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mpleThe Boulder Stop Marketing Plan Sample PlanDirect Mail - Direct Web Sales - Retail Sales

This sample business plan was created using Marketing Plan Promarketing planning software published by Palo Alto Software.

This plan may be edited using Marketing Plan Pro and is one of 70+ sampleplans available from within the software.

To learn more about Marketing Plan Pro and other planning products for smalland medium sized businesses, visit us atwww.paloalto.com.

This is a sample marketing plan and the names, locations and numbers may have beenchanged, and substantial portions of the original plan text may have been omitted topreserve confidentiality and proprietary information.

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Requests for reprints, academic use, and other dissemination of this sample plan should beemailed to the marketing department of Palo Alto Software at [email protected]. Forproduct information visit our Website: www.paloalto.com or call: 1-800-229-7526.

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Confidentiality Agreement

The undersigned reader acknowledges that the information provided by ________________in this marketing plan is confidential; therefore, reader agrees not disclose it without theexpress written permission of ________________.

It is acknowledged by reader that information to be furnished in this marketing plan is in allrespects confidential in nature, other than information which is in the public domain throughother means and that any disclosure or use of same by reader, may cause serious harm ordamage to ________________.

Upon request, this document is to be immediately returned to ________________.

____________________Signature

_____________________Name (typed or printed)

_______________Date

This is a marketing plan. It does not imply an offering of securities.


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mple1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.0 Situation Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.1 Market Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.1.1 Market Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.1.2 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.1.3 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.1.4 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.2 SWOT Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.2.1 Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.2.2 Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.2.3 Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.2.4 Threats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

2.3 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82.4 Product Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.5 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.6 Critical Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.7 Historical Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.8 Macroenvironment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

3.0 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

3.1 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.2 Marketing Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.3 Financial Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.4 Target Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.5 Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.6 Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.7 Marketing Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3.7.1 Product Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133.7.2 Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143.7.3 Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143.7.4 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

3.8 Marketing Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

4.0 Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.1 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.2 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

4.2.1 Sales Breakdown - Mail and Web Direct Sa . . . . . . . . . . . . . . . . . . . . . . 18

4.2.2 Sales Breakdown - Retail Store Sales . . . . . . . . . . . . . . . . . . . . . . . . . . 184.3 Expense Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184.4 Contribution Margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

5.0 Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

5.1 Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 2 Marketing Organization 22

Table of Contents


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mple1.0 Executive Summary

This marketing plan is designed to give us a blueprint for marketing our new retail store, TheBoulder Stop. We have included a complete market analysis, target market summaries, aSWOT analysis, a detailed milestones table, and other relevant discussions.

Our ambitions for this marketing plan include:

Using our existing Internet and direct-mail marketing expertise to build localpromotions and marketing literature.

Devising lucrative promotions that will draw sponsorships from possible strategicpartners. These promotions are key to our strategy of increasing our strategicalliances through cross-promotions.

Identifying our strengths, weaknesses, opportunities, and threats. Identifying the local market forces, target markets, and promotional opportunities.

We hope this marketing plan creates a long-term growth model for our retail success. TheBoulder Stop has been successful at direct mail and Internet sales, and we hope to make asmooth transition into retail.

2.0 Situation Analysis

The Bend/Redmond area is growing faster than any other Oregon metropolitan area. Thisgrowth is fueled by the purchase of 2nd homes, from home-buyers nationwide and retirees,or those searching for an idyllic America. In addition, many people in Western Oregon makethe two to three-hour drive from Portland, Oregon's largest city, or Eugene, site of the

University and Oregon's and the state's second largest city, to escape the Spring, Fall, andWinter cloud cover and rainfall. We count all tourists and locals as potential customers, sincewe offer coffee and ice cream, as well as climbing gear and events.

Many locals in Redmond believe that growth, for the sake of growth, is a political disease.They are right. We must make sure our physical and sociological impact is kept to aminimum, and that locals maintain the quality way of life they deserve.

Our local competition is not as fierce as our direct mail and Web competition. They currently

do very little marketing and very few company-sponsored events. We won't rule out thepossibility that they may do so in the future as a response to our projected success in suchmarketing. The competition for coffee is an issue, yet we aren't directly competing with thedowntown Starbucks(tm), since we don't cater to the urbane culture, but rather the naturalexplorers, those who would rather go to a state park than city shops.

Boulder Stop -- Sample Plan


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mple2.1.1 Market Demographics

Direct Mail and Web Market

Geography: 80% U.S. customers.

15% European customers.

5% Other countries

Age: 18-34

Sex: 75% male

25% female

Retail Market

Geography: 90% U.S. customers

9% European customers

1% Other countries

Age: 15-45

Sex: 62% male

28% female

Males buy gear through catalogs and the Web more often than women. This skews the directsales toward male customers. In-store customers tend to be younger than catalog shoppers,and a larger % of them are locals or native to the United States.

Table: Market Analysis

Market AnalysisPotential Customers Growth 1999 2000 2001 2002 2003 CAGRWeekend warriors 25% 40,000 50,000 62,500 78,125 97,656 25.00%The curious 25% 30,000 37,500 46,875 58,594 73,243 25.00%Hardcore climbers 30% 15,000 19,500 25,350 32,955 42,842 30.00%Direct customers 35% 85,000 114,750 154,913 209,133 282,330 35.00%Other 0% 0 0 0 0 0 0.00%Total 30.70% 170,000 221,750 289,638 378,807 496,071 30.70%

2.1.2 Market Needs

There are two important underlying needs, and the combination of gear and coffee servesboth. The Boulder Stop's function is similar to that of the ski lodge at the bottom of the



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mple2.1.3 Market Trends

Trends are in our favor. We have three major trends that help us:

The sport of rock climbing is enjoying growth. The success of rock climbing gyms inthe Silicon Valley, Seattle, Eugene, and other locations offer clear evidence of thisgrowth.

Central Oregon is booming as a vacation destination and recreation spot. Oregon ingeneral is enjoying the growth of interest from Californians, Washingtonians, andformer urban dwellers searching for small, friendly communities.

Gourmet coffee demand is very strong throughout the Northwest. Growing numberslook to their expensive espresso drink as a way to enjoy a moment, and as a naturalpart of an outing or activity.

0

50,000

100,000

150,000

200,000

250,000

300,000

1999 2000 2001 2002 2003

Weekend warriors

The curious

Hardcore climbers

Direct customers

Other

Market Forecast

2.1.4 Market Growth

A di t [th l t t il bl t di ] di ti i O ill



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10.00%

20.00%

30.00%

40.00%

Target Market Growth

2.2 SWOT Analysis

The Boulder Stop recognizes the following strengths, weaknesses, opportunities, and threats(SWOT):

Strengths:

Community commitment Experience in the sport of rock climbing. Nationwide marketing experience.

Weaknesses:

Limited cash. Limited experience dealing with contractors/builders. Little experience with local politics.

Opportunities:

No well-focused, well-marketed competition.



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mple2.2.1 Strengths

Our most significant strength lies in our management team's skills in both rock climbing andrunning a small business. After years of working the pro circuit, Bill Walsh has gained insightinto the history, ethics, and progressive nature of traditional wall and sport climbing. PanSilverton has worked a number of years with small business clients looking for direction andstrategic cohesion. His insight has led to multi-million dollar finance deals that helped putsome $100K-500K a year businesses on the map. The combination of experience and provenbusiness acumen represent a strength for The Boulder Stop.

With a nationwide direct marketing business that includes Internet and catalog sales of morethan $50,000 per year, The Boulder Stop is in a natural position to expand into retail.Gateway Computer started as a small start-up direct assembly business in North Dakota andis now opening "Gateway Country" stores across America. Although The Boulder Stop istaking a more conservative approach, the company also enjoys strong brand recognition. Thenatural 'next-step' is to expand into retail, into Redmond, OR.

During it's 10 years of operation in Eugene, The Boulder Stop has contributed over $13,000toward community events and involvement. We have hosted "Boulder Green" for three years.A state wide bowling tournament, "Boulder Green" is about giving bowling balls and freebowling passes to the less fortunate in our community. We view this as one more win in thefight against badminton We are comfortable that our community involvement will onlystrengthen our business in Redmond, as it has in Eugene.

2.2.2 Weaknesses

The Boulder Stop has access to a limited amount of cash. Initial financing will not be difficultdue to solid credit and the low inventory depreciation rate, but ongoing financing will be moredifficult to obtain. It's not the receivable days that will wreak havoc on the cash plan, sincesales are 100% cash, it is the operating and marketing expenses.

Nobody at the Boulder Stop has experience in negotiating with contractors. This is a liabilitydue to the difficulty in managing and maintaining the timeliness and budget for a contractor.We will compensate for this weakness by retaining an expert contractual lawyer, FrankNussheim, to negotiate our side of the construction contract. Our lawyer will handle all

building commitments and authorize the disbursement of funds for such activities.

Although management at The Boulder Stop understands many of the concerns of localcitizens in Redmond, we have few opportunities to express our vision through a useful venue.Eastern Oregon can be very 'status quo' and any new player threatens the old order and putsthe locals on the defensive. Instead of proclaiming our innocence and placing the blame on afew radicals, we will pull the community together through free barbecues that include



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mple2.2.3 Opportunities

The market for rock climbing and hiking gear, good coffee, and ice cream in Redmond is farbelow saturation level. Our two local competitors do very little in the way of marketing, be itadvertising or community involvement PR. This gives us the opportunity to develop themarket and brand ourselves as the market 'original'.

The cost of selling via e-commerce and through mail-order has decreased tremendously inrecent years. Internet domain names (www.yourname.com) cost $35 a year, and e-commerce servers may be set up for only $30 a month. Certain high-circulation catalogs willdevelop custom catalogs for vendors and mail them for a fixed fee. This is incredibly costeffective for companies that don't have costly relationships with printers, graphic artists, andthe like. Both direct mail and Internet sales are a growing segment of our business.

Weekend warriors and hard core climbers will pay anything to get into the latest gear. Theaverage climber carries around $1,200 of equipment. Since climbers place their lives on theline when they use their equipment, the majority of them buy only name brand gear at aprice premium. Climbers associate high price with premium quality. Hikers are similar, but toa lesser degree. Hikers look for gear that looks great and feels comfortable. Our typicalcurious customer is lodging in Sunriver (20 miles), hiking at Smith Rock, Newberry Crater,and lakeside trails in the mountains. They own a new VW, SUV, or 4WD station wagon, aremarried, have a stable job, and are responsibly putting enough in savings to retire early. Inother words, they don't care what they pay for hiking gear, as long as it's not insulting. Wecategorize insulting as 110% or more above REI (Recreational Equipment Incorporated)prices.

Rock climbing service companies offer us a unique opportunity. We can team up with theseservices to promote our events and store, and in return we will give them 'shelf-space'. Thisgives service companies cost-effective market exposure. We will partner with companies suchas First Ascent LLC and other American Mountain Guides Association (AMGA) accreditees.

2.2.4 Threats

Locals are sensitive to the manner in which we develop our land for commercial use. The landis state owned. Oregon will lease one, 1/4 acre parcel to The Boulder Stop. Since it is public

land, the public can revoke our lease without offering just cause.

The last three years have been 'La Nina' years, pummeling Oregon with rain and coldweather. Last year, the rock climbing season began in May. When the season begins as lateas May, it means we have two to three fewer months of revenue with which to pay for ourleased land and equipment (fixed costs). Although we can hope for an Indian summer, thisdoesn't happen very often in Oregon. By early October, the vacation season is over, kids are



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2.3 Competition

Direct Mail and Web Sales:

REI (REI.com) and L.L. Bean (L.L. Bean.com) sell climbing gear to our target market.They are large corporate entities, each with powerful online and retail presence.Fortunately, they have not opened any retail stores in the Bend/Redmond area, so wecount them solely as direct mail and Web competitors. We hope to achieve .5-1% oftheir gross yearly direct sales.

Retail Sales:

[UnNamed#1] will be our toughest competitor, for they have already establishedthemselves in the rock climbing community. They have a very experienced andknowledgeable staff of expert climbers, and they are located on the highway thatleads directly to Smith Rock. They carry 75-80% of the same gear that we sell.

[UnNamed#2] sells limited gear (clothes), they do not promote, and they do notmarket their products extensively. On the other hand, they sell ice cream and carrymore GenX apparel than The Boulder Stop. Their biggest weakness is small store size.

-5%

0%

5%

10%

15%20%

-20 0 20 40 60 80 100 120

UnNamed#1

UnNamed#2

REI

Other

Competitor by Growth and Share

Table: Growth and Share Analysis



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2.4 Product Offering

Espresso is the big money maker for The Boulder Stop, with coffee peripherals coming in aclose second. Straight espresso bean re buys arrive on Mondays and Thursdays, ensuring thefreshest beans possible. Modified re buys begin on the first of each month. Bill Walsh willoversee all purchases, shipments, and deliveries.

The Boulder Stop sells high-quality rock climbing gear to serious climbers. Rock climbing gearis a long-term sales project that will rely on future catalog and "word-of-mouth" sales. Thegear is checked by knowledgeable employees who use and recommend equipment tocustomers and management. The gear is purchased from well-known manufacturers likeMetolius Mountain Products, Black Diamond, Boreal, and Petzl. Management will rely onemployees and customers to shorten the feedback loop in product and service offerings.Climbing gear is delivered every Thursday via UPS.

2.5 Keys to Success

To succeed in this business we must:

Sell products that are of the highest reliability and quality. We must offer as many ormore high-end products than REI offers online and through their Eugene and Portlandstores. This means we must carry all high-end brands of harnesses, active protection,passive protection, helmets, ice climbing gear, camping gear and mountaineeringgear.

We will offer loss leaders and other promotions that bring customers into the store, tobuy goods and to generate awareness of promotional events.

Provide for the satisfaction of 100% of our customers. Our customers are veryvaluable to us, and we will design a customer care plan to manage complaints,implement employee and customer feedback, manage supplier accounts, and predictfuture conflicts.

To partner with the appropriate service companies in order to supply our customerswith all the climbing products and services they need.

Establish long-term relationships with great distributors such as Trago, Petzl, BlackDiamond, Beal, Metolius Mountain Products, and others.

2.6 Critical Issues

As we expand into retail, our success will depend on whether we will be able to maintain ourexisting direct business. The retail model offers a more mature market than the direct modeland exposes us to fewer outside threats. In our direct business sales, we compete against big



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conservatively and spend accordingly. Projects must be kept on budget and on time,marketing programs must be cost efficient and backed by solid data gathering and a highpotential for success, measured or otherwise.

2.7 Historical Results

Our marketing strategies have always revolved around direct Internet and mail sales. Wehave done little tele-sales, as that does not fit into our business practices model. To date, ourdirect sales model has been successful in (1) keeping costs down, (2) giving us great ROI, (3)

building a business from nothing to $150,000 a year, and (4) restraining our growth to matchour level of financing.

As we expand into a new market and grow with a new business model, we will need to putour direct mail sales experience to work. We will need to be just as aggressive about gettingour message out to the locals. Our direct mail sales experience will help us determine whichdirect market tactics and programs work, and which ones don't. From flyers to magazine andnewspaper ads, we will use our connections and resources gathered through national directsales to focus our retail marketing on one region.

In addition, our Website and Website sales will be of much use to us. We will synch Websitesales orders with in-house ordering systems, to ensure that customers may buy over the Weband pick up merchandise in the store if they wish, free of shipping charges. By adopting thismarketing program, we will gain from historical experience, while adapting to our retail directbusiness model.

Things have changed tremendously in the direct catalog (mail) and especially the Internetsales category. Major players such as REI and L.L. Bean now rely on Web sales to boostcatalog sales. Both companies put out the same number of catalogs, but use the Web forproduct real-time pricing, order tracking, and customer feedback. Since 1995, Web businesshas grown by 3,000%. Direct market growth, and our sales stability in the direct market, giveus the power to leverage our direct sales to build non-Internet retail sales.

2.8 Macroenvironment

Rock climbing

The rock climbing industry is growing faster than ever. Although the gear is expensive,people buy it because it provides them with long-term fun.

Coffee and Espresso



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3.0 Marketing Strategy

We will build strategic partnerships with climbing service companies. We will differentiate The Boulder Stop from competitors through aggressive

advertising and promotional campaigns that demonstrate our community support andcommitment.

We will build retail store awareness through our direct mail and Web campaigns,leading to greater word-of-mouth marketing.

3.1 Mission

The Boulder Stop is an equipment store specializing in rock climbing gear and coffee/espressodrinks. Our mission is to provide an entertaining, fun, and knowledgeable atmosphere toclimbers who experience nothing but a rock face and nutrition bars all day. Rock climbing isas much about storytelling and nostalgia as it is about routes and gear. The Boulder Stopadds value by creating a 'campfire' social setting in a retail location.

We take care of our employees; that is, we pay them well and give them a share of profits.We respect all customers who respect our store and people, and show respectful diligencetoward those who choose not show our people respect.

We work as a team, not as a socialist Mecca. Our people are paid according to their skills andabilities. In addition, each employee will have the option of company-sponsored trainingcourses and outside curricula that build on their skill sets.

Our customers are our most important asset, and we rely on them for feedback. We do not,

however, send out unsolicited surveys to unsuspecting customers. We will accept in-storesuggestions and test them for results.

We have a plan and our goals are clear: To create a fun, entertaining, and respectful retailenvironment that generates sales of espresso and climbing gear.

3.2 Marketing Objectives

1. To make The Boulder Stop the number one destination for rock climbing equipmentcustomers in Oregon, and to achieve the largest market share in the region for rockclimbing gear. There are no resources for gauging market share for our local market,but the State of Oregon provides yearly economic data by region. We will use thisdata to compile an estimate of market share goals for 1998.

2. To be an active and vocal member of the community, and to provide continual re-



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3.3 Financial Objectives

Our financial objectives are as follows:

To always maintain a minimum cash balance of $10,000. To maintain year-end minimum contribution margins of 40%. To grow direct retail sales by a conservative minimum of 12% per year. To achieve sales of $190,000 in year one.

3.4 Target Markets

We will focus on the highly discriminating, hard-core climber segment first, because these arethe opinion leaders. Both the weekend warrior and the curious will follow the hard-coreclimbers. If we can attract and keep the hard-core climbers, then they will become part of theattraction for the others. To attract them, we will carry all the best high-tech gear, know the

jargon, use the latest technology, and become a "Futurist" product and services company.

We want to clearly differentiate the weekend warriors from the hard-core climbers. Lesscompetitive, or at least at a different competitive level, these climbers are usually at Smithfor fun. They respect the hard-core climbers and want to be like them, but don't want to beclassified as having "rock on the brain." Approximately 20-30% of these climbers will respondto family events by bringing their families; the other 70-80% climb with friends andoccasionally try to outdo each other. This market is highly susceptible to getting stuck in acoffee shop with friends, they will talk about their latest romance, conflict with other friends,the future, or the fine espresso at The Boulder Stop. We will market the weekend warriorswith a combination of amateur climbing events and other sponsored activities.

3.5 Positioning

For climbers who need a place to stop for gear and coffee near Smith Rock, The Boulder Stopoffers high quality climbing gear, gourmet espresso drinks, and a comfortable place to meetand talk. We will position The Boulder Stop as a community-involved organization thatcreates value for the community while minimizing environmental impact.

3.6 Strategies

Our main marketing strategy is to focus on the overall experience needed by each customer.Some of our customers will seek a friendly gathering place to discuss climbs and prospects



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e3.7 Marketing MixOur marketing mix relies heavily on our promotions. Our unique promotions set us apart fromour local competitors, which sponsor few promotions. From the Perry Claw Rock Festival toThe Llama races, The Boulder Stop will seek to create high-impact local events that createconsumer recall and increase foot traffic.

Our prices are competitive, but we do not compete on price. We will not match prices; we willsimply perform monthly competitive shopping trips to gauge the average prices for goods.

Our store and location give us a competitive advantage. The Boulder Stop is located within

1/4 mile of Smith Rock itself, and within walking distance of the park.

Our opportunities for differentiating on service are limited. Our part-time staff areexperienced rock climbers, and are very knowledgeable about gear and the sport itself.Beyond this expertise, there's no reason for us to create special services when we can co-market climbing schools and services through store flyers and posters.

3.7.1 Product Marketing

As a reseller of name-brand products, we have very little control over how our customersview each individual product. We do, however, have control over the customer environmentand the manner in which we display our products. From a standard retail standpoint, productmarketing appears to be very simple - display the products in an aesthetically pleasingmanner, and they will come. It is much more complicated for us. We have identified threetypes of customers, and each group has it's own buying pattern.

The hard-core climbers need a great selection of gear, and will be disappointed if they aren'toffered a 'bargain bin' of last years' model gear. The hard-core gear shoppers will beseparated from the curious by a low glass partition. This partition will serve both to absorbthe noise of shoppers and eaters, and to separate and maintain the climbers' social order. Wewill host climber discussion groups, with free coffee on Friday. and Sat. nights after 7:00p.m. This will give hard-core climbers an opportunity to exchange stories and relax in ourcafe, away from their nemesis: 'yuppie tourists'.

The weekend warriors won't feel excluded from the gear, and will also partake of the bargainbin. The warriors will find comfort in the cafe area, where they can talk about their pursuitsrather than challenge them on the rock face. These people are not in great shape, and arelikely to flock to the store as early as 3:00 p.m. for ice cream and cookies. We'll have extrastaff on hand during these times.

The curious are difficult to gauge. They will flow in and out all day, and are likely to peruse



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e3.7.2 PriceWe are a store that is positioned for impulse buying; therefore, it is important that wemaintain a flexible pricing strategy.

Our pricing strategy will be based on competitive parity guidelines. We will notexceed competitors' prices by more than 10%.

Price says a lot about a product. The products that are innovative and not availableelsewhere in the region will be marked up to meet the demand curve. We are notafraid of premium pricing a premium product.

Espresso beverages will be priced a little below the industry average. Although we

will still make money off the beverages, we consider this a "Loss Leader" strategywhereby word-of-mouth advertising brings customers in for the drinks, simply tomake them aware of our additional products and services.

3.7.3 Promotion

The Boulder Stop will implement a strong sales promotion strategy. Advertising will besecondary.

[Omitted] will be paid up to $2,000 to determine the needs of the surroundingpopulation and how the company may best meet those needs with promotions,literature and other marketing programs..

Promotional campaigns will be partially outsourced to [Omitted]. Advertising will be consistent with [Omitted]. Sales promotions and public relation strategies will work together to inform

customers of new products, to encourage an image of community involvement for TheBoulder Stop, and to limit environmental impact.

3.7.4 Service

Service is important to our mix. We have an obligation to provide quality products andcheerful service, fast and efficiently. Our service goals are simple and easy to maintain.

We will make plain our policy that we do not accept returns or exchanges without receipt andproof of product failure. We are in this to make money, as a business, and cannot afford togive our value to free riders or people with 'buyer's remorse', who choose not to takeresponsibility for their purchase(s).



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e3.8 Marketing ResearchWe will obtain market research through in-store customer comment cards and the localChamber of Commerce.

4.0 Financials

Sales are expected to grow from $193,000 the first year to $262,000 by year three.

Expenses will increase with the rate of inflation (3%) minus diminishing cost of goods(1%).

4.1 Break-even Analysis

For our break-even analysis, we have chosen $3 to represent our average revenue per unit.Although revenue from ropes and other gear amount to significantly more revenue per unit,

such items skew the revenue curve toward less units sold. We want to engage in a practicalanalysis of precisely what it will take to turn the company profitable by using the P&Lstatement. In light of this, the Break-even analysis merely becomes a gauge by which we canmeasure our monthly revenue streams to predict long-term profitability.

According to the analysis, we will break-even at 1,333 units.

($3,000)

($2,000)

($1,000)

$0

$1,000

$2,000

$3,000

0 444 888 1332 1776 2220

Monthly break-even point

Break-even Analysis



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mpleTable: Break-even AnalysisBreak-even Analysis:

Monthly Units Break-even 1,333Monthly Revenue Break-even $4,000

Assumptions:Average Per-Unit Revenue $3.00Average Per-Unit Variable Cost $0.75Estimated Monthly Fixed Cost $3,000

4.2 Sales Forecast

We will promote to the weekend warriors by hosting fun events like the "Llama Run". Ourpart-time sales clerks, also trained in the ways of promotional tactics, will call businesseswithin the Bend area and establish additional sponsors for these events.

For in-store sales, our strategy will be to maintain as much on-site POP (point-of-purchase)literature as possible. Our part-time staff will be responsible for informing customers of theproducts and creating the best fit between customer and product. Our employees do not workon commission.

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Carabiners

Ropes

Books and Magazines

Cookies and Cones

Espresso Regulars

Espresso Shakes

Gear Rentals

All Other Gear

Other

Monthly Sales Forecast



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mpleTable: Sales ForecastSales Forecast

Unit Sales 2000 2001 2002 2003 2004Carabiners 3,577 4,007 4,488 5,026 5,629Ropes 331 370 415 465 520Books and Magazines 181 203 227 254 285Cookies and Cones 17,358 19,441 21,773 24,386 27,313Espresso Regulars 23,867 26,731 29,938 33,531 37,555Espresso Shakes 2,387 2,673 2,994 3,353 3,755Gear Rentals 362 405 454 508 569All Other Gear 2,172 2,433 2,725 3,052 3,418Other 0 0 0 0 0Total Unit Sales 50,234 56,262 63,013 70,575 79,044

Unit Prices 2000 2001 2002 2003 2004Carabiners $9.13 $9.50 $9.88 $10.27 $10.68Ropes $141.95 $147.63 $153.54 $159.68 $166.07Books and Magazines $12.15 $12.64 $13.14 $13.67 $14.21Cookies and Cones $1.01 $1.05 $1.10 $1.14 $1.18Espresso Regulars $1.77 $1.84 $1.92 $1.99 $2.07Espresso Shakes $2.68 $2.79 $2.90 $3.02 $3.14Gear Rentals $4.05 $4.21 $4.38 $4.56 $4.74All Other Gear $20.30 $21.11 $21.95 $22.83 $23.74Other $0.00 $0.00 $0.00 $0.00 $0.00

Sales 2000 2001 2002 2003 2004Carabiners $32,669 $38,052 $44,323 $51,628 $60,136Ropes $46,946 $54,682 $63,694 $74,191 $86,417Books and Magazines $2,197 $2,559 $2,980 $3,472 $4,044Cookies and Cones $17,574 $20,470 $23,843 $27,773 $32,350Espresso Regulars $42,287 $49,256 $57,373 $66,828 $77,841Espresso Shakes $6,403 $7,459 $8,688 $10,120 $11,787Gear Rentals $1,464 $1,706 $1,987 $2,314 $2,696All Other Gear $44,084 $51,349 $59,811 $69,668 $81,149Other $0 $0 $0 $0 $0

Total Sales $193,623 $225,532 $262,700 $305,993 $356,421

Direct Unit Costs 2000 2001 2002 2003 2004Carabiners $3.54 $3.64 $3.75 $3.87 $3.98Ropes $55.57 $57.24 $58.96 $60.73 $62.55Books and Magazines $0.76 $0.78 $0.80 $0.83 $0.85Cookies and Cones $0.10 $0.10 $0.11 $0.11 $0.11Espresso Regulars $0.25 $0.26 $0.27 $0.28 $0.28Espresso Shakes $0.40 $0.42 $0.43 $0.44 $0.45Gear Rentals $0.25 $0.26 $0.27 $0.28 $0.28All Other Gear $12.13 $12.50 $12.87 $13.26 $13.66Other $0.00 $0.00 $0.00 $0.00 $0.00

Direct Cost of Sales 2000 2001 2002 2003 2004Carabiners $12,658 $14,603 $16,845 $19,433 $22,418Ropes $18,379 $21,202 $24,459 $28,215 $32,549Books and Magazines $137 $158 $182 $210 $242Cookies and Cones $1,752 $2,021 $2,331 $2,690 $3,103Espresso Regulars $6,022 $6,947 $8,014 $9,245 $10,665E Sh k $964 $1 112 $1 282 $1 479 $1 706



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mple4.2.1 Sales Breakdown - Mail and Web Direct Sa

Our direct sales are seasonal in nature, yet, unlike retail sales, we can maintain smallmargins throughout the Northern Hemisphere's Fall/Winter months. We will maintain thesesales by temporarily discontinuing our direct mail sales in favor of Web sales. Websitemanagement costs are between $25-50 a month. Banner advertising on sites such asoutside.com, rockandice.com, and others will cost under $1,500 and will help us maintainmarket exposure during the off season.

We will create direct mail catalogs again in April.

4.2.2 Sales Breakdown - Retail Store Sales

Retail store sales will end in November and begin again in April. Retail sales figures relyheavily on espresso and carabiner purchases.

The average climber loses one carabiner every trip, and The Boulder Stop will be there toprovide them with the best selection of 'biners in the Redmond area. We will price the 'binerscompetitively, but not too competitively. At an average price of $9 per 'biner, we pricedhigher than REI, but lower than any of our local competition.

In-store espresso sales are driven by our marketing promotion machine. As people learn thatwe are a community-involved, neighborhood organization, we'll gain the trust of locals whowill choose to drive five miles to the The Boulder Stop, at scenic Smith Rock, rather than visitthe local 'strip malled' ice-cream parlor for a cone. This goes back to our main objective: Tobecome a place where locals and expert climbers can mingle to enjoy good gear, coffee, icecream, cookies, etc.

4.3 Expense Forecast

Our expense forecast relies on a conservative inflation forecast of 4% per year minus a 1%

diminishing cost allowance.



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$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000


Advertising/Promotion

Sponsored Activities

Direct Marketing Activities

Other

Monthly Expense Budget

Table: Marketing Expense Budget

Marketing Expense Budget 2000 2001 2002 2003 2004Advertising/Promotion $3,000 $3,000 $3,000 $3,000 $3,000Sponsored Activities $11,250 $9,000 $9,000 $8,000 $7,000Direct Marketing Activities $49,500 $42,000 $42,000 $42,000 $42,000Other $0 $0 $0 $0 $0

------------ ------------ ------------ ------------ ------------Total Sales and Marketing Expenses $63,750 $54,000 $54,000 $53,000 $52,000Percent of Sales 32.92% 23.94% 20.56% 17.32% 14.59%Contribution Margin $63,517 $94,984 $120,394 $151,123 $186,903Contribution Margin / Sales 32.80% 42.12% 45.83% 49.39% 52.44%

4.4 Contribution Margins

May and August will provide us with the lowest contribution margins. May, because we areopening our doors in May, requiring plenty of promotional material, and the suppliesnecessary for our big Grand Opening celebration. August, because we've scheduled the PerryClaw Rock Festival during August. This event will bring some of the finest local musicians andnationally recognized climbers to Smith Rock for a three-day climbing celebration/contest.

The rest of the seasonal year, our contribution margins will average 40% for the first three



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$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000


Contribution Margin Monthly

Table: Contribution Margin

Contribution Margin2000 2001 2002 2003 2004

Sales $193,623 $225,532 $262,700 $305,993 $356,421Direct Costs of Goods $66,356 $76,549 $88,306 $101,870 $117,518Other Variable Costs of Sales $0 $0 $0 $0 $0

------------ ------------ ------------ ------------ ------------Cost of Goods Sold $66,356 $76,549 $88,306 $101,870 $117,518Gross Margin $127,267 $148,984 $174,394 $204,123 $238,903Gross Margin % 65.73% 66.06% 66.39% 66.71% 67.03%

Marketing Expense Budget 2000 2001 2002 2003 2004Advertising/Promotion $3,000 $3,000 $3,000 $3,000 $3,000Sponsored Activities $11,250 $9,000 $9,000 $8,000 $7,000Direct Marketing Activities $49,500 $42,000 $42,000 $42,000 $42,000Other $0 $0 $0 $0 $0

------------ ------------ ------------ ------------ ------------

Total Sales and Marketing Expenses $63,750 $54,000 $54,000 $53,000 $52,000Percent of Sales 32.92% 23.94% 20.56% 17.32% 14.59%Contribution Margin $63,517 $94,984 $120,394 $151,123 $186,903Contribution Margin / Sales 32.80% 42.12% 45.83% 49.39% 52.44%

5.0 Controls



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mple5.1 Implementation

The first milestone is distribution of a flyer to announce our grand opening celebration. Theflyer will appear on telephone poles (where legal), in outdoor stores, and will be mailed to ourlist of direct-mail customers. Our celebration will consist of an outdoor barbecue, gunny sackraces, climber-dunking festivities, and llama racing. Local vendors have been invited to setup booths and participate, subject to prior approval.

During the flyer campaign, Pan Silverton will arrange for Yellow Pages print ads and InternetWeb banner advertising within the Bend/Redmond area, as well as the Portland area. TheYellow Page ads are purchased through a flat-fee to USWest Dex, and The Yellow Pages

company. Banner ads are more complex and require a media kit with a value-added offeringto retailers with Internet websites. The pitch will be - help us market ourselves and we willadd your company to our online listing of outside resources.

The first annual Llama Run is a special event for the St. Charles Medical Center in Bend.Llamas and their owners will converge on Redmond for races that include 1st, 2nd, and 3rd-place winners. First prize wins $1,000, 2nd wins $750, and 3rd wins $250. The Most ColorfulLlama award will be given to one winner at the end of the show, and will include a bag ofllama feed and a $100 gift certificate to the Heathman restaurant. The entry fee will be $100

per llama, and all fees will go directly to St. Charles Medical Center.

The Perry Claw Rock Festival will bring big-name climbing stars such as Louis Baruqe andSheri Lassiter to Smith Rock for a full day climb. Climbers will be available to sign autographson gear and such. Admission will be $7 and all proceeds will go to support prostate cancerresearch.

The Boulder Stop will be one of the sponsors of the PA Golf Classic held in Bend, OR on Sept.1, 1999.

Yellow pages print and web listings

Print and distribute Grand Opening flyer

Grand Opening Celebration

1st Annual Llama run

Perry Claw Rock Festival

Milestones



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mpleTable: MilestonesMilestones

Milestone Start Date End Date Budget Manager DepartmentYellow pages print and web listings 4/1/99 5/1/99 $500 Silverton MarketingPrint and distribute Grand Opening flyer 4/1/99 5/15/99 $400 Silverton MarketingGrand Opening Celebration 5/15/99 5/15/99 $3,500 Walsh Marketing1st Annual Llama run 7/23/99 7/23/99 $2,000 Walsh MarketingPerry Claw Rock Festival 8/1/99 8/3/99 $3,500 Walsh MarketingPA Golf Classic -- Sponsor for evening hikes 9/1/99 10/1/99 $2,000 Walsh MarketingOther 3/1/99 4/1/99 $0 ABC DepartmentTotals $11,900

5.2 Marketing Organization

We are a small company where sales and marketing consist of two to three people. Bill Walshand Pan Silverton will lead and implement the marketing programs, while part-timeemployees will carry out many of the tasks. The marketing organization is very informal, buttightly managed, with clear obtainable goals, and a thorough list of deadlines. Details arevery important to the implementation of our marketing plan, the most important being thosethat are unseen. Marketing will do its very best to plan for the unforeseeable.

5.3 Contingency Planning

Contingency planning is an important part of the marketing organization, as noted in theprevious topic.

Our biggest potential problems, the ones that will limit our ability to create programs, arefinancial. Our budget relies on sales figures that are reliable and well-researched, but are alsoaffected by such things as weather and political difficulties. Our first plan is a 'scale-down'plan; that is, we will eliminate the Llama run, Rock festival, and PA Golf sponsorship and waitout the year, relying on website and direct sales to cover our cost of doing business. Thedirect business alone will not support our financial commitments, but with excellent credit,inventory as collateral, and basic Smith Rock foot traffic, we will survive without popularmarketing programs.

If we lose a part-time employee, there will be plenty to find elsewhere. If we lose PanSilverton, his skills will be difficult to replace, but we will have plenty of quality applicantsliving in the Bend/Redmond area. Will also have the option of hiring away competitors'employees, as they are poorly paid and are given very little company ownership.

O li bi l h i ill i l th tit ki



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plAppendix Table: Marketing Expense Budget

Marketing Expense Budget May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

Advertising/Promotion $900 $350 $350 $350 $350 $350 $0 $0 $0 $0 $0 $350Sponsored Activities $3,500 $0 $2,000 $3,500 $2,000 $0 $0 $0 $0 $0 $0 $250Direct Marketing Activities $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $1,500 $1,500 $1,500 $1,500 $1,500 $6,000Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Sales and Marketing Expenses $10,400 $6,350 $8,350 $9,850 $8,350 $6,350 $1,500 $1,500 $1,500 $1,500 $1,500 $6,600Percent of Sales 43.46% 25.93% 33.32% 38.40% 31.81% 25.00% 38.78% 38.65% 38.52% 38.39% 38.27% 28.24%Contribution Margin $5,631 $10,063 $8,454 $7,354 $9,264 $10,601 $570 $578 $587 $595 $603 $9,217Contribution Margin / Sales 23.53% 41.09% 33.73% 28.67% 35.29% 41.73% 14.73% 14.90% 15.06% 15.23% 15.40% 39.44%

Boulder Stop -- Sample Plan Appendix

Copyright Palo Alto Software, Inc.2004 All rights reserved. www.paloalto.com Not for reproduction, publication, or distribution. Pg 2

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Contribution Margin

May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Sales $23,930 $24,489 $25,063 $25,649 $26,249 $25,405 $3,868 $3,881 $3,894 $3,907 $3,920 $23,369Direct Costs of Goods $7,898 $8,076 $8,258 $8,445 $8,635 $8,454 $1,798 $1,803 $1,807 $1,812 $1,816 $7,553Other Variable Costs of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Cost of Goods Sold $7,898 $8,076 $8,258 $8,445 $8,635 $8,454 $1,798 $1,803 $1,807 $1,812 $1,816 $7,553Gross Margin $16,031 $16,413 $16,804 $17,204 $17,614 $16,951 $2,070 $2,078 $2,087 $2,095 $2,103 $15,817Gross Margin % 66.99% 67.02% 67.05% 67.08% 67.10% 66.72% 53.51% 53.55% 53.59% 53.62% 53.66% 67.68%

Marketing Expense Budget May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Advertising/Promotion $900 $350 $350 $350 $350 $350 $0 $0 $0 $0 $0 $350Sponsored Activities $3,500 $0 $2,000 $3,500 $2,000 $0 $0 $0 $0 $0 $0 $250Direct Marketing Activities $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $1,500 $1,500 $1,500 $1,500 $1,500 $6,000Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Sales and Marketing Expenses $10,400 $6,350 $8,350 $9,850 $8,350 $6,350 $1,500 $1,500 $1,500 $1,500 $1,500 $6,600Percent of Sales 43.46% 25.93% 33.32% 38.40% 31.81% 25.00% 38.78% 38.65% 38.52% 38.39% 38.27% 28.24%Contribution Margin $5,631 $10,063 $8,454 $7,354 $9,264 $10,601 $570 $578 $587 $595 $603 $9,217Contribution Margin / Sales 23.53% 41.09% 33.73% 28.67% 35.29% 41.73% 14.73% 14.90% 15.06% 15.23% 15.40% 39.44%

Boulder Stop -- Sample Plan Appendix

Copyright Palo Alto Software, Inc.2004 All rights reserved. www.paloalto.com Not for reproduction, publication, or distribution. Pg 3

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