QuickTrophy.com.

Brunswick, Gary J. ; Dehring, Terry

CASE DESCRIPTION

The primary subject matter of this case concerns the growth and development of a web-based trophy and awards retail business, with primary focus on marketing strategy issues. Secondary issues examined include the identification and measurement of relevant performance metrics for an upstart firm such as QuickTrophy.com, and the relationship between strategic goal setting and the implementation of relevant strategies designed to achieve those goals. This case has a difficulty level of 3-4, and would be appropriate for junior-to-senior level students. The case is designed to be taught in 3 class hours, and is expected to require 4-6 hours of outside preparation by students. It might be helpful for students to examine other successful and failed web-based business models for comparison purposes.

CASE SYNOPSIS

The case centers around a group of entrepreneurs who recognized, develop and implement a unique web-based business model applied to the sports trophy business. QuickTrophy.com offers customers levels of customer service unparalleled in the trophy business, including an easy-to-use website, next day shipping, and a money-back guarantee. The company faces some unique challenges in developing and maintaining a consistent customer base, and is looking for additional ways of expanding their business through complimentary products and services. QuickTrophy.com is a small company, which has an interesting value proposition and the potential for significant growth.

INTRODUCTION

The idea for QuickTrophy came from the company co-founder, Stephen Roberts. While sitting stuck in traffic in suburban Detroit on a hot June Saturday afternoon he could feel his blood pressure rising. The team banquet was in 20 minutes and it looked like he would be late. Traffic was barely moving, all the radio music was bad, and none of the CDs sounded good. The thermometer read 94 degrees and the air conditioning wasn't working. Stephen had just picked up the team trophies--this was his third trip to the trophy shop--and he wasn't happy with them. With beads of sweat on his forehead, he started thinking about what he had gone through to get these trophies.

His adventure had started nearly 3 weeks earlier. Like most volunteer coaches for young soccer teams, Stephen was not only the busiest person on the team, but also in charge of getting the team trophies at the end of the season. So like all the other coaches he went to the local trophy retail shop. After a 30 minute drive to get to the shop he was faced with a line of customers, complicated forms to fill out, piles of meaningless choices to make, and a bored staff person with an attitude. Finally, after an hour in the store, he was done and ready to face the traffic for the trip home.

Two weeks later his trophies were ready. He went to pick them up, only to find out that the names were misspelled on two of the trophies, and they were all the wrong color. With the banquet just 4 days away, he had to have the shop place a rush on the corrections. They would be ready on the day of the banquet and he could pick them up at 4:30 (the banquet was at 6:00).

So today he went to get the "fixed" trophies. He found that the trophies were the right color and the two misspellings were corrected. However, a name was now misspelled on a different trophy! But there was no time to get it corrected, so he took the trophies and started for the banquet.

Sitting in his car stuck in traffic, hot, frustrated, and angry, Stephen thought: "Why isn't there an easier way to do this!" Frustration can often lead to inspiration. He figured this was a perfect application for the internet--travel could be eliminated, choices streamlined, names could be copied and pasted into engraving forms, the finished trophies delivered to his door. So Stephen looked on the web for a trophy shop and to his amazement, there were none that offered an on-line ordering service. He checked with some fellow coaches and none of them were aware of an on-line trophy company either, but they all agreed it would be a great idea. One of the coaches, Mike King, thought the idea was so good that he suggested that he and Stephen start a company to do it.

Mike did some more investigation, talked with some of his friends who had business contacts in the trophy industry, developed a business plan, and came to the conclusion that this was a viable business idea. The only thing they needed was the person to make it happen. Stephen contacted a close friend of his, Terry Dehring, to see if he would be willing to take charge and run the project. Terry agreed on the condition that it was located in Marquette. The three shook hands and QuickTrophy was born.

Terry refined and expanded the business plan, developed the web site design, contracted with a local firm to do the programming, and developed the product portfolio, supplier relationships, physical plant, computer systems, and office infrastructure. After extensive testing and refining, the web site went live on April 10, 2001.

CURRENT PERFORMANCE

Since starting, sales have grown quite dramatically with orders coming in from all over the country and even some from Japan, Guam, Germany, and Greenland. The majority of trophy orders (approximately 40%) have come from the East Coast (Boston to Washington D.C.). Approximately 25% of orders were from the West Coast (Seattle, San Francisco, and L.A.). Another 20% were from the Mid West (Detroit and Chicago). The remaining 15% have come from the rest of the country with higher concentrations of orders coming from Atlanta, Research Triangle (NC), Dallas, and Denver.

Below are business metrics by quarter for QuickTrophy since going live in April 2001. Note: many of the Site Visitors in early 2001 were likely QuickTrophy employees or their programmers as the web site was undergoing several updates and revisions during that time period.

CURRENT OPERATING METRICS

The gross profit margin for trophies and medals for QuickTrophy at current pricing levels was 72.9% (gross profit = (sales--cost of goods). In addition, QuickTrophy had fixed expenses of $18,500 per month. Monthly break-even sales were $32,325. Current retail prices for various trophy products are available on the QuickTrophy.com website.

The operating ratios listed below are from the Awards and Recognition Association 2002 survey of trophy and awards retailers. Although they provide a basis for comparison, they do vary quite a bit from QuickTrophy because the business models are quite different: QuickTrophy is an internet retailer while the average retailer is a small street level retail outlet.

THE OPPORTUNITY

The available market for trophies and related products is huge. Information from the ARA (Awards and Recognition Association)--an industry group for trophy and awards retailers and suppliers--estimates there are about 10,000 retail trophy shops nationwide, employing 80,000 people with sales of over $2,000,000,000 annually.

The largest segment of the trophy market is the sports trophy market. Particularly for youth sports teams, like the soccer team that Stephen was getting trophies for. This is the primary market QuickTrophy was designed to supply.

The majority of the market is currently being serviced by local "Mom & Pop" retail shops. These stores service a small geographic area and need to be able to supply all trophy and award products to their local customer base. They need to be all things to some people. So every order is a "Special Order" and parts are ordered to fill each order individually. To reduce shipping costs, orders are collected and parts are ordered once a week. Once the parts are in, the orders are completed and customers are called to come and pick them up. The standard turn around time is 2 weeks. Order forms are hand written, read by the engraver who types the engraving instructions into a machine to make the trophy name plates. This process is inherently error-prone and name plates are commonly incorrect.

Compared to local trophy retail shops, QuickTrophy has several advantages. The internet is available 24/7 from home or work. The web site was designed to be extremely easy to use. The selection of trophies was simplified. Engraving instructions are easily typed in, names can be copied and pasted from the team roster. There are several opportunities to review and correct any misspelled words or names. The manufacturing process is highly automated so the engraving information is processed automatically. Thus, there are no engraving errors. Finally, QuickTrophy stocks an adequate supply of parts so trophies can be made and shipped out by the next business day. Orders are shipped to the customers home or work address so no travel is necessary.

One of the few disadvantages of QuickTrophy compared to local retail shops is the product selection. Specifically, local shops can offer everything, because they stock nothing, as mentioned earlier. QuickTrophy maintains an inventory of parts, so can only offer certain styles and sizes of trophies on a quick turn around basis.

Since QuickTrophy started, other on-line trophy retailers have appeared (and are summarized later in the case). QuickTrophy still had advantages over them. For example, QuickTrophy.com still has the easiest to use web site, particularly for engraving. The 24 hour turn around is still the fastest in the industry. Some on-line competitors offer a 72 Hour Rush service, for a premium, while others are even slower.

TARGET MARKET

QuickTrophy's target market was the person who typically purchases the team trophies: The coach of the team. More specifically, the coach who is extremely busy and time pressured and values speed, simplicity, and a minimum of decisions when purchasing their trophies. Also, the target market was someone linked to the internet on a regular basis. The growing use of the internet to post practice sessions and game schedules offers QuickTrophy the opportunity to target these coached directly.

In addition, because the coaches are so busy, they often don't order the trophies until the last minute. QuickTrophy's fast turn around time fills this need perfectly. Here are some quotes from recent customers:

"Thanks for the great trophies. I was amazed that the order was processed and the product was fabricated only hours after being ordered. I will recommend your company to others who are looking for a good product at competitive prices with excellent service."--William S.

"I received our volleyball trophies today and they look great. I am very pleased with my experience with your company. The ease of ordering, speed of delivery, and prices will keep us returning for future orders."--Kathleen K.

"I just received my order this afternoon and wanted to express my appreciation for the EXTREMELY FAST service and wonderful craftsmanship. Trophies ordered and at my door in 5 days! Faster than any trophy shop in SE Michigan--AND awesome prices! THANKS!"--Julie W.

QuickTrophy's customers rate their speed, products, and service very high according to results of a recent survey. In addition, 89% of those surveyed planned to use QuickTrophy again and 94% said they would recommend QuickTrophy to a friend.

The challenge with marketing to coaches directly represents classic consumer behavior issues; namely, how to find and contact coaches. Typically, the only record of team coach contact information is kept at the local league level. Some e-mail or other contact information is available on league web sites or local team web sites, but this requires significant searching.

Another challenge with team coaches is the short "life span" of volunteer coaches. Many volunteers only coach teams for one or two seasons before they get burned out and quit. Some of the long-timers will coach for 5-6 years before they quit. In addition, they only need trophies or awards once or twice each year. So a "frequent buyer" will only be looking to purchase annually or semi-annually.

Finally, coaches tend to be very busy and don't have a lot of time to shop around. So when they need trophies, they will either go where they went last time or ask another coach what they did for trophies. In smaller towns this works to the advantage of the local trophy retailer where local brand recognition and loyalty are important. The challenge for QuickTrophy is to reach the coach just before they need to order trophies.

MARKET NEEDS

The need for relatively inexpensive trophies currently exists as shown earlier. The need to purchase these trophies in a fast, easy to use environment, with a minimum of frustration is a growing need among the target market segment and will continue to grow. Because of this, QuickTrophy has focused on simplicity, ease of use, order placement in a minimum of time, quick fulfillment, and accurate production of the trophies to meet the demands of the target market.

Presently it is estimated that the vast majority of the sports trophy market is being supplied by local retailers. There are currently an estimated 10,000 local retail trophy shops in the United States (ARA membership dealer records). With the large number of local retailers, it is obvious that the market is quite substantial.

The internet is a large and rapidly growing marketplace. Consumer sales on the internet is growing at a rapid pace. ComScore Networks says that consumer spending on the internet in the first 6 months of 2002 grew 29% to $19.8 billion. BizRate.com calculated the sales during the same time period were $23.5 billion. Meanwhile Neilsen/NetRatings calculated that 120.2 million people use the internet either at home or at work, an increase of 6.5% over the previous year. And those users spent an average of over 19 hours on the internet during the month. Including QuickTrophy, there are only a handful of on-line trophy retail companies with a serious presence on the internet.

With the advent of QuickTrophy.com and several key competitors (summarized in the next section), a strategic window exists for other competitors to enter this market. It seems questionable that any new web-based competitors will emerge from traditional local retailers as the business model for the two businesses is so different. Additionally, it appears that some consolidation in the local retail business is taking place through franchises, mainly by Crown Awards. They are headquartered in New York and have roughly 100 franchised stores throughout the United States.

COMPETITION

As stated earlier, there are already several trophy retailers on the internet. Most are simply advertising pages for a local retail shop and they offer no on-line ordering, just a local phone number to call to place your order. There are currently 6 internet major web sites which do offer on-line ordering similar to that offered by QuickTrophy.

The existence of other internet retailers puts pressure on QuickTrophy to provide preferable service in the form of speed, ease of use, and accuracy. In addition, more pressure is placed on marketing and sales as the existence of a web site is no longer unique.

A thorough review of the competing internet sites found that all competitors had some aspect which made them desirable. However, they all required many decisions to be made and required a considerable number of "clicks" to place the order. All had confusing or cumbersome engraving instructions. Additionally, all competitors offer many (often too many) choices for their customers. In light of all these shortcomings and the QuickTrophy chosen market niche, the QuickTrophy.com web site is faster and easier to use than any of the current competitors.

The chart below details the strengths and weaknesses of each of the current internet competitors. The links should be live to their site if you want to view them personally.

MARKETING STRATEGIES

Product

QuickTrophy's product line focuses on relatively inexpensive ($5--$30) sports trophies and medals. The trophies are attractive, made with quality parts, and built to order. The name plates are engraved to customer specifications. Three lines of engraving are allowed on each name plate. The high level of automation at QuickTrophy ensures that what the customer requested for engraving is exactly what gets engraved. Customers are given several chances to review and correct any miss spelled words or names before the name plates are produced. The streamlined product selection and automated engraving allows QuickTrophy to make and ship orders by the next business day for most customers.

The QuickTrophy web site is clean, tastefully designed, and easy to navigate. Customers can place an order in 6 pages (3 to specify the trophies and engraving, 3 to specify shipping and credit card information). The entire order process can be completed in 10 minutes for a team of 12 players. Communication and customer service is extremely important at QuickTrophy so the customer knows what to expect and when to expect it. After placing their order, they are automatically sent an e-mail from the credit card processor informing them that their credit card was charged and the amount it was charged. Then they are sent an e-mail from QuickTrophy listing the details of their order along with a request to review it for accuracy and call or e-mail in any corrections. When the order is completed and shipped, they are sent an e-mail from UPS with the package tracking number and a link to the UPS web site to track their order to their door. If there are any questions about their order, a QuickTrophy representative will call and/or e-mail the customer for confirmation or clarification.

Price

QuickTrophy prices its products comparable to other internet retailers. Retail prices of other internet retailers are periodically checked and compared to QuickTrophy's prices for any changes. Periodic price testing of trophies between product lines (e.g., for example raising the price of all golf trophies and lowering the prices on all bowling trophies) has demonstrated that a great deal of price elasticity exists in this market. Although the internet invites easy comparative price shopping, it appears price is not a primary concern among QuickTrophy customers.

Engraving is included in the price for all trophies. Engraving on medals is optional and costs $0.99 per medal (3 lines are allowed). Shipping costs are based on the UPS shipping model using weight, distance, and speed to calculate the costs. Most orders cost about $7 to ship via UPS Ground.

Promotion

Because QuickTrophy is an internet company and sells all their products through their web site, their marketing efforts have focused on directing people to their web site.

Their primary marketing strategy has been to achieve key placement on internet search engines. This has been pursued in a variety of ways. The fastest and easiest method to get top placement on a search engine listing is to buy it. This is done via pay-per-click vendors such as Overture, Ah-ha, 7Search, and Yahoo! Pay-per-click vendors let retailers bid on key words (such as "trophy" or "trophies") or keyword phrases (such as "baseball trophies"). When an internet user types the keyword in a search engine (such as MSN, AOL, Looksmart, Ask Jeeves, etc.) the highest bidders appear at the top of the page and the rest of the matches appear below them in an order determined by the search engine. When a customer clicks on the listing, it takes them to the company's home page, and automatically charges the company their bid price. This free-market approach works reasonably well except that usually only the top 3 bidders get to appear at the top of the search engine list, so a company like QuickTrophy.com needs to be a top bidder in order to make the cut. Quite often the most popular key words get bid way beyond the point where they make any economic sense, particularly for smaller firms.

QuickTrophy's second method to get high placement on the search engines is to optimize the web pages to fit the criteria each search engine uses to rank their pages. These are the pages that appear below the paid listings. Each search engine uses different criteria and changes those criteria periodically. You can purchase software to help you optimize your web pages, but everyone uses the same software, so it doesn't help much. Another option is to contract out the optimization to a company that specializes in this service. Of course, they also charge on a click-through basis.

QuickTrophy's secondary marketing effort has focused on direct e-mail. Their database of e-mail addresses has been obtained primarily by direct on-line searches of league web sites, sports portal sites (eteamz, ysusa, etc.), and individual team web sites. Their e-mails point out the key selling points of a simple, easy to use web site, fast production of custom made trophies, and accurate engraving. QuickTrophy sends out e-mails at the beginning of each sport season and includes pictures of our products. They also send out follow up e-mails 2 to 3 weeks later.

Place/Distribution

The primary distribution method for QuickTrophy products is via the QuickTrophy web site: www.QuickTrophy.com. Details of this are covered in the above section.

An alternative distribution strategy QuickTrophy employs is to supply finished trophies for other retailers. QuickTrophy currently supplies selected trophies to an internet retail site and labels them with the retailers name tag and drop ships directly to the customer. Although this does not help their brand recognition, it does provide production volume to the factory and revenue to the income stream.

Another distribution strategy is to employ sales representatives on a commission basis. QuickTrophy has set them up with their own web page (for example see Mark Johnson's Home page at markj.QuickTrophy.com). Results of sales reps has been limited.

CURRENT PERFORMANCE CHALLENGES

Since the time that Stephen had such an excruciating experience with his local trophy shop and tried to order trophies on the web but could find no companies to help him, QuickTrophy has emerged to fill that void. However, in the meantime, other competitors have also entered the arena. Now the strategic picture has changed and the challenges have likewise changed.

1. How can QuickTrophy achieve brand recognition in a rapidly congested internet marketplace? How can a national brand be built on a local marketing budget? When a volunteer coach needs to get trophies, what can be done to make sure he or she thinks of QuickTrophy? What methods of brand-building can be employed that are effective and yet inexpensive?

2. Search engine placement is rapidly increasing in price to ridiculous levels. How can more traffic be driven to the web site on a cost-effective basis? What will it take to double the number of web site visitors? Quadruple? Increase the visitors by an order of magnitude? What methods are available and what will each method cost--in total and on a per customer basis? In other words, what are the customer acquisition costs per method?

3. People only coach for a few years, and only purchase trophies once or twice a year. How can QuckTrophy.com get to the decision-maker at the right time? How many new customers need to be added each month to replace "lost" coaches and still achieve a significant level of growth? How can "new" customers be identified and cultivated by QuickTrophy.com?

4. Are there other market channels that should be exploited? Other product lines that should be added? How can QuickTrophy build sales to $1 to $2 million in 2 years? How can sales be increased to $10 million in 5 years?

Gary J. Brunswick, Northern Michigan University

Terry Dehring, QuickTrophy.com

 Site Visitors Orders Sales Units

2001 Q2 24,003 0,162 11,474 1,408
2001 Q3 23,916 0,171 11,066 1,204
2001 Q4 17,720 0,430 30,862 3,176
2002 Q1 24,632 0,646 39,174 5,483
2002 Q2 30,410 0,880 59,283 8,046
2002 Q3 32,920 0,509 36,483 4,939
2002 Q4 39,019 0,766 50,620 6,785
2003 Q1 39,033 0,651 50,481 6,109
2003 Q2 38,658 0,989 74,206 9,309
2003 Q3 40,271 0,725 48,278 4,989
2003 Q4 44,295 0,837 61,435 6,720

 Average Trophy
 QuickTrophy Retail Co

Cost of Materials 27.0% 32.3%
Employee labor 17.6% 13.3%
Employee related 04.7% 02.7%
Shipping/postage 18.8% 02.1%
Advertising 16.7% 04.1%
Insurance 01.9% 02.2%
Occupancy 03.3% 08.1%
Amortized depreciation 04.2% 03.1%
 94.2% 67.9%

Competitor Advantages

Awards.com Nice drag & drop feature
www.awards.com Free Engraving
 Extensive product line
 Reasonable prices

CrownAwards.com Many choices
www.crownawards.com
 Reasonable prices

 3-5 days + shipping

NetTrophy.com Can customize each part
www.nettrophy.com Free Engraving
 Extensive product line
 Reasonable prices
 Free shipping > $50 order

MrTrophy.com Limited choices
www.mrtrophy.com Easier engraving instr
 Avg 3 days + shipping
 Lowest prices

DinnTrophy.com Extensive selection
www.dinntrophy.com Low prices
 Avg 3 days + shipping
 Free shipping > $100 order

Trophies2Go.com Fast loading page
www.trophies2go.com Free engraving
 Large selection
 Free shipping

Competitor Disadvantages

Awards.com Cartoon-like pictures
www.awards.com Cumbersome engraving process
 Slow to load
 7 days + shipping

CrownAwards.com Many layers of pages
www.crownawards.com Need to specify engraving for each
 trophy separately
 10 cents/letter after 40

NetTrophy.com Adds to trophy price
www.nettrophy.com Cumbersome engraving process
 Many pages of choices
 Priced ala carte items
 5-10 days + shipping

MrTrophy.com Cumbersome process
www.mrtrophy.com $1 per trophy <10 order
 Up to 14 days + shipping if out of stock
 $12.50 ship orders <$100

DinnTrophy.com Confusing selection process
www.dinntrophy.com Difficult engraving process
 5 cents/letter after 40
 Confusing procedure

Trophies2Go.com Too much stuff on page
www.trophies2go.com Cannot find where to engrave
 Many pages to view
 3-7 days + shipping