1. Executive Summary
Pegasus Sports International is a start-up aftermarket inline skating accessory manufacturer. Inline skates have four or five wheels arranged in a single line and are often called Rollerblades by the general public after one of the early pioneers in the category. 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’s other accessories such as SkateSails.
The aftermarket skate accessory market has been largely ignored. Although 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. Skating is a booming sport. Currently, most of the skating is recreational. There are, however, a growing number of skating competitions, including team-oriented competitions such as skate hockey as well as individual competitions such as speed skate racing. Pegasus will work to grow these markets and develop the skate transportation market, a more utilitarian use of skating.
Pegasus has outlined a go-to-market marketing program that combines highly relevant products and services with an evolving direct-to-consumer distribution strategy to tap into customer passions and loyalty.
2. Situation Analysis
Pegasus is entering its first year of operation. Its products have been well received, and marketing will be key to the development of brand and product awareness as well as the growth of the customer base. Pegasus International offers several different aftermarket skating accessories, serving the growing inline skating industry.
2.1. Market Summary
Pegasus possesses 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, what their specific needs are, and how Pegasus can better communicate with them.
2.1.1. Market Demographics
The profile for the typical Pegasus customer consists of the following geographic, demographic, and behavior factors:
- Pegasus has no set geographic target area. By leveraging the expansive reach of the Internet and multiple delivery services, Pegasus can serve both domestic and international customers.
- The total targeted population is 31 million users.
- There is an almost equal ratio between male and female users.
- Ages 13-46, with 48 percent clustering around ages 23-34. The recreational users tend to cover the widest age range, including young users through active adults. The fitness users tend to be ages 20-40. The speed users tend to be in their late 20s and early 30s. The hockey players are generally in their teens through their early 20s. The extreme segment is of similar age to the hockey players.
- Of the users who are over 20, 65 percent have an undergraduate degree or substantial undergraduate coursework.
- The adult users have a median personal income of $47,000.
- Users enjoy fitness activities not as a means for a healthy life but as intrinsically enjoyable activities in themselves.
- Users spend money on gear, typically sports equipment.
- Users have active lifestyles that include some sort of recreation at least two to three times a week.
2.1.2. Market Needs
Pegasus is providing the skating community with a wide range of accessories for all variations of skating. The company seeks to fulfill the following benefits that are important to its customers:
- Quality craftsmanship. The customers work hard for their money and do not enjoy spending it on disposable products that work for only 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’s industry experience and personal dedication to the sport will provide it 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.
2.1.3. Market Trends
Pegasus will distinguish itself 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 (Table 2.4). Therefore, the marketing is being directed toward this group. BladeBoots will enable users to enter establishments without having to remove their skates. BladeBoots will be aimed at the recreational skater, the largest segment. SkateAids, on the other hand, are great for everyone.
The sport of skating will also grow through SkateSailing. This sport is primarily for the medium-to-advanced skater, and its growth potential is tremendous. The sails that Pegasus has manufactured have been sold in Europe, following a pattern similar to windsurfing. Windsailing originated in Santa Monica but did not take off until it had already grown big in Europe.
Another trend is group skating. More and more groups are getting together on skating excursions in cities all over the world.
For example, San Francisco has night group skating that attracts hundreds of people. The market trends are showing continued growth in all directions of skating.
2.1.4. 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, although sales have slowed down in some markets. The growth statistics for 2015 were estimated to be about 31 million units. More and more people are discovering — and in many cases rediscovering—the health benefits and fun of skating.
2.2. SWOT Analysis
The following SWOT analysis captures the key strengths and weaknesses within the company and describes the opportunities and threats facing Pegasus.
- In-depth industry experience and insight
- Creative yet practical product designers
- The use of a highly efficient, flexible business model utilizing direct customer sales and distribution
- The reliance on outside capital necessary to grow the business
- A lack of retailers who can work face to face with the customer to generate brand and product awareness
- The difficulty of developing brand awareness as a start-up company
- Participation within a growing industry
- Decreased product costs through economies of scale
- The ability to leverage other industry participants’ marketing efforts to help grow the general market
- Future/potential competition from an already-established market participant
- A continued slump in the economy that could have a negative effect on people’s spending of 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
Pegasus Sports International is forming its own market. Although there are a few companies that do make sails and foils that a few skaters are using, Pegasus is the only brand that is truly designed for and by skaters. The few competitors’ sails on the market 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 manufacturers 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 make.
2.4. 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 inline skates, which allows skaters to enter places that normally would not allow them in with skates on. BladeBoots come with a small pouch and belt that 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 skatesailing could become a very popular sport. Trademarking this product is currently in progress.
- The third product, SkateAid, will be in production by the end of the year. Other ideas for products are under development but will not be disclosed until Pegasus can protect them through pending patent applications.
2.5. Keys to Success
The keys to success are designing and producing products that meet market demand. In addition, Pegasus must ensure total customer satisfaction. If these keys to success are achieved, it will become a profitable, sustainable company.
2.6. Critical Issues
As a start-up business, Pegasus is still in the early stages. The critical issues are for Pegasus to:
- Establish itself 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.
3. Marketing Strategy
The key to the marketing strategy is focusing on the speed, health and fitness, and recreational skaters. Pegasus can cover about 80 percent of the skating market because it produces products geared toward 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, its products are useful to all of the different segments.
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.”
3.2. Marketing Objectives
- Maintain positive, strong growth each quarter (notwithstanding seasonal sales patterns).
- Achieve a steady increase in market penetration.
- Decrease customer acquisition costs by 1.5 percent per quarter.
3.3. Financial Objectives
- Increase the profit margin by 1 percent per quarter through efficiency and economy-of-scale gains.
- Maintain a significant research and development budget (as a percentage relative to sales) to spur future product developments.
- Achieve a double- to triple-digit growth rate for the first three years.
3.4. Target Markets
With a projected world skating market of 31 million that is steadily growing (statistics released by the Sporting Goods Manufacturers Association), the niche has been created. Pegasus’s aim is to expand this market by promoting SkateSailing, a new sport that is popular in both Santa Monica and Venice Beach in California. The breakdown of participation in skating is as follows: 1+ percent speed (growing), 8 percent hockey (declining), 7 percent extreme/ aggressive (declining), 22 percent fitness (nearly 7 million—the fastest growing), and 61 percent recreational (first-timers). Pegasus’s products are targeting the fitness and recreational groups because they are the fastest growing. These groups are gearing themselves toward health and fitness, and combined they can easily grow to 85 percent (or 26 million) of the market in the next five years.
Pegasus will position itself as the premier aftermarket skating accessory company. This positioning will be achieved by leveraging Pegasus’s competitive edge: industry experience and passion. Pegasus is a skating company formed by skaters for skaters. Its management is able to use its vast experience and personal passion for the sport to develop innovative, useful accessories for a broad range of skaters.
4. Marketing Tactics
The single objective of the marketing program is to position Pegasus as the premier skating accessory manufacturer, serving the domestic market as well as the international market. The marketing program will seek to first create customer awareness concerning the offered products and services and then develop the customer base. Specifically, Pegasus’s marketing program is composed of the following approaches to product, pricing, distribution, and communications.
Several of Pegasus’s 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 through a solid business model, long-range planning, and a strong management team that is able to execute this exciting opportunity. The three principals on the management team have more than 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.
This will be based on a per-product retail price. Because of the advantages of selling directly, higher margins can be achieved with premium pricing that will still appeal to customer segments.
Pegasus will sell its products initially through its Web site. In addition to allowing for higher margins, this direct-to-the-consumer approach will allow Pegasus to maintain a close relationship with customers, which is essential for producing products that have a true market demand. By the end of the year, Pegasus also will have developed relationships with different skate shops and will begin to sell some of its products through retailers.
The message that Pegasus will seek to communicate is that it offers the best-designed, most useful skating accessories. This message will be communicated through a variety of methods. The first will be the Pegasus Web site, which will provide a rich source of product information and offer consumers the opportunity to purchase. A lot of time and money will be invested in the site to provide the customer with the perception of total professionalism and utility for Pegasus’s products and services.
The second marketing 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. In addition, a number of smaller periodicals 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, which will be sent out to customers. The cost of the sales literature will be fairly minimal because it will use the already-compiled information from the Web site.
4.5. Marketing Research
Pegasus is blessed with the good fortune of being located in the center of the skating world: Venice, California. It will be able to I everage this opportune location by working with many of the different skaters who live in the area. Pegasus was able to test all of its products not only with its principals, who are accomplished skaters, but also with 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.
This section will offer the financial overview of Pegasus related to marketing activities. Pegasus will address break-even analysis, sales forecasts, and expense forecast and indicate how these activities link to the marketing strategy.
5.1. Break-Even Analysis
The break-even analysis (Table 2.5) indicates that $7,760 will be required in monthly sales revenue to reach the break-even point.
5.2. Sales Forecast
Pegasus feels that the sales forecast figures are conservative. It will steadily increase sales as the advertising budget allows. Although the target market forecast (Table 2.4) listed all of the potential customers divided into separate groups, the sales forecast (Table 2.6) groups customers into two categories: recreational and competitive. Reducing the number of categories allows the reader to quickly discern information, making the chart more functional.
5.3. Expense Forecast
The expense forecast will be used as a tool to keep the department on target and provide indicators when corrections/modifications are needed for the proper implementation of the marketing plan.
The purpose of Pegasus’s 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
The milestones identify the key marketing programs (Table 2.7). It is important to accomplish each one on time and on budget
6.2. Marketing Organization
Stan Blade will be responsible for the marketing activities.
6.3. Contingency Planning
Difficulties and Risks
- Problems generating visibility, a function of being an Internet- based start-up organization
- An entry into the market by an already-established market competitor
- Determining that the business cannot support itself on an ongoing basis
- Having to liquidate equipment or intellectual capital to cover liabilities
Source: Kotler Philip T., Keller Kevin Lane (2015), Marketing Management, Pearson; 15th Edition.