The End

Our final marketing plan has been published - please check it here!

The final plan is a summary of everything we have done this past few weeks. The analysis and all the justifications can be seen as blog posts. The overall structure of the blog can be found here.

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Key Performance Indicators

In Ambro's case, KPIs ought to be used in order to evaluate its success of a particular area of activities. These KPIs will be constantly analyzed and adjusted to determine Ambro’s actual performance to that of projections and thus maintain Ambro in the path of profitability, scale and sustainability.

For Ambro, the following areas and its KPIs are important:

• Marketing KPIs
• New customer acquisition: measures the extend of new consumers reached by Ambro's marketing efforts. This KPI is especially important when looking at market share growth and penetration towards a new consumer segment. Ambro is using a online delivery system. It makes tracking old and new customers easy as opposed to the brick and mortar retail stores as Ambro has additional data on their consumers: their addresses. By crosschecking the addresses of a current batch of shipment to the previous batches, the amount of new customers that Ambro is reaching can be identified and measured.  
• Social interactions online: accounts for the exposure of your online marketing efforts to your targeted consumers. Different social media platforms that Ambro will advertise on have different interactions (Facebook Likes, Twitter Mentions) which gives a direct indication how many consumers are actually taking positive notice of Ambro's activities and messages towards the consumer.
•       Industry Life Cycle Stage: The life cycle stage of the industry that a company enters greatly influences the opportunities for success. Evidently companies entering early in the industry life cycle having greater odds of success than those entering very mature or terminal industry stages. Given the inherent and pioneering characteristics of Ambro, Ambro can be placed in the former stage of the industry life cycle and thus will be able achieve scale and recognition quicker and be able to carve-out multiple opportunities throughout its path in becoming the next best food alternative. Defining this stage could be elemental as Ambro's strategy and efforts ought to correspond to its current stage. 
• Customer KPIs
• Customer order wait time: the time that customers need to wait to receive their Ambro orders can play an elemental role in to the value delivered. This KPI can be measured by requesting data on delivery times of the company Ambro chooses for package deliveries. Besides that, the deliveries can be tracked. This will enable Ambro to keep track of the delivery times using software.
• Financial KPIs
• Sales, costs and profits: these KPI's can speak for themselves as one of the most important focus area's of Ambro. It can be measured through the proper financial and cost management accounting processes.
• Returns on Investment: will measure the ability of your investments (marketing campaigns, process improvements, product improvements etc.) to generate new revenue. In other words, ROI shows the efficiency of the use of money in terms of generating new sales, therefore new profits. However, determining ROI could be proven to be quite hard as the link between a specific investment and the general development in sales.  

Marketing Mix: Place

The "Place" component of the marketing mix is mainly about distribution. It is important to provide the product at the right "place", which is convenient for consumers to access. With regard to the recent development of the Internet being the distribution channel as well as taking into account the age and shopping behavior of Ambro's main target group, it seems very reasonable to market their product online.

Distribution channels
Ambro currently only sells their product at their own website. This seems to be a cost-effective and suitable strategy for the moment. The main benefit of internet-based distribution according to Olsen (1998) are the following:

• Drive revenues up by extending the company's reach to broader, more global markets
• Reduce costs by bypassing traditional distribution channels by avoiding commissions, and lowering transaction fees 
• Enhance customer experience by providing more and better information with multimedia.

A major disadvantage of online sales is the fact that the customer lose face to face contact with the product and the value provider. However, we have found that Americans have an increased desire to order items online. Therefore, it can be concluded that the average American consider the benefits of internet-based distribution for retailers to be significantly higher than its costs.

In the longer term, Ambro wishes to expand to larger retail websites online. These websites will have the capacity to facilitate to the increased demand for Ambro at that point of time. Potential websites to look at are Amazon, AmericaGrocer and Walmart.

As for the retail stores, Ambro would receive substantial in store promotion if it was present in these traditional brick and mortar stores. However, the current margins retailers charge are too high. This will drive up Ambro's retail price, placing the product out of financial reach for most of the US consumers. Driving down Ambro's production costs should be achieved before considering such a move to the retail stores.

Sources:

• Olsen, M.D., et al, (1998), 'The internet as a distribution channel', Cornell Hospitality Quarterly,  vol. 39 no. 4 42-54
• Delivering Services via Internet: New Distribution Channel for Traditional Services; Zagreb International Review of Economics and Business, 2004, vol. 7, issue Special Conference Issue, pages 141-152

Marketing Mix: Price

Current and future pricing

As discussed earlier, Ambro’s current price for one package is 79€ (including international shipping). For two packages, customers pay 119€ during the pre-sales phase. With one package, you are able to make 7.5 full meals or 15 breakfasts, making one full meal cost 10.53€ or 7.93€, respectively.

A non-negligible part of the price is caused by international shipping costs, which are quite expensive. In order to cut these costs and to offer smaller, easier-to-use packages to consumers, one of Ambro’s short-term goals should be to find local production partners. Thereby, they will be able to offer the product on a much lower price. Our estimate for this new price is 50€ per package, making one meal cost 6,67€.

Comparison with substitutes

Soylent, which we view as the closest available substitute for Ambro, is much cheaper. “A week’s worth” (21 meals) package costs about 48€ ($65), resulting in a price of 2.29€ per meal. This means that Ambro, even considering the new estimated price for the US, is more than double the price of Soylent. However, one needs to keep in mind that Soylent is no direct competitor; a significant difference to Ambro is that Soylent is not organic.

A price comparison to other substitutes, such as easy-to-take along snacks, seems rather difficult. They might be cheaper but their nutritional value may, even if they are combined to form a full meal, stay a lot lower than Ambro’s. Rather, we compare Ambro to the popular U.S. meal substituting dietary shakes. If we plot Ambro against these competitors in a Price / Organic quality matrix (and against the U.S. averages) we see the following:

First a short explanation. The official definition of organic products is: a labeling term that refers to an agricultural product produced in accordance with the regulations of the National Organic Program in the United States. This mainly refers to the production process. Organic products become more and more prevalent in United States supermarkets. Both Soylent and IdealShape are products which are cheap and rely heavily on the use of chemicals and therefore not organic. The price is based on US averages and the average of one meal over the whole product range of the different brands.

When we want to compare these products it is important to note that they all serve a different industry, IdealShape is focused on dietary products and although Ambro and Soylent will be most likely labeled to this segment by the FDA, they are no dietary  products, but rather serve different needs as discussed before. As can be seen, Ambro is priced rather premium, but is still cheaper than a regular U.S. meal. Considering the fact that most organic meals are more expensive than regular ones, we could safely state that Ambro is a relatively cheap meal substitution.

Why premium pricing?

As mentioned before, Ambro is following a Blue Ocean Strategy by creating a new market. Ambro will be the first healthy meal substitute. As a first mover, the company can set the price without heavily considering competitors' prices. However, not only competitors but also substitutes must be taken into account; compared to substitutes, Ambro is offered at a premium price.

This pricing strategy can be justified by the following reasons:

• Ambro's main target group are high-income earners
• Ambro is a high-quality convenience product
• The organic food category is supposed to continue to grow; people are willing to pay more for healthy, organic food

Marketing Mix: Promotion

Here we want to answer how promotion of Ambro should be carried out – where and when to do marketing to reach our target group.

Marketing channels

Internet: social media

Firstly, we think that internet is the prime advertising channel for Ambro to use. As a totally new, niche market product with no direct competitors, it is important for Ambro to get some opinion leaders to market their product. These opinion leaders would be successful and extremely busy business people interested in healthy lifestyle and who blog regularly. Such bloggers are Timothy Ferriss (Fourhourworkweek) and Dave Asprey (The Bulletproof Executive), which were both mentioned by Ambro’s founders. Other bloggers to contact would be those successful bloggers on the Digital100 Power Index.

Ambro could try to get their attention multiple ways:

• Give free samples to the bloggers
• Engage beta users to write on online forums on busy but healthy lifestyle and participate in these as well
• Acquire meetings with influential people known for blogging when visiting Stanford University with the Start-up Sauna program in January

At the moment Ambro has around 120 beta users, some in the US as well.  Getting them to praise Ambro on online forums is very important in terms of Word-of-mouth – health enthusiasts, especially those with busy life, are likely to rely on recommendations by other people. Also other social media channels such as Youtube could be used for building awareness of meal substitutes. In addition, Ambro could advertise on facebook since that is often quite cost-efficient – and may reach lots of people with interest in their product.

PR

As a new product, it is important for Ambro to get publicity through different online newspapers/magazines in the areas of technology, start-ups, healthy lifestyle etc., to reach the innovators and early adopters of a new product. Ambro has already received some media coverage on Wired and Business Insider. Other very influential magazines to get articles on would be Discover or other online tech newspapers covering new technology trends. Such articles are extremely important for marketing – therefore, Ambro should be sure to contact such magazines, give ideas for articles and be present at important innovator events, from where they could acquire media presence.

Speaker events

Ambro recently attended Slush, a startup event in Finland. The objective of the event was to meet investors as well as spread the word of Ambro. The group should look for similar local events in the big cities of US, especially our first target region San Francisco West Bay area. The event could be such that are meant for startup or even ones meant for promoting new ideas (such as in TEDx events) – for Ambro meaning promoting the organic food substitutes to be able to live healthy and feel good despite extremely busy jobs.

Naturally, all these promotion ways should be continued also after the launch, but these are especially important before launching the product as well.

Marketing campaign

As the financial districts are the best locations for reaching extremely busy business people, we suggest Ambro to make physical marketing campaigns in these areas during lunch times – by giving free samples. Naturally, Ambro cannot spend too much on free samples due to high production costs, but the positive outcomes are likely to beat the losses – after all, Ambro needs get visibility among the business people.

Website and social media channels

Time of promotion

Timing of promotion depends heavily on Ambro’s final decision of their launch date. Online promotion for raising awareness should be started right away – there can never be enough of awareness of a new product. Attending of speaker events is only possible to do when in the country; with their current plans, this would mean in the beginning of 2014. However, they should already be in touch with any organizers. Physical marketing campaigns should be made at the time of launch. 

Marketing messages
In all of their marketing messages, Ambro should communicate the product's core attributes for the consumers - making food easier, quicker and healthier. This should apply to those professionals in extremely busy jobs who

1. need to save time
2. want to eat healthy
3. want to feel good 

Thus, we believe these core values should be used in all marketing actions:
Time-saving, healthy, wellbeing

Other notes

We decided Ambro should not offer discounts on the product at this point, since this might hurt the image of the premium product. Production and other operating costs may be quite high in the beginning, which also suggests not cutting the price down.

Marketing Mix: Product

When are which needs addressed?

Well, as is mentioned in positioning, Ambro is targeted at the busy but health-conscious people. So it satisfies the need for a quick lunch, which means that it actually provides consumers the time lost with having a regular or even fast food lunch since Ambro could be easily made and be consumed on the go. Besides, Ambro satisfies the need for healthy food – an optimized portion provides both men and women with all the healthy, nutritious ingredients of a perfect meal. 

But is this linkage clear enough? Are organic foods healthy? The topic is subject to discussions lately, but the most important blogs (like this one, this one or this one) tend to positively answer this question and rely themselves therefore amongst others on this Newcastle research, even though a Stanford Analysis seems to oppose it (which in turn is again opposed here). Apart from academic research, many consumers live with the simple heuristic that organic food means also healthy food, so therefore we think marketing Ambro as organic will appeal to health fanatics.

Our target customers can use Ambro as a replacement for breakfast, lunch or dinner. Ambro could be used as a replacement for any of them. However, research shows that most U.S. citizens regularly skip breakfast. Therefore, Ambro could be the most convenient solution for breakfast skipping while simply consuming it on the way. However, it is just as likely that business people need a quick lunch, or work late and miss a good dinner later the day. In those cases, Ambro provides a healtheir solution than fast food or simple sandwiches.

Product Features

So far, the product consists of a powder that is sold in big bags of 8 meals. One meal always accounts for two breakfasts. The powder itself provides the specific ingredients, but consumers still need to scoop and mix the product themselves.

Since Ambro is a higher-than-average priced product (see the other post), it is important that the texture and layout of the package carry distinctive features that promote Ambro’s premium positioning. This can be reached through using high-end materials, and/or carefully designed packages that support the product image. For example the brand Innocent produces premium smoothies and communicates a playful brand image through their layout and premium package materials.

Possible Product Improvement

A possible improvement could lie in creating one-portion packages, so that people do not need to worry about amounts anymore. To even increase simplicity, these packages could be made in a way that users can open the package, add the water, close the package, shake, and consume. The package might look something like this:

The first package should have some resealing mechanism on top so that consumers can add water, close the package, shake, and consume. The second package however, should have some folding feature so that consumers can unfold it, add water, put the cap on, shake and consume. The third package would use the same mechanism as the first but with a different material.

Blue Ocean Strategy

In fact, Ambro does not particularly face competition but rather enters a whole new market. In other words, Ambro creates a blue ocean strategy. Ambro renders competition irrelevant by creating a leap value for both themselves as well as the customer. While meal replacements already exist, Ambro is the first one using organic and healthy ingredients. This drives up the price as well, leaving greater potential for operating profit. So with regards to competition, Ambro will be the very first healthy meal substitute, and ideally, Ambro will also be easier to use than competitive products.

Ambro’s cost are high though (which is different from traditional Blue Ocean Strategy) but this is only due to the use of specific ingredients. When the product attracts an initial customer base, opportunities for cheaper ingredient growing and processing could be slowly adapted via economies of scale so that Ambro in the end appeals to a larger customer base. Regarding regular meals on the other hand, Ambro is still cheaper - let alone a regular organic meal.

Sources

Kim, W.C. & Mauborgne, R. (2004). Blue Ocean Strategy. Harvard Business Review, 69-80.

Forecasting: the competitor's strategy

Seeing the fact that Ambro enjoys its position as the first entrance in to the niche market in the US, it would not be surprising if many competitors decide to enter the market if Ambro would deliver abnormal performances. Thus, it is elemental for Ambro to anticipate the new entrance's strategy in order to defend its position in the market.

A tool to forecast such behavior can be found in the Stackelberg leadership model devised by the German economist Heinrich Freiherr von Stackelberg in 1934. This model is a game theoretic model where the first entrant is called the 'leader'. All other subsequent entrants are called the 'followers'. According to the model, the leader can set the price and the quantity upon entering the market according to monopoly market equilibrium principles .The leader has every incentive to capture as much of the market as possible as it will be the most profitable move. If market demand is not unlimited, the followers will be forced to produce less than the leader. The followers would hurt itself and the leader if they try to produce more because it will drive the market price down. This move would be considered irrational as the profitability of both the leader and the follower would suffer.

For Ambro, this means the following:

• The potential entrants are likely to focus on a specific area's with a low initial quantity. 
• The potential entrants would compete for market share through other tools than price

Ambro could prevent the dangers of entry by anticipating these moves of the competitor. However, it must be noted that the Stackleberg model is leaning heavily on assumptions such as rationality and full transparency of the market. Furthermore, it assumes that the leader has the capacity to capture more than 50% of the market at entry. But using this theoretical framework might provide a stepping stone onto a more complex market forecasting process. 

Sources:
Stackelberg, H von, (1934), 'Market Structure and Equilibrium: 1st Edition'  Bazin, Urch & Hill, Springer 2011

Forecasted Sales and Costs

Our team has conducted thorough research of the market. We were able to establish an expected revenue and loss account for the first year of Ambro's launch in the US. Please click on the picture of our revenue and losses sheet in order to get a magnified picture.

Notes, sources and assumptions 

2: The working population of Silicon Valley which houses lots of time constrained  and high achieving people.

3: Ambro targets consumer near the age range of 18-35. 

4: San Franciso city also houses lots of high achieving and time constrained population. Here the working force has not been filtered out yet.  

5: Ambro targets consumer near the age range of 18-35.

6: In order to filter out the non-working population living in San Francisco, the unemployment rate is applied here. 

9: 'Possible reach' refers to the percentage of customers Ambro will be able to sell to within it's total targetable population. The following factors exclude consumers in the total targetable population to be a customer of Ambro:

• Non time constrained work force
• Consumers who are not conscious about their health
• Consumers with know knowledge about Ambro
• Consumer who cannot afford Ambro
• Other external and unforeseen factors

15: Exchange rate Euro's to USD, taken on the 4th of December 2013 

20: UPS truck transfer rates are applied for 100 Ambro packages. The scenario's of 'negative' 'moderate' and 'positive' relate to the physical distance of the production facility to its consumers in the San Francisco Bay area. The packages will approximately have the following characteristics:

• Dimensions: 20 by 20 by 20 inches
• Weight: Approximately 108 Kg
• 100 Ambro packages goes in to 1 package for truck shipment

25: Green Card application fee for foreign investors/entrepreneurs starting their business and operations within US boarders. 

29: Miscellaneous costs are budgeted. This will transfer to 'retained earnings' account in the next accounting period. These include but are not limited to: 

• Set up fees of the offices and general operations
• Corporation foundation fees
• Budget for unforeseen expenditures

Conclusion

From the projected revenues and costs, it can be seen that Ambro will book a slight profit in its first year.This will definitely contribute towards the survival of the start-up in the US as most of these start ups won't see their first positive cash flow in the initial period.

Where to start in the US?

Since we have determined the US as the most promising market for Ambro, the following analysis will help to determine where in the US Ambro’s product should be launched first.

Logically, the company should choose a region for which the density of their target group is particularly high. Besides this, existing relationships might play a role for that decision.

Based on these factors, we feel certain that the highest potential for Ambro is exists in the San Francisco West Bay Area, including Silicon Valley, in California:

Population:

Ambro’s main target group, which we have determined as 20-35 year old professionals with academic education, is fairly well represented in the area of Silicon Valley and San Francisco. Sillicon Valley itself has a working population of around 125000 people. For the San Francisco area, the working population can be estimated. This is done by using the total amount of the San Fransisco area inhabitants, filter everybody out who does not belong in the working population (everybody younger than 18, older than 65) and apply the unemployment rate of 6.5% to it. The final conclusion gives a total of around 771000 working people in the San Francisco area. This gives a total working population of around 896000 people in the greater San Francisco Bay area.

The following diagram gives an overview for Santa Clara and San Mateo Counties, showing that around 1/3 of the population is between 25 and 44, which provides a good basis for the spread of Ambro’s product:

In San Francisco, the age distribution is similarly beneficial for Ambro. The median age here is 36.5 and 30% of the habitants belong exactly to the category of Ambro’s target group; they are between 20 and 35 years old.

Health awareness:

In general, California is well known for its residents to be more interested in healthy eating than it is the case for the majority of other American states. Californians try to remain in good shape by working out and eating comparatively healthy. Data about overweight and obese individuals is in line with this statement.

Statistics of the student population that is overweight or obese in Silicon Valley, compared to California as a whole, shows that between 2005 and 2010 this number has been on average 5% lower for the Silicon Valley area:

A comparison between San Francisco and the US in general illustrates this even more clearly. Whereas almost 70% of adults age 20 years and over are overweight or obese in the US, in San Francisco this group accounts for 42% only.

High entrepreneur rate:

Both San Francisco and the Silicon Valley are popular locations for startups. Many young entrepreneurs start their business here. The relative growth of small business loans in Silicon Valley, compared to data for the US, supports this statement:

Since entrepreneurs are often very busy, ambitious people who care about their health and prefer to eat healthy food, they seem to perfectly suit Ambro’s target group.

Another interesting aspect about startups in the San Francisco Bay Area is that the amount of food entrepreneurs has significantly increased. Venture capitalists are investing much more into food projects than during previous years. This might hint at sufficient demand for products like Ambro's in this area.

Hard-working employees:

Ambro’s geographical target market should feature a great number of busy and hard-working people since they are particularly interested in fast and healthy meals. In the Silicon Valley area, these individuals can definitely be found a lot. David Shaywitz argues that the key to startup success is also to work very, very hard. He suggests that the majority of Silicon Valley entrepreneurs is not able to keep up with a healthy work-life balance. The demand for healthy and quick nutrition seems to be extremely high.

Apart from all the reasons stated above, Ambro already has connections to Standford University via the Startup Sauna. These can help to break into this market and perfectly support our recommendation to launch their product in the San Francisco West Bay Area.


Source for the graphs:
Silicon Valley Index Website http://www.siliconvalleyindex.org

Funding: Possibillities

Initially, Ambro's funding had come out of the founding team's own capital. Currently, additional funds are raised through crowdfunding* platforms such as Kickstarter and Indigogo. Extended funding opportunities towards expansion in the US could be found in the popular TV show The Dragon's Den. This popular North American TV show pits start-ups against professional investors. The start-ups each have 10 minutes in order to convince the five professional investor's of the value of their start-ups. At the end, the investors can decide how much capital they want to provide for this start-up. Numerous North American start-ups have received the necessary funds in this way. As Ambro has developed a tangible product which does not have received any competitive pressure, it chances at the Dragon's Den could be considered to be substantial. In addition, Ambro should try to get to attend start-up fairs such as Slush in Northern Europe, since these offer great opportunities to pitch ones idea and attract investors. 

* Crowdfunding is a form of funding in which project creators (startups) present their idea thoroughly on a crowdfunding website, and interested test users presubscribe to their product/service, already paying for the purchase. Thus, the companies get capital for production and are able to start the project. However, in order for the company to receive any money, enough of people need to like the idea as the project creators (companies) need to reach their funding goals. (kickstarter.com)