AN EXAMPLE OF A MARKETING PLAN

SPREE WATCH MARKETING PLAN SUMMARY

Based on an evaluation of the watch market and our strengths, General will introduce the Spree watch.

SITUATION ANALYSIS
Half the buyers of branded fashion watches are between 18 and 34 years of age. This group, which purchases more watches per capita than those older, is our primary market segment. Watch purchases are more likely by consumers in the northeast and Midwest. Many purchases are expected to be impulse, requiring strong point-of-purchase support. Seventy percent of the market is concentrated with strong competition from Swatch, Fossil, Guess?, and Anne Kline. We have extensive experience in the manufacture of innovative, high quality, precision plastics and timing devices permitting us to offer the consumer value in a branded fashion watch. Additionally, we have experience distributing products into 75 percent of the outlets for branded fashion watches.

OBJECTIVES
The combination of a unique, cost-effective design allows us to establish a three percent market share in the first year. The Spree watch project will break-even in 1998.

MARKETING STRATEGIES
General will introduce a new product, the innovative Spree watch, using penetration pricing, extensive advertising, and expanded distribution in order to increase our revenues and growth rate.

ACTION PLAN
The Spree watch has strong product benefits compared to current market offerings. To achieve our objectives we will offer our unique watch in a variety of designs at a suggested retail price of $45. Our current distribution covers 75 percent of the market. At this time we will not expand our distribution to access the jewelry store retail channel. We will increase our sales force by 5 persons and add a sales trainer to support for our market plan. Advertising of one million dollars will emphasis the unique design of the watch and is weighted toward print and point-of-purchase displays. This and television advertising will be scheduled two-thirds in the first six months of the campaign. To achieve consumer awareness in the first year, our advertising voice share will be considerably higher than that of the four market leaders.

FINANCIAL ANALYSIS AND EXPECTED RESULTS

We expect first year sales of 8.5 million dollars and project break-even for the project in the first year.

CONTINGENCY PLANS
If the competition increases advertising or our sales are less than expected, we are prepared to add as much $500,000 to our advertising budget.

SPREE - THE MARKET PLAN

SITUATION ANALYSIS General's core business is industrial timing devices and consumer clocks, based on skills in manufacturing high quality timing movements and plastic casings. This market plan is based on providing consumers with a high quality, innovative watch. It will be offered in a variety of styles for both men and women. The casing and movement has other potential applications not discussed in this plan. Our 1995 profits of 30 million dollars represent 7.5 percent of total sales. Sales growth has slowed to a current level of 5 percent annually. Growth in current markets is expected to be limited. The Spree watch is one of several projects with the potential to improve General's growth rate. Market Analysis The Spree watch will compete directly with several other branded fashion watches. The market size for branded fashion watches is forecast to be $524 million retail dollars in 1998, growing to $721 million by 2002. Annual market growth is expected to exceed six percent through 2002, exceeding our current annual sales growth. Market Segments Table Error! Bookmark not defined.: Market Segments by Age Those under 35 years of age purchase slightly over 50 percent of all branded fashion watches as shown in the Table 1. The highest purchase 18-24 19% 13% 1.46 prevalence is those from 25 to 34 who purchase 74 percent more watches per capita than those the 25-34 33 19 1.74 average consumer. Purchase behavior is expected to differ among age segments and by gender. 35-54 35 40 0.88 Young females [18-24 years of age] are expected to be intense purchasers. This group is likely to be 55+ 13 29 0.45 very styling conscious. Women in the 25 to 34 age group will be our second significant segment, expected to buy more watches than any other age-sex segment.
AGE PERCENT OF WATCH BUYERS PERCENT OF POPULATION OVER 17 RELATIVE PURCHASE INDEX

Consumer purchases of branded fashion watches also vary by region as shown in Table 2. An index of relative watch sales by regions shows that sales are above average in the east north central, west north central, north central, and midatlantic states. Product introduction is likely to be more successful in the states in these regions. Table Error! Bookmark not defined.: Watch Sales by Region

REGION WATCH SALES

POPULATION %

INDEX OF WATCH SALES 1.33 0.94 1.15 0.71 1.00 1.14 1.20 0.83 0.83

Consumer Behavior Swatch has changed watch buying habits by encouraging ownership of multiple low-priced, carefully designed branded fashion watches. Brand switching and experimentation by consumers is easy for low priced watches, assuming availability. Consumers are very design oriented when buying branded fashion watches. Watch attributes that we consider most important include watch and band design, packaging, price, and durability. Distribution and display are very important in this market and can encourage impulse purchases for both personal use and as gifts.

ENC SA MA WEST WSC WNC NE ESC MOUNT

20% 16 15 15 10 8 6 5 5

15% 17 13 21 10 7 5 6 6

Consumers are reached through five types of outlets.. We currently have access to four of these channels, representing 75 percent of watch sales. Channel development is necessary to reach the total watch market. A majority of branded fashion watches are currently purchased at department stores. We will take advantage of our strong distribution through department, discount, and drug stores to assure widespread availability of Spree watches. Jewelry store channel development will be deferred until we are established in our traditional retail channels. Competitive Analysis Although there are fourteen competitors in this market, there is substantial concentration. Swatch, Fossil, Guess?, and Anne Kline are strong competitors, holding 70 percent of the market. Swatch and Fossil have strong manufacturing and distribution skills, while Guess? and Anne Kline have less extensive distribution networks but strong name recognition in fashion. Fossil and Swatch are strong at the lower price lines. Branded fashion watches are a relatively new product category. Although pioneered by Swatch, there is considerable opportunity for new entrants as demonstrated by Fossil and Guess?. Company Analysis General currently distributes products through channels accounting for 75 percent of watch sales. Branded fashion watch sales are growing faster than our current product lines. Our innovative product, product design skills, strong manufacturing skills, and experience in distributing consumer clocks provide an opportunity for entry and growth in this market. SWOT Analysis Strengths Innovative production methods provides the potential for new designs Experience in distribution channels for timepieces

Weaknesses No experience in distribution to jewelry stores No experience in marketing fashion products

Opportunities Large market Market growing faster than our current sales Consumer demand for fashion goods creates a demand for innovative products

Threats Strong competition with concentrated market shares Possibility of new market entries

OBJECTIVES

Market share of three percent of the branded fashion watch market in the first year [sales of over 8 million dollars]. Project break-even in 1998.

MARKETING STRATEGIES General will introduce a new product, the innovative Spree watch, using penetration pricing, extensive advertising, and expanded distribution in order to increase our revenues and growth rate. ACTION PLAN Product We will introduce between 30 to 40 different designs in the first year. One quarter of these will have a "metal" case, copying many of the traditional and modern metal designs. These are targeted at consumers 25 and over. We will design a series including licensed characters and unusual shapes for the market segment under 24 years of age. Swatch does not have exclusive licensing for Disney and Warner Brothers characters or Coke. By using these and others we will have a variety of product and character designs in our line. The most unusual aspect of our line will be some very unusual shapes. Several of these will be geometric; hexagon, trapezoid, oval, and diamond. For younger ages our technology allows the design of watches in the shapes of cartoon character faces.

Price The Spree watch will be sold for a suggested retail price of $45. We believe that we have product quality and feature advantages, encouraging the use of a price slightly exceeding Swatch. This pricing strategy, coupled with our efficient production methods, aids in achieving our relatively high market share for a new product entry. Distribution We will introduce Spree in the northeast but within the first year sell to the national market. With our current strong distribution channels nationwide covering 75 percent of watch sales, we will limit our potential if we restrict our distribution to specific regional markets. Although we do not currently have jewelry stores, our distribution will place watches in at least 75 percent of locations in the United States. We will use current normal distributor markups. Promotion Five new sales representatives will be added to assist in the development of new distribution outlets. A sales trainer will be hired to train the sales force in the new product. This will be within our $500,000 sales support budget based on an average salary and benefits cost of $100,000 for each position. The advertising level for the four leading firms can be compared by determining the ratio of voice share (% of total advertising dollars of $20 million) divided by the market share as shown in Table 3. Consumers will not know our brand; therefore, we will have to advertise more aggressively to achieve brand awareness. Although our market share goal in 1998 is three percent, we will set advertising at one million dollars. This will achieve an advertising voice/market index considerably higher than our competition. Table Error! Bookmark not defined.: Fashion Watch Advertising and Voice
COMPANY MARKET SHARE VOICE SHARE VOICE/ MARKET SWATCH FOSSIL GUESS? ANNE KLINE 20% 20% 20% 13% 28% 24% 21% 13% 1.4 1.2 1.05 1.9 ADVERTISING MILLION $ 5.5 4.8 4.2 2.5

SPREE PLAN

3%

5% [assumes same level of total advertising as last year]

5.0

1.0

Media will be targeted to our major market segments; women between 18 and 24 and between 25 and 34. Smaller amounts will be directed to other segments. FINANCIAL ANALYSIS AND EXPECTED RESULTS As shown in Tables 1 and 2 of the financial appendix, we expect to achieve a market share of three percent and sales of $8.5 million in the first year. The Spree watch project will break-even in the first year. We do not expect any watch technology breakthroughs during this period. Competition is expected to be based on design, price, and achieving widespread distribution, areas in which we expect to be very competitive. In conclusion, we will invest one million dollars in the Spree watch project. We can achieve sufficient market share to achieve our financial and marketing objectives. During the next five years the market is expected to grow and our costs are expected to decline with experience increasing unit contribution. Our greatest challenge will be tracking the market's tastes in watch design and meeting and leading these with creative and innovative designs. CONTINGENCY PLANS Table Error! Bookmark not defined.: Impact of Advertising Levels on Financial Results It is not expected that there will be increased price competition due to the entry of the Spree watch. $2,500,000 1998 $35.8 Increased advertising, however, might lead to an 3,000,000 1999 34.0 3,500,000 1999 30.4 increase in industry advertising. A sensitivity 4,000,000 1999 28.6 analysis of the effect of increased advertising on our break-even year and cumulative profits appears in Table 4. Increases in advertising in steps of an additional $500,000 dollars up to $4 million, assuming no additional gains in market share, have fairly limited effect on our performance. Therefore, in the event that there is increased industry advertising, we are prepared to increase our advertising by as much as $1,500,000 annually. Our increase advertising also will allow us to react to lower than expected consumer awareness, fewer distribution outlets than planned, or less than expected consumer acceptance of Spree watch.
TOTAL AD BUDGET BREAK EVEN YEAR NET PRESENT VALUE IN MIL. $

FINANCIAL APPENDIX
TABLE 1: PRO-FORMA INCOME STATEMENT AT $50 PRICE

CURRENT YEAR

1997 BEFORE

RESEARCH & DEVELOPMENT INVESTIGATION COSTS DEVELOPMENT COSTS DISCOUNT RATE PER YEAR

RELEASE $250,000 $750,000 12.00%

$50.00 SUGGESTED RETAIL PRICE $12.50 LESS RETAIL DISCOUNT (25%) $37.50 PRICE TO RETAIL $7.50 LESS WHOLESALE DISCOUNT (20%) $30.00 MFG SELLING PRICE

ANNUAL COSTS AND SALES PRODUCER'S PRICE PER UNIT VAR COSTS PER UNIT FIXED COSTS PER YEAR RETAIL SALES FORECAST [MIL $] INDUSTRY SALES PER YEAR [UNITS] COMPANY MARKET SHARE [UNITS] COMPANY SALES PER YEAR [UNITS]

1998 $30.00 $15.00 $2,000,000 $524 10,480,000 2.00% 209,600

1999 $30.00 $14.00 $2,000,000 $574 11,480,000 4.00% 459,200

2000 $30.00 $13.50 $2,000,000 $616 12,320,000 6.00% 739,200

2001 $30.00 $13.25 $2,000,000 $672 13,440,000 8.00% 1,075,200

2002 $30.00 $12.00 $2,000,000 $721 14,420,000 10.00% 1,442,000

INCOME STATEMENT SALES REVENUES VARIABLE COSTS FIXED COSTS PROFITS CUMULATIVE PROFITS NET PRESENT VALUE

BEFORE RELEASE

1998 $6,288,000 $3,144,000 $2,000,000 $1,144,000 $144,000

1999 $13,776,000 $6,428,800 $2,000,000 $5,347,200 $5,491,200

2000 $22,176,000 $9,979,200 $2,000,000 $10,196,800 $15,688,000

2001 $32,256,000 $14,246,400 $2,000,000 $16,009,600 $31,697,600

2002 $43,260,000 $17,304,000 $2,000,000 $23,956,000 $55,653,600

$1,000,000 ($1,000,000) $35,309,732

TABLE 2: PRO-FORMA INCOME STATEMENT AT $45 PRICE

CURRENT YEAR

1997 BEFORE

RESEARCH & DEVELOPMENT INVESTIGATION COSTS DEVELOPMENT COSTS DISCOUNT RATE PER YEAR

RELEASE $250,000 $750,000 12.00%

$45.00 SUGGESTED RETAIL PRICE $11.25 LESS RETAIL DISCOUNT (25%) $33.75 PRICE TO RETAIL $6.75 LESS WHOLESALE DISCOUNT (20%) $27.00 MFG SELLING PRICE

ANNUAL COSTS AND SALES PRODUCER'S PRICE PER UNIT VAR COSTS PER UNIT FIXED COSTS PER YEAR RETAIL SALES FORECAST [MIL $] INDUSTRY SALES PER YEAR [UNITS] COMPANY MARKET SHARE [UNITS] COMPANY SALES PER YEAR [UNITS]

1998 $27.00 $15.00 $2,000,000 $524 10,480,000 3.00% 314,400

1999 $27.00 $14.00 $2,000,000 $574 11,480,000 5.00% 574,000

2000 $27.00 $13.50 $2,000,000 $616 12,320,000 8.00% 985,600

2001 $27.00 $13.25 $2,000,000 $672 13,440,000 10.00% 1,344,000

2002 $27.00 $12.00 $2,000,000 $721 14,420,000 11.00% 1,586,200

INCOME STATEMENT SALES REVENUES VARIABLE COSTS FIXED COSTS PROFITS CUMULATIVE PROFITS

BEFORE RELEASE

1998 $8,488,800 $4,716,000 $2,000,000 $1,772,800 $772,800

1999 $15,498,000 $8,036,000 $2,000,000 $5,462,000 $6,234,800

2000 $26,611,200 $13,305,600 $2,000,000 $11,305,600 $17,540,400

2001 $36,288,000 $17,808,000 $2,000,000 $16,480,000 $34,020,400

2002 $42,827,400 $19,034,400 $2,000,000 $21,793,000 $55,813,400

$1,000,000 ($1,000,000)