9-3 Marketing Plan Milestone: Channels of Distribution and IMC Promotion/Budgets Submit part four of your Marketing Plan, which includes the following sections:Â VII. Channels of Distribution VIII. IMC Promotion Plan IX. IMC BudgetÂ

4

Marketing Plan: Financial Analysis and Pricing Structure

Paula Traver

MKT 500-X1328

Marketing Plan: Financial Analysis and Pricing Structure

V. Financial Analysis

It is essential to conduct financial analysis before starting any business in order to

know the feasibility of the business. Financial analysis helps in understanding the

future performance of the business and possible returns on the investments.

Outcome of the financial analysis helps in ascertaining the beginning of the

business. Before starting a business, the company requires investment in

establishing basic facilities and resources to operate the business. In case of South

Bend Snow Removal, the company requires investing in: acquiring office space,

technology, human resources, equipment and promotional activities. South Bend

Snow Removal needs to estimate fixed and variable cost and forecast the future

sales and revenue, to analyze the possible return on the business.

Sales and Revenue Forecast:

	Year 1	Year 2	Year 3	Year 4	Year 5
Total Orders	250	275	315	365	435
Avg. Value of order	$1000	$1100	$1200	$1400	$1600
Total Sales	$2,050,000	$3,002,500	$3,078,000	$5,011,000	$6,096,000
Operating Expenses	$2,065,000	$2,080,000	$2,096,500	$3,023,725	$3,055,034
Profit	( $ 15,000)	$22,500	$81,500	$1,087,275	$3,040,966

The following things considered while conducting business and revenue forecast:

· It is expected that business will grow @ 10 percent during the first year of operation and @ 15 percent for the next two years and @ 20 percent during the fourth year.

· Positive word of mouth, use of social media and extensive publicity will support in Business growth as well as increasing the average value of the order. Customer confidence in South Bend Snow Removal services will increase over time, hence growth in the number of orders and value is expected.

· An increase in operating expenses from 10 to 15 percent is also anticipated due to rising prices of commodities and increase in operational expenses.

Break- Even Analysis:

This analysis helps in determining the point, where company will recover all its cost. Break-even point refers to the point where business is neither in profit nor in loss.

Total fixed cost: the total fixed cost of business is $1,015,000 (which includes rent of storage facility and administrative pay role).

Unit price/ Average order price: $ 1,000/ per customer for the first year.

Variable cost per unit: $600/ per unit for the first year. Variable cost is

expected to grow from 10 to 15 percent during the next five years.

The above chart is showing that the South Bend Snow Removal Company will

start earning a profit after one year of operation. According to the chart break-even

point of business will occur after one and one half years of operation.

VI. Pricing Strategy

Services that will be offered by South Bend Snow Removal that delivers

a reliable and economic experience to residents of South Bend. It is important that

we have trained technicians for equipment maintenance. South Bend Snow

Removal is targeting all residences and businesses in the city. It is essential for the

the company to keep every service component excellent since each service

component has cost attached to it. To target market successfully, South Bend

Snow Removal is required to price its services competitively, yet reasonable

enough to recover the operational cost and to make a profit (Kotler, 2012).

The tentative prices of all the services offered by South Bend Snow Removal are:

Area	Sidewalks	Driveways	Sidewalks, Driveways with salt/sand	*Corporate
Low	300	150	400	150
Medium	450	200	600	200
High	600	300	800	300

All prices mentioned above is in USD, * cost per person.

The above mentioned prices of each service are just tentative prices, which

can be changed depending upon the size of the lot and any extras the customers

request (salt or sand). Thereby all the prices mentioned in the above table are

tentative average prices (Weber, 2008).

Final Prices

Before deciding the final prices of different services, it is important to consider the

fixed and variable cost, discount prices, margins and profit of the business. The

target market selected by the company i.e. business and residential, are very

demanding in nature. Customers who belong to an elite class wants extraordinary

services and quality, irrespective of higher cost associated with the services. South

Bend Snow Removal should decide on the prices of the services that are

appropriate for the organization ; the company should not compromise on the

quality of services (Aaker, 1991). South Bend Snow Removal decided to choose

the medium price range. This price range will allow service to be delivered without

compromising the quality. Since competitors are supplying similar services at

higher cost the medium price range will provide a competitive advantage to the

competitors.

Aaker, D. (1991). Managing Brand Equity: Capitalizing on the Value of a Brand Name. New York: Simon and Schuster. Kotler, P. (2009). Marketing management. New Delhi: Pearson Education India. Weber, W. K. (2008). Dynamic Pricing: Strategies to Grow Profits in the Hospitality Industry of the 21st Century. Germany: BoD – Books on Demand.

Total Fixed Cost Year 1 Year 2 Year 3 Year 4 Year 5 115000 115000 115000 115000 115000 115000 total cost Year 1 Year 2 Year 3 Year 4 Year 5 0 265000 280000 296500 323725 355034 total sales Year 1 Year 2 Year 3 Year 4 Year 5 0 250000 302500 378000 511000 696000