INTRODUCTION
Contemporary business environment and fashion industry specifically demand a lot of planning and clarity in setting marketing strategy for new players. Double Touch Boutique, successfully operating in the high end and middle class New York City market and other states within the country, is looking at the strategic options of entering the United Kingdom. The complexity of a business, explained by the variety of the product lines, short product lifecycle and different distribution strategies places pressure on the pricing of the Double Touch Boutique products and demands accurate forecasting and estimation of the initial investment costs.
The objective of this part of the marketing plan is to look at the overall costs of the business, formulate temporary and permanent pricing strategy and calculate a tentative estimate of the first year operating profits.
OVERALL COSTS OF THE BUSINESS
Based on the initial assumptions, the company is planning to enter both, high end and middle class segment of the market with three major product lines. Given the limitations of the case, at this stage it will not be able to estimate other costs rather than the cost of the product supply chain.
Transportation Costs
Promotional costs
Based on the formulated marketing strategy the company will establish the budget for social promotions, such as supporting orphanages and schools for the disabled, contests and academic competitions. These costs will represent a significant part of the overall business budget and should be included in the initial calculations (Christ, 2011).
Other costs
Import taxes and sales tax are estimated at 15% and 22% accordingly, based on the country´s average. Final picture of the costs is presented in the project financial outline along with the sales forecast and expected profit.
Assumptions
The calculations presented in the Project Estimations in Appendix I include several major assumptions. First of all, the sales forecast is based on average sales of 600 units per day, given the fact that part of the sales will be sold on the promotion “2 for 1”, reducing the stock, but not adding value. Secondly, initial promotional and marketing budget, taking into considerations the above mentioned campaigns is estimated at USD$ 120,000 and further monthly spending is set at USD$ 20,000. Fuel and dispatch costs are estimated on the potential volume and should be adjusted according to the real operations and the number of daily deliveries. Finally, the total budget for setting up the operations and funding the first year of sales in the country is estimated at USD$ 750,000 and will be funded internally.
PRICE SETTING TACTICS
The United Kingdom is a complex market with strong competition profile in luxury and high end fashion items. Entering the market with a new brand would mean competing with well-established and popular brands. With that in mind, Double Touch Boutique will adapt three-step pricing strategy:
- Promotion “2 for 1” for the first operational month, which will enact an introduction of the collection element and generate specific interest in the customers;
- Medium term pricing of the items, which will offer average price of 10-15% lower than the competition;
- Adjustment of the prices to the market level after six months of operations.
The above outlined strategy will give initial competitive advantage to the company and ensure additional visibility due to attractive promotions and introduction of the collection. First six months of the operations will ensure that the customers had the opportunity to explore and test the Double Touch product and will open the doors for adjustment of the prices to the market level. This strategy, along with a strong focus on social media, street and YouTube marketing will enable the company reaching its breakeven point and generating good revenue during the first operational year.
EXPECTED PROFIT
The Financial Project Overview table in Appendix I presents an overall view on the operational side of the business and illustrates the expected return after the first operational year. The calculations are based on three assumptions (Christ, 2011):
- The three product lines, which will be the entry collections of Double Touch Boutique have similar costs and can be sold at identical prices;
- Sales volume is expected to grow steadily 15% over the first six months and additional 30% as from the 7th month of operations.
- Operational “Waste” is not taken into consideration.
REFERENCES
Christ, P. (2011). Principles of Marketing. Available August 30, 2012 from KnowThis.com. Review the following chapters:
APPENDIX I – FINANCIAL PROJECT ESTIMATIONS
