JavaNet Internet Cafe - Sample Plan

This sample marketing plan was created using Marketing Plan Pro®- marketing
planning software published by Palo Alto Software, Inc.

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

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

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

You are welcome to use this plan as a starting point to create your own, but you do not have
permission to resell, reproduce, publish, distribute or even copy this plan as it exists here.

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

Copyright © Palo Alto Software, Inc., 1995-2007. All rights reserved.

 Confidentiality Agreement

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

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

 Table of Contents

1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

le
2.0 Situation Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Market Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1.1 Market Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

mp
2.1.2 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1.3 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1.4 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 SWOT Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2.1 Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2.2 Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Sa
2.2.3 Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2.4 Threats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Service Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 Critical Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Pro
2.7 Macroenvironment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3.0 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3.1 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Marketing Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Financial Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Target Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
lan
3.6 Strategy Pyramids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Marketing Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7.1 Services and Service Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7.2 Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7.3 Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7.4 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.8 Marketing Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
gP

4.0 Financials, Budgets, and Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

4.1 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.3 Expense Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.4 Linking Sales and Expenses to Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
tin

4.5 Contribution Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

5.0 Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Implementation Milestones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.2 Marketing Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Contingency Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
rke

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Ma

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com
 JavaNet Internet Cafe

1.0 Executive Summary

le
The goal of this marketing plan is to outline the strategies, tactics, and programs that will
make the sales goals outlined in the JavaNet business plan a reality in the year 1999.

mp
JavaNet, unlike a typical cafe, provides a unique forum for communication and entertainment
through the medium of the Internet. JavaNet is the answer to an increasing demand. The
public wants: (1) access to the methods of communication and volumes of information now
available on the Internet, and (2) a place to socialize and share these experiences with friends
and colleagues.

Sa
Marketing will play a vital role in the success of JavaNet. JavaNet must build a brand around
the services it offers by heavily promoting itself through local television, radio, and print
advertising. Marketing efforts are just beginning by the time a potential customer enters
JavaNet for the first time. A strong emphasis will be put on keeping customers and building
brand loyalty through programs focused on staffing, experience, and customer satisfaction.

Pro
Our target markets include:

• Students from nearby housing centers.

• Business people from the downtown business centers and professional buildings.
• Seniors from nearby retirement facilities.
lan
2.0 Situation Analysis

JavaNet just opened its doors for business a little over a month ago. Business is good, and
customers have been impressed with our offerings, but we need to focus our efforts on
implementing the strategies, programs, and tactics outlined in the original business plan.
gP

Differentiating ourselves from other more traditional cafes has given us the ability to
effectively compete on the beverage and pastry side of the business with the already
entrenched competition. Sales are brisk and in-line with projections.

The Internet services side of the business is rapidly being accepted by the local community.
tin

Memberships are meeting the projections outlined in the business plan, and sales of Internet
services are meeting the goals forecast. Students love to gather for late-night sessions, nearby
seniors are getting a glimpse of what the Internet offers, and local business people love to
stop by for a quick bite and an email check.
rke

2.1 Market Summary

JavaNet is faced with the exciting opportunity of being the first-mover in the local cyber-cafe
market. The consistent popularity of coffee, combined with the growing interest in the
Ma

Internet, has been proven to be a winning concept in other markets and will produce the same
results here.

All three target markets for the JavaNet service are growing at a relatively fast pace. We're
faced with a large number of potential customers, and we're offering a needed service.

Target Market Growth:

• University students continue to grow at a steady pace, at nearly 4%

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 1
 JavaNet Internet Cafe
• Office workers in the downtown area and nearby professional buildings continue to add
value, growing at 3%

le
• Seniors are becoming an important part of downtown business, growing at almost 6%
• Teens continue to play a major role in downtown foot-traffic, growing at 2%

mp
Target Markets

Sa
University Students
Office Workers

Pro
Seniors
lan
2.1.1 Market Demographics
gP

JavaNet's customers can be divided into two groups. The first group is familiar with the
Internet and desires a progressive and inviting atmosphere where they can get out of their
offices or homes to enjoy a great cup of coffee and Internet access. This group is made up of
students from the University of Oregon and business people from nearby downtown offices and
professional centers.
tin

The second group is not as familiar with the Internet. This group is made up of seniors from
the downtown retirement centers. There are three large retirement centers in the downtown
area, and currently none of them offer Internet access to their residents. Seniors represent a
growing segment of Internet users. They use the Internet to communicate with friends and
family and they will be regular users of the JavaNet service.
rke

Table: Market Analysis

Market Analysis
2001 2002 2003 2004 2005
Potential Customers Growth CAGR
Ma

University Students 4% 10,000 10,400 10,816 11,249 11,699 4.00%

Office Workers 3% 20,000 20,600 21,218 21,855 22,511 3.00%
Seniors 6% 3,000 3,180 3,371 3,573 3,787 6.00%
Total 3.59% 33,000 34,180 35,405 36,677 37,997 3.59%

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 2
 JavaNet Internet Cafe

2.1.2 Market Needs

le
Factors, such as addiction, and historical sales data ensure that the high demand for coffee will
remain constant over the next five years.

mp
The rapid growth of the Internet and online services that has been witnessed worldwide is only
the beginning of a long-lived trend towards an economy built on the infrastructure of the
Internet. The potential growth of the Internet is enormous, to the point where one day, a
computer terminal with an online connection will be as common and necessary as a telephone
or toilet. This may be 5 or 10 years down the road, but for the next five years, the online
service provider market is sure to experience tremendous growth. Establishing itself as the

Sa
first cyber-cafe in the area, JavaNet will enjoy the first-mover advantages of name recognition
and customer loyalty. Initially, JavaNet will hold a 100 percent share of the cyber-cafe market
locally. In the next five years, competitors will enter the market. JavaNet has set a goal to
consistently maintain a market share of greater than fifty percent.

Pro
2.1.3 Market Trends

The Internet has become a point of conversation in almost all social groups. People are talking
about sites they visited, business people are talking about Internet-based businesses, and kids
are talking about the latest Internet clubs and chat rooms. People like to communicate their
Internet experiences with their friends, colleagues, and family. However, it can be difficult to
lan
do it in front of a computer terminal at the office or in the family study. A comfortable place to
gather and share these experiences is becoming a real need.

JavaNet will provide:

• A meeting place for business people interested in sharing their Internet-based

gP

business ideas.
• A social hub for students and young people interested in sharing a beverage and their
Internet experiences with friends.
• A place for nearby seniors to gather and learn about the powers of the Internet and
better communication methods.
• A stopping point for travelers in need of an Internet connection.
tin

A market survey was conducted in the Fall of 1998. Key questions were asked of fifty potential
customers. Some key findings include:

• 35 subjects said they would be willing to pay for access to the Internet.
rke

• $2.50 an hour was the most popular hourly Internet fee.

• 24 subjects use the Internet to communicate with others on a regular basis.
Ma

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 3
 JavaNet Internet Cafe

le
Market Forecast

mp
25,000

20,000

15,000

Sa
University Students
Office Workers
10,000 Seniors

5,000

Pro
0
2001 2002 2003 2004 2005
lan
2.1.4 Market Growth

The market for the services JavaNet will offer is growing rapidly. The cyber-cafe hasn't come
to this area yet, but similar services are growing rapidly on a global scale. Large cities that
cater to large numbers of travelling business people and tourists have been saturated with
businesses offering the services JavaNet will offer. Business people use the Internet services to
gP

catch up on email and communications with their family, and tourists do the same. Our area
supports a population that has many of the same needs and interests of this larger group.

The student population continues to grow as the University grows in popularity with high-
school graduates from out of state. These students tend to have money and an interest in up-
scale social centers. Business in the downtown area is on the rise with the coming completion
tin

of the renovated Fifth Street Market and the new Compu-tech facility. JavaNet will target these
groups with radio and TV spots on local stations.
rke
Ma

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 4
 JavaNet Internet Cafe

le
Target Market Growth

mp
6.00%

5.00%

4.00%

Sa
3.00%

2.00%

Pro
1.00%

0.00%
University Students Office Workers Seniors
lan
2.2 SWOT Analysis

The SWOT analysis provides us with an opportunity to examine the internal strengths and
weaknesses JavaNet must address. It also allows us to examine the opportunities presented to
JavaNet as well as potential threats.
gP

JavaNet has a valuable inventory of strengths that will help it succeed. These strengths
include: a knowledgeable and friendly staff, state-of-the-art computer hardware, and a clear
vision of the market need. Strengths are valuable, but it is also important to realize the
weaknesses JavaNet must address. These weaknesses include: a dependence on quickly
changing technology, and the cost factor associated with keeping state-of-the art computer
hardware.
tin

JavaNet's strengths will help it capitalize on emerging opportunities. These opportunities

include, but are not limited to, a growing population of daily Internet users, and the growing
social bonds fostered by the new Internet communities. Threats that JavaNet should be
aware of include, the rapidly falling cost of Internet access, and emerging local competitors.
rke

2.2.1 Strengths

1. Knowledgeable and friendly staff. We've gone to great lengths at JavaNet to find
Ma

people with a passion for teaching and sharing their Internet experiences. Our staff is
both knowledgeable and eager to please.
2. State-of-the art equipment. Part of the JavaNet experience includes access to state-
of-the-art computer equipment. Our customers enjoy beautiful flat-screen displays,
fast machines, and high-quality printers.
3. Up-scale ambiance. When you walk into JavaNet, you'll feel the technology. High
backed mahogany booths with flat-screen monitors inset into the walls provide a cozy
hideaway for meetings and small friendly gatherings. Large round tables with displays

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 5
 JavaNet Internet Cafe
viewable from above provide a forum for larger gatherings and friendly "how-to"
classes on the Internet. Aluminum track lighting and art from local artists sets the

le
mood. Last, but not least, quality cappuccino machines and a glass pastry display case
provide enticing refreshments.
4. Clear vision of the market need. JavaNet knows what it takes to build an upscale
cyber cafe. We know the customers, we know the technology, and we know how to

mp
build the service that will bring the two together.

2.2.2 Weaknesses

Sa
1. A dependence on quickly changing technology. JavaNet is a place for people to
experience the technology of the Internet. The technology that is the Internet changes
rapidly. Product lifecycles are measured in weeks, not months. JavaNet needs to keep
up with the technology because a lot of the JavaNet experience is technology.
2. Cost factor associated with keeping state-of-the-art hardware. Keeping up with

Pro
the technology of the Internet is an expensive undertaking. JavaNet needs to balance
technology needs with the other needs of the business. One aspect of the business
can't be sacrificed for the other.

2.2.3 Opportunities
lan
1. Growing population of daily Internet users. The importance of the Internet almost
equals that of the telephone. As the population of daily Internet users increases, so will
the need for the services JavaNet offers.
2. Social bonds fostered by the new Internet communities. The Internet is bringing
people from across the world together unlike any other communication medium.
JavaNet will capitalize on this social trend by providing a place for smaller and local
gP

Internet communities to meet in person. JavaNet will grow some of these communities
on its own by establishing chat areas and community programs. These programs will
be designed to build customer loyalty.
tin

2.2.4 Threats

1. Rapidly falling cost of Internet access. The cost of access to the Internet for home
users is dropping rapidly. Internet access may become so cheap and affordable that
nobody will be willing to pay for access to it. JavaNet is aware of this threat and will
rke

closely monitor pricing.

2. Emerging local competitors. Currently, JavaNet is enjoying a first-mover advantage
in the local cyber-cafe market. However, additional competitors are on the horizon, and
we need to be prepared for their entry into the market. Many of our programs will be
designed to build customer loyalty, and it is our hope that our quality service and up-
scale ambiance won't be easily duplicated.
Ma

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 6
 JavaNet Internet Cafe

2.3 Competition

le
The dual product/service nature of JavaNet's business faces competition on two levels.
JavaNet competes not only with coffee retailers, but also with Internet service providers. The
good news is that JavaNet does not currently face any direct competition from other cyber

mp
cafes in the local market. There are a total of three cyber cafes in the state: one located in
Portland and two in Ashland.

Heavy competition between coffee retailers creates an industry where all firms face the same
costs. There is a positive relationship between price and quality of coffee. Some coffees retail
at $8/pound, while other more exotic beans may sell for as high as $16/pound. Wholesalers

Sa
sell beans to retailers at an average of a 50% discount. For example, a pound of Sumatran
beans wholesales for $6.95 and retails for $13.95. And as in most industries, price decreases
as volume increases.

Pro
2.4 Service Offering

JavaNet will provide its customers with full access to the Internet and common computer
programs and equipment. Some of the Internet and computing services available to JavaNet
customers are listed below:

• Access to external POP3 email accounts.

lan
• Customers can sign up for a JavaNet email account. This account will be managed by
JavaNet servers and accessible from computer systems outside the JavaNet network.
• FTP, Telnet, Gopher, and other popular Internet utilities will be available.
• Access to Netscape or Internet Explorer browsers.
• Access to laser and color printing.
• Access to popular software applications, like Adobe Photoshop and Microsoft Word.
gP

JavaNet will also provide its customers with access to introductory Internet and email classes.
These classes will be held in the afternoon and late in the evening. By providing these classes,
JavaNet will build a client base familiar with its services. The computers, Internet access, and
classes wouldn't mean half as much if taken out of the environment JavaNet will provide. Good
coffee, specialty drinks, bakery goods, and a comfortable environment will provide JavaNet
tin

customers with a home away from home; a place to enjoy the benefits of computing in a
comfortable and well kept environment.
rke

2.5 Keys to Success

The keys to the success for JavaNet are:

• The creation of a unique, innovative, upscale atmosphere that will differentiate JavaNet
from other local coffee shops and future Internet cafes.
Ma

• The establishment of JavaNet as a community hub for socialization and entertainment.

• The creation of an environment that won't intimidate the novice user. JavaNet will
position itself as an educational resource for individuals wishing to learn about the
benefits the Internet has to offer.
• Great coffee and bakery items.

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 7
 JavaNet Internet Cafe

2.6 Critical Issues

le
The risks involved for JavaNet are:

• Will there be a continuing demand for the services offered by JavaNet?

mp
• Will the popularity of the Internet continue to grow, or is the Internet a fad?
• Will individuals be willing to pay for the services JavaNet offers?
• Will the cost of accessing the Internet from home drop so significantly that there will
not be a market for Internet Cafes such as JavaNet?

Sa
2.7 Macroenvironment

The retail coffee industry in this area experienced rapid growth at the beginning of the decade
and is now moving into the mature stage of its life cycle. Many factors contribute to the large

Pro
demand for good coffee: The student population at the University is a main source of demand
for coffee retailers, the cold and damp climate is extremely conducive to coffee consumption,
and current trends in the Northwest reflect the popularity of quality coffee and specialty drinks.

The popularity of the Internet is growing exponentially. Those who are familiar with the
information superhighway are well aware of how fun and addicting surfing the Internet can be.
Those who have not yet experienced the Internet need a convenient, relaxed atmosphere
where they can feel comfortable learning about and utilizing the current technologies. JavaNet
lan
seeks to provide its customers with affordable Internet access in an innovative and supportive
environment.

3.0 Marketing Strategy

gP

JavaNet has three main strategies. The first strategy focuses on attracting novice Internet
users. By providing a novice-friendly environment, JavaNet hopes to educate and train a loyal
customer base.

The second and most important strategy focuses on pulling in power Internet users. Power
tin

Internet users are extremely familiar with the Internet and its offerings. This group of
customers serves an important function at JavaNet. Power users have knowledge and web-
browsing experience that novice Internet users find attractive and exciting.

The third strategy focuses on building a social environment for JavaNet customers. A social
rke

environment that provides entertainment will serve to attract customers that wouldn't
normally think about using the Internet. Once on location at JavaNet, these customers that
came for the more standard entertainment offerings, will realize the potential entertainment
value the Internet can provide.
Ma

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 8
 JavaNet Internet Cafe

3.1 Mission

le
JavaNet has one purpose.

JavaNet provides communities with the ability to access the Internet, enjoy a cup of coffee,

mp
and share Internet experiences in a comfortable environment.

JavaNet's marketing will consistently build on this mission. Everything we do, from the pricing
structure for our services to the ambiance we create, must be done with this mission in mind.
We cater to: downtown business people, traveling business people, university students, and
seniors. Our ambiance and our services are designed for this clientele and our marketing

Sa
efforts are focused on capturing this market.

3.2 Marketing Objectives

Pro
JavaNet's marketing objectives for the first three years of operation include:

• Grow total sales by 10% annually.

• Diversify the service offering to insulate the business against fluctuations in any one
component of the revenue stream.
• Build customer loyalty through educational programs.
• Maintain a staff of enthusiastic employees excited to share their Internet knowledge
lan
with JavaNet customers.
• Build the JavaNet brand to the point where it becomes a household word in the area.

3.3 Financial Objectives

gP

The goal of this marketing plan is to outline the marketing strategies, tactics, and programs
that will make the vision outlined in the JavaNet business plan a reality in the year 2000. The
vision outlined in the business plan includes sales of roughly $275,000 in the first year with
that figure increasing 10% annually.
tin

3.4 Target Marketing

JavaNet intends to cater both to people who want a guided tour of the Internet and to
rke

experienced users eager to indulge their passion for computers in a social setting.
Furthermore, JavaNet will be a magnet for local and traveling professionals who desire to work
or check their email messages in a friendly atmosphere. These professionals will either use
JavaNet's PCs, or plug their own notebook computers into Internet connections. JavaNet's
target market covers a wide range of ages: from members of "Generation X," who grew up
surrounded by computers, to seniors from local retirement centers.
Ma

Our primary target markets include:

• Students. The large student population will become an important part of the JavaNet
customer base. The student population continues to grow with the success of the
University. Evening entertainment, access to the Internet, and the up-scale ambiance
will attract this demographic.
• Business people. The downtown business community is growing rapidly with the

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 9
 JavaNet Internet Cafe
addition of a new Compu-tech building and a flurry of new professional centers.
JavaNet will provide a perfect setting for business meetings. It will also give traveling

le
business people an opportunity to plug their laptops into the JavaNet network to check
email communications.
• Seniors. Represent a growing population of Internet users. JavaNet will target the
seniors in the nearby downtown retirement centers by offering "Introduction to the

mp
Internet" classes. The JavaNet staff will hold brief classes in the off hours to educate
seniors on how to use the Internet to communicate with friends and family. This will
build a regular base of customers that wouldn't typically use the services offered by
JavaNet.

Sa
3.5 Positioning

JavaNet will position itself as an upscale coffee house and Internet service provider. Business
people of all types will use JavaNet as a place to hold meetings and catch-up on email

Pro
communications. Students from nearby downtown housing centers will use JavaNet as a place
to socialize and discuss the latest Internet sites. Seniors from downtown retirement centers
will experience the Internet for the first time at JavaNet. Programs designed to teach
newcomers about the power of the Internet will help build customer loyalty and spread the
word about the services JavaNet offers.
lan
3.6 Strategy Pyramids

The following are the three key strategies JavaNet will focus on:

JavaNet's first strategy focuses on attracting novice Internet users. JavaNet plans on
attracting these customers by:
gP

• Providing a novice-friendly environment. JavaNet will be staffed by knowledgeable

employees focused on serving the customer's needs.
• A Customer Service desk will always be staffed. If a customer has any type of question
or concern, a JavaNet employee will always be available to assist.
• JavaNet will offer introductory classes on the Internet and email. These classes will be
tin

designed to help novice users familiarize themselves with these key tools and the
JavaNet computer systems.

JavaNet's second strategy will be focused on attracting power Internet users who will provide
an important function at JavaNet. JavaNet plans on attracting this type of customer by:
rke

• Providing the latest in computing technology.

• Providing scanning and printing services.
• Providing access to powerful software applications.

The third strategy focuses on building a social environment for JavaNet customers. A social
environment that provides entertainment will serve to attract customers that wouldn't
Ma

normally think about using the Internet. Once on location at JavaNet, these customers that
came for the more standard entertainment offerings will realize the potential entertainment
value the Internet can provide.

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 10
 JavaNet Internet Cafe

3.7 Marketing Mix

le
JavaNet's marketing efforts will focus on building a loyal base of customers that will use the
services provided on an almost daily basis.

mp
3.7.1 Services and Service Marketing

As the popularity of the Internet continues to grow at an exponential rate, easy and affordable

Sa
access to the information superhighway is quickly becoming a necessity of life. JavaNet
provides the local community with the ability to access the Internet, enjoy a cup of coffee, and
share Internet experiences in a comfortable environment. People of all ages and backgrounds
will come to enjoy the unique, upscale, educational, and innovative environment that JavaNet
provides.

Pro
3.7.2 Pricing

JavaNet bases its prices for coffee and specialty drinks on the "Retail Profit Analysis" provided
by our supplier, Allann Brothers Coffee Co., Inc. Allann Brothers has been in the coffee
business for 22 years and has developed a solid pricing strategy.
lan
Determining a fair market, hourly price for online use is more difficult because there is no
direct competition from another cyber-cafe in our area. Therefore, JavaNet considered three
sources to determine the hourly charge rate. First, we considered the cost to use other
Internet servers, whether it is a local networking firm or a provider such as America Online.
Internet access providers use different pricing schemes. Some charge a monthly fee, while
others charge an hourly fee. In addition, some providers use a strategy with a combination of
gP

both pricing schemes. Thus, it can quickly become a high monthly cost for the individual.
Second, JavaNet looked at how cyber-cafes in other markets such as Portland and Ashland
went about pricing Internet access. Third, JavaNet used the market survey conducted in the
Fall of 1998. Evaluating these three factors resulted in JavaNet's hourly price of $2.50.
tin

3.7.3 Promotion

JavaNet will spend almost fifty thousand dollars in its first year of operations to build a brand
and a loyal customer base. Marketing efforts will be focused on the local market, and the
rke

campaign will run the entirety of 1999, increasing roughly 10% per year to match increased
sales revenue. The marketing budget will consistently equal almost 20% of sales.

A Few Specific Marketing Efforts:

• Local TV spots
Ma

• Print Materials
• Local Newspapers
• Local Radio Spots
• JavaNet Events

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 11
 JavaNet Internet Cafe

3.7.4 Service

le
This topic is a critical reminder of the fact that JavaNet is a service business. The success of
our business depends upon the quality of the service we offer and delivering that service
consistently. JavaNet is dedicated to delivering this quality service.

mp
Dedicated to Quality Service Programs:

• We've gone to great lengths at JavaNet to find people with a passion for teaching and
sharing their Internet experiences. Our staff is both knowledgeable and eager to
please. An excess of staff members will consistently be on hand to provide service to

Sa
JavaNet customers. Performance will be frequently evaluated both internally and
through customer surveys.
• A highly valued member of the JavaNet staff will be the "Customer Happiness
Representative." This individual will be available forty hours a week to monitor the level
of happiness amongst JavaNet customers. This individual will be responsible for:

Pro
developing customer satisfaction programs, monitoring happiness levels, responding to
customer concerns, and the general well being of every JavaNet customer.

3.8 Marketing Research

In 1998, a market survey was conducted to help evaluate the business viability prior to its
lan
inception. The survey was a valuable resource for establishing pricing and market needs. We
will continue to conduct a survey of our customers and potential customers on an annual
basis. Survey results will be used to create new marketing programs and monitor the
performance of current marketing programs.
gP

4.0 Financials, Budgets, and Forecasts

The marketing plan is built on these truths:

1. The marketing budget is based on a percentage of sales value. Currently, that value is
tin

set at 20%.
2. Building a strong brand and brand loyalty is critical to the success of JavaNet.
3. Marketing is a critical component of the JavaNet business plan.
4. The relationship between marketing dollars spent and revenues generated is positive
only to a certain point. We don't feel that a marketing budget based on 20% of sales is
rke

close to that point where additional marketing dollars spent won't create additional
revenue. If we can manage, we plan to spend more than 20% of sales on marketing in
future years. However, we want to keep this relationship in mind as we consider
spending more on marketing efforts.
5. Our understanding of the need for strong branding and emphasis on marketing gives
us a competitive edge over other cafes in our area and potential competitors.
Ma

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 12
 JavaNet Internet Cafe

4.1 Break-even Analysis

le
JavaNet is operating in an industry capable of supporting high gross margins. Variable costs in
relationship to per-unit revenues are low. Variable costs are equal to roughly 25% of per-units
revenues. It is our hope that as we move into the future and continue to build relationships

mp
with our suppliers, this value will decrease further, approaching a value of 20%.

Fixed costs for JavaNet equal almost $7,500. Fixed costs include: payment of debt, facility
lease costs, hardware costs, and other costs JavaNet must maintain on a monthly basis. These
costs are fixed and aren't impacted by an increase or a decrease in sales.

Sa
Currently, JavaNet will break even at a monthly sales point of $10,000.

Break-even Analysis

Pro
$8,000
$6,000
$4,000
$2,000
$0
($2,000)
lan
($4,000)
($6,000)
($8,000)

0 1000 2000 3000 4000 5000

Monthly break-even point
gP

Break-even point = where line intersects with 0

tin

Table: Break-even Analysis

Break-even Analysis

Monthly Units Break-even 2,986

Monthly Revenue Break-even $10,002
rke

Assumptions:
Average Per-Unit Revenue $3.35
Average Per-Unit Variable Cost $0.84
Estimated Monthly Fixed Cost $7,500
Ma

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 13
 JavaNet Internet Cafe

4.2 Sales Forecast

le
Revenues for the first year of operation are based on an almost 10% growth rate from month
to month. This is an aggressive estimate, but we feel that our strong emphasis on marketing
will have positive results. Annually, beyond the first year of operations, we're predicting a

mp
growth rate of roughly 10%. We'll have a better idea of potential growth rate beyond year one
as we make our way through our first year. The plan will be updated as we receive more
information.

Sa
Sales Monthly

$50,000

Pro
$40,000
Coffee (based on average)
$30,000 Specialty Drinks (based on average)
E-mail Memberships
$20,000 Hourly Internet Fees
Baked Goods (based on average)
$10,000
lan
Other
$0
gP
tin
rke
Ma

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 14
 JavaNet Internet Cafe

Table: Sales Forecast

le
Sales Forecast
2001 2002 2003 2004 2005
Unit Sales
Coffee (based on average) 16,230 17,853 19,639 21,602 23,763

mp
Specialty Drinks (based on average) 9,129 10,042 11,047 12,151 13,366
E-mail Memberships 12,173 13,390 14,729 16,202 17,822
Hourly Internet Fees 60,255 66,280 72,908 80,199 88,219
Baked Goods (based on average) 54,777 60,255 66,280 72,908 80,199
Other 0 0 0 0 0
Total Unit Sales 152,564 167,820 184,602 203,062 223,368

Sa
Unit Prices 2001 2002 2003 2004 2005
Coffee (based on average) $1.00 $1.00 $1.00 $1.00 $1.00
Specialty Drinks (based on average) $2.00 $2.00 $2.00 $2.00 $2.00
E-mail Memberships $10.00 $10.00 $10.00 $10.00 $10.00
Hourly Internet Fees $2.50 $2.50 $2.50 $2.50 $2.50
Baked Goods (based on average) $1.25 $1.25 $1.25 $1.25 $1.25
Other $0.00 $0.00 $0.00 $0.00 $0.00

Pro
Sales
Coffee (based on average) $16,230 $17,853 $19,639 $21,602 $23,763
Specialty Drinks (based on average) $18,259 $20,085 $22,093 $24,303 $26,733
E-mail Memberships $121,726 $133,899 $147,289 $162,018 $178,219
Hourly Internet Fees $150,636 $165,700 $182,270 $200,497 $220,547
Baked Goods (based on average) $68,471 $75,318 $82,850 $91,135 $100,248
Other $0 $0 $0 $0 $0
Total Sales $375,323 $412,855 $454,141 $499,555 $549,510
lan
Direct Unit Costs 2001 2002 2003 2004 2005
Coffee (based on average) $0.50 $0.50 $0.50 $0.50 $0.50
Specialty Drinks (based on average) $2.50 $2.50 $2.50 $2.50 $2.50
E-mail Memberships $0.63 $0.63 $0.63 $0.63 $0.63
Hourly Internet Fees $0.31 $0.31 $0.31 $0.31 $0.31
Baked Goods (based on average) $0.00 $0.00 $0.00 $0.00 $0.00
Other $0.00 $0.25 $0.25 $0.25 $0.25
gP

Direct Cost of Sales

Coffee (based on average) $8,115 $8,927 $9,819 $10,801 $11,881
Specialty Drinks (based on average) $22,824 $25,106 $27,617 $30,378 $33,416
E-mail Memberships $7,669 $8,436 $9,279 $10,207 $11,228
Hourly Internet Fees $18,679 $20,547 $22,601 $24,862 $27,348
Baked Goods (based on average) $0 $0 $0 $0 $0
Other $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $57,286 $63,015 $69,317 $76,248 $83,873
tin

4.3 Expense Forecast

The marketing budget will consistently equal approximately 20% of sales. One of our strongest
rke

strengths is our marketing and brand building capabilities, and the aggressive marketing
budget is a reflection of the importance we attribute to our marketing activities.

Currently, the marketing budget beyond year one remains set at 20% of sales. It is our hope
to increase this budget should sales and efficiencies of scale allow us to do so.
Ma

Explanation of Major Marketing Expenses:

• Local TV spots... In our first year of operations, we will spend $23,000 on TV spots.
TV spots allow us to reach a large audience and effectively target our market.
• Print Materials... Print materials always require a significant budget. They include:
flyers, literature distributed internally, novelties for customers, coupons, and anything
else we can squeeze into this budget.
• Local Newspapers... An important part of our marketing efforts. Newspapers ads will

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 15
 JavaNet Internet Cafe
give us a vehicle for consistently getting our message/brand in front of a large number
of potential customers. We believe this vehicle will get our message to seniors, which

le
make up a large portion of our target market. In addition, the business section will
provide us with a means for communicating with our business customers.
• Local Radio Spots... These are an inexpensive way to secure a large number of daily
impressions.

mp
• JavaNet Events... This will include local radio and TV events where radio and TV
stations broadcast from the JavaNet site offering freebies to first-time customers for
stopping by. JavaNet will also run educational programs and community events
throughout the year.
• Customer Happiness Representative... This employee will monitor the level of
happiness amongst JavaNet customers. They will be responsible for: developing

Sa
customer satisfaction programs, monitoring happiness levels, responding to customer
concerns, and the general well being of every JavaNet customer.

Monthly Expense Budget

Pro
$5,000

$4,500

$4,000

$3,500
lan
$3,000
Local TV Spots
$2,500
Print Materials
$2,000
Other
$1,500

$1,000
gP

$500

$0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
tin

Table: Marketing Expense Budget

Marketing Expense Budget 2001 2002 2003 2004 2005

Local TV Spots $23,000 $25,300 $27,830 $30,613 $33,674
Print Materials $6,750 $7,425 $8,168 $8,984 $9,883
rke

Other $3,300 $3,630 $3,993 $4,392 $4,832

------------ ------------ ------------ ------------ ------------
Total Sales and Marketing Expenses $33,050 $36,355 $39,991 $43,990 $48,389
Percent of Sales 8.81% 8.81% 8.81% 8.81% 8.81%
Ma

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 16
 JavaNet Internet Cafe

4.4 Linking Sales and Expenses to Strategy

le
Our marketing expenses are tied directly to our sales revenue. As sales increase, the
marketing expenses will increase. Currently our marketing expenses equal roughly 20% of
sales, and we hope to increase that value in the future. Our programs will be monitored for

mp
efficiency and return on investment. Most notably, we want to pay close attention to the value
of the "Customer Happiness Representative." This component of our marketing budget is
expensive, and we want to track the value of the program to make sure we're optimizing our
budget. Periodically, we will survey our customers to determine the effectiveness of our
programs, and we'll adjust the marketing mix appropriately based on our findings.

Sa
Sales vs. Expenses Monthly

$50,000

Pro
$45,000

$40,000

$35,000

$30,000

$25,000 Sales
Expenses
lan
$20,000

$15,000

$10,000

$5,000

$0
gP

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

4.5 Contribution Margin

tin

The Contribution Margin chart and table presents a strong outlook for JavaNet's first year of
operations.

1. Sales increase an average of 10% per month in the first year.

rke

2. Contribution margin runs at roughly 50%.

3. The marketing budget is consistently based on 20% of total revenue.
4. A strong focus on local TV and radio is apparent in the expense breakdown.
5. The marketing budget is spread evenly throughout the year.
Ma

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 17
 JavaNet Internet Cafe

le
Contribution Margin Monthly

mp
$40,000

$35,000

$30,000

$25,000

Sa
$20,000

$15,000

$10,000

Pro
$5,000

$0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Table: Contribution Margin

lan
Contribution Margin
2001 2002 2003 2004 2005
Sales $375,323 $412,855 $454,141 $499,555 $549,510
Direct Cost of Sales $57,286 $63,015 $69,317 $76,248 $83,873
Other Variable Costs of Sales $3,000 $3,000 $3,000 $3,000 $3,000
------------ ------------ ------------ ------------ ------------
gP

Total Cost of Sales $60,286 $66,015 $72,317 $79,248 $86,873

Gross Margin $315,036 $346,840 $381,824 $420,306 $462,637

Gross Margin % 83.94% 84.01% 84.08% 84.14% 84.19%

Marketing Expense Budget 2001 2002 2003 2004 2005

Local TV Spots $23,000 $25,300 $27,830 $30,613 $33,674
Print Materials $6,750 $7,425 $8,168 $8,984 $9,883
tin

Other $3,300 $3,630 $3,993 $4,392 $4,832

------------ ------------ ------------ ------------ ------------
Total Sales and Marketing Expenses $33,050 $36,355 $39,991 $43,990 $48,389
Percent of Sales 8.81% 8.81% 8.81% 8.81% 8.81%

Contribution Margin $281,986 $310,485 $341,833 $376,317 $414,249

Contribution Margin / Sales 75.13% 75.20% 75.27% 75.33% 75.39%
rke

5.0 Controls

The goal of this marketing plan is to outline the strategies, tactics, and programs that will
make the sales goals outlined in the JavaNet business plan a reality in the year 2000. We have
Ma

these marketing obstacles to face:

• The creation of a unique, innovative, upscale atmosphere that will differentiate JavaNet
from other local coffee shops and future Internet cafes.
• The establishment of JavaNet as a community hub for socialization and entertainment.
• The creation of an environment that won't intimidate the novice user. JavaNet will
position itself as an educational resource for individuals wishing to learn about the
benefits the Internet has to offer.

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 18
 JavaNet Internet Cafe

Our marketing efforts will be focused on building the image outlined above. We have

le
milestones and sales goals to meet and a business plan outlining our first and second year of
business in detail. It will be critical to use this marketing plan and the JavaNet business plan as
living/working documents. We can't allow them to sit in a file. They must be used as a map for
the future success of JavaNet.

mp
5.1 Implementation Milestones

Sa
The milestones chart below outlines key dates that the marketing team must meet. The
milestones table includes both sales goals and deadlines for major projects that impact the
programs outlined in the Marketing Expense Budget. Each milestone is assigned a manager
and that manager has ownership of the task and is responsible for its success. We will track
our successes and failures by reviewing planned-vs-actual results. Successes and failures will
be reviewed and addressed and a quarterly basis.

Pro
Table: Milestones

Milestones

Advertising Start Date End Date Budget Manager Department

TV Ad Creative 1/15/1999 2/1/1999 $500 Cale
Radio Spot 1 Creative 1/15/1999 2/1/1999 $250 Cale
lan
Radio Spot 2 Creative 2/1/1999 2/10/1999 $250 Cale
Newspaper Ad Creative 1/1/1999 1/5/1999 $75 Cale
Other
Total Advertising Budget $1,075
PR Start Date End Date Budget Manager Department
Customer Happiness Representative
1/15/1999 2/1/1999 $500 Cale
Prog. 1
Other
gP

Total PR Budget $500

Direct Marketing Start Date End Date Budget Manager Department
JavaNet Event 1 Creative 2/1/1999 2/10/1999 $250 Cale
JavaNet Event 2 Creative 4/1/1999 4/10/1999 $300 Cale
Other
Total Direct Marketing Budget $550
Web Development Start Date End Date Budget Manager Department
Introduction to the Internet Class 1 1/15/1999 1/16/1999 $250 Cale
tin

Other
Total Web Development Budget $250
Other Start Date End Date Budget Manager Department
Customer Survey 3/1/1999 4/1/1999 $1,000 Cale
Other
Total Other Budget $1,000
rke

Totals $3,375

5.2 Marketing Organization

The founder of JavaNet, Cale Brockman, has a BS from the University of Oregon in Marketing
Ma

and Management and will head the marketing effort. Initially, there will only be one additional
member of the marketing team, the "Customer Happiness Representative." This position has
not yet been filled, but it is the first milestone that must be completed. The "Customer
Happiness Representative" will play a large role in implementing the different marketing
programs. A marketing manager will be hired during the third or fourth quarter if revenues
meet projections.

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 19
 JavaNet Internet Cafe

5.3 Contingency Planning

le
This marketing plan is just that, a plan. Plans don't always work out and we have to be ready
to deal with the likelihood that JavaNet won't make good on the projections outlined in this
plan. We also have to prepare ourselves for overwhelming success.

mp
The following are some possible scenarios:

Revenues exceed projections - A serious increase in revenues over projections will give us
an opportunity to increase our marketing budget above the allocated 20%. We'll be able to
hire the marketing manager earlier, and we'll be able to provide more equipment and possibly

Sa
add an additional location.

Revenues miss projections - We have to be prepared for this possibility. If we miss our
projections, we simply have to re-double our marketing efforts. The danger in this scenario is
that the first reaction to missed projections is to decrease spending, particularly marketing

Pro
expenses. We can't do that! We have to get our message out to the target market, and we
can't do that if we stop spending on marketing. Additional capital infusions may become
necessary and that possibility is detailed in the business plan.

Internet side of business plays a lesser role - Our customers might not be willing to pay
for Internet access or JavaNet memberships as Internet access costs and hardware costs
continue to fall. If this scenario materializes, we will need to move our focus to beverages and
pastry items, perhaps even providing deli-style lunches. Internet services in the scenario
lan
would still play an important role in attracting customers; we'd just have to charge less and
move our numbers around to accommodate this trend.
gP
tin
rke
Ma

Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 20
 Appendix

Appendix Table: Sales Forecast

Sales Forecast
Jan Feb Mar Apr May Jun Jul Aug Sep

p l e
Oct Nov Dec

m
Unit Sales
Coffee (based on average) 0% 800 840 882 988 1,106 1,250 1,413 1,526 1,648 1,780 1,922 2,076
Specialty Drinks (based on average) 0% 450 473 496 556 622 703 795 858 927 1,001 1,081 1,168

a
E-mail Memberships 0% 600 630 662 741 830 938 1,060 1,144 1,236 1,335 1,442 1,557
Hourly Internet Fees 0% 2,970 3,119 3,274 3,667 4,107 4,641 5,245 5,664 6,118 6,607 7,135 7,706

S
Baked Goods (based on average) 0% 2,700 2,835 2,977 3,334 3,734 4,219 4,768 5,149 5,561 6,006 6,487 7,006
Other 0% 0 0 0 0 0 0 0 0 0 0 0 0
Total Unit Sales 7,520 7,896 8,291 9,286 10,400 11,752 13,280 14,342 15,489 16,729 18,067 19,512

o
Unit Prices Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Coffee (based on average) $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00

r
Specialty Drinks (based on average) $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00 $2.00
E-mail Memberships $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00 $10.00

P
Hourly Internet Fees $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50
Baked Goods (based on average) $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25 $1.25
Other $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

n
Sales
Coffee (based on average) $800 $840 $882 $988 $1,106 $1,250 $1,413 $1,526 $1,648 $1,780 $1,922 $2,076
Specialty Drinks (based on average) $900 $945 $992 $1,111 $1,245 $1,406 $1,589 $1,716 $1,854 $2,002 $2,162 $2,335

la
E-mail Memberships $6,000 $6,300 $6,615 $7,409 $8,298 $9,377 $10,596 $11,443 $12,359 $13,347 $14,415 $15,568
Hourly Internet Fees $7,425 $7,796 $8,186 $9,168 $10,269 $11,604 $13,112 $14,161 $15,294 $16,517 $17,839 $19,266
Baked Goods (based on average) $3,375 $3,544 $3,721 $4,167 $4,668 $5,274 $5,960 $6,437 $6,952 $7,508 $8,108 $8,757
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

P
Total Sales $18,500 $19,425 $20,396 $22,844 $25,585 $28,911 $32,670 $35,283 $38,106 $41,154 $44,447 $48,002

Direct Unit Costs Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Coffee (based on average) 0.00% $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50

g
Specialty Drinks (based on average) 0.00% $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50 $2.50
E-mail Memberships 0.00% $0.63 $0.63 $0.63 $0.63 $0.63 $0.63 $0.63 $0.63 $0.63 $0.63 $0.63 $0.63

n
Hourly Internet Fees 0.00% $0.31 $0.31 $0.31 $0.31 $0.31 $0.31 $0.31 $0.31 $0.31 $0.31 $0.31 $0.31
Baked Goods (based on average) 0.00% $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

i
Other 0.00% $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25

t
Direct Cost of Sales
Coffee (based on average) $400 $420 $441 $494 $553 $625 $706 $763 $824 $890 $961 $1,038

e
Specialty Drinks (based on average) $1,125 $1,181 $1,240 $1,389 $1,556 $1,758 $1,987 $2,146 $2,317 $2,503 $2,703 $2,919
E-mail Memberships $378 $397 $417 $467 $523 $591 $668 $721 $779 $841 $908 $981

k
Hourly Internet Fees $921 $967 $1,015 $1,137 $1,273 $1,439 $1,626 $1,756 $1,896 $2,048 $2,212 $2,389
Baked Goods (based on average) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

r
Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Subtotal Direct Cost of Sales $2,824 $2,965 $3,113 $3,487 $3,905 $4,413 $4,986 $5,385 $5,816 $6,281 $6,784 $7,327

M a
Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 21
 Appendix

Appendix Table: Contribution Margin

Contribution Margin
Jan Feb Mar Apr May Jun Jul Aug Sep

p l e
Oct Nov Dec

m
Sales $18,500 $19,425 $20,396 $22,844 $25,585 $28,911 $32,670 $35,283 $38,106 $41,154 $44,447 $48,002
Direct Cost of Sales $2,824 $2,965 $3,113 $3,487 $3,905 $4,413 $4,986 $5,385 $5,816 $6,281 $6,784 $7,327
Other Variable Costs of Sales $0 $0 $0 $0 $0 $0 $500 $500 $500 $500 $500 $500

a
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Cost of Sales $2,824 $2,965 $3,113 $3,487 $3,905 $4,413 $5,486 $5,885 $6,316 $6,781 $7,284 $7,827

S
Gross Margin $15,676 $16,460 $17,283 $19,357 $21,680 $24,498 $27,183 $29,398 $31,790 $34,373 $37,163 $40,176
Gross Margin % 84.74% 84.74% 84.74% 84.74% 84.74% 84.74% 83.21% 83.32% 83.42% 83.52% 83.61% 83.70%

o
Marketing Expense Budget Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Local TV Spots $0 $2,000 $0 $2,000 $0 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $4,000

r
Print Materials $500 $500 $500 $500 $500 $500 $500 $500 $500 $750 $1,000 $500
Other $250 $100 $250 $100 $250 $500 $250 $500 $250 $500 $250 $100

P
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Sales and Marketing Expenses $750 $2,600 $750 $2,600 $750 $3,500 $3,250 $3,500 $3,250 $3,750 $3,750 $4,600
Percent of Sales 4.05% 13.38% 3.68% 11.38% 2.93% 12.11% 9.95% 9.92% 8.53% 9.11% 8.44% 9.58%

n
Contribution Margin $14,926 $13,860 $16,533 $16,757 $20,930 $20,998 $23,933 $25,898 $28,540 $30,623 $33,413 $35,576
Contribution Margin / Sales 80.68% 71.35% 81.06% 73.36% 81.81% 72.63% 73.26% 73.40% 74.90% 74.41% 75.17% 74.11%

P la
i n g
e t
a r k
M
Copyright © Palo Alto Software, Inc. 1995-2007 All rights reserved. Not for resale, reproduction, publication, or distribution. www.paloalto.com Page 22