Confidentiality Agreement The undersigned reader acknowledges that the information provided by _________________________ in this marketing plan is confidential;

therefore, reader agrees not to disclose it without the express written permission of_________________________. It is acknowledged by reader that information to be furnished in this marketing plan is in all respects confidential in nature, other than information which is in the public domain through other means and that any disclosure or use of same by reader, may cause serious harm or damage to

________________________. Upon request, this document is to be immediately returned to_________________________. ___________________ Signature ___________________ Name (typed or printed) ___________________ Date This is a marketing plan. It does not imply an offering of securities. Table Of Contents 1.0 Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2.0 Situation Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.1 Market Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.1.1 Market Demographics. . . . . . . . . . . . . . . . . . . . . 3 2.1.2 Market Needs. . . . . . . . . . . . . . . . . . . . . . . . . 3 2.1.3 Market Trends. . . . . . . . . . . . . . . . . . . . . . . . 4 2.1.4 Market Growth. . . . . . . . . . . . . . . . . . . . . . . . 5 2.2 SWOT Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2.1 Strengths. . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2.2 Weaknesses. . . . . . . . . . . . . . . . . . . . . . . . . 6 2.2.3 Opportunities. . . . . . . . . . . . . . . . . . . . . . . . . 6 2.2.4 Threats. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.3 Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.4 Product Offering. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.5 Keys to Success. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.6 Critical Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.0 Marketing Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.1 Mission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.2 Marketing Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 Financial Objectives. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.4 Target Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.5 Positioning. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.6 Strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.7 Marketing Mix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.8 Marketing Research. . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.0 Financials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.1 Break-even Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.2 Sales Forecast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.3 Expense Forecast. . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5.0 Controls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 5.1 Implementation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 5.2 Marketing Organization. . . . . . . . . . . . . . . . . . . . . . . . . 15 5.3 Contingency Planning. . . . . . . . . . . . . . . . . . . . . . . . . 15 1.0 Executive Summary The Basket of Goodies (BOG) is a premier gift basket manufacturer and retailer. BOG is concentrating on making gourmet gift baskets out of a wide range of high quality ingredients. In addition to having several flagship baskets, BOG will also offer the option of a custom basket,

allowing the customer to choose the ingredients themselves.

BOG will be selling to individuals as well as corporations. Initially the bulk of BOG's business will be generated from individuals, but as time passes, a growing percentage of sales will come from corporations .

While there are many different competitors in the market now, they are larger in size and much less flexible. BOG will be able to meet customer demands through superior products, customer attention, and customer product offerings. BOG will be raising awareness of their products through the use of a brochure and a Website. Once a customer is interested in placing an order, they can come by the office, call in the order, or order via our secure Website. In addition to the customer being able to pick up the basket from BOG's office, BOG can ship it to them via UPS. Once up and running with some momentum, BOG will be steadily producing profits. It is projected that by December BOG will be profitable. By the end of year three, it is projected that BOG will be generating over $5,000 in income. $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 2002 2003 2004 Individuals Corporations Annual Sales Forecast The Basket of Goodies Page 1 2.0 Situation Analysis Basket of Goodies is entering its first year of operation. BOG recognizes the importance of crafting and following a comprehensive marketing plan. BOG offers the market a high quality, gourmet gift basket at a reasonable price. In addition to having four stock baskets, BOG will allow customers to customize their own basket from a list of possible ingredients. 2.1 Market Summary BOG possess good information about the market and knows a great deal about the common characteristics of the prized customers. BOG will leverage this information to better understand who is served, their needs, and how BOG can best communicate with them. BOG recognizes that this is an evolving process that requires multiple intervals of attention throughout the year.

Individuals Corporations Target Markets Table 2.1: Target Market Forecast Target Market Forecast Potential Customers Growth 2002 2003 2004 2005 2006 CAGR Individuals 8% 14,258 15,399 16,631

17,961 19,398 8.00% Corporations 12% 298 334 374 419 469 12.01% Total 8.09% 14,556 15,733 17,005 18,380 19,867 8.09% The Basket of Goodies Page 2 2.1.1 Market Demographics The profile for BOG's customer consists of the following geographic, demographic, and behavior factors: Geographics The immediate geographic target is the city of Stevens, TX with a population of 213,000. A 35-mile radius will be served. The total targeted population is 14,556.

Demographics 69% female, 31% male. Ages 28-65. Have a household income over $45,000. Corporate customers have between 15-85 employees. Behavior Factors Purchase gifts regularly. Prefer to give gifts that are somewhat practical or at least will be used as opposed to being shelved. Appreciate the element of presentation in gifts that they give. Enjoy spending some of their discretionary income on gifts for friends. Recognize the value of giving a gift to an employee and the invaluable goodwill that the

unsolicited/unexpected gift generates. 2.1.2 Market Needs Bassket of Goodies is providing its customers with very attractive gourmet food baskets. These baskets come in several standard themes as well as the option of creating a custom basket. BOG seeks to fulfill the following benefits that are important to customers:

Selection- BOG offers many different stock baskets as well as the opportunity for the customer to choose the perfect ingredients for their basket. Price- BOG operates on a low overhead model, allowing them to generate fair margins and competitive prices. Customer Service- BOG recognizes that superior customer service is needed in order to gain market share and be competitive. The Basket of Goodies Page 3 2.1.3 Market Trends The market trend for the gift basket industry has been one of consolidations and mergers with larger companies purchasing smaller local companies. This trend can be rationalized for several reasons: Economies of scale allows larger companies to generate better margins than small, local players. Brand equity/recognition is powerful within the industry as many customers choose their basket maker from popular, well-known companies, such as Hickory Farms, based on name

alone. Therefore it makes sense for larger companies to grow in number of franchises/outlets and geographic coverage.

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 2002 2003 2004 2005 2006 Individuals Corporations Market Forecast The Basket of Goodies Page 4 2.1.4 Market Growth In 2000, the national gift basket industry had $806 million in sales. The market is growing at a steady 4% per year. This growth can in part be attributed to an increase in product offerings. For years the gift baskets from most of the larger companies were fairly utilitarian and plain; some people got fruit baskets, others got meat, cheese, and cracker baskets. Many of the companies have tried to generate growth by offering a wider selection of baskets.

0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% Individuals Corporations Target Market Growth 2.2 SWOT Analysis The following SWOT analysis captures the key strengths and weaknesses within the company, and describes the opportunities and threats that face BOG. 2.2.1 Strengths Vendors who have local, high quality ingredients. Artistic flair that provides BOG with basket appearances that are unmatched. Low overhead that provides excellent margins and flexibility in manufacturing.

The Basket of Goodies Page 5 2.2.2 Weaknesses As a home-based start-up, if sales really spike it might be difficult to fulfill a large increase in orders. A limited marketing budget to generate awareness of BOG and its service/product offerings. A limited number of hours a day limits time that can be spent on sales/business

development relative to order fulfillment. 2.2.3 Opportunities Participation in an industry that is generally quite steady in terms of sales. The ability to have a marginal decrease in the spread of fixed costs relative to each basket as sales increase. 2.2.4 Threats Competition from industry gorillas like Hickory Farms or substitute competitors like FTD. The industry is attractive, in part, because of its

simplicity, creating an incentive for new entrants into the market. 2.3 Competition There are many different forms of competition in the gift basket business: 1.Similar gift basket type retail stores- There are several of these stores located in Stevens. These competitors offer a wide range of gift baskets, however, none of them are concentrating on the higher end, gourmet products lines.

2.Nut/fruit companies- There are several stores that concentrate on nuts and or fruit baskets. 3.Bath product gift basket companies- There is currently one gift basket company that concentrates on bath products. Bath products have a slightly smaller recipient market, since typically women are most appreciative of bath products gifts, though more and more men are aware that this is the gift to give.

4.Regional gift basket- There is one retailer that sells gift baskets composed of local products. These types of baskets tend to appeal to people that are buying gifts for people that are not from this area.

5.Candy gift baskets- There are a couple of candy stores that offer a candy gift basket as one of their products . Similar to the bath products basket, candy typically appeals to women a bit more than to men.

6.Florists- Flowers are a tried and true product that competes with gift baskets. Once again flowers tend to appeal to women more so than men. The Basket of Goodies Page 6 2.4 Product Offering Basket of Goodies sells gift baskets that they put together themselves. BOG's theme for the baskets is gourmet. Their premier baskets are a smoked fish basket, a fruit basket, a pasta dinner basket, and a picnic basket that has caviar, crackers, fruit, and smoked fish. BOG also offers a custom basket that allows customers to pick items from a list and BOG will assemble the basket

with their custom ingredients.

For the custom baskets, BOG will provide a list of options grouped into four different categories. The customer then chooses two items from each of the four categories and the gift basket is made for them.

In addition to previously mentioned production baskets, BOG will typically have one or two specials, seasonally based. 2.5 Keys to Success The keys to success are: Customer service. Flexibility. Competitive or superior product offerings. 2.6 Critical Issues BOG is still in the speculative stages as a start-up business. Its critical issues are: Control start-up expenses. Continue to take a modest fiscal approach, expanding in size only when it is no longer possible to fulfill orders at the current headcount. It is important to do this judiciously because if the business is expanded and demand suddenly falls, BOG could be subjected to severe financial distress.

Generate awareness and customer loyalty for repeat business and referrals. 3.0 Marketing Strategy The marketing strategy will seek to use several techniques to increase awareness of Basket of Goodies in the city of Stevens. The first method will be a Website. The second will be the use of brochures. These two methods will target the individual customers. The corporate customers will be targeted through a networking campaign, leveraging owner Susan Presento's contacts from her previous employers.

The Basket of Goodies Page 7 3.1 Mission Basket of Goodies' mission is to create the finest gift baskets available. We exist to attract and maintain customers. When we adhere to this maxim, everything else will fall in to place. Our products and services will exceed the expectations of our customers.

3.2 Marketing Objectives Increase repeat customers by 7% per quarter. Increase the number of corporate clients by 6%. Decrease the marginal per customer acquisition costs by 8% per year.

3.3 Financial Objectives Profitability by the end of year one. Reduce the labor costs for order fulfillment by 3% a year. Increase sales enough to warrant hiring an employee.

3.4 Target Markets BOG has two distinct groups of customers, individuals and corporate customers: 1.Individuals- The individuals are people who are looking to give a friend, relative, colleague, etc., a gift basket as a gesture of goodwill. These customers typically do not have a specific type of gift basket in mind when they look at BOG's product offerings, they just want to give a gift.

2.Corporate- The corporate customer is typically buying the basket for a colleague at work either as a sign of appreciation or for a special event or as a thank you for a customer. The corporate market can be further broken down to banks, health care, employment gifts, real estate, apartments, special events/promotions, corporate headquarters, hotels/vacation resorts, and automobile dealerships.

3.5 Positioning Basket of Goodies is positioning itself as an upscale manufacturer of gourmet gift baskets through the introduction of several production baskets as well as custom options. BOG will achieve this positioning by leveraging their competitive advantages.

The competitive advantage is based on two factors, low overhead which supports reasonable prices, and an unrelenting desire for the highest quality product and service. 1.Overhead- BOG's overhead is particularly low because it is a home based business. Most of BOG's competition is based in retail shopping areas. While they receive more walk by traffic and therefore higher sales numbers, their rent is a very large monthly expense. BOG avoids this large expense by having the business run out of owner Susan Presento's home. Additionally, Susan will be using a modified version of JIT (just in time) inventory and assembling. Susan's husband passes by 90% of Susan's vendors on his way home from work so Susan is able to order inventory when she needs it and have her husband pick it up on the way home from work. This significantly lowers shipping costs and carrying costs for

The Basket of Goodies Page 8 inventory. BOG will have some of the standard baskets in stock for walk by orders, but will try not to have large amounts in overhead. 2.Unrelenting desire for the highest quality product and service- Let's face it, this market space is already crowded and a mediocre gift basket service is not going to fly, so Basket of Goodies must have some sort of differentiating feature that lets it stand out. Susan only uses the finest quality ingredients and can afford to because of her low overhead. Additionally, she always follows the maxim that the customer must be 100% satisfied. That means she is willing to loose money on an occassional order, if necessary, to please a customer, confident that in the long run this is a wise business decision.

3.6 Strategies The single objective is to position Basket of Goodies as a manufacturer of unique, attractive, gourmet gift baskets for individuals as well as corporate customers. The marketing strategy will seek to create customer awareness regarding the product offerings, develop the customer base, and work toward building customer loyalty and referrals that will significantly decrease customer

acquisition costs.

BOG will seek to communicate the message that they offer a higher quality, gourmet alternative for gift baskets relative to the baskets currently available. This message will be communicated through various methods, tailored to each target market. The first method will be the use of a Website. The Website will have product information, company information, as well as ordering information and order taking. The site will be useful to both targeted groups, individuals as well as corporate customers.

The second method will be brochures, primarily marketing to individuals. These brochures will be dispersed through many different sources. The last method of communication is networking and it is primarily for the corporate customer. Before founding Basket of Goodies Susan worked within the Human Resource Department of several larger corporations and has developed a large list of contacts. Susan will leverage these personal/professional relationships to generate business for BOG. Since she has worked within the HR departments before, she is quite familiar with the buying habits and decision making processes; key knowledge for generating corporate sales.

3.7 Marketing Mix BOG's marketing mix consists of the following approaches to pricing, distribution, advertising and promotion, and customer service. Pricing- BOG will be charging a per basket fee for the stock production baskets. Regarding the custom baskets, a price can be quoted once the customer decides on the ingredients that they want.

Distribution- While the orders for the baskets can be placed on our secure Website, by phone, or at the office, the distribution of the product will occur from the office and can be shipped to any continental U.S. address.

Advertising and Promotion- A Website, brochures, and networking will be used to raise awareness and generate sales. Customer Service- Following benchmark companies such as L.L. Bean, Eddie Bauer, and Siemens, customer service will be a priority. Susan truly believes that reputation is everything.

The Basket of Goodies Page 9 3.8 Marketing Research The informal market research began five years ago when Susan was purchasing a gift basket for a friend. She did not have the time to make her own basket so she called a few different places to get quotes. Over the next few years she purchased several more baskets from established companies while keeping the idea in the back of her head that she might start her own basket company. With this idea she analyzed the different vendor's offerings.

While working on the initial business plan for BOG, Susan held two focus groups, each with seven to nine people, to determine customer preferences in regards to gift baskets. The focus groups explored the different preferences that the people held in regards to gifts and gift baskets. Although Susan had a list of questions already drawn up that she asked both groups, she also had time set aside where there could be a free flow of discussion. The focus groups proved to be a very worthwhile exercise giving Susan valuable insight into the participant's minds as well as confirming a number of assumptions that Susan held. Overall, this market research confirmed and strengthened the BOG business and marketing plan.

The Basket of Goodies Page 10 4.0 Financials This section will offer a financial overview of Basket of Goodies as it relates to the marketing activities. Break-even analysis, sales forecasts, and expense forecasts will all be addressed. 4.1 Break-even Analysis The Break-even Analysis indicates that $5,600 will be needed in monthly

revenue to reach the important break-even point. ($4,000) ($3,000) ($2,000) ($1,000) $0 $1,000 $2,000 $3,000 $4,000 $0 $1,890 $3,780 $5,670 $7,560 $9,450 Monthly break-even point Break-even point = where line intersects with 0 Break-even Analysis Table 4.1: Break-even Analysis Break-even Analysis: Monthly Units Break-even 160 Monthly Sales Break-even $5,600 Assumptions: Average Per-Unit Revenue $35.00 Average Per-Unit Variable Cost $10.00 Estimated Monthly Fixed Cost $4,000 The Basket of Goodies Page 11 4.2 Sales Forecast The first month will be spent setting up the business. It is unlikely that there will be much sales activity. In addition to dealing with some legal and accounting issues, equipment will need to be purchased, an office created, and an assembly room/inventory room set up in the basement. Susan will also be developing a system for assembly (work flow processes) within the first month.

Susan will also be working on having the Website designed and set up. This will require a bit of time spent with her Web designer to perfect the look and feel of the site as well as to set up BOG as an online e-commerce merchant. Susan plans to use 1st-At-The-Top.com Internet and Ecommerce Consulting, www.1st-At-The-Top.com, to design her secure Website, and assure strong search engine placement on the Internet.

Month two - three will begin to see some sales activity. BOG recognizes that it will take a bit of time to really ramp up the sales. Susan will be doing a lot of networking in an attempt to spread awareness about BOG's products and services. Because Susan's husband will be helping out with picking up some of the materials, Susan will not need an employee until near the end of year one. $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Individuals Corporations Monthly Sales Forecast Table 4.2: Sales Forecast Sales Forecast Sales 2002 2003 2004 Individuals $33,640 $64,575 $78,452 Corporations $9,905 $28,744 $31,458 Total Sales $43,545 $93,319 $109,910 Direct Cost of Sales 2002 2003 2004 Individuals $11,438 $21,956 $26,674 Corporations $3,368 $9,773 $10,696 Subtotal Cost of Sales $14,805 $31,728 $37,369 The Basket of Goodies Page 12 4.3 Expense Forecast The marketing expenses will be budgeted to allow BOG to spend an increased amount during the first quarter in order to raise visibility for this start-up company. The expenses will then decrease and level off for the second and third quarter and will increase significantly during the last quarter in anticipation for strong holiday sales.

$0 $200 $400 $600 $800 $1,000 $1,200 $1,400 Website development/ maintenance Brochures Networking

Monthly Expense Budget Table 4.3: Marketing Expense Budget Marketing Expense Budget 2002 2003 2004 Website development/ maintenance $1,510 $1,000 $1,000 Brochures $1,090 $800 $900 Networking $1,840 $1,900 $2,000 ------------ ------------ ------------ Total Sales and Marketing Expenses $4,440 $3,700 $3,900 Percent of Sales 10.20% 3.96% 3.55% Contribution Margin $24,300 $57,891 $68,641 Contribution Margin / Sales 55.80% 62.04% 62.45% The Basket of Goodies Page 13 5.0 Controls The purpose of the marketing plan is to provide the organization with a long-term guide for growing the business. The plan will also serve as a functional short-term document that enumerates the activities that must take place. The following areas will be monitored to gauge effectiveness:

Marginal order fulfillment costs. Annual and monthly repeat business. The number of complaints or problems as a percentage of overall sales.

5.1 Implementation The following milestones identify the key marketing programs. It is important to accomplish each one on time and on budget. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Marketing plan completion Website development Website maintenance Brochure production Brochure dissemination/ printing Networking activities

Milestones Table 5.1: Milestones Milestones Plan Milestone Start Date End Date Budget Manager Department Marketing plan completion 1/1/02 2/1/02 $0 Susan Website development 2/1/02 4/30/02 $600 Susan Website maintenance 2/1/02 12/31/02 $660 Susan Brochure production 2/1/02 2/15/02 $500 Susan Brochure dissemination/ printing 2/15/02 12/31/02 $200 Susan Networking activities 1/1/02 12/31/02 $1,800 Susan Totals $3,760 The Basket of Goodies Page 14 5.2 Marketing Organization Susan will be responsible for all of the marketing activities. She has purchased PageMaker to generate brochures and will outsource the Web development to 1st-At-The-Top.com Internet and Ecommerce Consulting, www.1st-At-The-Top.com.

5.3 Contingency Planning Difficulties and risks: Deliberate actions by a large competitor with the express goal of driving Susan out of business. Problems with vendors that create fulfillment issues. Problems generating visibility.

Worst case senarios may include: Determining that there is not sufficient business to support BOG on an ongoing basis. Some sort of product liability or negligence action that necessitates closure of the operation. The Basket of Goodies Page 15 Table 4.2 Sales Forecast Sales Forecast Plan Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Individuals $0 $0 $1,245 $1,854 $1,987 $2,854 $3,254 $3,475 $3,654 $3,758 $4,014 $7,545 Corporations $0 $0 $75 $187 $421 $564 $745 $887 $998 $1,014 $1,645 $3,369 Total Sales $0 $0 $1,320 $2,041 $2,408 $3,418 $3,999 $4,362 $4,652 $4,772 $5,659 $10,914 Direct Cost of Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Individuals $0 $0 $423 $630 $676 $970 $1,106 $1,182 $1,242 $1,278 $1,365 $2,565 Corporations $0 $0 $26 $64 $143 $192 $253 $302 $339 $345 $559 $1,145 Subtotal Cost of Sales $0 $0 $449 $694 $819 $1,162 $1,360 $1,483 $1,582 $1,622 $1,924 $3,711 Appendix: The Basket of Goodies Page 1 Table 4.3 Marketing Expense Budget Marketing Expense Budget Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Website development/ maintenance $600 $60 $60 $60 $60 $60 $60 $60 $120 $250 $60 $60 Brochures $500 $0 $0 $0 $100 $0 $0 $0 $100 $120 $130 $140 Networking $150 $150 $150 $150 $150 $150 $150 $150 $150 $160 $170 $160 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ----------- ------------ Total Sales and Marketing Expenses $1,250 $210 $210 $210 $310 $210 $210 $210 $370 $530 $360 $360 Percent of Sales 0.00% 0.00% 15.91% 10.29% 12.87% 6.14% 5.25% 4.81% 7.95% 11.11% 6.36% 3.30% Contribution Margin ($1,250) ($210) $661 $1,137 $1,279 $2,046 $2,429 $2,669 $2,700 $2,620 $3,375 $6,843 Contribution Margin / Sales 0.00% 0.00% 50.09% 55.71% 53.13% 59.86% 60.75% 61.19% 58.05% 54.89% 59.64% 62.70% Appendix: The Basket of Goodies Page 2