4.1 Overall Marketing Strategy
The key to EASI's success will be reaching the product safety and compliance engineers at small- and medium-sized businesses. This is where the majority of sales opportunities exist. EASI will penetrate each target market through direct mailings, niche advertising, and telemarketing. To accomplish this we will initially target the large market leaders in each industry through beta testing in order to establish market presence and increase EASI's credibility. In addition, the previously mentioned arrangement between UL and EASI presents an opportunity for creating customer awareness. UL has proposed including EASI's name in UL's Catalog of Standards for Safety and having EASI product literature included in the UL submittal package sent to potential customers. Another integral element of EASI's strategy is to be responsive to all regulatory and Standards changes in our target industries. We have also initiated discussions with representatives of the Computer and Business Equipment Manufacturers Association (CBEMA) and are establishing networks with CBEMA members who are interested in EASI's products, or who can put us in touch with others who may be interested in our products.
4.2 Strategic Alliances
EASI is currently developing several key strategic alliances. In addition to obtaining permission to publish the European Community (EC) Directives in electronic format and corresponding with John McCarthy, Vice President of Standards for the Canadian Standards Association (CSA), we are currently formalizing a strategic alliance with Underwriters Laboratories. UL requested a proposal for an agreement under which UL would contribute funding toward EASI's software development in return for a share of revenues. Appendix H includes a letter regarding this arrangement from Robert Williams, Corporate Manager of Standards at Underwriters Laboratories. A meeting will be held on April 9,1992 at EASI's office in Austin, Texas at which time Robert Williams, Gary Schremppe (Field Site Representative for Underwriters Laboratories), and EASI's management team will negotiate the details of the agreement.
UL is currently providing EASI with technical expertise to aid in product development and has provided Standards in both printed and electronic formats. EASI's evolving strategic alliance with UL indicates UL's belief that the EASI management team can develop a "saleable" product. Unlike UL, EASI's management team possesses the necessary expertise to develop compliance software systems successfully. EASI's strong relationship with UL is a significant competitive advantage that will contribute to our success in the marketplace. EASI's UL contacts and relationships cannot be duplicated in a short period of time. Therefore, any potential competitor to EASI would have to overcome a significant barrier to entry upon entering the market.
4.3 Initial Sales and Promotion
In order to penetrate the market quickly and provide a catalyst for future "word-of-mouth" sales, EASI will saturate our initial target market of 5,700 domestic manufacturers complying with UL 1950 through a direct mailing. Each direct mail packet will include a product demonstration disk and product literature. In addition, EASI will offer a substantial introductory discount during the first 6 months of initial product release. EASI will also establish a toll-free number for orders and service.
Industry surveys indicate that the majority of manufacturers complying with product safety standards read the same trade publications. EASI will advertise extensively in publications including Compliance Engineering, Design News and Electronic Buyers News in order to maximize product exposure and sales. EASI personnel will actively submit technical articles regarding the company's products, and their features and benefits, to these trade publications. EASI will also target its promotional efforts at relevant trade shows, CBEMA conferences, and compliance seminars. For example, the use of EASI's products during UL seminars will serve as a third party endorsement by UL and will allow us to directly reach UL clients. This strategy will give us the best access to engineers responsible for a company's product safety design and compliance requirements.
There are four typical channels for the distribution of software products: 1) software retailers, 2) value-added resellers (VARs), 3) direct sales, and 4) mail-order. EASI's software is an industrial niche product. Since software retailers typically handle consumer-oriented mass market products, distributing through this channel presents no advantage. VARs are typically independent businesses that provide customers with integrated hardware and software systems. EASI's software is designed to run on multiple computer platforms and thus our customers do not have the need for the skills of a VAR. EASI will use direct sales only to establish market presence in the Austin-Houston-Dallas market.
EASI will distribute its products primarily through Nationally Recognized Testing Laboratories (NRTLs) and mail-order channels. NRTLs provide EASI with a direct link to manufacturers testing products to comply with particular safety standards. Specifically, UL has proposed distributing EASI's software in conjunction with UL Standards manuals and diskettes. This will give us direct access to UL clients. Mail-order sales provide an efficient means of reaching our target customer base. EASI has acquired High Tech Texas an extremely valuable database of Texas high-tech manufacturing and service organizations produced by TINS (the Texas Innovation Network). It will serve not only as a mailing list for our initial product, but for future products as well. It will also assist in our direct sales effort in the Austin-Houston-Dallas market.
4.5 Pricing Strategy
Based on feedback from our alpha and beta sites and our market survey, we have identified a typical submittal profile for manufacturers. This shows most companies submit between three and five products per year to UL for approval and spend 180 man-hours per product submittal. This includes time spent on documentation, standards interpretation, product redesign, and testing. As the cost of a typical UL product submittal averages between $3,000 and $10,000, a company's overall cost in obtaining a UL mark may reach $15,000 per product when internal costs are included. EASI's software is designed to provide the customer with considerable cost savings.
EASI is in a market which is currently void of direct competition. In this situation, the benefits of EASI's products must be weighed against the benefits of "alternatives" available to the customer in order to determine price (see "Competitive Analysis" chart in Section 2.5). EASI's initial product, UL Solutions - 1950, will be marketed at a price of $3,000 per copy and we expect future products to be similarly priced, on average. This price allows our customers to realize both manpower and cost savings (see Appendix I). Preliminary results from a pricing survey, and interviews with customers, indicate that a price of $3,000 is actually below what some customers will pay for this product.
The software program, User's Manual, and a one-year subscription to updates of the standard for which a particular program is designed will be included in the initial purchase price. Standards updates to be used with EASI's software will be available to customers on a subscription basis. A subscription for updates to the standard in subsequent years will be priced at $500 per standard per year and will be available for distribution through a restricted access electronic Bulletin Board System (BBS). Interviews with product safety managers have revealed that UL frequently revises its Standards without notifying affected customers. EASI will be able to provide timely Standards revisions due to our strong relationship, and emerging strategic alliance, with UL. EASI's BBS will assure for the timely distribution of updates to the Standards. Therefore, manufacturers have a vested interest in maintaining a yearly update subscription with EASI. Finally, EASI will provide its customers with a 30-day money back guarantee. All of these factors serve to alleviate any potential customer reluctance associated with trying EASI's products.
4.6 International Markets
As U.S. sales' levels approach maturity, EASI will seek new markets for our products. The largest market outside the U.S. for information technology is the Japanese market, with approximately 4,700 manufacturers (see Appendix A). EASI has developed a three-phase proactive plan for entry into this market: 1) initial market research, 2) suitability of the product, and 3) formation of an alliance (or alliances) with a Japanese distributor(s). Initially, EASI will study Japanese business practices, make contact and network with other companies doing business in Japan, and investigate growth in this market. Next, EASI will examine the suitability of our products for Japanese manufacturers. Linguistic, cultural, customer support, and computer platform portability concerns will be addressed. Finally, EASI will review our market research and propose an alliance with a Japanese distributor. EASI will select this distributor from those we have identified as serving the Japanese market leaders in the information technology industry. EASI will consider, among other attributes, the distributor's ability to monitor competition and its ability to provide venture capital, if required.
|Expert Application Systems, Inc.|
|Table of Contents||Appendices|
0. Executive Summary|
1. The Company
2. The Market
4. Marketing Plan
5. Product Development
7. Financial Plan
Letters of Support
Product Screen Samples
Product Price List
Endorsement from UL
Board of Advisors
|All information herein is confidential and belongs to Expert Application Systems, Inc.|