Video Store Marketing Plan

Independent Choice Flicks

Situation Analysis

2.0 Situation Analysis

ICF has just begun their first year of operation. A comprehensive marketing plan will be instrumental in developing visibility to ensure future profitability. ICF offers a unique selection of "artsy," non-commercial movie rentals. This selection differs considerably from the normal stock that Blockbuster would carry.

2.1 Market Summary

ICF has collected good information about their market and knows a great deal of information about their archetype customer. ICF will leverage this information to determine how to better communicate with and serve their customers.

Target Markets



Market Analysis

Market Analysis
		2001	2002	2003	2004	2005
Potential Customers	Growth						CAGR
Under 30	12%	36,000	40,320	45,158	50,577	56,646	12.00%
Over 30	9%	28,500	31,065	33,861	36,908	40,230	9.00%
Other	0%	0	0	0	0	0	0.00%
Total	10.70%	64,500	71,385	79,019	87,485	96,876	10.70%

2.1.1 Market Demographics

The profile for the ICF customer consists of the following geographic, demographic, and behavior factors:

Geographics

• The immediate geographic target is the city of Ann Arbor with a population of 123,000.
• A 15 mile radius is in need of ICF's services.
• The total targeted population is estimated at 64,500.

Demographics

• Male and female.
• Ages 18-55. This age range draws off a combination of university students and locals within the community.
• Have (or are getting) a college education and some with graduate degrees.
• An income over $40,000 (except the students who earn far less but have a decent amount of disposable income).
• Non-conventional individuals.

Behavior Factors

• Enjoy alternative, or less commercial, movie options.
• Prefer to be stimulated intellectually when viewing their films.
• Participate in cultural activities.

2.1.2 Market Needs

ICF is providing the customer with a wide range of high quality film rental options. ICF seeks to fulfill the following benefits that are important to their customers:

• Selection: A wide range of rental options that are unavailable at the larger, dominant rental chains.
• Accessibility: All rentals are available from ICF's centrally located storefront. Additionally, ICF is open a wide range of hours to accommodate customer's various schedules.
• Customer service: The patron will be impressed with the level of attention that they receive.
• Competitive pricing: All rentals will be priced competitively relative to the competition.

2.1.3 The Market and Trends

ICF is a specialty movie rental store that competes in the broader movie rental business. The industry can be characterized as the "big two," Hollywood Video and Blockbuster. To be sure, there are some independent video rental stores, generally in small neighborhoods and towns, but in general, the big gorillas control everything and target the middle, the mainstream.

The movie rental business can be further characterized by selection and rental turnover. If a store offers a good selection and has a large number of rental turnovers, then it is likely going to be successful. This is the gorilla's strategy. They support this strategy even more by selling some of their rentals as they become less popular to be able to reinvest the money into the newest releases. This last strategy only works with the mainstream market and not ICF's market because the mainstream market is attracted to what is new, the current releases. Once something has been out for a while, interest wanes. With ICF customers, the age of the video is irrelevant, it is the thematic quality, irrespective of popularity and newness that dictates acceptance.

There are two major chains, Blockbuster and Hollywood Video that are expanding throughout America, often at the expense of the "mom and pop" outfits who are unable to compete against the giants. Typically the giants will enter a town and over time drive the local, independently-owned shops out of business because of their large selection and commercialization that people favor. Blockbuster and Hollywood Video however only address one segment (albeit the major one) of the population, the segment that prefers commercial releases.

Market Forecast



2.1.4 Market Growth

In 2000, the video rental industry had revenues exceeding $7.3 billion dollars. The industry is forecasted to grow at 9% for the next several years. One major reason for this growth is the increasing costs of seeing movies out in theatres. It can cost upwards of $20-$25 for two people to see a movie in the theatre. These rising costs have driven demand for the video rental industry, which offers far more reasonable rates and a wider selection, although not as cutting edge.

Target Market Growth



2.2 SWOT Analysis

The following SWOT analysis captures the key strengths and weaknesses within the company, and describes opportunities and threats that ICF faces.

2.2.1 Strengths

• Strong relationships with distributors.
• Excellent staff who are well informed and customer attentive.
• A centrally-located store front.
• An unmatched selection.

2.2.2 Weaknesses

• The struggle to raise brand awareness.
• A limited budget to acquire customers.
• Not having the buying power that the giants have, increasing acquisition costs.

2.2.3 Opportunities

• A growing rift in the market between artsy and commercial films and the corresponding viewers.
• The opportunity to decrease customer acquisition costs over time as more customers are acquired through referrals.
• The ability to leverage the fact that the "giants" ignore the majority of the alternative/intellectual population segment.

2.2.4 Threats

• Competition from the giants if they decide to change their course and address the alternative crowd.
• A significant increase in movie theatre technology that makes the in-the-movie experience more difficult to replicate at home.
• Increased popularity of independent and foreign films, ensuring that the giants carry these titles.

2.3 Competition and Buying Patterns

Currently in Ann Arbor there are two different types of competitors:

1. The industry gorillas: This refers to Hollywood Video and Blockbuster. For all intent and purposes these two are indistinguishable. Both are large and very corporate in the sense that every store is the same, just like a McDonalds. Both stores compete on location, there is little that differentiates them. One guarantees that new releases will always by in stock, but you only get them for a two day rental. The other does not guarantee them in stock, but you get them for five days. For the gorillas, they concentrate the most energy on the new releases, this is what their customers seem to want.
2. Local video rentals: These stores are small, locally-owned companies that typically cater to a neighborhood. Generally, they do not specialize in any one thing, they usually have a wide range of offerings and the bulk of their customers live within blocks of the store. Ann Arbor has several of these.

People make video rental decisions based on a few factors, typically selection and convenience. If they want selection of the latest and most popular movies they go to the gorillas. If they do not rent movies that often and are more interested in convenience then they might visit the local video store.

2.4 Service Offering

ICF will provide Ann Arbor with an alternative movie rental store, a service that is not yet offered in Ann Arbor. The current offerings of typical rental stores are based on popular, commercial releases. There is a market for alternative releases, evidenced by the popularity of the Monarch Arts Cinema which shows this exact genre of movies in a first run movie theatre format. In essence, ICF will be the home extension of the Monarch.

2.5 Keys to Success

• Creative selection.
• Passionate employees.
• Professionalism.
• Customer centric business model.

2.6 Critical Issues

ICF is still in the speculative stages as a retail establishment. Its critical issues are to continue to take a moderate fiscal approach; expand not for the sake of expansion but because it makes fiscal sense to.