Spectrum Limousine and Transportation

Proposal and Feasibility Study of Introducing a Customer Loyalty Program to the Current Business Model

Business Services Operations Research Event Lawrence High School DECA Chapter February 25-27, 2012 Lawrence High School 2525 Princeton Pike Lawrenceville, NJ 08648

Frank DiMartino Caitlyn McBride

Table of Contents I. Executive Summary.....1 II. Introduction.........2 A. Description of the business or organization...2 B. Description of the community...4 C. Description of the businesss target market.......5 III. Research Methods Used in the Study.....7 A. Rationale and description of selected research methodologies selected to conduct the research study.7 B. Process of conducting the selected research methods...9 IV. Findings and Conclusions of the Study......10 A. Findings of the research study..10 B. Conclusions based on the findings14 V. Proposed Strategic Plan...16 A. Goals/objectives and rationale...16 B. Proposed activities and timelines...17 C. Proposed budget....22 D. Proposed metrics to measure ROI, sales, traffic, customers......24 VI. Bibliography27

Figures and Charts: Figure 1: NJ Population Distribution Map....4 Figure 2: Population Distribution Graph...4 Figure 3: Timeline of Proposal..19 Chart 1: Sedan Rates, Upgrade Fees, and Hourly Rates...23 Figure 4: ROI Metric.....25

I. EXECUTIVE SUMMARY Spectrum Limousine and Transportation, a family owned and operated livery service, covers a service area that spans Mercer, Middlesex, and Somerset counties in New Jersey. Its headquarters is located in Ewing, NJ, a central location within its service area. Spectrum is half of a partnership, AAASLI Transportation Group, with AAA Taxi, making it a full service company. The fleet is very diverse with vehicles ranging from Town Cars and Stretch Limos to Toyota Priuses. Great service and a high level of professionalism are characteristic of Spectrum, always making it a customer favorite. Spectrum offers hotel, corporate, and airport transportation in conjunction with a service for personal endeavors like weddings and proms. Problem: The current economic problems have left no company unscathed, but small businesses have taken harder hits than most. The transportation industry never truly recovered from 9/11 when they lost not only countless corporate accounts, but American interest in travel as well. Spectrum, therefore, is facing many large competitors during a time when it is difficult to maintain profits. In order to overcome and persevere, Spectrums Operations Manager, Kevin Myers, knows that they have to capitalize on every opportunity possible. Customer loyalty programs are wildly popular and allow the business to retain customers, helping to cushion long run profits. These programs, therefore, are the next opportunity for Spectrum to gain an edge on its competitors. Research Methods: Extensive research through interview techniques and internet resources allowed for a thorough investigation into Spectrums needs and target market. We first explored Spectrums general business structure and habits, focusing on the perspective of potential clients. Then, we conducted a competitive analysis of Spectrums main competitors. The goal of this analysis was to determine the industrys current utilization of custo mer loyalty programs. The final part of our research involved a tour of Spectrums facilities and interview with the Operations Manager. This part of the research was key because it allowed us to tailor our ideas to Spectrums business philosophy and future objectives. Findings and Conclusions: At every stage of research, it was apparent those customer loyalty programs have a great deal of potential for Spectrum. Even though many other industries have embraced the programs, they are rare in the livery industry and none of Spectrums competitors utilize them. However, they present a unique opportunity to improve customer retention rates, which are typically low for pleasure travelers. Loyalty programs also have prospects within the corporate accounts because keeping an active account results in lower prices. Since Spectrums competitors have the ability to finance large marketing campaigns, it is important that Spectrum preserves and grows its market share through customer loyalty programs. Proposed Customer Loyalty Program: The Esteemed Travelers program is at the heart of our proposal. It is a tiered, points-based rewards program that has been designed differently for personal and corporate accounts. In order to implement the program, Spectrums software will be updated, also helping the convenience of driver and passengers at the same time. A small marketing campaign will accompany the program, but it will utilize free press in order to offset the costs of the software, keeping the program affordable. The points system was calculated following the principles of artificial advancement, maximizing Spectrums profit. To help attract new customers, we also propose a referral program to complement the rewards system. -1-

II. INTRODUCTION A. Description of the business or organization Spectrum Limousine and Transportation is a family owned and operated limo and taxi service operating in the Mercer, Middlesex, and Somerset counties of Central New Jersey. For over forty years, Spectrum has offered incredible services and amenities to its clients. Although originally started as a taxicab service in 1968, Spectrum has prospered to also include a luxury car service catered to a diverse customer base. As one-half of the AAASLI Transportation Group, Spectrum is partnered with AAA Taxi allowing them to maintain a relationship with their original taxicab roots while still specializing in luxury car service. Because of this partnership, Spectrum Limousine and Transportation and AAA Taxi are able to fulfill any potential needs of their customers. As a luxury car service, Spectrum offers transportation to corporate and special events ranging from weddings and proms to concerts and sporting events, along with transportation to airports and train stations. Spectrum is also one of only a handful of companies in New Jersey to offer an executive protection service for celebrities and corporate executives. These services are provided using a variety of vehicles including Lincoln Town Cars, Corporate Limousines, Super Stretched Limos, and Corporate Shuttle Buses. The four-door Town Cars offer accommodations for up Above: One of the multiple European sedans offered to Spectrums customers.

to two passengers while the Corporate Limousine offers seating for six. For larger groups, the Super Stretched Limos can accommodate eight to ten passengers and the Corporate Bus is able to transport up to thirteen individuals. In an effort to appeal to a wider clientele, Spectrum also -2-

offers three specialty vehicle options: Toyota Priuses, European sedans, and Cadillac Escalades. These vehicles enhance the appeal of the company since their unique features set them apart from traditional options. Customers wishing to reduce their carbon footprints find the Toyota Prius particularly attractive because it is a hybrid offering great gas mileage and reduced emissions. The increased gas mileage also reduces costs for Spectrum. For those wishing to experience greater legroom and a foreign flare, a European sedan is the perfect match. Among other models, both Audis and BMWs are offered. A great selection for travelers with a lot of luggage or a desire to travel in an SUV is the Cadillac Escalade. For many companies, the product presented to customers is a finished good such as a skateboard or a computer, however, Spectrum Limousines product is the service provided. As a result, Spectrum holds itself to the highest standards of service, ensuring every customer interaction is as positive as possible. A critical component to maintaining customer satisfaction is the quality of each employees training, attitude, and personality. Because Spectrum is a small, family-owned company among a vast array of larger competitors, they must utilize a personal touch to connect with customers and build loyalty. This strategy sets them apart from their competitors who offer similar vehicles but less appealing customer service. One customer remarks that she would like to thank [Spectrum] for sending me such a confident, capable, congenial and professional chauffeur who is not only always on time, but always dressed appropriately and sincere in his efforts as a driver and as person. I would like to commend your organization on a job well done. (Joanna Lear)

-3-

B. Description of the community (economic, geographic, demographic, and socioeconomic factors) Spectrum, because it is a fairly localized operation draws a loyal customer base from its surrounding community. In New Jersey, it proudly serves Mercer, Middlesex, and Somerset counties, in addition to fares as far reaching as the John F. Kennedy and La Guardia airports in New York City, NY as well as Philadelphia International Airport in Philadelphia, PA. With its headquarters located in Ewing, NJ, a central location in Mercer County, Spectrum is strategically located within its service areas. As depicted in the population distribution map to the Figure 1: NJ Population Density

right and the population density graph below, the three counties Spectrum serves are highly populated when compared to other parts of New Jersey and the United States. In fact, these three counties boast a combined population of approximately 1.5 million people (US Census Bureau). Figure 2: Population Distribution Graph

Persons per Square Mile

United States
New Jersey Somerset County Middlesex County Mercer County 0 500 1000 1500 2000 2500 3000

-4-

Middlesex and Mercer counties are far more densely populated than the state and national averages, while Somerset still holds its own far above the national and just under the state figures. Spectrums service area is also saturated with numerous companies, both large and small. Particularly in Princeton and along the Route 1 corridor, Spectrum has direct access to regional, national, and global corporate headquarters. Some of those companies include Novo Nordisk, Mercedes-Benz, Johnson & Johnson, Bristol Myers Squibb, and NRG Energy. This diversified set of well-established companies acts as a strong source of corporate accounts for Spectrum. Many of the corporations are even in the upper tier of Fortune 500 companies. Aside from the countless business plazas in their service area, a fairly large number of hotel chains such as: Hyatt, Westin, Double Tree, Holiday Inn, Hilton, and Marriott are located along Route 1. In total, there are eleven major hotels just along the Route 1 corridor and each hotel tends to capitalize on out-of-town travelers and executives who need transportation. In addition, the areas demographics lack certain characteristics than also allow Spectrum to prosper. Since the three counties within the service area are suburban and major airports are more than thirty minutes away, there is a lacking of car rental companies. Even though the area is popular for travelers, there market is not large enough to warrant dedicated rental services. This leaves many potential customers without transportation during their stay and suburban areas are not conducive to pedestrian travel. Therefore, car services are able to access a market that car rentals usually saturate. C. Description of the businesss target market Spectrum has several target markets due to both the large customer base it is exposed to and the great variety of services it offers. Its primary target market, however, consists of

-5-

corporations and other professional clients. One major secondary market is hotel guests and another is pleasure travelers. These three target markets account for a vast majority of Spectrums profit while its taxicab service ensures operational costs are covered. Even though these markets all utilize similar services, the marketability and promotional plan for each market differ. Spectrums primary market, without question, is corporate accounts. As opposed to personal accounts, businesses are reliable customers. Creating and maintaining a positive relationship with the companies in this market is a key to expanding Spectrums services. This market primarily consists of large businesses and corporations within the service area. Spectrum also targets several corporations located in New York City because all New York airports are within the service area. Spectrums definition of business also includes area universities and non-profits including the Robert Wood Johnson Foundation. These accounts are the most profitable for Spectrum since they tend to require car services on a regular basis. The most popular services for this primary market are executive protection, transportation to and from airports, and service to and from hotels. Another large part of this market is commuter travel. Providing business people transportation between their homes and train stations plays a large role in many corporate accounts. Most of these commuters also become part of other target markets, usually as pleasure travelers. Spectrums largest secondary markets, pleasure and hotel travel, also weigh heavily on profitability and success. Although these customers do not typically bring repeat business, they still are essential to Spectrum. These markets are where Spectrum focuses its promotion and advertising. Word of mouth and other cost effective organic strategies are especially effective and exceptional service given to one customer usually results in multiple referrals. Hotel guests

-6-

are targeted through agreements with the hotels themselves. Having the ability to make connections with their guests, many of whom do not have any means of transportation, is a vital part of this markets success. The several hotel chains in the service area and lack of car rental companies facilitate this market. Spectrum targets pleasure travelers and hotel guests because they primarily utilize ride-and-wait services. This brings in even more profit because revenue is made not just during travel, but between pickups as well since the customers must also pay for the time drivers spend waiting for them. Because of these factors, Spectrums secondary markets consist almost entirely of short-term relationships and a constant stream of new customers. Therefore, these markets require an increased amount of promotion in order to attract a steady influx of new business while their primary market focuses on cultivating existing relationships. The secondary markets have a larger and more diverse audience than the primary market, making it more difficult for Spectrum to accurately tailor its services for the consumer. This forces Spectrum to appeal to these markets through a large variety of options and the inclusion of personal service. III. RESEARCH METHODS USED IN THE STUDY A. Description and rationale of research methodologies selected to conduct the research study In order to understand the operations and analyze the feasibility of a successful customer loyalty program for Spectrum, various research studies were undertaken. After careful planning, the process settled into a three-pronged approach. This approach enabled us to accurately and thoroughly analyze both Spectrum and customer loyalty programs as the focuses of the first two prongs. Meanwhile, the third prong was the most integral in the development of our plan. It allowed us to aggregate the findings of the first two prongs into a single coherent plan, designed

-7-

to specifically optimize Spectrums profitability and growth. The conclusions we drew from the research studies ultimately materialized into a formal outline of a possible customer loyalty program for Spectrum Limousine. The first step was evaluating the utilization, benefits, and disadvantages of customer loyalty programs to Spectrums services in particular. We conducted a thorough investigation of into the structure and needs of Spectrum through analysis of the companys services, facilities, and current operations. The second prong of our research study determined the receptiveness of the industry to a customer loyalty program. Since the limousine industry is incredibly competitive, we conducted a competitive analysis of Spectrums largest competitors. The goal of this inquiry was to gauge the utilization of customer loyalty programs by other companies and to determine Spectrums strengths and weaknesses within the industry. The third prong of our study was designed to give us insight into the potential to promote and expand Spectrums services within the different target markets along with vision into the specific strategies required to successfully implement our program. We did this by determining Spectrums business plan and future goals, then tailoring our plan to fit with the philosophy of the company. The result of this segment of the study was a complete plan, created specifically for Spectrums business structure. Our rationale for the study was to gain enough knowledge about Spectrums operations, business structure, competitors, and customers as well as the general strategies and procedures involved with the implementation of effective customer loyalty programs within small businesses, enabling us to design a successful loyalty program for Spectrum. B. Process of conducting and selecting the selected research methods

-8Above: Spectrums website, Spectrumlimousine.com

The first prong of research allowed us to become familiar with the Spectrums services and operations, resulting in a better understanding of the advantages and disadvantages of a customer loyalty program for Spectrum. This analysis was conducted primarily utilizing Internet resources. Spectrums website offered a wealth of information about the cars and services it offers. It also allowed us to experience Spectrum from the perspective of a potential customer. We were able to gauge the interactiveness of the website and availability of existing discounts. In addition, we conducted a search using Google and looked into several of the top search results. This allowed us to discover reviews about the business from outside sources. The search results included car service directories and websites like Citysearch, a popular service that acts as a guide to discover small businesses within urban areas. The second research prong was also web-based, but it was aimed at discovering customer loyalty program usage within the limousine industry. We also needed to determine Spectrums strengths and weaknesses when compared with its local competitors. Spectrums main competition within its service area was found to be A-1 Limousine, King Limousine, and Olympic Airporter. They were determined through a Google search of limousine service princeton nj. A-1 Limousine was chosen because it is a similar size to Spectrum, King Limousine since it is a larger company, and Olympic Airporter because it operates as a smaller service than Spectrum. This combination of competitors served as a diverse sampling of the industry, providing us with valuable comparisons for our competitive analysis. We then examined each competitors website, noting both similarities and differences between each service and Spectrum. The third and final prong of our research study was conducted in a personal manner. We reached out to management at Spectrum and interviewed their Operations Manager, Kevin Myers, after touring their facilities. The interview was utilized as a tool to better understand

-9-

Spectrum from the owners perspective. The goal was to gain insight into business philosophy, business objectives, and operations goals. Our questions were focused on four major topics: currently loyalty rewards, description of operations, current activity within individual target markets, and objectives. The manager kindly answered all of our questions and also showed us how their computer systems operate, providing valuable insight. He went through the process converting a reservation into a pick-up and elaborated on how customer profiles are currently utilized. The following questions were asked in order to gain information on these topics. Interview Questions for Operations Manager Current Loyalty Rewards 1. What type of incentives, if any, do you offer your current customers? 2. Are there any incentives/rewards for new customers to utilize your service? 3. Which of your target markets are most responsive to current incentives? Description of Operations 1. Do you maintain customer profiles? Is there specific software that you use? 2. What information is stored on the customer profiles? 3. How is AAASLI Transportation structured and how closely related are you to AAA Taxi as a result? 4. What types of rates do you charge for your different services?

Current Activity within Target Markets 1. What kind of target markets do you have? 2. How would you describe your current customer retention rates for each target market? 3. What types of promotion, if any, do you use?

-10-

Objectives 1. Are there specific goals of a customer loyalty program that you would personally like to see? 2. What type of direction is Spectrum moving towards for the future? Is there a way customer loyalty programs could fit into this vision?

IV. FINDINGS AND CONCLUSIONS OF THE STUDY A. Findings of the research study The research study proved thorough and effective, providing us with an accurate understanding of Spectrum from the perspective of both customer and employee. All of the findings were utilized in the development of the customer loyalty program. The internet research showed the overall scope of Spectrums services and accessibility. After exploring Spectrums website, it became apparent that even though they have a Preferred Vendors list, there are no avai lable promotions or discounts available for either the merchants or Spectrum itself. Spectrums Preferred Vendors List In addition, the only way to currently make reservations is through a phone call with the

company because there is no access to online reservation systems. The website does offer links to testimonials, a Facebook page, and a Twitter feed where we were able to gather additional information about customer interactions. The basic scope of Spectrums service is also available on its website. We were able to access descriptions of Spectrums fleet with specific details on each vehicles amenities along with a detailed listing of every service offered by Spectrum. The -11-

reviews on Citysearch were also revealing because it was an outside source showing customers raw reactions. These reviews were consistent with the testimonials on the main website. This first research study revealed that Spectrum is a small company with a strong commitment to its customers, taking pride in its service. The results of the competitive analysis, our second research prong, provided us with a strong sense of the limousine industry and Spectrums position within it. The first company, Olympic Airporter, is based in Farmingdale, NJ and the majority of its service area lies within Mercer County. However, it is almost exclusively tailored towards airport transportation using regular routes and shuttles. Olympic Airporter has a larger fleet than Spectrum in numbers, but does not offer as many varied services. The next business in our analysis is A-1 Limousine, based in Princeton, NJ. Of the three companies, A-1 is Spectrums largest competition according to according to Kevin Myers, the Operations Manager. This is due largely to the fact that its services are incredibly similar to Spectrums and its fleet is also larger. Just like the other two services, however, A-1 does not offer a rewards program to its clients. The final company included in our competitive analysis is King Limousine. This company was chosen as an example of a large-scale operation. King Limousine is a part of global network, which is based in Philadelphia, PA. King specializes in airport transportation, but offers many of the same services as Spectrum as well. The results of this competitive analysis were incredibly valuable because it gave us a snapshot of the industry as a whole. As part of the last research study, we reached out to Spectrum Limousine and worked with them to expand our research, gaining the business perspective we needed to successfully outline a loyalty program. During our visit, we were able to get an insiders view into the computer software used by Spectrum. They use a livery software suite designed by FastTrak

-12-

that allows employees to build basic customer profiles and manage reservations. These profiles include both personal information and past payment records and are currently only used for reference. Through our interview with Kevin Myers, we also came to a better understanding of Spectrums goals and philosophies. Since Spectrum is a small business, it is unable to procure a substantial promotion and marketing budget. As a result, it is more difficult to obtain personal accounts and once they are acquired, the accounts are only valuable if they become long-term relationships with repeat reservations. Kevin went on to stress the value of corporate accounts because they offer business that is more regular and easier to obtain. When describing these two target markets, he alluded to the fact that corporate accounts tend to be driven by costs and the lowest price wins their business. However, it seems as though personal accounts can be influenced through personal touches and small perks that make the client feel special. Therefore, different aspects of Spectrums service are desired by their two main target markets. Corporate accounts look for efficiency and cost-effectiveness while the pleasure travelers focus on the overall experience and quality of service. Kevin used this difference between the preferences of the two target markets to justify the need for two loyalty structures: one that caters to corporate accounts and another to individual clients.

B. Conclusions based on the findings When reflecting on our findings, it becomes evident that Spectrum could greatly benefit from a customer loyalty program. A well-constructed program will be able to give Spectrum an advantage over its competitors while raising the customer retention rate. Our first research study affirmed the wide variety and quality of services Spectrum offers. Spectrum had a good, marketable product that successfully grows and thrives entirely on organic promotion. Since

-13-

there were no special offers or discounts on the website, there is a lot of room to expand the marketing strategy to involve that type of promotion. Due to Spectrums size, a large promotional plan is neither necessary nor sustainable and the existence of positive reviews on the internet certainly plays to its advantage as free press. Free press and word-of-mouth promotion work effectively for Spectrum since it has such a good product. The competitive analysis was an integral study because it allowed us to expand our research beyond Spectrum, a single firm within the industry. The main result was that, even in the large companies, there was no evidence of loyalty programs or other promotions. In this way, all the firms were similar to Spectrum. Customer loyalty and retention programs, such as credit card rewards, are so successful in other industries it was surprising to find that the livery industry was lacking loyalty initiatives. In addition, because Spectrums competitors operate on a larger scale, they are able to implement more traditional promotional plans. Therefore, it is imperative that the loyalty program Spectrum uses is effective. It must be able to retain new customers and attract regular business back because the larger services have an upper hand in advertisement. As a result, they are able to attract a larger volume of new customers. In order to overcome this disadvantage, Spectrum must improve its retention rate so that it makes a better profit margin on each client as opposed to just a large number of clients. In the long run, this strategy will pay off because Spectrum will be able to rely on its customer base for steady revenue while the other companies might face outlooks that are more volatile. The third and final research study conducted, the interview, related directly to the proposal we were formulating. The interaction that with the computer system was very valuable. It showed Spectrums current technology base and specific capabilities. Since our loyalty program calls for more detailed client profiles, it was important to note that almost all

-14-

information for every client is entered by hand unless they fill out an online form. The online form, although it allows a potential customer to request a reservation, is not truly a form of automation because the request is still handled by an employee. These types of interactions are important to understand because they can potentially cost money by shifting or altering a persons job responsibilities. The information on Spectrums projections and goal were equally as important. The company is looking to expand in order to become more competitive within the industry and not be overshadowed by larger fleets. The fact that Spectrums target markets are treated so separately was also an interesting revelation. After learning this, we found it necessary to have two loyalty programs: one for corporate accounts and another for personal. At the culmination of all three prongs of our approach, it becomes very clear that customer loyalty programs not only show reasonable potential within the livery industry, but also are part of a previously untapped strategy. This strategy is cost-effective and focused more on cultivating and maintaining current relationships than creating a specific promotion and marketing plan. The assumption is that through free press and organic marketing backed up by word-of-mouth; enough new clients will be brought in to the service. Spectrum is looking for an innovative way to stay competitive with larger companies, keeping itself alive. Our customer loyalty program has the ability to be the strategy that will give Spectrum an edge over its competitors. V. PROPOSED STRATEGIC PLAN A. Goals/objectives and rationale At the core of our proposed loyalty program are three main objectives: enhancing the experience of clients, expanding on the current customer base, and creating in-depth customer profiles. Companies such as Spectrum Limo rely heavily on the positive experiences of their

-15-

customers; if service is poor, the customer is likely to discontinue their usage of Spectrum Limousine. Before one can focus on gaining new clients, they must ensure that they maintain the customers whom they already have. In the transportation industry, word of mouth is the most prevalent marketing tool utilized because many patrons depend on the first hand experiences of their friends and colleagues to make their choice of which firm to use. Therefore, the upkeep of stellar services for customers who have remained with Spectrum is a top priority, as it will lead to new customers and retention of current clients. New customers are critical to the continued success of Spectrum as the travel habits and work schedules of current customers is constantly in flux. A customer may use Spectrum Limo fifteen times during a two-month span but then taper off and only use their services only four times over the next three months. Because customer usage can be unpredictable and erratic at times, having a wider pool of clients is a great benefit to Spectrum and assists in maintaining efficiency and profits. Also, developing in-depth profiles of customers will enable Spectrum to better track visits, sales, and the effectiveness of the customer loyalty program. By fulfilling our core objectives, we can greatly improve both the quality of service offered by Spectrum and increase company profits and efficiency.

B. Proposed activities and timelines The most successful customer loyalty programs in use today are ones in which there a several dimensions and levels of reward towards which customers are constantly striving to achieve. In keeping with this philosophy, our loyalty program will consist of a tiered rewards program in which customers can gain and redeem points based on how often they use Spectrum Limousine. The five rewards, which will be available to customers who continue to utilize Spectrum Limo, include a free mini-fridge or minibar, 20% off their total purchase, coupons

-16-

redeemable at a variety of preferred retailers, ungraded vehicles, and free trips. Much like the rewards, the points, which customers gain each time they use Spectrum, will also be tiered. Silver Customers - first year clients - will receive ten loyalty points for every 50 miles travelled, Gold Customers - second year clients - will receive fifteen loyalty points for every 50 miles, while Diamond Customers who have stayed with Spectrum for three years receive 20 loyalty points per 50 miles. As an added incentive, customers remaining with Spectrum for five or more years - the Platinum Customers - will receive 40 loyalty points each time they travel 50 miles with Spectrum. The first reward, a free mini-fridge or minibar, will be redeemable at 30 loyalty points and available to both private and corporate customers. Each time a customer uses Spectrum Limousine and Transportation, their trip mileage averages around 80 to 120 miles. Therefore, a new customer can expect to be eligible to redeem their points for this amenity after their second or third trip with Spectrum. Next, when private and corporate customers reach 55 loyalty points, they may redeem them for a 15% discount on any transaction valued up to $175. Along with their close ties to their customers, Spectrum Limo also maintains a positive relationship with many area businesses and vendors. Because of these close relationships, Spectrum is able to offer members only discounts to business such as the ones liste d at the right. This reward can be gained two ways; by accumulating 75 loyalty points, or by arranging for transportation to and from the hotels and restaurants that are affiliated with Spectrum. Some discounts available are: 20 - 35% off coupons, buy one entree and get the second one free, and store credit ranging from $15 to $30. Travelling in the highest luxury and style is of the utmost importance for many clients and most would gladly upgrade their vehicle to ensure their travel experience is as relaxing as possible. With our fourth reward, private and corporate clients can upgrade their

-17-

current vehicle for free with the accumulation of 110 loyalty points, allowing them to experience the comforts of a European Sedan while paying for a standard Lincoln Town Car. Lastly, the final tier of our loyalty program is a free trip valued up to $175, and the customer can use this reward as a $175 discount for any trips costing more than $175. Alongside the tiered rewards, the loyalty program offers benefits for current customers who recommend Spectrum Limousine to their friends and colleagues and are successful in bringing new business to Spectrum. Much like systems used by other companies, a customer registers the email addresses of friends and co-workers who then receive an email advertising Spectrum and showing them how to sign up for service. If any referrals turn into business for Spectrum, the customer who sent out the original referral will receive a discount equivalent to 10% of their friend or colleagues travel costs. In order to link it with the rewards program, the client who initiates the referral will be able to earn points on the first trip of the new customer. This will be enticing because they are able to essentially earn free points beca use they do not pay for the trip. We believe that this will bring many new customers to Spectrum and increase business greatly. In order to properly implement the customer loyalty and referral programs, it is necessary to maintain a schedule. This will ensure that the program is unveiled smoothly and the transition between systems can be managed. The timeline below shows the projected schedule to fully

-18-

implement the customer loyalty program at Spectrum Limousine. Figure 3: Timeline of Proposal Upon acceptance of this proposal, the acquisition and installation of the most up to date FastTrak software can be installed and the drivers and employees of Spectrum Limousine and Transportation can begin to learn how to best utilize this tool. FastTrak is an online software tool that allows companies such as Spectrum Limo to track and organize all of their sales in a cloud that can be accessed by employees. With the newest version recently released, all sales and transactions can be updated in real time without any actions by Spectrum; the cloud technology is synced with weather stations, news agencies, airports allowing for automated management of current travel when traffic and other delays become prevalent. Also available with the newest version is a FastTrak app that can be accessed by drivers on their iPhones, iPads, or other smartphones allowing for increased ease and efficiency. Customers will be able to access their FastTrak profile through Spectrum Limousines website, ensuring that all information entered is correct and enabling them to easily keep track of and redeem their loyalty points.

-19-

Screen shot of the new program showing the General Information page under the new customer profile system. Approximately two weeks after FastTrak begins to be used, our preliminary research surveys will be sent to current clients to gain insight into which features of a customer loyalty program are most commonly desired. The survey we plan to circulate is included on the next page. Once the first completed survey is returned, we can begin to finalize the loyalty program over the following month span. The survey will be the first of many which will be used to gauge the customers opinions on the program. It is important to conduct an initial survey t o ensure that the rewards are properly tiered, having the most desired rewards assigned higher point values. If the reward they want most is worth more points, clients will wish to earn more points in an effort to reach the point level required to get the reward. Concurrently, marketing of the proposed loyalty program will proceed and inform many potential and current customers of the great things coming soon. Three weeks after implementing of the program, another round of surveys similar to the preliminary research survey will be sent to clients. They will focus on the -20-

how successful the program has been in its infancy and the effect it has had on the clients relationship with Spectrum. Furthermore, surveys on the usage and benefits of the loyalty program will continue to be executed every three months to monitor progress. The program will constantly undergo minor improvements so that it reflects the views of our customers. Spectrum Survey 1. Is this your first time using Spectrum Limousine and Transportation? Yes No 2. If you are a returning or frequent customer, please estimate how often you use Spectrum Limousine and Transportation. Once every few years (2-3 years) Once or twice a year 3-5 times per year 6-10 times per year More than 10 times a year 3. For returning customers, how would you rate the quality of service offered by Spectrum Limousine and Transportation? Excellent Good Average Fair Poor 4. Which features of a rewards program do you feel would benefit you the most? Check all that apply. Free/Discounted Transportation Concert/Sporting Event Tickets Free In-Transit Amenities Ex: mini-fridge access Upgraded Vehicles Other (please specify)

5. Would you be interested in participating in a customer rewards program with Spectrum Limousine and Transportation that would be a points system similar to that of frequent -flyer miles and credit-card reward programs? Yes If no, why? 6. If Spectrum Limousine and Transportation were to implement a customer rewards system, do you feel that you would be more likely to use their services more often? Yes 7. How would you classify yourself as a traveler? Pleasure Business No Both No

C. Proposed budget Considering the fact that Spectrum is a small business, it is essential that costs be kept at a minimum. This proposal has been designed to maximize Spectrums long-run profit while -21-

having only a slight impact on its short-term finances. Therefore, the only direct cost to Spectrum is the upgrading of their software. We plan to remain with the same company, but simply purchase the latest version, Global Online Cloud Standard, which is reasonably and keeps Spectrum with its current software provider. The largest cost involved with the software is the one-time setup fee, $850. There is also a monthly maintenance fee of $50 plus a $0.08 charge per reservation. There prices are barely noticeable, especially when offset by the additional revenue they will accumulate. If Spectrum grows and books more than 5000 reservations, the price will drop to $0.06. There is also some cost incurred because of the rewards. Rewards like coupons cost nothing to Spectrum because the establishments offer them in exchange for business. However, the minibar access, car upgrades, free trips, and discounted excursions all decrease the amount of profit Spectrum gets. However, this plan minimizes this effect to the point that it is barely noticeable by Spectrum. Although our tiered reward program awards greater amenities and benefits as you gain more loyalty points, some rewards appear more economically logical then they truly are. For example, by the time a customer gains around 150 loyalty points - enough for a free ride - they likely will have used Spectrum for seven or eight trips. A free ride would save them up to $175 and grant an average discount of 13% per ride over the course of the past eight or nine rides. For the same number of points, the customer could also chose to receive a discount of 20% on three separate rides. For many, because the 20% discount is easier to gain and seems to offer relatively the same savings because it is nearly double the average savings of a free ride, they chose to take the 20% discount. Most consumers are driven by the need for instant gratification and the desire to save money right away. While choosing a 20% discount is not the smartest decision for a customer, it is a likely and common choice which in turn helps to maintain

-22-

customer loyalty and satisfaction, and saves money for Spectrum Limousine. The plan was designed this way by following the principles of artificial advancement, a process described in a publication by the Wharton Business School. The general idea is that the rewards program should only give the illusion of great deals. Otherwise, the business would lose more money than it is willing. This allows Spectrum to still have happy Esteemed Travelers members, but preserve its own profits all at the same time. By using this strategy, it is possible to have both Spectrum and the customer feeling satisfied with their transactions. A few of Spectrums rates are included below. With only a 10%-15% loss of profit on each of the base costs when customers spend their points, Spectrum still makes more money than if the percentage was taken from the total price.
Sedan Rates To/From Philadelphia, Pa To/From Hamilton Lambertville Lawrenceville New Brunswick New Hope Princeton Trenton Base $95.00 $110.00 $100.00 $125.00 $115.00 $100.00 $90.00 20% Gratuity $19.00 $22.00 $20.00 $25.00 $23.00 $20.00 $18.00 Tolls $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 $5.00 10% FSC $9.50 $11.00 $10.00 $12.50 $11.50 $10.00 $9.00 Total $128.50 $148.00 $135.00 $167.50 $154.50 $135.00 $122.00 Hourly Rates Sedan SUV Limousine Upgrades From Sedan 6 Passenger Limo SUV Passenger Van 8-10 Passenger Limo Cost $55.00 $75.00 $100.00 Cost $50.00 $60.00 $70.00 $90.00

Chart 1: Upgrade Fees, Sedan Rates, and Hourly Rates The marketing strategy that we plan to utilize will have no negative financial impact on Spectrum. We plan to utilize most of Spectrums current promotional strategies. The most prevalent of these would be word-of-mouth. This is where the referral program becomes important because it encourages current customers to promote Spectrum so that they can achieve the referral. As effective as this organic marketing is, it does not comprise the entirety of the plan. The other source of promotion will be free press. Spectrum will use its Facebook page and Twitter profile in order to spread the word about the Esteemed Travelers. This will reach an -23-

even larger audience than some radio or print advertisements while costing the company nothing. Other social media outlets like Yelp!, StumbleUpon, and Citysearch will allow Spectrum to reach more potential clients than ever before possible. D. Proposed metrics to measure return on investment (ROI), sales, customer retention, customer satisfaction, etc. A feature of the new software from FastTrak will give Spectrum a number of metrics to monitor customer profiles. This will be an important tool in identifying the strengths and weaknesses of the program. It also allows Spectrum to better recognize trends within its target markets because of the more advance customer profiles. However, this is not the only way we plan to measure the success of the program. There already is a general survey posted on Spectrums website and we plan to expand upon it and add a survey link to each clients profile. Here, about every three months members of the Esteemed Travelers Program will be able to participate in a survey about their thoughts of the program and offer any suggestions or concerns. As an incentive to take the survey, each member who completes the survey will be rewarded with 10 bonus points. These surveys will provide both qualitative and quantitative feedback on the program. The qualitative inputs will be particularly valuable because they will not only allow clients to provide their candid opinions, but also serve as an opportunity to voice any suggestions. This will be important for the growth of the program because it ensures that features remain favorable with the clients by changing to address their desires.

-24-

In addition to the data gathered through these strategies, the effects and efficiency of the customer loyalty program can be evaluated by measuring ROI. The figure to the right can be used to gauge and understand the effects of the program on the business itself during both short and long-term situations. Financial Has revenue or profit increased or decreased? Digital Has the company enhanced its digital assets? Brand Have consumer attitudes about the brand improved? Risk Management Is the organization better prepared to respond to problems affecting reputation, promotion, and sales? If Spectrum addresses this metric at the end of every quarter, it will be able to accurately understand how the customer loyalty program affects the business. This program will undoubtedly have an effect on each sector of the metric, effectively showing its ROI. It will affect digital perspective through the new software, which operates entirely on the cloud. Also, with a marketing plan highly concentrated in social media, Spectrum will have a greater presence in the digital world. Risk management will surely improve too. This is because most of the issues Spectrum currently experiences are caused by miscommunications and human error during the reservation and scheduling processes. These occurrences will be virtually eliminated because of the online reservation and scheduling system which will even alert drivers when

-25-

flights are delayed so that they can schedule accordingly. Spectrum will also be storing more information on each customer, enabling them to better address each customers complaints and concerns. As far as brand perspective, Spectrum is the first livery service in its service area to offer a customer loyalty program and as a result there should be a buzz created. Spectrum will have an advantage over it competitors because it offers an entirely unique program. Financial impact will be the hardest to measure. Spectrum will have to gather statistics on its retention rates, new customers, and number of services customers use on average in order to gauge the financial effects of the program. This ROI metric will be incredibly useful in both short and long-term analyses when used in conjunction with the other metrics. The transportation industry is incredibly competitive, with multiple services often occupying similar service areas with almost identical vehicle fleets. Therefore, these companies strive for things to differentiate themselves from their competition. As a small business, Spectrum must work even harder to find these opportunities because it does not have the scale or capital to procure advertising and promotion like its competitors do. Starting a program like the Esteemed Travelers Club will give them the edge that they need to expand and defend their market share.

-26-

VI. BIBLIOGRAPHY Internet Resources A-1 Limousine. Web. Jan. 2012. <http://www.a1limo.com/>. FastTrak Cloud Livery Systems. Web. Jan. 2012. <https://myFastTrak.com/index.php>. "GroundWidgets Acquires ULS." Limousine Digest. 2011. Web. Jan. 2012. <http://limodigest.com/IndustryUpdates/1211/09IU-1211-ground-widgets-acquire-uls.html>. King Transportation Service, Inc. Web. Jan. 2012. <http://www.kinglimoinc.com/index.htm>. "LimoPad." Ground Widgets. Web. Jan. 2012. <http://www.groundwidgets.com/pages/limopadenterprise>. Limousine Software (ULS). Web. Jan. 2012. <http://www.unifiedliverysystems.com/>. "The Lowdown on Customer Loyalty Programs: Which Are the Most Effective and Why." Knowledge@Wharton. Wharton School of Business. Web. Jan. 2012. <http://knowledge.wharton.upenn.edu/article.cfm?articleid=1545>. Notte, Jason. "5 Best, 5 Worst Customer Loyalty Programs." TheStreet. 25 June 2010. Web. Jan. 2012. <http://www.thestreet.com>. Olympic Airporter. Web. Jan. 2012. <http://olympic-limo.com/index.html>. "Spectrum Limousine." Citysearch. Web. Jan. 2012. <http://national.Citysearch.com/profile/6857749/ewing_nj/Spectrum_limousine_svc.html>. Spectrum Limousine. Web. Jan. 2012. <http://Spectrumlimousine.com/>. "US Census Bureau." Web. Jan. 2012. <http://www.census.gov/>. Personal Interview Myers, Kevin- January 19

-27-