When using the free-cash flow model, cash flows are discounted at the weighted average cost of capital (WACC) and when using the dividend discount model, dividends are discounted at….
Case Study – Montana Mountain Biking
Schneider, G. P. (2015). Electronic Commerce (11th ed.). Stamford, CT: Cengage Learning. ISBN: 978-1-285-425436
Jerry Singleton founded Montana Mountain Biking (MMB) 18 years ago. MMB offers one-week guided mountain biking expeditions based in four Montana locations. Most of MMB’s new customers hear about the company and its tours from existing customers. Many of MMB’s customers come back every year for a mountain biking expedition; about 80 percent of the riders on any given expedition are repeat customers.
Jerry is happy with this high repeat percentage, but he is worried that MMB is missing a large potential market. He has been reluctant to spend a lot of money on advertising. About 10 years ago, he spent $80,000 on a print advertising campaign that included ads in several outdoor interest and sports magazines, but the ads did not generate enough additional customers to cover the cost of the advertising. Five years ago, a marketing consultant advised Jerry that the ads had not been placed well. The magazines did not reach the serious mountain bike enthusiast, which is MMB’s true target market. After all, a casual mountain bike rider would probably not be drawn to a week-long expedition.
Another concern of Jerry’s is that more than 90 percent of MMB’s customers come from neighboring states. Jerry has always thought that MMB was not reaching the sizable market of serious mountain bike enthusiasts in California. He talked to the marketing consultant about buying an address list and sending out a promotional mailing, but producing and mailing the letters seemed too expensive. The cost of renting the list was $0.10 per name, but the printing and mailing were $4 per letter. There were 60,000 addresses on the list, and the consultant told him to expect a conversion rate of between 1 and 3 percent. At best, the mailing would yield 1800 new customers and MMB’s profit on the one-week expedition was only about $100 per customer. It looked like the conversion cost would be about $246,000 (60,000 × $4.10) to obtain a profit of $180,000 (1800 × $100). The consultant explained that it was an investment; because MMB had such a high customer retention rate, the profit from the new customers in the second or third years would exceed the one-time cost of the mailing in the first year. Jerry was not convinced.
Nine years ago, MMB launched its first Web site. It included information about the company and its tours, but Jerry did not see any need to include an expedition-booking function on the site. He did think about selling caps and jackets with the MMB logo, but that idea never was implemented. The MMB logo is well known in the mountain biking community in the upper Midwest.
The MMB Web site includes an e-mail address so that visitors to the site can send an e-mail requesting more information about the expeditions. Robin Davis, one of MMB’s expedition leaders, is an amateur photographer who has taken many photos while on the trails over the years. Last year, she had those photos digitized and put them on the MMB Web site. The number of e-mail inquiries increased dramatically within a month. Many of the inquiries were about MMB’s expeditions, but a surprising number asked for permission to use the photos, or asked if MMB had more photos like those for sale. Jerry is not quite sure what to make of the popularity of those photos. He is, after all, in the mountain bike expedition business.
MMB has had the same basic website for 9 nine years, and Jim has recognized that technology has changed and become more affordable. As such, he decided that a digital marketing program should be created to attract new clients to his Montana Mountain Biking (MMB) business. With his past success and reputation, he wants to leverage his website to not only sell his mountain biking expedition packages, but to also sell mountain biking accessories and apparel items that are branded with MMB logo. MMB profits hit a new record high last year, so Jim has the funds to invest to launch his new expanded product offerings and develop his digital marketing program.
Jim has hired you as a marketing consultant to create a report that highlights what you would propose to create an effective business presence online, and the means to process payments and sell merchandise on his website. Additionally, he is also requesting that you include the web marketing strategies you will use to generate leads for his expedition service, and the social platforms that will be used to generate traffic to the website and enhance his overall branding efforts.
Your assignment this week is to review the five stages of customer loyalty shown in Figure 4-5 and prepare a report in which you classify MMB’s customers. Estimate the percentage of MMB customers who fall into each of the five categories (Support your classification with logic and evidence from the case narrative) and then develop your recommendations that address the specific material he has hired you for. You will want to convey the importance of presenting an image consistent with MMB philosophy, principles, and identity that also meets the accessibility goals and the needs of the website visitors. In addition, an outline of the elements (such as branding, product characteristics, product use benefits, and comparison to competing products) you would include in the online communication media (Web page, e-mail, social networking, and so on) that is used to introduce new customers to Jim’s MMB business.
The following requirements must be met:
· Write between 1,000 – 1,500 words using Microsoft Word in APA 6th edition style.
· Use an appropriate number of references to support your position, and defend your arguments. The following are examples of primary and secondary sources that may be used, and non-credible and opinion based sources that may not be used.
1. Primary sources such as government websites (United States Department of Labor – Bureau of Labor Statistics, United States Census Bureau, The World Bank), peer reviewed and scholarly journals in EBSCOhost (Grantham University Online Library) and Google Scholar.
2. Secondary and credible sources such as CNN Money, The Wall Street Journal, trade journals, and publications in EBSCOhost (Grantham University Online Library).
3. Non-credible and opinion based sources such as, Wikis, Yahoo Answers, eHow, blogs, etc. should not be used.