity Per Stroller) 46 Exhibit 34: Make/Buy For Frame 47 Exhibit 35: Logistics Total Shipping Costs 48 Exhibit 36: Order Quantities 48 Exhibit 37: Factory Layout 51 Exhibit 38: Process Map 52

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Exhibit 39: Organizational Chart 54 Exhibit 40: Production Capacity 55 Exhibit 41: Annual Cash Flows- Scenario Comparison 58 Exhibit 42: Year 0 Startup Costs 60 Exhibit 43: COGS vs. Gross Margin 62 Exhibit 44: Financial Ratios 63 Exhibit 45: Breakeven Analysis 63 Exhibit 46: Comparables Ratio Assumptions 64 Exhibit 47: List of Potential Risks 65

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Appendix Page Appendix 1: Purchase Intent 6 Appendix 2: List of Interviewees 7 Appendix 3: Interview Questions 7 Appendix 4: Focus Group Results 7 Appendix 5: House of Quality 8 Appendix 6: Promotion Schedules and Pictures 10 Appendix 7: Billboard Locations 12 Appendix 8: Print Advertisements 14 Appendix 9: Profile of the Retail Environment 15 Appendix 10: ACV Calculations 16 Appendix 11: Yearly Sales Prices 21 Appendix 12: Purchase Intent Calculations 23 Appendix 13: Base Case BASES Model 24 Appendix 14: Optimistic BASES Model 26 Appendix 15: Pessimistic BASES Model 27 Appendix 16: Qualtrics Survey Example 33 Appendix 17: KPI Activity Diagram 37 Appendix 18: Years 0 - 5 Base Case IS Annual Costs 40 Appendix 19: TCO Calculations 41 Appendix 20: Stroller Blueprint 44 Appendix 21: List of Suppliers 45 Appendix 22: Logistics Shipping Costs 47 Appendix 23: Raw Materials Schedule 49 Appendix 24: Years 3 5 Process Diagrams 53 Appendix 25: Aggregate Plan 56 Appendix 26: Annual Cash Flows 61 Appendix 27: Income Statement 62 Appendix 28: Optimistic and Pessimistic Scenario Analyses 69

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Section I: Executive Summary:

The predominant hazard pattern in the stroller study was falls, with an estimated

3,206 injuries, or 51% of the total estimate. The next most prevalent pattern was tip-overs, with 1,628 injuries, or 26%of the total.1 Consumer Product Safety Commission We have developed Stable Baby, a new type of stroller that is designed to eliminate the

issue of strollers tipping over. Although umbrella strollers are lightweight and easily portable,

they do tend to tip backwards if you have bags hanging on the handles of the stroller. Our

product combines umbrella and full-size strollers to create a hybrid stroller that is lightweight,

easy to maneuver and safe. Stable Babys key differentiating factor is a kickstand that will

prevent your stroller from tipping backwards, while still having the features of a lightweight

stroller.

In order to launch Stable Baby, we are specifically requesting $1,014,152 from investors,

which is equal to a contribution of 75% of the required initial investment for 77% ownership in

our company. In addition, we request a $338,050 investment from management, friends and

family, equivalent to 25% contribution for 23% ownership. As a result of our high profit

margins, we forecast a positive net income in year 1 which is expected to grow throughout the

next 5 years with a slight dip in year 3 due to expansion costs. Our gross margin, as a percentage

of sales, peaks in year 2 at 51.9% and our average net income percentage is 14.8%. We expect a

negative cash flow of $809,291 in year 1 and a positive cash flow of $7,922,211 by year 5. With

a projected 70,034 units in year 1, we should have a high 75% average margin of safety for all 5

years.

For all 5 years, Stable Baby will invest in over $250,000 worth of IT infrastructure,

including purchasing our own server, ERP system, and security systems for the manufacturing

plant. Of this total IS expense, $135,600 will be allocated to our part-time IT consultants salary,

who will aid us to integrate Microsofts Dynamics CRM system into our core business structure.

We also will implement ADT security systems around the perimeter of the warehouse to prevent

potential theft and vandalism, which may be harmful to our business. The result we hope to gain

from these investments is having an efficient process between our suppliers, retailers, and

1 "Durable Infant or Toddler Products." CPSC. Consumer Product Safety Commission, n.d. Web. 17 Apr. 2013.

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customers. In addition, with this increase in information supply, we hope to manage our

inventory more efficiently, with the added benefit of easing our operational activities.

We have narrowed down our segment to parents/guardians of children ages 0-5 years old,

as well as expectants, who are concerned with strollers tipping over. We expect that these

parents/guardians will have an annual household income over $50,000, so we will target the

upper middle and upper classes.

In year one, we have decided that small chain stores, independent retailers, and online

retailers (Amazon) are our ideal points of entrance because there are almost no barriers to entry.

Stable Baby has a suggested retail selling price of $113.00, our revenue maximizing price based

on the surveys we collected. In year two, we will continue to target the same distribution

channels as in year one; however, we will also be targeting stores which our manufacturers

representatives were unable to reach in year one. Because our channels of distribution remain

relatively similar in years one and two, our retail selling price will also remain at $113.00. In

year three, we will enter JCPenney as our department store and Buy Buy Baby as our targeted

baby superstore. As we enter JCPenney and Buy Buy Baby, our retail selling price dips to an

average weighted retail price of $95.10. Due to our impressive sales history from years one

through three, we will be rewarded by our entrance into Target in year four. Here, we expect an

average weighted retail price of $93.10. By our fifth year, we will not enter any new channels of

distribution, causing our average weighted retail price to remain the same. Overall, Stable Babys

ACV grows constantly throughout all five years.

We will outsource most of our raw materials from overseas suppliers, in addition to

contracting domestic suppliers. However, we will be assembling the Stable Baby stroller in

house. We researched the option of buying the stroller frame instead of assembling it in-house

since it is our most expensive subassembly, but we realized it would be financially wiser to not

purchase a pre-assembled frame. Assembling in-house would save us approximately 50% in

costs, at a price of $23.24 per frame.

We believe Stable Baby is a worthy investment because we provide families with a safe,

reliable, and affordable stroller that introduces key differentiating features into the market.

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Section II: Corporate Social Responsibility Initiatives: Option A) We will use biodegradable materials to manufacture our product.

At first, we considered using biodegradable materials to manufacture our product;

however, after further examining this idea, we realized it would not be in our best interest. Using

biodegradable materials could pose a possible safety concern for our product. Parents may not

trust a stroller that is made of biodegradable materials because they may feel as if Stable Baby is

not as sturdy or durable as other strollers. In order to test our hypothesis, we asked our survey

respondents which material they would prefer to be used in a Stable Baby stroller. The four

options were aluminum, plastic, steel, and bamboo, with bamboo being the biodegradable option.

Only 11.69% of respondents who would definitely buy or probably buy a Stable Baby said they

would prefer a bamboo stroller. However, 54.55% of survey respondents who would definitely

buy or probably buy a Stable Baby preferred an aluminum stroller.2 For this reason, we knew

this would not be a feasible CSR initiative.

Option B) We will donate 1% of our profits to St. Jude Childrens Research Hospital.

St. Jude Childrens Research hospital provides research and care for life-threatening pediatric

diseases. As a service that provides benefits to parents and children, we value any monetary

donation that can help save a childs life.

We felt that St. Jude would be a well-suited CSR initiative because both of our

responsibilities are targeted towards the safety of children. The majority of individuals who

purchase strollers are parents/guardians who would never wish to see their children hospitalized

with a life-threatening illness. By donating 1% of our sales to St. Jude, we are not only helping

children and families undergoing unfortunate circumstances, but we are also giving our

customers the opportunity to feel good about purchasing a Stable Baby.

Based on our survey results, 50.65% of individuals who said they would probably buy or

definitely buy our product also indicated that their purchase intent would significantly increase if

we donated a percentage of our profits to St. Jude Childrens Research Hospital. Also, 37.66%

said their purchase intent would somewhat increase.3 For all of these reasons combined, we have

decided that St. Jude Childrens Hospital would be our CSR Initiative.

2 Online Survey Software, Customer Satisfaction Surveys, Enterprise Feedback Management, Employee Surv. Web. 20 Mar. 2013. . 3 Ibid., Qualtrics

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Introduction:

The current stroller market is highly populated with umbrella strollers, which are

lightweight and easily portable, as well as full sized strollers, which are larger, safer, and

generally more durable. However, both of these strollers do not address the concern of strollers

tipping over. Stable Baby is a new type of stroller that is specifically designed with a kickstand,

to eliminate the risk of a stroller tipping over. While this is Stable Babys key differentiating

feature, we also pride ourselves in the ability to combine key attributes of umbrella and full sized

strollers in order to design a product that is regarded as highly safe, portable, and easy to use.

We conclude that consumers who value a Stable Baby stroller should be expecting

parents, as well as parents/guardians of children ages 0-5, who are highly concerned about the

safety of their child in a stroller that may tip over. Through our surveys we also realized that the

majority of individuals who specified they would definitely buy or probably buy our product had

an annual household income of $50,000 and above; therefore, we adjusted our target market to

specifically target parents/guardians whose annual household income exceeded this amount.

In terms of social trends, it is important to note current family demographics and the

changing patterns relating to this. Approximately 75% of new mothers are 20-34 years old.4 For

this reason, we have adjusted our advertising tone and tactics to directly target mothers in this

age group. Specifically, we have used lighthearted and youthful colors that we felt would appeal

to mothers within this age group.

Another social trend we noted was the increase in single mothers. In 2008 a record four-

in-ten births were to unmarried women.5 For this reason, we made sure to design Stable Baby to

be a compact stroller so that single mothers could easily use our product.

With safety being our main concern, we made sure to abide by certain government

regulations, such as the Consumer Product Safety Commission (CPSC) and Juvenile Products

Manufacturers Association (JPMA). The CPSC states that there were numerous non-fatal

incidents associated with strollers involving a variety of hazards such as instability, collapse, and

4 Livingston, Grethchen, and D'Vera Cohn. "The New Demography of American Motherhood." Pew Social Demographic Trends RSS. Pew Research Center, 6 May 2010. Web. 20 Mar. 2013. . 5 Livingston, Pew Social Trends.

2

non-functioning restraint systems.6 In order to avoid these hazards, we made sure that our raw

materials fully satisfy the CPSC regulations. The JPMA works alongside retailers to ensure the

safety of child products.7 We have made sure that Stable Baby also satisfies their requirements,

since safety is a make-or-break factor in the baby durables category.

Stable Babys key product attributes are adjustable handles and a kickstand while being

lightweight. Separately these characteristics are found in different strollers, but our product is the

only one that provides the whole package. The table found below provides an in-depth

comparison of Stable Baby to our competitors:

Competitors Price Strengths Weaknesses

Babies R Us Umbrella Stroller

$19.99 lightweight, easy to maneuver, portable

not that durable, easily tips over

Peg Perego Vela Easy Drive Stroller

$229.99 adjustable handles, a lot of storage

not that light, tips somewhat easily

Graco Literider Stroller

$79.99 durable not that light, tips somewhat easily

Go Go Babyz Urban Advantage Stroller

$145.00 very durable, doesnt tip

very heavy, not portable

Stable Baby $113.00 lightweight, easy to maneuver, adjustable

handles, portable, doesnt tip

not that much storage

Overall, we are confident that Stable Baby will be an icon of a successful stroller that will

provide consumers with utmost quality, comfort, and reliability.

6 "Durable Infant or Toddler Products." CPSC. Consumer Product Safety Commission, n.d. Web. 17 Apr. 2013. 7 JPMA Juvenile Products Manufacturers Association | Dedicated to promoting the industry and the safe use of juvenile products. jpma.org. JPMA 2010. N.d. Web. 17 Mar.2013. < http://jpma.org/>

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Section III: Marketing

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Objectives and Segmentation:

Stable Baby is a new type of stroller designed to eliminate the issue of strollers tipping

over. With the introduction of this new product, Stable Baby has focused its efforts on four

distinct marketing objectives. Our first objective focuses on improving product awareness. We

are creating a strong brand identity for our stroller by ensuring that more parents/guardians are

aware that there is a solution to the issue of strollers tipping. When a parent/guardian becomes

concerned with a stroller tipping, we hope that Stable Baby is the first product that comes to

mind. We are developing a brand identity that creates a competitive edge in the stroller industry.

Another objective of our company will be to increase our products ACV. In order to achieve

this goal, we plan on placing Stable Baby on the shelves of major stroller retailers nationwide,

such as Toys R Us and Babies R Us, by year six. Finally, we are striving to achieve positive

growth every year. Overall, we hope that by reaching these objectives, we will be able to

increase frequency that a loyal customer purchases a Stable Baby product, therefore increasing

our customer retention rate.

Exhibit 1: Target Segment

Households with Children Ages 0-5

(including born during the year)

26,919,793

Working Class (

5

Stable Baby is targeting expecting parents, as well as parents and guardians with children

ages 0-5, who are concerned about strollers tipping. The parents/guardians are expected to have

an annual income of over $50,000, which means we will be targeting the upper middle class and

the upper class, as shown in Exhibit 1. Our product is priced higher than a typical umbrella

stroller, which is why we made the strategic decision to remove the lower and lower middle

classes from our target market. We combined the upper middle and upper class into one segment

because we found similarities in the stroller shopping habits of these two groups through our

surveys. According to our survey results, 40.76% of individuals who said they would definitely

buy or probably buy a Stable Baby stroller also responded that they received an annual income of

over $50,000. Based on the research we have conducted, Exhibit 2 shows that these individuals

would be the most likely to purchase our product.

Exhibit 2: Income vs. Purchase Intent

To calculate the size of our target market, we began by looking at the US Census Bureau

for households with children ages 0-5.8 This total number proved to be 25,298,180 households.

We then took the birth rate into consideration based on the trends in the fertility rate, and added

8 Number and Percentage of Family Households with Own Children under 18, by Age and Number of Children, Race/ethnicity, and Family Structure: 2008. US Census Bureau, n.d. Web. 18 Apr. 2013.

3% 6%

41%

2% 1%

24%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

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1,621,613 to accommodate for the number of births per year. This number was calculated from

the data provided by the US Census Bureau. There are 64.1 births per 1000 women per year. For

this reason, we used 6.41% to calculate births per year.9 In order to account for the trend of

overall decreasing birthrates in the past 20 years, we added an estimated contrasting decrease

rate of 0.5%. Because the birth rate varies greatly per year, we were able to conclude that a

decreasing rate of 0.5% would be our best average per year.10 We decided to include this

information in our target market size because babies are being born at a decreasing rate, leading

to fewer stroller purchases. This led to the total number of households with children ages 0-5,

including those born during the year, to equal 26,919,793. We then made adjustments to the size

of our target market based on our segments specific psychographic of parents/guardians who are

concerned with strollers tipping. After conducting our survey, we were able to calculate that

71.79% of the respondents shared that concern, which can be found in Exhibit 3. More

information detailing the calculation for purchase intent, price and target market size can be

found in the appendix11. In order to reach our final target size, we took 71.79% of the households

with children ages 0-5 whose annual income was greater than $50,000 (13,594,495), which

resulted in an overall target market size of 9,760,151.

Exhibit 3: Concerned Tipping

9 Centers for Disease Control and Prevention. Births and Natality. Centers for Disease Control and Prevention. Office of Information Services, 18 Jan. 2013. Web. 15 Apr. 2013. . 10 Information Please Database. "Births and Birth Rates." Infoplease. Infoplease, 2007. n.d. Web. 15 Apr. 2013. . 11 Appendix 1: Purchase Intent

0%

10%

20%

30%

40%

50%

VeryConcerned

Concerned Indifferent HardlyConcerned

Not at allConcerned

% Concerned about Tipping

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Market Research:

The main components of our marketing research included online research, one-on-one

interviews, hosting a focus group, and distributing online and paper surveys. These research

tactics helped improve our knowledge of what parents/guardians value regarding strollers and the

safety of their children. Through online research, we were able to grasp a solid understanding of

numerical and financial data that pertains to the stroller industry. We were able to learn and

distinguish many methods available for distributing our product, as well as our potential retail

environments. For example, online research allowed us to conclude that we benefit most from

selling Stable Baby online, in small chains, and in independent retailers in years 1 and 2,

including department stores and baby superstores in year 3, and entering mass merchandisers in

years 4 and 5.

Our one-on-one interviews (see appendix for a detailed list of interviewees12 and

questions13) served as a preliminary introduction to what parents/guardians valued in a stroller.

We gathered that individuals valued safety, portability, and compactness in a stroller. We were

able to use this information to build on our product, to recognize and understand the needs of our

proposed target market.

Our focus group consisted of six parents who have had experience with strollers and were

willing to share their expertise on the matter. We found that all six parents have had the

unfortunate experience of their stroller tipping over. Along with suggestions of how to design

Stable Baby to best benefit our target market, our focus group gave us insight on other important

attributes of a typical stroller. Exhibit 4 shows how the design of our stroller had changed after

our focus group. After the focus group we realized that aside from preventing strollers tipping, in

order to design a successful stroller, it must also be lightweight. During the focus group we

discussed using weights to increase stroller stability; however, after the focus group we knew

that a stroller that prevented tipping would be unattractive if it was not lightweight. More

information regarding our focus group can be found in Appendix 414.

12 Appendix 2: List of Interviewees 13 Appendix 3: Interview Questions 14 Appendix 4: Focus Group Results

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Exhibit 4: Stroller Design Evolution

Finally, we used online and paper surveys to gain a clear understanding of what our

potential target market valued most in a stroller. Through these surveys, we learned that the

majority of our respondents had annual household incomes of over $50,000.15 We were pleased

to see that safety was the number one concern in strollers, making us confident that Stable

Babys value of preventing strollers from tipping over would be deemed as our primary attribute.

We were also reassured that lightweight, compactness, and portability were also the most

important attributes in a stroller.16 Based on these results, we combined all of these attributes to

design a desirable product. We also used these survey results to rank the customer attributes and

create an appropriately related House of Quality, which can be seen in detail in Appendix 517.

Perceptual Maps:

In order to find which characteristics differentiate our stroller from others on the market,

we created two perceptual maps. It is difficult to quantify characteristics such as tipping and non-

tipping strollers; however, perceptual maps provided the best insight for comparing Stable Baby

to other existing products. Both perceptual maps compare strollers based on their likelihood of

tipping and not tipping. The first map also compares strollers against being lightweight and not

lightweight. As seen in Exhibit 5: Perceptual Map #1, being lightweight and not tipping is

15 Online Survey Software, Customer Satisfaction Surveys, Enterprise Feedback Management, Employee Surv. Web. 20 Mar. 2013. . 16 Ibid. 17 Appendix 5: House of Quality

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something that no product in the existing stroller market can offer. Strollers such as Babies R Us

umbrella stroller, Vela Driver stroller, and Graco Literider stroller are all lightweight strollers,

but they also have the possibility of tipping. This is because strollers that are lightweight

typically have the inclination to tip when something is placed on the handles. Stable Baby is

specifically designed to prevent this issue. Our stroller is unique because it is both lightweight

and does not tip over due to the kickstand on the back of the stroller.

Exhibit 5: Perceptual Map #1

Our second perceptual map compares strollers that tip and do not tip against strollers with

adjustable and nonadjustable handles. Adjustable handles tend to be an attribute on more

luxurious strollers; however, we pride ourselves on being less expensive while also providing

key attributes to our customers. Peg Perego Vela Easy Driver Stroller retails for $229.99.18 Its

price is much higher than Stable Baby, which retails for $113.00. This gives Stable Baby a

competitive advantage in establishing ourselves in the stroller industry. The only stroller seen in

18Peg Perego Vela Easy Drive Stroller. Toysrus. N.p., n.d. . Web. 16 Apr. 2013.

Lightweight

Babies R Us Umbrella Stroller $19.99; 7.6 lb

Peg Perego Vela Easy Drive Stroller

$229,99; 15.8 lb Stable Baby

$113; 13.36 lb

Tipping

Go Go Babyz Urban Advantage Stroller

$145; 35 lb

Non-Tipping

Non-Lightweight

Graco Literider Stroller

$79.99; 17.07 lb

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Exhibit 6 that has adjustable handles is the Peg Perego Vela Easy Driver Stroller. While the Peg

Perego has this key differentiating feature, it does not have a mechanism that prevents it from

tipping backwards.

Exhibit 6: Perceptual Map #2

Promotion and Marketing Budget:

Stable Baby has invested in push and pull marketing tactics to increase the overall

awareness of our stroller. See Appendix 619 for a detailed breakdown of our promotion

schedules by month, including costs and awareness percentages.

Our push tactics for all five years will include trade shows, trade magazine ads, and point

of purchase displays. Playtime New York is a professionals only three day trade show

featuring American and International child product manufacturing companies. We will be

featuring Stable Baby at this tradeshow in all five years. The All Baby & Child Kids Expo is a

four day juvenile trade show. Its primary focus is on buyers for independent, national, and

international retailers. In terms of trade magazine ads, we will be featuring our product in Baby

Shop magazine for all five years. Each year, we increase the number of months that we

advertise in Baby Shop. Finally, our point of purchase display will include a life-size cardboard

shopping bag that will read, Place ALL your bags on the handles to test out the balance of this

stroller.

19 Appendix 6: Promotion Schedules and Pictures

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Our pull tactics for all five years will include online advertising, expos, coloring book

distribution, and magazine awareness in Parents the First Year. Our trade show and expo set

ups can also be found in Appendix 6. In years 1 through 5, we use outdoor billboards as our

pull marketing tactics. In years 3, 4, and 5 we add airport advertising to our pull tactics as well.

In years 4 and 5, we will also be handing out Stable Baby bibs, diaper bags and coffee

thermoses at trade shows, as well as at Chuck E Cheeses. In year 5 we will also have celebrity

endorsements. We will be giving away fifty Stable Baby strollers to celebrities and public

figures, in hopes that they will publicly use our product.

Measuring the effectiveness of our communications:

Stable Baby will measure the effectiveness of our communications strategies by using

key performance indicators which will be further analyzed in IS page 37. We plan on measuring

the impact of our advertising campaign by monitoring the number of people who enter the

promotion code that can be found in Stable Baby coloring books as seen in Exhibit 7. The

promotion codes found in the coloring books will give participants a chance to be randomly

selected to win a Stable Baby stroller free of charge. These codes will be entered on our website,

making it simple for us to track how many individuals have visited our site solely due to our

color books. We will be giving away these coloring books at our expo; therefore, we will also

use the coloring book promotion code method to keep track of the effectiveness of our presence

at expos. Exhibit 7: Coloring Book Ad

We will be giving away these coloring books at

childrens hospitals; therefore, we will also use the coloring

book promotion code method to keep track of the

effectiveness of our presence at children oriented locations. Unfortunately, we do not have a direct method to

measure the effectiveness of non-electronic ads; however,

we were able to decide upon a few tactics, that when used

together, can provide us an estimate of the effectiveness of

our non-electronic integrated marketing communications (IMC).

12

We will be placing our billboards in strategic regions of the country, specifically major

cities. Appendix 720 shows all of the locations where our billboards will be present. In order to

measure the effectiveness of our billboards, we will be tracking the number of stroller purchases

in the regions that the billboards are located. We will also track the shipping address provided by

customers who order online, and compare it to the geographical location of our billboards versus

cities without billboards. Beginning in year 3, we will be advertising in airports through airport banners. Our most

efficient way to measure the success of airport advertising will be to monitor how many users are

logging onto our website from within or near the airport. Although this is not optimal due to the

fact that there is not free internet access at Hartsfield-Jackson Atlanta International Airport, we

expect that many users will be using 3G, 4G or LTE networks via smartphone in order to log on

to the internet. Therefore, to measure the effectiveness of our airport advertising, we will be

tracking the number of IP addresses that come from or near the airport we advertise in. Our

reasoning behind choosing this specific airport is because it is the worlds busiest airport,

according to their website.21 Based on our budget, we estimated that we could advertise there for

six months; therefore, we chose the months with the most passengers (refer to Appendix 622). Our overall method to measure the effectiveness of our advertising tactics will be to ask a

question on the home page of stablebaby.org asking where the visitor heard about Stable Baby.

While we recognize that this will not be the final result of effectiveness, we believe this will give

us a well-rounded estimate. We will be tracking our online advertisements through Adwords and Adsense. For

Adwords, we will be able to see the results on a day-to-day basis via our Adwords reports

provided by Google.23 We will also be able to see whether our visibility under natural search

results is improving. We hope that receiving high traffic through Adwords will increase our

ranking in Google search, and ultimately we will be displayed on the first page under relevant

searches.

20 Appendix 7: Billboard Locations 21 Miller, Louis E. "Welcome from the Aviation General Manager." Hartsfield-Jackson Atlanta International Airport. Hartsfield-Jackson Atlanta International Airport, n.d. Web. 17 Apr. 2013. 22 Appendix 6: Promotion Schedules 23 Google, "Google AdWords-Online advertising by Google." Accessed April 10, 2013. .

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In terms of banner ads, we will be measuring the click-through rate and page impressions.

We will also be tracking which websites people are visiting prior to arriving at stablebaby.org.

This way we will be able to track which keywords that were entered on the search engine

brought them to our website.

Advertising Campaign:

Exhibit 8: Stable Baby Logo, Slogan, and Message

Our Logo:

Our Slogan: Ride Safe, Ride Stable, Ride Stable Baby.

Our Message: The stroller that does not tip over.

Exhibit 9: Sample Advertisement

For our advertising campaign, we have decided to use a slightly different tactic than

current stroller companies. Most stroller companies design their advertisements to appeal to

young children; however, it is not the child buying the stroller, it is the parent. We will be

14

using peach and white as our theme colors as seen in Exhibits 8 and 9. We have decided to use

a soft and youthful color, and have combined these traits with a simplicity that provides a more

mature feel. For more examples of advertisements, see Appendix 824. The messages of our

advertisements are aimed to target parents who value the safety of their child. We want

parents/guardians to trust our stroller enough to place their children in it. We also realize the

importance of parents being able to put bags on the back of the stroller, and have designed ads

to show how Stable Baby solves the problem of strollers tipping as a consequence of such

actions.

Even though some retailers dont require strollers to be sold packaged, we have decided

to include packaging for each Stable Baby

stroller. This is because most mass

merchandisers, such as Target, require

packaging and we want to minimize the risk of

not being accepted. In addition, we want all

consumers and retailers to view our product

with one of utmost quality and reputation.

Similar to most strollers with packaging, Stable

Baby will be packaged in a rectangular

cardboard box that is 4 x 1 x 1. However, in

order to slightly distinguish our product, we

will be using a peach box with the Stable Baby

logo printed down the side in white lettering

(Exhibit 10).

Channels and Pricing:

24 Appendix 8: Print Advertisements

Exhibit 10: Packaging

15

Exhibit 11: Profile of the Retail Environment

After conducting thorough research of the baby durable industry, we discovered that this

category is broken down into seven

different retail categories: mass

merchandisers (31%), baby superstores

(26%), department stores (12%),

independent retailers (9%), small

chains (3%), online (12%), and other

(7%) as seen in Exhibit 11. Refer to

Appendix 925 for a thorough

breakdown of our retail environments

profile. The dominating channels are

baby superstores and mass

merchandisers, which we will begin targeting in years 3 and 4. We cannot target these channels

prior to years 3 and 4 because we will need to build a strong reputation and an impressive sales

history first in order to prove our products importance. The department stores represent the

middle section in terms of percentage of sales, but they are also challenging to get into, which is

why we are targeting them in year 3. We have decided that small chain stores, independent

retailers, and online retailers are the perfect point of entrance for us in year 1, because there are

almost no barriers to entry. These stores are willing to take on new baby products and put these

products on their shelves. The other category represents child specialty stores (i.e. Pottery Barn

Kids), discount stores (i.e. T.J. Maxx and Marshalls) and second hand retailers (i.e. Once Upon a

Child). We decided not to pursue channels from the other category because we would not be

selling new strollers through second hand retailers. Nearly all child specialty stores do not sell

strollers and we want to uphold our products reputation by not being sold in discount stores.

25 Appendix 9: Profile of the Retail Environment

16

Exhibit 12: Base Case ACV

Base Case ACV Year 1 Year 2 Year 3 Year 4 Year 5

Mass Merchandisers - - - 4.00% 5.60%

Baby Superstore - - 3.50% 4.90% 4.90%

Department Stores - - 1.54% 2.15% 2.15%

Independent Retailers 2.25% 3.95% 3.15% 2.32% 2.32%

Online 12.00% 12.00% 12.00% 12.00% 12.00%

Small Chain Stores 1.32% 1.32% 1.32% 1.32% 1.32%

Total ACV: 15.57% 17.27% 21.51% 26.69% 28.29%

Beginning in year 1, we expect to target independent retailers and small chains (less than

ten stores), as well as online selling. Because Stable Baby is a small startup company, it is vital

that we spend our first two years gathering retail selling history in order to expand our channels

of distribution even further in years to come. Refer to Appendix 1026 for a thorough breakdown

of our optimistic and pessimistic ACV calculations.

In our second year, we will continue to target the same independent retailers, small

chains, and also proceed with online selling. Although we continue with the same channels of

distribution, we are able to increase our ACV in year 2. As depicted in Exhibit 12, we will be

increasing our ACV and will be targeting the stores our manufacturing representatives were not

able to reach in year 1. In year 2, online and small chains will account for the same ACV as year

1.

In year 3 we will be continuing to sell through independent retailers; however, due to

channel conflict our ACV for independent stores will decrease. Online and small chain ACV will

remain the same. We also plan on entering Buy Buy Baby and JCPenney in year 3. Entering

JCPenney and Buy Buy Baby will contribute an additional 5.04% to our overall ACV (Exhibit

12). In light of our impressive sales history for years 1 through 3, we will be entering mass

merchandisers in year 4. We hope that our market penetration rate for baby superstores will

increase from 50% to 70% of Buy Buy Baby stores. Our penetration in JCPenney is also

expected to increase from 50% to 70%, thus increasing ACV for department stores (Exhibit 12).

26 Appendix 10: ACV Calculations

17

Unfortunately, our ACV for independent retailers will decrease once more. This is due to the fact

that we will be entering more chains; therefore, our presence in independent stores will be

minimized.

Finally, in year 5 only our ACV for mass merchandisers will increase. This is due to the

increase in our penetration rate. We are hoping to be in 70% of Targets stores nationwide, this

will increase our ACV from Target. Aside from this increase, ACV for independent retailers,

baby superstores, small chains, and department stores will maintain the same.

Stable Babys ACV constantly grows throughout all five years. Our ACV grows the most

from years two to four because those are the years we enter JCPenney, Buy Buy Baby and

Target. These three stores are Stable Babys main retail channels and are accordingly where we

expect most of our distribution to come from.

Retail Selling Price/Channel Margins:

Exhibit 13: Revenue Maximizing Price

For independent stores, small chain stores and on Amazon, Stable Baby has a suggested

retail price of $113 (Exhibit 13) because it is our revenue maximizing price based on the surveys

we collected. However, this would be Stable Babys retail price only in years 1 and 2. As we

enter JCPenney and Buy Buy Baby in year 3, Stable Babys price of $113 will no longer be

$249,283,125 $257,164,096

$196,577,550

$114,033,860

$64,969,546 0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

87.5 113 138 163 188

Reve

nue

($)

Price ($)

Revenue Maximizing Price

18

0%

20%

40%

60%

80%

100%

1 2 3 4 5

$66.67 $66.67 $52.74 $53.26 $53.26

$113 $113 $95.10 $93.10 $93.10

Mar

gins

(%)

Years

Stable Baby Yearly Prices & Margins

Average Weighted Retail PriceAverage Weighted Selling Price

feasible because we are in a highly competitive industry. The stroller industry is already highly

populated with existing competitors; therefore, we can expect Graco and similar stroller

manufacturers to enter in year 3. Graco, one of our main competitors, is a well-known stroller

manufacturer whose product features are similar to those of Stable Baby strollers. We have

chosen to refer to Graco as our competitor because they are a relatively lightweight stroller who

is well known and is in the similar price range. Due to these criteria, we felt that using Graco as a

comparison to ourselves in terms of competition is most relevant. This is also why we expect to

lower Stable Babys average weighted retail price to $95.10 in order to remain price competitive.

As shown in Exhibit 14, the retail price of Stable Baby decreases year to year alongside

manufacturers price. Specifically, in year 3 we would suggest Stable Baby to sell for $99 to

independent retailers and small chains, $96 to JCPenney and Amazon, and $90 to Buy Buy

Baby. As we begin selling to Target in years 4 and 5, Stable Babys average weighted retail

selling price will decrease to $93.10. Stable Babys price of $99 will remain the same for both

independent retailers and small chain stores. Stable Babys price will decline by $1 to $95 for all

units sold at JCPenney and Amazon. Stable Babys price of $90 will remain the same for Buy

Buy Baby and will also be our suggested retail price for Target in the following year. All of year

4s prices will be identical to the prices in year 5.

Exhibit 14: Yearly Prices & Margins

Each channel of

distribution has a different retail

margin. Independent retailers

and small chain stores have a

50% retail margin, which is why

they have the highest suggested

retail price throughout all 5

years. JCPenney and Buy Buy

Baby have a 45% retail margin,

while Target has a 40% retail

margin, and units sold on

Amazon have a 35% retail margin. Amazons retail margin includes the business to consumer

19

shipping cost. The retail margins for each distribution channel determine the price we expect to

charge our channel intermediaries. The average weighted selling price to the different channels

would decline from $66.67 to $53.26 over a span of five years. In years 1 and 2, we would

charge $73.45 to Amazon, and $56.50 to independent retailers and small chain stores. In year 3,

our selling price would be $62.40 to Amazon, $52.80 to JCPenney, and $49.50 to Buy Buy

Baby, independent retailers, and small chain stores. In years 4 and 5, we would still be charging

$49.50 to Buy Buy Baby, independent retailers and small chain stores. Our selling price in year 4

would decline to $52.25 for JCPenney and $61.75 for Amazon; and the selling price would be

$54 to Target.

Discounts and Promotions:

Our primary promotional tactic will be creating childrens coloring books and

distributing these to ten different childrens hospitals throughout the country. We will have a

total of 200 coloring books donated to each hospital, totaling 2,000 coloring books per year.

Exhibit 15 shows a list of all of the hospitals that we will be donating our color books to. We

chose these hospitals because they are some of the most prominent and well known childrens

hospitals in the nation. There will be twelve pages in each coloring book. Ten of these pages will

have pictures for the children to color. Within these coloring books there will be an

advertisement for Stable Baby that includes a promotional code, as well as a cover page that

includes Stable Babys logo and company name. This promotional code can be entered online

and will automatically enter individuals in a chance to win a free Stable Baby stroller. Ten of

these codes will be winning codes, and individuals will then have the opportunity to enter their

personal information and shipping address in order to receive their free Stable Baby stroller.

20

Exhibit 15: Hospital Locations

Hospitals Location Mattel Children's Hospital Los Angeles, CA Children's Hospital of Los Angeles Los Angeles, CA UCSF Children's Hospital San Francisco, CA Children's Hospital of Philadelphia Philadelphia, PA Cincinnati Children's Hospital Medical Center Cincinnati, OH Boston Children's Hospital Boston, MA Texas Children's Hospital Houston, TX Riley Hospital for Children Indianapolis, IN Children's National Medical Center Washington D.C. Yale-New Haven Children's Hospital New Haven, CT

Channel Conflict:

We expect to see channel conflict through independent retailers. As we begin distributing

through more channels, such as Buy Buy Baby, JCPenney, and Target, the number of

independent retailers who carry our product will decrease. As stated earlier, we expect to lose

40% of our independent retailers in year 3. We assume that department stores, baby superstores,

and mass merchandisers will have a competitive advantage because of their ability to offer lower

prices. We expect our sales/manufacturer representatives to build and maintain strong

relationships with independent stores, which would result in some, even if minimal, independent

stores to continue carrying Stable Baby.

Sales Volume: Exhibit 16: Year 1 Sales Breakdown

As you can see in Exhibit 16, in year

1, 60% of Stable Babys units will be

devoted to online sales; specifically we

expect most of them to be sold through

Amazon. The rest of Stable Babys units will

be split 20% into independent stores and

20% into small chain stores. Since Stable

Baby is a new company looking to build

awareness and a solid customer base, we

hope that devoting most of our sales online would generate a solid retail selling history.

21

In year 2, since we do not change our distribution channels, Amazon will once again

generate 60% of Stable Babys sales. Independent stores and small chain stores will generate the

remaining 40% evenly. For detailed numbers about yearly sales prices for years 2 through 4,

refer to Appendix 1127.

In year 3, Stable Baby will begin to create a majority of sales in Buy Buy Baby and

JCPenney which should help us target a wider audience than in the first two years. Because Buy

Buy Baby and JCPenney have a greater audience than small chains and independent stores we

intend for most of our sales to be generated through these two channels. Specifically, thirty

percent of our sales will come from Buy Buy Baby, and JCPenney will generate an additional

20% of our yearly sales.

As Stable Baby enters into Target stores in year 4, we would expect a greater distribution

of sales volumes by using all six of our distribution channels. Buy Buy Baby and Amazon will

remain a constant percentage, while Targets entrance should generate 20% of sales. JCPenney

will decrease to 15% of total sales, while independent stores and small chains continue to

generate the least amount of sales. The smaller stores generate the least amount of sales because

their retail selling price is the highest and fewer people visit these stores.

Looking at our growth alone we

would expect to be in larger Baby

Superstores, such as Babies R Us, in

year 5. However, due to an increase in

competition, we are conservative with

our estimates which are displayed in

Exhibit 17. For this reason, we account

for being present in the same stores as

year 4. Because we are not selling to

any new retailers, our sales volume

distribution will not change.

27 Appendix 11: Yearly Sales Prices

Exhibit 17: Year 5 Sales Breakdown

22

$0.00

$200,000.00

$400,000.00

$600,000.00

$800,000.00

$1,000,000.00

$1,200,000.00

0 1 2 3 4 5

Sala

ry ($

)

Year

Exhibit 18: Comparison of Sales Force Salary Scenarios

Mixed Rep Salary

Sales Rep Only Salary

Mfg. Rep Only Salary

Sales Force:

We are going to use manufacturers representatives in years 1 and 2 to sell the Stable

Baby. In year 3, we are going to hire our own sales force to sell to all our retailers, except for

online. Our company decided to use our own sales force as soon as possible, for several

qualitative reasons. We want representatives who are loyal to our company and who we can

personally hire in order to

ensure that they will

represent Stable Babys

values in the way that we

prefer. In addition, in any

scenario (base, optimistic,

or pessimistic), it is cheaper

to switch over to a complete

sales force beginning in

year 3. We analyzed the

cost differences between

using a mix of manufacturers and sales reps, only manufacturers reps, and only sales reps for

years 3, 4, and 5 (as that is when we enter more types of retailers). This analysis is displayed in

Exhibit 18. The reason we do not move to 100% sales reps before year 3 is because for the first 2

years, based on the fact that we are only in independent retailers and small chains, it is not yet

necessary to hire, train and utilize our own employees. Every year after year 2, it is more cost-

efficient to use our own sales reps.

Commission for Manufacturers Representatives:

We only use manufacturers reps in years 1 and 2. They receive 10% commission on the

sales they make, which comes from those in the independent retailers and small chains. As we

sell only in independent retailers, small chains, and the internet for these 2 years, the

manufacturers representatives are receiving 40% of sales, as the other 60% are from online

sales. In year 1, with this 10% commission, manufacturers reps are paid $158,277; in year 2,

they receive $237,865.

23

Commission for our own Sales Force:

Our sales reps salary begins at $50,000, and they will obtain a bonus of $5,000 each

year, on top of commission. We calculate commission as a percent of sales, excluding what is

sold online (as online units do not require the efforts of a sales rep). Specifically, the sales rep

receives 2% of sales, which is calculated by the average manufacturers selling price for that

year, multiplied by the percent of units that go to the retailers at which the representative is

selling. Because we are only using sales reps in years 3, 4, and 5, the percent of sales that go to

the sales reps retailers is everything except the online salesonline sales are 20% of sales in

years 3 through 5. As with all of our salaries, the sales reps also receive an additional 25% to

their base salary, which accounts for expenses such as benefits and retirement accounts. Overall,

this equates to a total sales rep salary of $170,511 (2.008% of sales) in year 3, $251,378 (2.194%

of sales) in year 4, and $294,958 (2.138% of sales) in year 5.

Sales Projections:

We used our BASES model to ultimately decide what our five year sales projections

would be. Our target market size was determined through the US Census for year 1 and we made

adjustments for the subsequent years. Stable Babys adjusted purchase intent was derived from

our target market survey results. We have adjusted our purchase intent for 80% of individuals

who said they would definitely buy our product, as well as 30% who said they would probably

buy our product, based on their preferred stroller price. Our total purchase intent increased by

4.84% between years 2 and 3, as shown in Exhibit 19, due to our lowered selling price. Included

in our overall purchase intent is the potential purchase increase based on our donations to St.

Jude Childrens Research Hospital, which is our CSR initiative. Refer to Appendix 1228 for

detailed purchase intent calculations.

28 Appendix 12: Purchase Intent Calculations

24

Awareness and ACV are positively correlated and increase throughout all five years. We

earn enough money in the earlier years to be able to spend a large amount of money on

advertising in magazine ads, on billboards, transit ads, etc. As we are accepted into Buy Buy

Baby, JC Penney and Target in our later years, it is safe to assume that consumers can more

easily find our products.

Units at trial and units at repeat will be one unit per consumer because it is generally

unexpected for consumers purchase more than one stroller at a time. Our repeat rate was

determined through survey results and was distributed accordingly in our BASES model (Refer

to the full base case BASES model in Appendix 1329). 14.29% would repurchase one year after,

18.18% two years after, 20.13% three years later and 5.84% 4 years after. So in year 5, the total

repeat households would be a total of year 1 repeat rate times year 4 trial units, year 2 repeat rate

times year 3 trial units, year 3 repeat rate times year 2 trial units and year 5 repeat rate times year

1 trial units.

29 Appendix 13: Base Case BASES Model

Exhibit 19: Purchase Intent vs. Price

25

Exhibit 20: BASES Model Year 5 Sales

As seen in Exhibit 20, our forecasted units, which are derived from our BASES model, escalate

at an increasing rate for all 5 years. This is why we assume that competitors, such as Graco, will

take 20% of our sales in year 3, 30% in year 4 and eventually 35% in year 5.

Optimistic/Pessimistic:

Exhibit 21: Sales Projection Line Graph

26

In our optimistic scenario sales projection, which is depicted in Exhibit 21, we expect a

high volume of sales compared to our base case scenario. Due to this high volume, we should

expect competitors to enter earlier and stronger than in the base case. These competitors should

enter in year 3 and take 35% of our yearly sales. They should subsequently take 45% in year 4

and an enormous 55% of our sales in year 5.

Stable Babys retail price will be $113 in year 1, as with our base case. However, as

competition increases, we expect the retail price of Stable Baby to increase in year 2 due to our

high volume in sales and success in year 1. This increase is also caused by our strong reputation

and word of mouth among consumers. Due to such favorable sales in the year before, we plan to

sell for a higher price in year 2 and expect that this increase in our retail selling price will not

change consumers willingness to pay. Since competition will most likely enter in year 3, Stable

Babys price should dip to an average weighted retail price of $107.50 and continue to decrease

accordingly in our fourth and fifth year. Stable Baby will not be able to sell as many units in our

later three years if we do not lower our retail price as an adjustment for competition.

As displayed in Appendix 1430, a breakdown of the optimistic BASES model, awareness

increases in our optimistic case. We estimate that it will take consumers 3 impressions to become

aware of Stable Baby, compared to 4 impressions in our base case. In Exhibit 22, our ACV

increases as well because we expect a higher penetration and acceptance rate from retailers, as

well as a lower percentage of channel conflict between independent retailers and chain stores that

carry Stable Baby. We expect an early acceptance in year 3 into Target and an upgrade into

Walmart stores by year 5. Consumers should also expect to find Stable Baby at Babies R Us

stores rather than at Buy Buy Baby. Walmart and Babies R US are both leaders in their

respective industry markets, which results in a much higher ACV of 33.89% in year 5 compared

to our base case. Because our awareness and ACV are much higher, we have made the

assumption that our repeat rate will increase 50% in comparison to our base case. More

awareness and a higher level of distribution should directly affect the chances of consumers

repurchasing a Stable Baby.

30 Appendix 14: Optimistic BASES Model

27

Exhibit 22: ACV Optimistic

Optimistic Case ACV Year 1 Year 2 Year 3 Year 4 Year 5

Mass Merchandisers - - 4.00% 5.60% 7.00%

Baby Superstore - - 6.00% 8.40% 8.40%

Department Stores - - 1.54% 2.15% 2.15%

Independent Retailers 2.25% 3.95% 3.68% 3.02% 3.02%

Online 12.00% 12.00% 12.00% 12.00% 12.00%

Small Chain Stores 1.32% 1.32% 1.32% 1.32% 1.32%

Total ACV: 15.57% 17.27% 28.53% 32.49% 33.89%

On the other hand, our pessimistic scenario has very different outcomes compared to base

and optimistic. Stable Baby sales are predicted to start off with slower sales in year 1, but

increase by nearly $7 million by year 5. Stable Babys pessimistic unit sales increase yearly, as

can be found in Exhibit 23. Further details regarding the pessimistic BASES model can be found

in Appendix 1531.

Exhibit 23: Pessimistic BASES Model

Sales only slightly increase in years 3 to 4 compared to years 1 through 3. For this

reason, we should expect competition to enter later than in our base case, and also take a smaller

percentage of our sales. Competition should eventually take 20% of our yearly sales in year 4

and 25% of sales in our 5th year.

Stable Babys retail price should once again start off at $113 in both years 1 and 2

because our sales volume is still fairly low and increasing the price would lower our consumers

incentive of purchasing. We expect to lower Stable Babys retail price in years 3, 4 and 5

because we begin to enter multiple channels of distribution and therefore our strollers will be

surrounded by increasing competition.

31 Appendix 15: Pessimistic BASES Model

Pessimistic BASES Model Year 1 Year 2 Year 3 Year 4 Year 5 Total Stable Baby Units 56,979 82,293 151,788 152,968 207,818

28

Exhibit 24: ACV Pessimistic

Pessimistic Case ACV Year 1 Year 2 Year 3 Year 4 Year 5 Mass Merchandisers - - - - 4.00% Baby Superstore - - 2.80% 3.50% 4.20% Department Stores - - 1.23% 1.54% 1.84% Independent Retailers 1.52% 2.79% 1.93% 1.26% 0.77% Online 12.00% 12.00% 12.00% 12.00% 12.00% Small Chain Stores 1.32% 1.32% 1.32% 1.32% 1.32% Total ACV: 14.84% 16.11% 19.28% 19.61% 24.14%

Stable Babys awareness and ACV would both be lower than our base case in our

pessimistic scenario. Awareness is lower because in this scenario, it takes a typical consumer 5

impressions to become aware of Stable Baby, rather than 4 impressions in our base case. In terms

of distribution, independent retailers are less accepting of our product, and consequently we are

admitted into fewer stores. We also expect to delay our entrance into Target until year 5 due to

our decreased penetration rate into independent retailers. Lastly, we account for a slower

penetration rate into both Buy Buy Baby and JC Penney stores as well. A lower penetration rate

and smaller acceptance rate will ultimately result in a lower ACV throughout all 5 years ending

with 24.14% ACV, as depicted in Exhibit 24, which is approximately four percent less than our

base case. A decreased ACV and awareness affects our consumers rate of repurchasing. We

assume consumers would not repurchase a stroller as often as our base case and assume that the

repeat rates decrease by 50%.

29

Section IV: Information Systems

30

Introduction:

In todays society, almost everything runs and revolves around the use of computers and

technology. Whether it stems from mundane tasks to the most intricate jobs, information

technology plays an essential role in our day-to-day activities, specifically in aiding our business

processes to be efficient and productive. We can use information technology to gain insightful

data, increase awareness through online marketing tactics, and tie a closer relationship with our

customers.

Strategy:

Stable Baby follows a Red Ocean strategy, as we use existing technology targeted

towards existing customers, positioned in saturated market spaces. There are many consumers

who, in fear of their childs safety, have opted to purchase baby strollers that are less likely to

tip. Avoiding this problem would require consumers to purchase heavier strollers, which, at

times, tend to become cumbersome for parents on-the-go. Storage, mobility, and portability are

all hindered by the bulky design, and as a result, Stable Baby is directed towards existing

demand as we try to beat the competition by offering a lightweight stroller that prevents tipping.

For the first two years, we will primarily follow a long-tail strategy, as the majority of our

sales are online. However, we also plan to start distributing through independent offline retailers

and small chain stores beginning from the introductory phase (refer to Appendix 11). In later

years, we shift towards a short-tail approach as we enter into department stores and mass-

merchandisers. Thus, we strive to have a simple user-interface for our website, enabling parents

who normally dont shop online to easily navigate through pages. This is specifically because

one part of our website informs potential customers where our product can be purchased offline.

Advantages of Information Systems/Technologies:

Taking advantage of IS can help aid our processes, specifically between our retailers,

suppliers, and ourselves. As the industry giant Walmart was able to [gain] command over its

suppliers and effectively [penetrate] their executive decision-making using the Retail Link

31

System (RLS)32, we too would like to maximize and utilize our information flow along the

supply chain. However, the RLS system is most beneficial to companies who sell a wide array of

products at high volume because fixed costs tend to run fairly high. Therefore, we have focused

our attention on Microsofts Dynamics CRM as our main Enterprise Resource Planning system.

With the Dynamics CRM system, clients can track, view, edit, create, and search for records.

Since it is a Microsoft product, CRM seamlessly integrates with Outlook, as opposed to

Salesforce, which requires each client to pay $60.00 per year to integrate with Outlook.33

Dynamics CRM also allows us to efficiently manage our inventory, track sales, and offers a

customer service platform. After comparing Salesforce and Dynamics CRM, the final decision

was based on price, because both systems offer all the services that we need.

When a product is purchased, whether through Amazon or retailers, the data is sent to our

manufacturing headquarters. This automated process will help ease reordering processes when a

certain number of purchases trigger a notification to suppliers to ship in more raw materials.

Information systems and technology will also be utilized to create tactical alliances with highly

visited sites, such as Amazon. By allowing us to place inbound links from their site, we expect to

generate more awareness and visitors to ours.

Website Design:

We design our website to link our innovative product with the familiarity of existing

strollers. Stable Baby operates in the same way as a normal stroller, with the added benefits of

not tipping and having adjustable handles. Because we want to show these distinctive

characteristics over our competitors, the first image our visitors will see on our website

(www.stablebaby.org) is a simple, yet attractive, baby stroller. Once their interest has been

seized, we can explicate the true benefits of our product.

Our websites landing page, as shown in Exhibit 25, displays our products non-tipping

feature through the use of informative images, text, and video. We strive to distinguish ourselves

from our competitors by designing a website that differs from the more popular child-themed

32 Matthews, Christopher. "Data-Driven Management." 10 Ways Walmart Changed the World. (2012): n. page. Web. 5 Apr. 2013. . 33 Quartano, Leah. "Microsoft Dynamics CRM vs. Salesforce.com Comparison Outlook Integration Part 2." CRM Software Blog. (2013): n. page. Web. 10 Apr. 2013. .

32

layout. We do this because we realize that the family member who ultimately browses for and

purchases the stroller would be the parent, and not the child. Upon designing the theme, we hold

the following traits in mind: innovative, trustworthy, and high quality. By using clear, glossy

texts, artistic backgrounds, and revolving images, we strive to keep these traits evident. The

image of our companys website is vital because it reflects upon the perception of our strollers

quality. Not only will our website affect our brands image, but also future sales.

Exhibit 25: Website Landing Page

As mentioned above and in Exhibit 1 (page 4), our primary target audience consists of

parents and guardians with children ages 0-5 years who are mainly concerned about their stroller

tipping. Price is a less sensitive factor, as we are targeting middle to upper class parents and

guardians with an expected annual income of over $50,000. Noted by our survey results from

Qualtrics34, most respondents answered safety as their primary concern. An example of such a

34 Online Survey Software, Customer Satisfaction Surveys, Enterprise Feedback Management, Employee Surv. Web. 20 Mar. 2013. .

33

survey can be found in Appendix 1635. These results led us to use our website to focus consumer

attention towards our products differentiating safety feature.

Another goal we keep in mind while designing our website is maintaining a user friendly

interface. This attribute is important because websites that are difficult to navigate may drive

potential customers away. Additionally, we want visitors to feel connected to us because they

will be placing their childs safety in our care. By utilizing Web 2.0, an interactive Internet-

based [service],36 we are not only able to display images and videos to our site, but also receive

important user feedback and reviews from customers. Should consumers feel the need to voice

their concerns, there is a contact form that directly links to our companys Gmail account. We

then receive the complaint immediately, and are able to address the concern. Our ultimate goal is

to get customers to purchase our strollers. The call-to-action purchase now button on our

webpage directs visitors to Amazon.com, where our online sales will be held. Finally, we want

to reinsure visitors that we are a trustworthy company, and that our strollers are manufactured

with great attention to detail.

We will measure the effectiveness of our website by observing user behavior in the

following ways: stickiness, conversion rate, and retention rate. Google Analytics37 is a tool

designed to measure such rates. After considering various methods of measuring website

effectiveness, we chose not to measure bounce rate because our call-to-action button is located

on the landing page. Instead, we decided to measure stickiness in order to examine users interest

levels in learning about our product. The longer the visitor stays on our website, the better. This

measurement may also correlate with our goal of maintaining a user friendly interface. The

stickiness rate also measures whether or not visitors will take the time to interact with our

website, which includes reading/writing reviews and learning about our product. The conversion

rate will generate enough information for us to measure the success of our websites purpose of

turning visitors into customers. Retention rate will measure the rate of returning customers,

which we account for in our base case model (Appendix 13).

35 Appendix 16: Qualtrics Survey Example 36 Olver, James M., Theresa K. Lant, Robert Plant, Karl D. Majeske, and Steven R. Kursh. Business Resources. Boston, MA: Pearson Learning Solutions, 2013. 298. Print. 37 "Google Analytics.". Google, 03 Apr 2013. Web. 14 Apr 2013. .

34

Search Engine Optimization (SEO)

On-Site Strategy:

To increase the flow of visitors to our website, we will use On-Site and Off-Site search

engine optimization tools. Improving the former requires the following traits: using relevant

keywords on our website, having clean and consistent HTML codes (Meta tags), using a sitemap

to ease navigation, the use of videos, images, and informative headers.

Having relevant Meta tags enables our website to be indexed by Google to appear in the

organic search results page. There are four primary tags that need to be considered: title tag,

Meta description tag, Meta keywords tag, and the Meta robots tag.38 The title tag comprises of

our company name, Stable Baby, as well as a few short descriptions of who we are. Having a

relevant title tag is important as this will be what [appears] in the clickable link on the search

engine results page (SERP)changing them may result in more click-throughs.39

We created a title tag, Stable Baby stroller that doesnt tip, and people who are

familiar with our company name can search for our site by entering Stable Baby. Additionally,

our webpage will appear when shoppers type in keywords such as stroller and non-tip. Not

only does this enable us to build our brand, associating Stable Baby with a non-tipping stroller,

but it also increases our SERP rankings. One benefit of our company name is that we have the

word Baby already included in the title, which means that typing in baby and stroller

together in the search page will automatically narrow the results down to our site.

Next, we focused on the Meta description tag. Although this will not directly affect our

ranking, it may contribute to our click-through rate. Having a precise, descriptive phrase of our

product under the title tag will inform people what our site is about, as it [draws] readers to a

website from the results page.40 Ultimately, the higher the click-through rate to our webpage,

the higher up we will appear on the rankings page.

To better help search engines index our page, we have coded our webpage to include

HTML Meta keyword tags that describes our product, as displayed in Exhibit 26.

38 "Meta tags: title, keywords, description." SiteGround. N.p., 2013. Web. Web. 14 Apr. 2013. . 39 Whalen, Jill. "All About Title Tags." High Rankings. N.p., 24 Jan 2012. Web. Web. 14 Apr. 2013. . 40 "Meta Description: Best Practices for Search Engine Optimization." 2013. N.p., Online Posting toSEOMOZ. Web. 14 Apr. 2013. .

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Exhibit 26: Website HTML Meta tags

Since most popular search engines nowadays use Web crawlers41 to index sites into

large databases, making sure these crawlers do not ignore our webpage is another important

aspect we have considered. To eliminate this possibility, we wrote additional Meta tags to make

sure all robots crawl our website. This will further increase the number of searchable

keywords and improve our SERP rankings because it will index additional pages from our site.

The following format can be used:

Exhibit 27: Website HTML Meta tags for crawlers

In addition to writing the HTML codes with a consistent manner (to optimize our SEO), the code

in Exhibit 27 will make sure that they index all of our pages. Although some may say its

superfluous to add in these codes, as mostsearch engine crawlers will index your pageeven

if you do not have a robot tag,42 we take precautionary steps to ensure it. Non-customers will

only be able to read the content rather than write reviews, due to the fact that only customers

who register with our website can post reviews. Therefore, we need not worry about potential

spammers degrading our rankings.

Aside from having clear and concise HTML tags, we also make our website neat and

easy to navigate with informative headers and a site map bar at the top of every page. This

allows users to travel within our site without running into dead-ends. We also use clear, legible

texts, as well as images and videos to enhance user experience. With our images, as many search

41 Olver, James M., Theresa K. Lant, Robert Plant, Karl D. Majeske, and Steven R. Kursh. Business Resources. Boston, MA: Pearson Learning Solutions, 2013. 298. Print. 42 "Meta tags: title, keywords, description." SiteGround. N.p., 2013. Web. Web. 14 Apr. 2013. .

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engines (until very recently) cannot read and analyze images, we have decided to include ALT

text to our images to let search engines associate it with some short phrase or description.

Off-site Strategy:

To improve our SEO through Off-Site tactics, we will resort to negotiations with high-

trafficked sites and our retailers to place inbound links from their websites to ours. Since we plan

to distribute our online sales through Amazon.com all five years (Appendix 11) having an

inbound link directed from their website to ours will be mutually beneficial, since we too will

place an outbound link to their site. We will turn to popular social media sites such as Facebook

or Twitter to help promote consumer awareness and visitors to our site, as shown in Exhibit 28.

With a higher rank in the Search Engine Results Page, we will ultimately yield a wider audience.

Exhibit 28: Stable Baby Facebook

Internet Marketing:

We will generate online awareness using social media tactics, an opt-in email program,

and Google AdWords. Our CMO will be responsible for fulfilling all duties correlated with these

internet marketing techniques. In terms of social media, Stable Babys marketing efforts will be

present on Facebook, Twitter, YouTube, and Instagram. We believe that word of mouth will play

a significant role in generating awareness to our website; however, much of this word of mouth

is expected to be generated virally. Because we will have our web address and product

information listed throughout our Facebook page, the more likes we receive on the page, the

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better chance we will increase our website awareness. Similarly, we will be able to track the

number of Twitter and Instagram followers with increased visits to our web page.

Through YouTube, we will post advertisements for Stable Baby. These advertisements

will consist of videos, and be directly uploaded to YouTube using Stable Babys username.

These ads will be informative, sharing information about Stable Babys purpose as a product, as

well as how we contribute to St. Jude Childrens Hospital. In order to generate increased and

positive viral word of mouth, our CMO will need to keep our social media sites relevant and

captivating.

Our opt-in email program will be an alternative approach to increasing the flow of

visitors to our website. Although email sent without the permission of the recipient is considered

spam, email that consumers opt-in to receive can be considered as an internet marketing

technique. We will use our social media platforms to give consumers access to sign up for emails

that provide Stable Baby updates. These e-mails will ask for post-purchase feedback, while

providing a preview of our current web page.

In addition, Google AdWords will also be used to create higher volume of visitors to our

webpage. These costs are accounted for within the online portion of our advertising and

promotion tactics schedule. We will be purchasing keywords such as safe, stroller, baby,

stable, and tip-over. Purchasing these words will enable us to increase our relevance in

Google searches, which will help consumers to find our site, and ultimately increase our sales.

Information Systems for Internal Operations Management:

One of the key performance indicators we want to measure is the acquisition rate. Refer

to Appendix 1743 for the activity diagrams of our key performance indicators.

The acquisition rate is important to us because it is a measurable key performance

indicator that expresses customer satisfaction. This allows us to gain insight into both

quantitative and qualitative feedback. As previously mentioned, our website features a reviews

page that only customers may write on and interact with via Web 2.0. Those who havent

purchased our stroller are unable to write reviews, because we do not want false critiques or

spammers on our page. To differentiate between true customers and non-customers, each sale is

43 Appendix 17: KPI Activity Diagram

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associated with a specific identity key. Upon registering for an account, they must either enter

the credit card information they used to purchase the stroller, or this unique identity key.

To get the acquisition rate, we will calculate the number of purchases online compared to

how many customers decide to register within that group. We only sample online customers

because we expect that the majority of our online users will be the most motivated to create an

online account, compared to all of our customers. We will monitor this data monthly, using

Google Analytics to help us measure our source of visitors. 44 An example of this information can

be seen in Exhibit 29 below.

Exhibit 29: Google Analytics Acquisition Report

From these numerical statistics, we can identify and filter the number of returning customers, and

take the percentage of those who actually register with our website.

The second key performance indicator we will monitor deals with daily internal

operations. We will measure the number of defective strollers that come off our assembly line. In

order to standardize what our company considers to be defective, we created a list of

requirements necessary to pass JPMA standards. These standards include whether the stroller

vibrates when pushed, if the adjustable handles feel oiled enough to eliminate harsh resistance

when utilized, and if the stroller can withstand the necessary weight capacity. If one part does not

pass the necessary requirements, the stroller is considered a defect and will be disassembled for

remanufacturing or discarded.

We will collect this data by first having an inspection test in the manufacturing plant once

the stroller is taken off of the finished goods assembly line. Then we can measure, out of all the 44 Peters, Meghan. "How to Get the Most Out of Google Analytics." Mashable. N.p., 04 Jan 2012. Web. Web. 16 Apr. 2013. .

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strollers we produce, what percentage of them are defective. After the final worker of the

production line identifies a defect, the COO is responsible for entering this data into the system.

Based on the percentage we collect each day from the number of defects over the number of

strollers produced, we will continually try to improve in comparison to previous days

percentages. We have chosen not to measure the strollers defect rate per hour because that

would be an unnecessary use of resources. In addition, measuring defects every day allows us to

compare data over long periods of time. Using this strategy, we can measure 100% of our total

sample population size, which increases the accuracy of our data. We compare these rates against

ourselves because the only defect rate that matters is our own. Even if our competitors have

product recalls, we will not have access to their detailed manufacturing facility statistics.

We will enter our KPI information into our ERP as soon as it is received. This will

measure our defect rate over the next five years. If, for example, we happen to have unreliable

raw materials, Stable Baby will have back up suppliers to order from. It is vital to our company

that we monitor our number of defects because it will be a preventative measure in reducing

costs and upholding a positive brand identity.

Investments in Information Systems:

IS Expenses Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Fixed

Office Supplies $40,823 $0 $0 $4,675 $7,752 $4,874 Production Related $4,740 $0 $0 $0 $0 $0 Sales-Related $9,995 $0 $0 $5,999 $999 $0

Variable Office Supplies $960 $960 $960 $960 $960 $960

Production Related $444 $444 $444 $444 $444 $444 Additional $49 $49 $49 $49 $49 $49

TCO Computers $0 $0 $0 $7,500 $3,500 $3,500

Projectors $0 $0 $100 $317 $100 $217 Printing Expense $0 $2,570 $2,741 $2,741 $2,741 $2,741

Total IS Expense $57,011 $1,453 $1,453 $12,127 $10,204 $6,327 Total Salary Expenses $6,000 $24,000 $24,000 $24,000 $28,800 $28,800 Total Costs $63,011 $28,022 $28,294 $46,685 $45,345 $41,585

Exhibit 30: IS/IT Annual Costs

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Exhibit 30 provides a summarized view of the annual costs for our IS/IT infrastructure.

We categorize the main expenses into three sections: office supplies, production related, and

Sales/Additional. The first category comprises mostly of computer/server expenses. For this,

we choose to run Dell computers, due to their customizable traits, performance, and stability.

The second category consists of security systems to protect our productions headquarters, and the

third deals with licenses for our Microsoft Dynamics CRM system.

In year 0, we will invest in a Dell PowerEdge T110 II tower server, not only for its

affordable price at $6,135 with upgrades, but also for its customer reviews and reliability. The

server was chosen because we believe it is one of the best entry level servers on the market.

Additionally, since we will run our ERP system on-premise, the T110, with 32GB Memory at

16000MHz, provides the performance to handle necessary tasks. Also, since space is not a major

concern for us, we can opt out from using blade servers for our startup years. Also, we will

purchase seven Dell XPS 8500 desktops and XPS 13 MLK Ultrabooks. These computers allow

for each user to take their work with them and still have access to our database off-site using a

VPN network. We chose these products for their performance and reliability. We are willing to

pay for high quality products to have uninterrupted work flow, because slow and unstable

computers can harm our main businesses processes. In the first two years, there will only be five

computer users, but as a necessary precaution, we will purchase two more of each for backup.

(For a more detailed view, refer to Appendix 1845).

As the main enterprise resource planning system, we wil