Internet Loyalty Program

Tunes 4 You

1414 Wilton Way
Columbus, OH 43209

Tena M. Harper

This business plan was created for a customer loyalty program which capitalizes on the Internet surge in digital music. It was directly responsible for the owner receiving $3 million in capital to begin his company.

EXECUTIVE SUMMARY

Business Overview

Tunes4You.com offers a unique proposition that is attractive to consumers and to companies. Tunes4You.com is a business–to–business marketing solution for companies desiring to capitalize on brand recognition and strengthen brand loyalty. This completely customizable marketing solution offers consumers points that are redeemed online for a variety of music products. Consumers collect loyalty point codes and then redeem them at the Tunes4You.com Web site for a variety of music-themed products and services. Companies are able to customize their point offers completely. Tunes4You.com offers a unique proposition that is attractive to consumers and to companies.

Tunes4You.com L.L.C. is solely owned by Larry Rosenberry and is located in Columbus, Ohio. This facility will require standard fixtures and furnishings, Internet capability, phone lines and Web site development.

Digital music downloads are particularly valuable for companies because of their high perceived value. They give participants a lot of flexibility and choice, and put them in control of their own reward. They make the reward personally relevant and helps companies build better relationships.

Online rewards have become increasingly popular with marketers and corporations because they significantly reduce—and in some cases completely eliminate—fulfillment costs. There are no ware-houses, stamps or bubble wrap involved. There is a high degree of measurability. Tracking how many people participated is easy to do.

Digital music downloads are particularly valuable for companies because of perceived value with consumers. And the early results appear to be positive. McDonald's credited its "Big Mac Meal Tracks" promotion with being instrumental for its surging second quarter same–store sales. The effort, which dangled a free Sony Connect download with the purchase of a Big Mac meal, helped stimulate same– store sales to the tune of 9.2 percent for the quarter, according to the company.

The music downloads and subscriptions market is expected to almost quadruple in size this year, according to the Cambridge, Massachusetts–based Forrester Research. The firm estimates that it will hit $308 million in sales this year compared to $83 million in 2003. By 2007, sales in the sector are forecasted to soar to $2.7 billion. As digital music promotions become more popular, industry experts believe it won't be long before this new consumer reward begins to penetrate internal corporate incentive programs.

Objectives

Tunes4You's objectives are:

1. Achieve first–year revenues of $3,205,518 increasing to $13,445,217 in year five.
2. Achieve first–year net cash flow of $429,987 increasing to $3,216,888 in year five.

Mission

Our clients invest substantial time and money to acquire their best customers. But the actions taken to cultivate loyalty can make the difference between being competitive and complacent. Tunes4You.com's solid loyalty program can provide the short–term returns you want with the long–term success you need. We go beyond simple demographics to use a unique combination of demographic, behavioral and attitudinal measures that lead to meaningful solutions for your customer's individual needs.

Keys to Success

1. Completely customizable reward program
2. Strength of the youth market
3. Larry Rosenberry is an experienced marketing professional
4. The unique ability of musical rewards to appeal to a broad range of age demographics and cross–cultural influences

Financial Analysis

Operations

Tunes4You.com L.L.C. is solely owned by Larry Rosenberry.

Tunes4You.com is located in Columbus, Ohio. This facility will require standard fixtures and furnishings, Internet capability, phone lines and Web site development.

Start-up summary

PRODUCTS & SERVICES

Tunes4You.com is a customer reward or loyalty program that promotes the goods and services of others with redeemable online Tunes4You. Tunes4You.com is a customizable business–to–business marketing solution to build customer loyalty.

Tunes4You.com is a business–to–business marketing solution for companies desiring to capitalize on brand recognition and strengthen brand loyalty. This completely customizable marketing solution offers consumers points that are redeemed online for a variety of music products.

Companies are able to customize their point offers completely. They choose how many points are awarded to each consumer, how many of their products will contain redeemable points and whether they desire to offer a completely free product or service. This choice allows companies to maximize exposure while maintaining their budget. Companies are billed on the number of points redeemed by the end user. Billing companies on the total number of points redeemed allows for measurable tracking of actual participation in each program.

Consumers collect the points and redeem them at the Tunes4You.com Web site. They will have a variety of music related products to choose from, such as ringtones, downloads, compact discs, concert tickets, and posters. Consumers can choose to redeem their points immediately or save points for larger prizes.

Tunes4You.com offers a unique proposition that is attractive to consumers and to companies.

The point cards for Tunes4You.com are customizable for each individual corporation. Tunes4You.com will arrange for printing and delivery of the point cards to companies that are utilizing the programs.

Tunes4You.com will utilize proprietary software to customize each reward program for our individual clients. This software enables clients to customize the number of winners in each program, how many redeemable points each customer receives and how many winning tickets are included in each lot. The Tunes4You.com program is completely customizable to each merchant's need.

A variety of music–related products, services and companies are utilized to form a comprehensive Web site for the redemption of customer loyalty points. Tunes4You.com has a comprehensive Web site that allows consumers to choose what they desire to redeem their collected points for. Literature that fully explains the program will be provided at P.O.P. to entice and educate the consumer. Tunes4You.com will form strong relationships within the music industry. These relationships will provide a large selection of music related merchandise for consumers to choose from. A variety of music–related products, services and companies are utilized to form a comprehensive Web site for the redemption of customer loyalty points. Additional products such as concert tickets, music hardware and back–stage passes are all future products of Tunes4You.com.

Competition

Mypoints.com and Misterpoints.com offer similar online point redemption program as Tunes4You.-com. The difference between the reward programs is that both Mypoints.com and Misterpoints.com require consumers to fill out membership offers from a variety of companies (i.e.: Visa, eBay, Double-day book clubs).

Once consumers complete the requirements for the particular company, they are rewarded with points that may be redeemed for gift cards. Tunes4You.com offers customer loyalty points included in products consumers purchase regularly. Consumers collect their loyalty point codes and can redeem them at the Tunes4You.com Web site for a variety of music–themed products and services. The loyalty points are tied simply to the purchase of the participating product and not to credit offers or membership gimmicks. Consumers may redeem their points immediately for music downloads or save points to receive larger rewards.

GROWTH STRATEGY

For brand marketers and incentive planners alike, finding an award that appeals to everyone's interests is an elusive prize. But that may be changing. The most compelling incentive reward of late allows consumers or employees the chance to choose their own songs, via digital music downloads. Musical taste is like a fingerprint. Everyone's got one, but it–s different from person to person.

"Allowing consumers to download their favorite songs puts choice and control in their hands," says Geoff Cottrill, group director of entertainment marketing for Atlanta-based Coca-Cola. The fact that downloads have gained traction so quickly is an asset to marketers and planners, adds Toby Simpkins, director of promotions for Cramer–Krasselt, an integrated marketing communications company in Chicago. "The education about the medium has already been done," he says. "Everybody knows what a download is. Two years ago using music downloads [as an incentive] would have been way too forward thinking."

And Carlson Marketing Group, based in Minneapolis, has a number of incentive programs in development for its customers. "We've been hearing more about music downloads from both our existing and potential clients," says Joleen McFadden, director of partnership marketing for Carlson Marketing."[It will become a permanent fixture] because of its high perceived value. It gives participants a lot of flexibility and choice, and puts them in control of their own reward. It makes the reward personally relevant and helps companies build better relationships."

Digital music downloads are particularly valuable for companies trying to attract and retain younger employees, says Ivcich. "This group grew up with computers," she says. "You want to offer them awards from places they are already going." Maritz is currently developing reward programs that offer iPods, MP3 players and downloads. Besides the desirability of music as a reward, music downloads offer all of the benefits of being digital. Online rewards have become increasingly popular with marketers and corporations because they significantly reduce—and in some cases completely eliminate—fulfillment costs. "It's very cost-efficient," Samit says. "There are none of the inventory concerns" that traditional incentive programs face.

And tracking the success of an incentive program conducted with online rewards is significantly easier. Since the programs are all Web–based, "it is as easy to track as it is to redeem," says Cramer-Krasselt's Simpkins. "There is a high degree of measurability. If you want to know how many people participated, it's easy to do."

And the early results appear to be positive. McDonald's credited its "Big Mac Meal Tracks" promotion with being instrumental to its surging second quarter same–store sales. The effort, which dangled a free Sony Connect download with the purchase of a Big Mac meal, helped stimulate same–store sales to the tune of 9.2 percent for the quarter, according to the company. McDonald's ran out of the promotional packaging with the codes quicker than anticipated. "It was supposed to run for ten weeks, but in some stores they ran out as early as five weeks," says Jay Samit, general manager for Sony Connect, in Santa Monica, California.

Market Segmentation

The Tunes4You.com customer loyalty program is suitable for companies that want to strengthen brand recognition with consumers. While incentive programs come in a variety of types, using digital music is a natural for companies with a youth market. Growing up at a period that is more ethnically and culturally diverse than any previous American generation, the youth market represents an enormous culture market and stands at the cusp of new trends, attitudes, and consumer behaviors.

American Youth are influential in a broad set of family purchase decisions, from food and movies to clothes and computers. Estimates place teen spending of their own money at $63 billion. Add family money or teen influence into the mix and teen spending increases to a staggering level.

Target Market Segmentation Strategy

Tunes4You.com has segmented their target market by companies that desire to build brand loyalty. Corporations like Frito–Lay, PepsiCo, General Foods, Mars Inc, Hershey Corporation and others are a natural fit for the customer loyalty programs. Additional corporations that target a youth market also offer potential as target markets.

MARKET ANALYSIS

Although loyalty programs may be innovative in the e–tail realm, the biggest online success stories still come from the companies that have been doing business offline for a long time. According to estimates by research firm Gartner, more than 75 percent of consumers have more than one loyalty card that rewards them with redeemable points. In 2003, U.S. companies spent a total of more than US$1.2 billion on customer loyalty programs, and that figure is expected to rise in the future.

The music downloads and subscriptions market is expected to almost quadruple in size this year, according to the Cambridge, Massachusetts–based Forrester Research. The firm estimates that it will hit $308 million in sales this year compared to $83 million in 2003. By 2007, sales in the sector are forecasted to soar to $2.7 billion. As digital music promotions become more popular, industry experts believe it won't be long before this new consumer reward begins to penetrate internal corporate incentive programs.

Competition

Tunes4You.com offers distinctive competitive edge over other customer loyalty programs. This program rewards consumers for brand loyalty. Other incentive programs require consumers to participate in programs they are enticed to participate in by the rewards, unlike Tunes4You.com which offers rewards on products consumers regularly purchase. This marketing strategy builds and maintains consumer loyalty, an important differentiator.

MARKETING & SALES

Tunes4You.com will have a two fold marketing strategy. The first will be through business–to–business marketing with emphasis on trade journals, trade publications and trade Web site.

The second marketing strategy is coupled with each participating corporation. These marketing efforts will attract consumers who desire to redeem points for music related merchandise.

Initially, Larry Rosenberry will be responsible for explaining the numerous benefits of Tunes4You.com to corporate clients. A trained sales staff will implement sales programs after the start–up phase. Corporate clients choose the number and value of the loyalty points included with their product based on their marketing goals. The program is completely customizable for each corporate client. Corporate clients pay for their particular marketing strategy when consumers redeem their loyalty points at Tunes4You.com.

Revenue Forecast

The Revenue Forecast is both a balance of aiming high while aiming at what is possible. The forecast sets realistic company goals and maintains a set of achievable standards.

The Advertising revenue is based on earnings of $15,000 in the tenth month of the first fiscal year, increasing by 10 percent every month for the first two fiscal years, increasing by 70 percent annually in years three through five.

The Reward revenue is based on $100,000 in the third fiscal month, increasing by 20 percent each month in the first fiscal year. The Reward revenue increases by 20 percent annually in year two, 40 percent annually for years three through five.

The Affiliate revenue is based on 2,000,000 members in the first fiscal year, we are assuming that 7 percent of the customers will purchase an item at $100 of which Tunes4You will receive $4. (2,000,000*.07*$4) = $560,000 in year one, the members will increase by 2,000,000 in the following four fiscal years.

The cost of goods sold is based on 70 percent of the Reward revenue.

Annual revenue forecast

MANAGEMENT SUMMARY

Larry Rosenberry, owner and founder of Tunes4You.com, holds significant management responsibility within the company. Addition personnel will be hired before start–up.

Larry Rosenberry is very experienced in the industry of direct marketing, sales and online marketing. He developed a direct mail and online marketing plan that doubled the revenue of an advertising company in two years.

During his tenure as a sales rep for an e–commerce credit card processing company, e–billpaid, Larry was a top producer capturing $2 million dollars a month in processing. He began his first Internet company armed with the success and knowledge from his previous work. This company grew to $1.3 million in monthly revenues.

Larry is now devoted completely to Tunes4You.com and anticipates repeating his history of success.

PERSONNEL PLAN

Annual personnel plan

FINANCIAL PLAN

Key financial indicators

BREAK–EVEN ANALYSIS

Break-even analysis

PROFIT AND LOSS STATEMENT

Annual pro forma profit and loss

CASH FLOW

Annual pro forma cash flow

BALANCE SHEET

Pro forma balance sheet