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Perspectives of the Perfume by Design - Research Proposal Example

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The paper «Perspectives of the Perfume by Design” believes the company has all the necessary resources to build a successful business in the Mayfair region, London. The offer of a new fragrance, having no analogs in the market, and the “do-it-yourself” concept will contribute to brand awareness. …
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Perspectives of the Perfume by Design
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Developing a Small Business Perfume By Design CONTENT PAGE MANAGEMENT STRUCTURE……………………………………………… 4 The Management Hierarchy at Perfume By Design………………………….... 5 Legal and Tax Issues…………………………………………………………… 6 Corporate Legalities……………………………………………………………. 7 Tax Structure…………………………………………………………………… 7 PRODUCT AND SERVICE…………………………………………………... 7 SALES PROPOSALS…………………………………………………………. 8 Market Size – Demographic and Geographic Segmentation…………………… 9 Psychographic Segmentation…………………………………………………… 9 PROMOTIONAL MIX………………………………………………………… 10 FINANCIAL PROPOSAL…………………………………………………….. 14 CONCLUSION………………………………………………………………… 19 Executive Summary Perfume By Design is an upscale, unique fragrance laboratory housed in the Mayfair/London region catering to demographic markets between the ages of 25 and 35 in a unique, do-it-yourself environment (by appointment) to create unique fragrances and experience the composition of quality fragrance varieties. This start-up business will be funded by the two owners of the business, which will minimise long-term risk to the business in relation to loan liabilities. The company’s marketing focus will be direct mailing and online advertisements, cooperative marketing efforts with local retailers and businesses, as well as vendor booths for first-hand customer sampling. The business maintains excellent potential for first-year profitability, and beyond, and will make a lasting impression on the local community through its commitment to quality and service. Management Structure Due to the size of this start-up business, the management structure at Perfume By Design will consist of a typical top-down hierarchy, with a centralised management structure. The executive leadership consists of the two owners who will be responsible for the administrative functions at the company, handling all executive-level decision-making. In-store, the senior leadership function will be performed by a Deputy Manager, with all lower-level management and generic associates reporting directly to this manager. This centralised leadership hierarchy will ensure that adequate controls are in place in terms of in-store decision-making and will clearly illustrate the scope of authority granted to each position at Perfume By Design. The organisational structure of the business should be clearly designated (and posted) to leave no room for uncertainty about who at the business maintains authority1. THE MANAGEMENT HIERARCHY AT PERFUME BY DESIGN Employees at Perfume By Design, under the company’s stern focus toward creating an atmosphere of internal partnership, will be labeled as Scent Technologists and will be trained, prior to start-up, regarding scent combinations, how to deliver superior customer service, and how to effectively utilise the laboratory-environment equipment. Managers will be expected to comply with senior-level administrative policy and will be held accountable for compliance through incentive pay programmes or disciplinary actions in the event of non-compliance.2 This top-down management philosophy does not necessarily mean, in terms of establishing a positive culture, that managers and Scent Technologists will not receive flexibility for offering suggestions and contributing to the strategic goals of the company. In fact, the senior-level leaders will maintain a quality focus on the soft approach to managing human resources by continuously developing and coaching employees to succeed. Legal and Tax Issues All company representatives will be expected to comply with generic legislation regarding the equal treatment of employees under the following legal obligations proposed by UK government: Sex Discrimination Act of 1975 Race Relations Act Equality Act of 2006. Additionally, Perfume By Design must comply with health and safety regulations regarding the ensurement of maintaining a safe working environment for all employees under the Health and Safety at Work Act of 1974. This law “secures the health, safety and welfare of persons at work” and further “controls the emission into the atmosphere of noxious or offensive substances from premises”.3 The health and safety obligations of the company are exceptionally important for Perfume By Design as the majority of all business inventories involve various chemicals and substances necessary to create customised and unique perfume varieties for customers. In order to ensure compliance, as part of the start-up necessities for the business, an adequate system of ventilation and the establishment of a safety room will be implemented to ensure that the air is maintained without overwhelming chemical odors and to provide employees with a break room in the event of any negative sensations associated with a vast variety of chemical fragrances and substances. The ventilation system will be built to the highest standards for air disbursement in order to meet these legal guidelines. Though no chemicals will be used in the business which are harmful, Perfume By Design is aware that whenever chemicals are present there is the potential risk for adverse reactions in some individuals after prolonged exposure. Corporate Legalities Perfume By Design will take the form of a Private Limited Company, consisting of two owners in a 50/50 business proposal. The benefit of this structure is that it limits the liability to each owner in the event of massive financial losses in the new business venture. Because there is no plan to take the company public (FTSE trading), the Private Limited Company option is best-suited for leadership goals. Though setting up this type of business is often more costly, as it requires more extensive compliance to legal obligations, the long-term benefits of limited liability are suitable for the start-up business. Tax Structure Under this type of company, taxes will be accrued based on profits of the company and any measurable capital gains experienced during business operations year-per-year. The company will collect the necessary sales taxes required of UK law, not including VAT (value-added tax) as this particular tax does not apply to retail goods of this variety. Product and Service Perfume By Design will be set-up as both a laboratory for personalized customer fragrance development as well as that of a rather upscale perfume shop. Because the business will be developed in Mayfair (London), on Bond Street, which is home to some of the most exquisite boutiques and fashion designers in the region, the interior furnishings and artwork will reflect discriminating attitudes similar to other retail organizations in this district. Part of the service orientation is to help customers learn about the fine art of smell when one can explore and discover the secret of perfume leisure without being pressed into making a purchase. The products offered will vary from natural fragrance selections, to artificial fragrance varieties, to luxury scents at a higher price tag. All customers will need to schedule an appointment to utilise a one-hour session in which they can design their own, personalised scents which will be sold in specially designed, designer bottles. These sessions have a maximum guest capacity of three people per hour. Each scent will cost between £150-200 depending on customisation or fragrance variety. Sales Proposals Much to the benefit of Perfume By Design, there are currently no boutiques or specialised fragrance laboratories in the London region, giving the business a significant competitive edge. There are, however, several retail organisations including Gucci and Armani which are likely to carry their own branded perfumes as part of their retail offerings, however no organisation in this region offers services and products of this variety geared toward customised perfume creation. This gives Perfume By Design a unique opportunity to utilise creative marketing efforts in order to differentiate the business from any competition in the region. Market Size – Demographic and Geographic Segmentation The City of Westminster maintains a population total of 234,100, including over 7,000,000 million additional residents in the entire London area. Though it is unrealistic to assume that all of these residents in the surrounding Mayfair regions will be customers of Perfume By Design, it does tend to illustrate the enormous marketing potential for the company in reaching a wide variety of potential customers looking for a unique experience provided by the company. The company will be targeting 4,000 consumers between the ages of 25 to 35 under the A, B and C1 demographics under the ACORN model. Demographic group A represents upper middle class citizens with higher educational and professional credentials as well as higher income brackets. Group B represents the middle class citizen generally carrying middle management occupational credentials and average household incomes. Group C1 is the lower middle class citizen usually in low-level management positions or administrative support roles with less-than-moderate incomes. Groups A and B, based on the reputation and price tag associated with shops in Mayfair, will be the largest segments frequenting Perfume By Design. Psychographic Segmentation Because of the high volume of residents in the entire London area, as well as the regular international tourism which occurs in this region, Perfume By Design maintains virtually unlimited customer potential if the business can advertise and market efficiently. Perfume By Design, as a leader in upscale fragrance variety in a highly-trendy area of London, must position the business to focus on specific market segments, within the A,B,and C1 categories for the 25-35 year age groups, and market the business as an upscale company focused on satisfying the consumer behavioural patterns related to self-image and luxury. An appropriate positioning strategy for these affluent groups is to focus on price/quality or product class in most marketing efforts by further utilising the business’ close proximity to other affluent-oriented businesses in the region.4 The company’s marketing slogan, designed to build brand recognition and reinforce the firm’s commitment to upscale fragrances and varieties, will be Scents which endure forever. The 25-35 year-old segments sharing similar lifestyles such as being image-conscious and those drawn to follow fashion, are who will be targeted with the company’s marketing strategy. All print and online literature, through the development of the website, will be designed to reinforce these values to create a connection with Perfume By Design as a foremost leader in satisfying consumer needs related to these values. Promotional Mix The business has determined three specific promotional objectives which will be illustrated by the AIDA concept: 1. Direct Marketing - Perfume By Design will also maintain a heavy focus on relationship marketing, which involves building short-term customer relationships by providing superior quality products, extremely high levels of customer service, and will utilise customer relationship management (CRM) software to maintain a database which tracks specific information about customers who have already visited Perfume By Design. This will help in market analysis to track the various ages and purchases of different customer groups to determine whether the current inventory selections should be adjusted or whether the business is receiving new market visitation for an adjustment to current marketing strategies. This will act as an improvement to the business in the long-term and also create lasting relationships, through direct and online (email) marketing to keep Perfume By Design on the minds of customers and generate positive word-of-mouth at the same time. Though the implementation of CRM software represents a one-time investment of approximately £3,000-4,000, maintaining this database will allow for virtually unlimited electronic mailings to offer special promotions at virtually no cost to the business as it avoids postage costs. Customers are often enticed by incentives when deciding to visit a retail organisation (Schaefer, 2006), therefore this is a sound promotional strategy for cost-reduction and overall expected effectiveness based on theories of consumer behaviour. Awareness for our target segments at approximately 4,000 potential customers would be 30%, or 1,200 Interest is expected at approximately 20% or 240 Desire is anticipated at 20% or 48 Action is anticipated at 30% or 14 This would represent a significant achievement if direct advertising efforts achieved their intended results and would represent significant profitability to the business. 2. Cooperative Marketing Efforts – Creating relationships is not only about servicing customers and delighting them with service, it is also about establishing quality relationships with surrounding business leaders. All of the companies in the Mayfield region are operating in the pursuit of profitability, therefore the creation of pamphlets and brochures for distribution in other retail facilities would be appropriate marketing. As part of relationship-building, and for the utilisation of other local environments to advertise Perfume By Design, the company will allow other companies to leave local retail literature/marketing at Perfume By Design as part of cooperative marketing and community relationship building. 2500 copies, on one side of A4 paper, would cost the business approximately £138.5 This is intented to achieve instant recognition of the business and its new community and brand name. This is a relatively low cost method of establishing a presence at other local retailers and is considered a sound investment for reaching a wider variety of browsing and visiting customers to the Mayfair region. AIDA: Awareness for target markets of approximately 4,000 is anticipated at 40% or 1600 Interest is expected at 30% or 480 Desire is expected at 20% or 96 Action is anticipated at 20% or 19 The higher volumes of interest and anticipated action is due to Perfume By Design’s close proximity to other retailers and would reach higher volumes of customers due to the fact that they are already browsing close-by retailers looking for upscale merchandise. 3. Vendor Sampling Marketing – As another low-cost effort, the business anticipates making themselves visible in more than just the in-store environment by establishing sampling booths in the Mayfair region shopping malls whereby customers can preview the various scent options available for laboratory, personalised design. This would merely require achieving the authorisation of mall management officials to set up these booths, which could be achieved easily by appointment or telephone call. Any necessary permits for this work would be highlighted in these appointments, which the company could likely procure for minimal investment. During the booth presentation, customers would be invited, on the spot, to sign up for their appointments to make their own fragrances, which would only serve to enhance our reputation, expose our values related to customer service, and also build higher commitment to attending the one-hour fragrance sessions. AIDA: Awareness is expected at 60% for 4,000 visitors or 2,400 Interest is anticipated at 40% or 960 Desire is expected at 20% or 192 Action is expected at 20% or 38 These figures suggest that people will be more apt to commit to attending a personalised session at the company due to the nature of being exposed to Perfume By Design personnel. Success in these actions could greatly enhance profitability if committed customers sign up for these paid-for sessions. AIDA Cost (£) Action Sales 1 3,000 – 1 time fee 14 2,450 2 138 18 2,700 3 500 38 5,700 Total 3,638 70 10,850 This represents 298% gain in sales revenue generated by these activities over the cost of total investment. Clearly, the third promotional option, vendor booths, have the highest probability of success at boosting profitability. Cost and benefit analysis needed – you need to also take into account the costs of each promotion – do not forget your references. Financial Proposal The cash flow statement below illustrates the expected revenues earned through the course of business activities in the first year, starting in June 2009 to May 2010, illustrating sales and earnings figures for 2011 and 2012 as well: Cash Flow   FY 2010 FY 2011 FY 2012 Cash Received               Cash from Operations       Cash Sales £423,750 £463,125 £502,500 Cash from Receivables £118,101 £152,224 £165,349 Subtotal Cash from Operations £541,851 £615,349 £667,849         Additional Cash Received       VAT £0 £0 £0 Subtotal Cash Received £691,851 £615,349 £667,849         Expenditures FY 2010 FY 2011 FY 2012         Expenditures from Operations       Cash spending £68,000 £73,000 £78,000 Bill Payments £303,935 £360,460 £388,894 Subtotal Spent on Operations £371,935 £433,460 £466,894         Additional Cash Spent       VAT £0 £0 £0 Dividends £0 £0 £0 Subtotal Cash Spent £371,935 £433,460 £466,894         Net Cash Flow £319,916 £181,888 £200,955 Cash Balance £321,916 £503,805 £704,759 The cash flow statement illustrates expected revenues based on sales projections for each segment of business product, including natural, artificial, and luxury fragrance options. As illustrated by the statement, cash balance at fiscal year’s end 2010 is £321,916. The sales figures are justified by the sales forecast below: Sales Forecast   FY 2010 FY 2011 FY 2012 Unit Sales       Natural Fragrances 1,000 1,100 1,200 Artificial Fragrances 1,000 1,100 1,200 Luxury Fragrances 1,200 1,300 1,400 Total Unit Sales 3,200 3,500 3,800         Unit Prices FY 2010 FY 2011 FY 2012 Natural Fragrances £175.00 £175.00 £175.00 Artificial Fragrances £150.00 £150.00 £150.00 Luxury Fragrances £200.00 £200.00 £200.00         Sales       Natural Fragrances £175,000 £192,500 £210,000 Artificial Fragrances £150,000 £165,000 £180,000 Luxury Fragrances £240,000 £260,000 £280,000 Total Sales £565,000 £617,500 £670,000         Direct Unit Costs FY 2010 FY 2011 FY 2012 Natural Fragrances £61.25 £61.25 £61.25 Artificial Fragrances £52.50 £52.50 £52.50 Luxury Fragrances £80.00 £80.00 £80.00         Direct Cost of Sales       Natural Fragrances £61,250 £67,375 £73,500 Artificial Fragrances £52,500 £57,750 £63,000 Luxury Fragrances £96,000 £104,000 £112,000 Subtotal Direct Cost of Sales £209,750 £229,125 £248,500 At an anticipated sales volume, per year, of 3,200 of each fragrance variety, including the costs associated with the one-hour appointment bookings, represent approximately 80-85 units, per product category, to be sold monthly. At a price tag of between £150-200 based on type of fragrance sold, these are realistic sales volumes per month. This is taking into consideration the available market potential and the ability to procure the necessary raw materials, monthly, to satisfy customer demand. The cost of goods sold represents 35% for natural and artificial fragrances and 40% (all based on raw material chemical costs) for luxury fragrance selections. Break Even Analysis Break-even Analysis     Monthly Units Break-even 91 Monthly Revenue Break-even £16,090     Assumptions:   Average Per-Unit Revenue £176.56 Average Per-Unit Variable Cost £65.55 Estimated Monthly Fixed Cost £10,117 This break-even analysis illustrates that it will be necessary to sell at least 91 units of fragrance, of all varieties or combination thereof, in order to break even on all related business expenses including payroll, rent, utilities and other important financial obligations; or £16,090. The funds earned for this break-even analysis will come in the form of sales revenues. As it is forecasted for 8-10 perfume varieties (minimum) to be sold daily, this represents £52,500 monthly in sales estimates. This figure will allow for break-even to occur monthly with no problems. Start-Up Requirements Start-up     Requirements       Start-up Expenses   Legal £1,500 Stationery etc. £300 Insurance £2,000 Rent £3,500 Computers £1,600 Software Packages £400 Total Start-up Expenses £9,300     Start-up Assets   Cash Required £2,000 Start-up Inventory £20,000 Other Current Assets £45,000 Long-term Assets £8,000 Total Assets £75,000     Total Requirements £84,300 These figures represent the total costs of starting the business, which is expected to be approximately £84,300. The business will be receiving an initial investment, from both business leaders, at £150,000 each or a total of £300,000. These investment funds will come from the ownership and no other business or lending organisation, with much of these funds being returned to both owners in the event that start-up funding does not exceed the expected £84,300. The invested funds can also be utilised for early expansion of the business, based on preliminary success in year one, or to fund other business ventures related to Perfume By Design. Having the investment funds come directly from ownership accounts limits long-term risk to the business. Conclusion The business leadership believes that Perfume By Design maintains the necessary skills, funding, expertise and geographic location necessary to build a successful, contributing business to the Mayfair/London region. Offering a new specialty product which is unparalleled in dimension will give the company significant competitive advantage and will serve a wide variety of customers with excellence both in fragrance and in customer service. The design-it-yourself concept will also give customers a hands-on experience which will only assist in building strong brand recognition and, hopefully, brand loyalty compared to other retailers in the region which carry minimal fragrance selections. Though many of the figures listed in the start-up estimates (i.e. cash flow, profit and loss statement) are estimations based on current market figures and supply chain pricing for chemical compounds, the leadership of Perfume By Design is satisfied that this business plan is both feasible and sound for long-term profitability. This is a viable business plan with the capital required for start-up and a stern focus on getting marketing activities completed which will bring in the necessary revenues. Customer focus and community involvement, long-term, will only serve to enhance the business. Profitability expectations are in-line with industry norms. Read More
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