Cranium Filament Reductions
Cranium Filament Reductions
Cranium Filament Reductions
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5.0 Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.1 Implementation Milestones . . . . . . . . . . . . . . . . . . . . . . . 14
5.2 Marketing Organization . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Contingency Planning . . . . . . . . . . . . . . . . . . . . . . . . . 15
Cranium Filament Reductions
Cranium Filament Reductions is a hair salon located in Shaker Hts., Ohio that allows the entire
family to have their hair needs satisfied in one convenient location. Cranium serves men, women,
and children and accepts appointments as well as walk-ins. Cranium also sells retail hair care
products. Cranium is able to serve the entire family in one quick, convenient visit.
While there are many "quick salons" like Cranium, Cranium will excel due to its attention to detail
regarding customer service. Through unheralded customer attention, Cranium will slowly but surely
gain market share as it services the entire family, creating long-term relationships. Lastly
Cranium's location will allow it to attract a lot of walk in traffic.
After month four, sales will grow steadily for Cranium. Profitability will be reached by month nine
and $443,000 in revenue will be earned during year three with $61,000 in profits.
$600,000
$500,000
$400,000 Males
Females
$300,000
Women with young children
$200,000 Retail hair care products
$100,000
$0
2002 2003 2004
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Cranium Filament Reductions
Cranium Filament Reductions is in its first year of business as a start-up company. Cranium
recognizes the fact that a comprehensive, strategic marketing plan is required to ensure
profitability and success. Cranium offers a wide range of hair cutting services. The market need is
for a one-stop, convenient, hair salon that is skilled and reasonably priced, serving the entire
family.
Cranium Filament Reductions possess good information about the market and knows a great deal
about the common attributes of its most prized customers. Cranium will leverage this information
to understand who is served, their specific needs, and how Cranium can better serve them.
Target Markets
Males
Females
Mothers w/children
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The profile for Cranium Filament Reductions consists of the following geographic, demographic, and
behavior factors:
Geographics
• The immediate geographic target is the city of Shaker Hts. and the surrounding
communities with a total population of 112,000.
• A 20 mile geographic radius is in need of the offered services.
• The total targeted population is 46,000.
Demographics
Behavior Factors
• Are always on the lookout for convenience factors in regards to service providers.
• Attempt to get all of the family's needs serviced at the same time if possible.
Cranium Filament Reductions is providing families with a one-stop option for providing a wide
range of hair cutting/styling options. Cranium seeks to provide the following benefits that are
important to its customers:
• Convenience: Cranium can serve the entire family with no appointment necessary.
Additionally, Cranium's storefront is in a centrally located area.
• Customer Service: Serving the customer with superior attention is what the employees
are trained to provide.
• Competitive Pricing: Cranium offers pricing that is a bit more than a traditional barber
but far less than a dedicated women's hair salon.
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The market trend for the hair cutting industry is one of consolidation. Consolidation can be seen
with the high-end hair salons as well as the full-service, full-family companies such as Best Cuts.
Over the last five years there have been an expansion of upscale chain salons in major
metropolitan areas. The expansion takes the form of opening new stores, as well as purchasing
independently-owned salons and transferring them over to the chain. Additionally, this trend has
occurred with the full-service, family hair cutting stores.
The reason for this trend is similar to other industries that are consolidating; cost saving measures.
Cranium is not participating in this trend of aligning itself with a chain. Cranium believes that it has
better insight to its local market and would rather apply this specialized insight to its market
instead of adopting the procedures of a national chain.
Market Forecast
160,000
140,000
120,000
100,000
Males
80,000 Females
60,000 Mothers w/children
40,000
20,000
0
2002 2003 2004 2005 2006
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For the last seven years the hair cutting industry has grown steadily at 5% a year. The industry is
generally unaffected by economic upturns or downturns. While in upturns, women are more likely
to purchase extra services such as hair coloring or perms, although generally the consumption
pattern is unchanged. This is somewhat intuitive as most people need and get a haircut based on
an elapsed amount of time, independent of the economic environment that they are in.
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
Males Females Mothers w/children
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The following SWOT analysis captures the key strengths and weaknesses within the company, and
describes the opportunities and threats facing Cranium Filament Reductions.
2.2.1 Strengths
2.2.2 Weaknesses
• As a new entrant to the market, Cranium lacks brand equity that many of its competitors
have earned over years of service.
• The struggle to appear continually on the edge in terms of fashion and style.
• Large costs associated with a start-up company.
2.2.3 Opportunities
2.2.4 Threats
The buying patterns of men and women are quite different. Typically men are more price or
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convenience sensitive. Men typically care less about the task of getting their haircut. For them
whatever is easiest works best. Women are more concerned with hair styling and tend to bond
more with their stylists. This bond creates loyalty to their stylist. Once a stylist has earned their
trust they are more willing to blindly put their hair in the stylists hands.
2.4 Services
Cranium Filament Reductions provides hair styling for the entire family. This includes haircuts for
men and women, permanents and hair coloring for women, as well as haircuts for children.
Shampoos will be offered for all adult services. Service is offered on a walk in basis or by
appointment. Cranium Filament Reductions will emphasize a customer-centric service where the
customer's needs are always the priority.
Cranium Filament Reductions will also sell hair care products that are forecasted to account for
15% of sales. These professional quality supplies will include shampoos, conditioners,
reconstructors, brushes, combs, and other styling aids.
• Professionalism.
• Convenience.
• Customer attention.
Cranium Filament Reductions is still in the speculative stages as a start-up company. Its critical
issues are to continue to take a modest fiscal approach; expand at a reasonable rate, not for the
sake of expansion in itself, but because it makes prudent fiscal sense to.
Cranium Filament Reductions will have a somewhat limited marketing budget. The main reason for
this will be because some of the money that would otherwise be spent on marketing efforts will be
used for rent. By choosing a well-traveled, popular mall to locate Cranium in, it will receive a lot of
walk through traffic. The cost of having this location takes the form of higher than normal rent.
Part of the high cost of rent is just an expense if you want to locate a shop in a popular commercial
property. Some of the money also goes to mall association dues. The money for the mall dues
goes to marketing activities that are designed to increase visibility and traffic for the mall as a
whole.
The money from the marketing budget will be spent on the following marketing initiatives:
• Advertisements: Advertisements will be placed in two different local newspapers, the Plain
Dealer and the Sun Press. The Plain Dealer serves the entire Cleveland metropolitan area.
Not all of the readers will be willing to travel across Cleveland to go to Cranium, however, a
large percentage of people in Cleveland subscribe to the Plain Dealer, therefore it is a good
investment to increase visibility. The Sun Press is a more regional paper serving Shaker
Hts., Cleveland Hts., University Hts., and Warrensville Hts. While the reader base of the
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Sun Press is much smaller than the Plain Dealer, it is more geographically targeted.
• In-store and Store Front Displays: These displays will be visible to the large walk-
through traffic base.
3.1 Mission
Cranium Filament Reductions' mission is to provide reasonably priced, convenient hair styling. We
exist to attract and maintain customers. When we adhere to this maxim, everything else will fall
into place. Our services will exceed the expectations of our customers.
• Men: Men will typically make up 70%-75% of the clientele. The reason for this is that men
have shorter hair requiring a faster, simpler job.
• Women Who Cannot Afford an Upscale Salon: Women tend to favor a female specific
upscale salon if they can afford it. There is not often a difference in quality of an upscale
salon relative to a family hair salon other than a upscale salon will tend to pamper you
more, only accepts appointments, and the facility is generally a bit plusher. Someone who
is fiscally responsible as opposed to someone who likes opulence will favor a family style
salon.
• Young Mothers With Children: Most young children are notoriously difficult when it
comes to getting haircuts. A family style salon is a more laid back place that allows the
children to play while they are waiting and then will work with the parents in calming the
kids nerves when they are ready for their shearing.
Cranium Filament Reductions will target each of the three groups separately. The males will be
targeted by offering a quick, convenient, service. Because men have shorter hair, they tend to
require haircuts more often. Cranium Filament Reductions will cater to males with evening hours,
no appointments necessary, and quick turn around times.
Generally females prefer the allure of upscale salons, however, not everyone can afford this luxury.
For this reason Cranium Filament Reductions will provide the same quality hair styling, just without
the expensive price. Cranium will target these customers by emphasizing the sophisticated, ultra-
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Cranium Filament Reductions
Cranium Filament Reductions will also target mothers with children by offering kids toys to play
with while they wait and child-friendly hair stylists. Additionally, children receive a special rate
reflecting the fact that children's hair grows so fast that it can be expensive to keep up with regular
cuts as well as the recognition that it generally takes a lot less time to cut a child's hair so it should
be inherently less expensive.
3.5 Positioning
Cranium Filament Reductions will position itself as a convenient, full service, family hair salon.
Cranium will offer one-stop service offerings. Cranium will leverage its competitive edge to achieve
its desired positioning:
• Cranium will invest time and money into training to ensure that clients receive the best
experience possible making it is easier to turn them into a long-term customer. By
providing superior customer service, Cranium will be able to effectively compete against
and outlast larger chains and independent stores.
The single objective is to position Cranium as the premier, full service, family salon in the Shaker
Heights area. The marketing strategy will seek to first create customer awareness regarding the
services offered, then develop the customer base, and finally work toward building customer
loyalty and referrals.
The message that Cranium will seek to communicate is that the entire family can be served
quickly, professionally, with superior customer service at reasonable rates. The message will be
communicated through various methods. The first is in-store and storefront displays. This will be a
convenient method to attract people that walk past Cranium's store front.
The other method of communication is advertisements in two local newspapers. These newspapers
are widely read and will reach a large base of people.
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• Pricing: Cranium's pricing scheme will be based on a competitive pricing model with other
similar service providers.
• Distribution: All of Cranium's services and products will be dispensed from its centrally
located store.
• Advertising and Promotion: Locating the store in a high traffic mall will significantly
increase visibility. A targeted advertising campaign will also communicate Cranium's desired
messages.
• Customer Service: All of Cranium's employees have been trained in exceptional customer
service. All employees have discretion to remedy any problems encountered on their own
without having to first receive permission from a supervisor.
During the initial phases of the marketing plan construction, several focus groups were held to gain
insight into the buying patterns of prospective customers. The focus groups drew a wide range of
people from women to men to mothers. The participants were asked what type of service they
typically use and why. They were also asked how their current service could be improved and what
it would take to get them to switch to a new salon. They were given a bit of information regarding
Craniums offerings and they evaluated this. The focus groups provided invaluable information and
feedback. While some of the information gathered was already known to Cranium, other
information were things that made perfect sense but had not been thought of.
This section will offer a financial overview of Cranium as it relates to the marketing activities.
Cranium will address break-even analysis, sales forecasts, expense forecasts, and how they link to
the marketing strategy.
The break-even analysis indicates that $32,340 will be required in monthly revenue to reach the
break-even point.
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Break-even Analysis
$30,000
$20,000
$10,000
$0
($10,000)
($20,000)
($30,000)
$0 $10,770 $21,540 $32,310 $43,080 $53,850
Break-even Analysis:
Monthly Units Break-even 2,156
Monthly Sales Break-even $32,340
Assumptions:
Average Per-Unit Revenue $15.00
Average Per-Unit Variable Cost $1.80
Estimated Monthly Fixed Cost $28,459
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The first month will be used to set up the store and hire and train the employees. The store will be
officially open the second month. Sales for month two through will four will be somewhat slow, as
Cranium will be building up a customer base. From month four on sales will grow steadily.
$40,000
$35,000
$30,000
$25,000 Males
$20,000 Females
Women with young children
$15,000
Retail hair care products
$10,000
$5,000
$0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Sales Forecast
Sales 2002 2003 2004
Males $217,202 $395,458 $411,545
Females $21,712 $39,546 $41,155
Women with young children $2,172 $3,955 $4,115
Retail hair care products $36,150 $65,844 $68,522
Total Sales $277,236 $504,803 $525,337
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Marketing expenses are to be budgeted so that they are high during the first quarter in order to
raise visibility for the start-up organization. They will then settle down a bit until the winter months
when they will ramp up as the winter months are a time when there is an increase in spending on
hair care in preparation for the winter holidays.
$1,600
$1,400
$1,200
$1,000
Store front displays
$800
Plain Dealer advertisements
$600 Sun Press advertisements
$400
$200
$0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
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5.0 Controls
The purpose of Cranium's marketing plan is to serve as a guide for the organization. The following
areas will be monitored to gauge performance:
The following milestones identify key marketing programs. It is important to accomplish each one
on time, and on budget.
Milestones
Advertising campaign #1
Advertising campaign #2
Profitability
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Milestones Plan
Milestone Start Date End Date Budget Manager Department
Marketing plan completion 1/1/02 2/1/02 $0 Susan
Storefront design and shop set up finished 1/1/02 2/1/02 $1,100 Susan
Advertising campaign #1 1/1/02 6/30/02 $4,100 Susan
Advertising campaign #2 7/1/02 12/31/02 $4,100 Susan
Profitability 1/1/02 9/31/02 $0 Susan
Totals $9,300
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Susan Sever, the owner, will be primarily responsible for the marketing activities. Susan will use
outside assistance for some of the creative activities.
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Appendix: Cranium Filament Reductions
Table 4.2 Sales Forecast
Direct Cost of Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Males $0 $658 $750 $1,026 $1,985 $2,225 $2,585 $2,827 $3,225 $3,449 $3,582 $3,750
Females $0 $66 $75 $103 $198 $223 $259 $283 $322 $345 $358 $375
Women with young children $0 $7 $8 $10 $20 $22 $26 $28 $32 $34 $36 $38
Retail hair care products $0 $365 $416 $569 $1,096 $1,235 $1,435 $1,569 $1,790 $1,914 $1,988 $2,082
Subtotal Cost of Sales $0 $1,096 $1,249 $1,708 $3,299 $3,705 $4,305 $4,706 $5,370 $5,743 $5,965 $6,245
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Appendix: Cranium Filament Reductions
Table 4.3 Marketing Expense Budget
Marketing Expense Budget Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Store front displays $600 $0 $0 $0 $0 $500 $0 $0 $0 $0 $0 $0
Plain Dealer advertisements $500 $500 $500 $500 $150 $150 $150 $150 $500 $500 $500 $500
Sun Press advertisements $400 $400 $400 $400 $100 $100 $100 $100 $400 $400 $400 $400
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Sales and Marketing Expenses $1,500 $900 $900 $900 $250 $750 $250 $250 $900 $900 $900 $900
Percent of Sales 0.00% 12.86% 11.27% 8.25% 1.19% 3.17% 0.91% 0.83% 2.62% 2.45% 2.36% 2.26%
Contribution Margin ($1,500) $5,004 $5,834 $8,302 $17,547 $19,218 $22,947 $25,113 $28,035 $30,050 $31,244 $32,751
Contribution Margin / Sales 0.00% 71.49% 73.07% 76.10% 83.18% 81.18% 83.44% 83.52% 81.72% 81.90% 81.99% 82.09%
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