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John Molson School of Business Introduction to Marketing (Marketing 201)

Prepared By: Erika Bartolini, Kiana Brett, Farnaz Ally, Meriem Yasmine Bouabdallah, Amanda Quaglieri & Myriam Strasbourg

April 16, 2018

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Table of Contents IDENTIFICATION OF NEW PRODUCT

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MACRO-ENVIRONMENTAL IMPACT

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Demographic Environment

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Economic Environment

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Natural Environment

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Technological Environment

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Political/Social Environment

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Cultural Environment

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SEGMENTATION, TARGETING, AND POSITIONING

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SECONDARY DATA & SALES POTENTIAL

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THE MARKETING MIX

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Product

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Price

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Place

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Promotion

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WORKS CITED

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APENDIX A

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APPENDIX B

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APPENDIX C

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APPENDIX D

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APPENDIX E

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APPENDIX F:

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EXCELLENT T OF C

IDENTIFICATION OF NEW PRODUCT

3 It’s the first of the month and you’ve forgotten to buy your bus fare, causing you to be late from the inconvenience of waiting in line to refill your Opus card. Unfortunately, this is a relatable problem for most public transit users. In order to make the process of purchasing transit fares easier and more efficient, we decided to design an app that will draw upon existing Near Field Communication (NFC) technology. NFC technology uses electromagnetic radio fields in order to transfer data from one device to another (How NFC Works). This allows you to scan a smartphone over another device that is NFC compatible and exchange data. The most notable usage of this technology is through mobile payments (e.g. ApplePay). Our product in the form of a mobile application will: ● Harness NFC technology to pay for and redeem transit fares from the convenience of a mobile device. ● Initially be available to consumers in the Greater Montreal Area (Beginning Fall 2018) → potential for expansion across Canada. ● Include Additional Features to create a more efficient commute including: ○ Easy access to bus timetables, bus routes and metro maps Why O’PASS seeks to create convenience in the hectic lives of Canadians. People want their daily routines to be unencumbered and easy. We want to take the mundane task of commuting and turn it into a streamlined, convenient experience. O’PASS makes customers feel in control and have peace of mind. VERY STRONG STATEMENT How O’PASS creates a seamless public transit experience. O’PASS allows you to purchase and redeem public transit fares from the convenience of you smartphone. Over 76% of Canadians use a smartphone-- you can do just about anything with your phone today; why not use it to make your daily transit commute simpler? What Our O’PASS app using NFC technology already available on most smartphones, allows you to pay for and redeem your public transit fare from a mobile device. Simply buy passes online, tap your phone on the reader and go. The app provides a convenient location to access and view, bus timetables, routes and metro maps. Gone are the days of wasteful, easy to lose plastic and paper cards. Why will this Product be Successful? The increased popularity of NFC technology, coupled with the increase in smartphone usage in recent years is a recipe for success for our product. O’PASS provides value through the ability to conveniently purchase transit fares, view bus routes and time schedules It is also tailors to the increased demand on sustainability. IT WILL DEPEND ON THE CHOICE OF TARGET MARKET

MACRO-ENVIRONMENTAL IMPACT

4 Demographic Environment The demographic environment will be an important factor when marketing our product. Millennials make up a large portion of the population and are tech-savvy (Armstrong et al, 18). Furthermore, millennials show more willingness to accept eco-friendly products. As general awareness about the state of the earth is increasing, many do what they can to reduce their carbon footprint. This makes them the perfect target for our product. As previously mentioned, the O’PASS will make its debut in the greater Montreal area. This is the most populous area in Quebec, making up more than 50% of the entire province’s population (Appendix A). This highly congested metropolitan area, along with the increased migration of people from rural to urban areas (Appendix B), makes public transportation a very attractive alternative to driving. One major challenge the demographic environment poses to our product is it is currently limited. As it stands, our current target market makes up roughly 10 percent of the greater Montreal area’s population, or approximately 421,372 people. However, technology is becoming more apparent in everyday lives and therefore projecting an increase in the adoption of new products. Moreover, younger generations are very comfortable using technology and are learning to use it at a much younger age, which will allow us to cover a larger market as they grow older (Armstrong et al, 128). Finally, this is solely based on our coverage of the greater Montreal area. Eventually O’PASS will be available to all public transportation users across Canada, further widening our target market. GOOD POSSIBILITIES IT WILL BECOME A REALITY Economic Environment Economic factors greatly influence consumers’ buying decisions. O’PASS should not interfere with our target’s budget. Students in Montreal spend $14 every year to renew their OPUS cards, whereas O’PASS will be available to users for an annual flat rate of $20. For only $5 more a year we offer users greater value. Students achieve convenience and sustainability, while only slightly increasing their annual costs. IS IT REALLY A MATTER OF MONEY? In contrast, the annual flat rate for O’PASS is an added expense for non-students. Currently, nonstudents in Montreal can purchase an OPUS card for $6 and it only has to be changed every four years. This results in additional costs of $74 over that span. While this is the case, we do not believe this to be a budget breaking expenditure. We also believe that the benefits which come with using O’PASS significantly outweigh the annual costs. Natural Environment Consumers’ interest toward sustainability is increasing along with their demands for such products (Armstrong et al, 136). As our carbon footprints are posing many threats to the environment, the reduction of plastic is a topic that is often discussed and advertised as it is destroying our oceans and ecosystems. O’PASS will eliminate the need for plastic transit cards, thus reducing pollution.

5 Technological Environment The technological environment will positively impact sales for our product. Millennials are already comfortable with technology (Armstrong et al, 128), including NFC technology (Mobile Payment Users Worldwide). With the use of existing technology our product brings the public transportation field into the modern era without the fear usually caused by the adoption process. Smartphone users are already welcoming towards this technology and using it for debit/credit purchases. Our product works with the same technology that already exists in metro, but instead of the chip being on a card it is in consumers phones. Most smart phones already include this chip and it works with existing STM terminals. The product avoids obsolescence by latching on to a new technology. It meets the accelerating need for fast and direct service. A negative impact of the technological environment on our product is that smartphones need to be charged. If consumer’s smartphones runs out of battery the product is no longer usable. However, a solution to this problem would be to install charging stations at major bus stations and metros. Additionally, the STM has started putting outlets in their busses, therefore it is only a matter of time before the fear of a low battery is non-existent. Overall, the technological environment provides a wealth of opportunities for our product. It is using a growing but proven technology in a new way, so customers are more likely to be open to trying this product. ALL GOOD POINTS Political/Social Environment The trend of increasing Government regulations has the potential to create a negative impact for O’PASS (Armstrong et al. 138). O’PASS collects data on when consumers use and buy tickets. This has the potential to intrude on consumers privacy. While this can be used to create convenient purchase suggestions, O’PASS will have to be careful to make sure that we comply with the Quebec’s “Act Respecting the Protection of Personal Information in the Private Sector”. This would entail hiring a lawyer. By working with a lawyer, we can find ways to mold our product around existing laws and thereby reduce the negative impact this might have. Furthermore, we could establish our app to provide public transit statistics to the government. Our product protects the interests of society by providing an ecofriendly alternative to plastic and paper metro passes, providing a socially responsible behavior marketing opportunity. Overall, the Political environment provides both marketing threats and opportunities. Cultural Environment Canadians have core beliefs and values linked to sustainable development. Consumers tend to buy products or services that reflect their beliefs (Armstrong et al. 141). Our product feeds off Canadian sustainability values by providing an eco-friendly alternative to plastic and paper metro cards. Furthermore, it fits into an increasingly tech driven culture as NFC technology becomes more of a norm in western society (Mobile Payment Users Worldwide). By promoting the ecofriendly and tech driven elements of O’PASS we will manipulate these cultural environment trends to our advantage and gain potential loyalty from consumers whose values and beliefs

6 coincide with our product’s benefits. GOOD OVERALL ASSESSMENT OF MACRO FACTORS

SEGMENTATION, TARGETING, AND POSITIONING 1-2 pages Environment

Segment 1:

Segment 2:

Segment 3:

Geographic WHY DIFF NUMBERS?

Greater Montreal, Urban Area, Population Approximately 632,500

Greater Montreal, Urban Area, Population Approximately 685,000

Greater Montreal, Urban Area, Population Approximately 565 000

Demographic

Millennials, Ages 18-29, Full-Time/ Part-time University Students, Young Couples With/Without Children, Single Adults, Single Parent Family, HHI Under $20 000

Millennials, Ages 29-41, Full-Time Workers, Young Professionals, Semi-Young Couples, HHI $20 000-$50 000, Postgraduate

Generation X, Ages 42-51, Full-Time Workers, MiddleAged, Couple with Grown Children, Divorced, Professionals, Union Worker, Small Business Owner, Postgraduate, HHI $50 000$100 000

Psychographic

Upper Lowers, Working Class, Middle Class, Student

Upper Lowers, Working Class, Middle Class, Urban Professionals

Lower Lowers, Upper Lowers, Working Class, Middle Class, Urban Professionals

Behavioural

Regular Occasion, Economy, Convenience, Speed, Regular User, Heavy User, Absolute Loyalty, Intending to Buy, Enthusiastic

Regular Occasion, Convenience, Speed, Regular User, Medium User, Medium to Strong Loyalty, Desirous, Positive

Speed, Potential Users, Light to Medium User rate, Loyalty light to Medium, Unaware Readiness Stage, Indifferent

Profile Segment 1: ● Segment is composed of approximately 632 500 millennials ● Full-time/part-time university students, ages of 18 to 29 , Greater Montreal urban area. ● Regular and heavy users with absolute loyalty to the public transit system. Profile Segment 2: ● Approximately 685,000 positive postgraduate millennials. ● Full-time workers, young professionalS, ages of 29 to 41, Greater Montreal urban area. ● Semi-loyal, utilizes public transportation regularly due to its convenience, speed and economy. Profile Segment 3: ● Approximately 565 000 indifferent generation-Xers ● Full-time workers, ages of 42 to 51 years old, Greater Montreal urban area. ● Slight loyalty to public, HHI $50 000-$100 000, utilize public transportation lightly. VERY THOROUGH APPROACH TO SEGMENTATION

7 Target Market We have chosen segments one and two as our target markets for distinct reasons. Firstly, it is crucial to note that there is much resemblance between both segments in terms of the 4 segmentation variables identified above. For instance, both have similar loyalty to public transportation and use this method of commute on a regular basis. Research suggests that millennials, contrary to older generations, are more inclined to take public transportation rather than drive (Insights into Public Transit Use by Millennials, 2018). Millennials are tech-savvy generation, and technology is a major part of their daily lives (Armstrong et al. 128). They are dynamic and fast-paced, thus resulting in a need for higher levels of productivity. They seek convenience and demand instant gratification. This group tends to want to “move”, hence their need for fast, easy and effective transportation methods. Contrarily, Generation-Xers are much less technologically advanced, and they use public transportation much less frequently. Finally, they also tend to be indifferent when faced with new technological development. Due to the noteworthy distinction between the first two segments and segment three, we have decided that targeting both segments one and two would be the most logical and profitable option. EXCELLENT RATIONALE FOR TARGET MARKET SELECTION Value Proposition ●

“More for More” ○ Provides our customers with greater convenience, speed and reliability at a higher, yet reasonable price. ○ Positioning Statement: For the busy commuters always on the go, O’PASS is a mobile application that provides a quick and easy way to pay, use and gain control of their transit experience, all in the palm of their hand. GOOD TO FEATURE ASPECTS OF “CONTROL”

Differentiation ● Our only standing competitors are: ○ The current OPUS card. ○ OPUS en ligne: allows users to recharge OPUS card from a home computer ■ Limited because it cannot be done on the go ■ Requires specific computer software ○ Public transportation sector has yet to meet the technological advancements that many other companies and service providers have already harnessed. ● We are using existing technology, in which our target market is already familiar with, and introducing it to a new world of possibilities. ● Our product revolutionizes the traditional method of transit payment. HOW WILL STM REACT? ○ Allows for the purchase of transit fares from any location ● Our unique selling proposition is convenience: ○ With the versatility of the O’PASS, consumers will never again have to displace themselves to acquire transit fares. ○ We plan to work with consumers’ lifestyles, not change them. MAY BE DIFFICULT TO ACCOMPLISH

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SECONDARY DATA & SALES POTENTIAL After much consideration, we have determined a potential market size for the O’PASS based on the information from our two segments. In order to gain further insight on our market size, we evaluated many different sources of secondary data. We discovered various information regarding: the population size, the frequency on public transit use across Canada by generation, how many people use their smartphones while using public transportation and more. (Appendix C) ● Data relevant to Calculations ○ 82% of millennials use mobile devices on public transit ○ 39% of millennials use public transportation every day/frequently ● Percentage of the population that makes up our segment: ○ (0.39)(82)= 31.98% of millennials = target market ● Units Sold and Profits for Segment 1 (POTENTIAL) ○ SEGMENT 1: 632 508 millennials ○ 31.98% of 632 508 = 202 276 ○ Prediction of profits and units sold at percentage of segment captured: ■ 1%= 2023 units sold→ $40,460 if app costs 20$ ■ 2%= 4046 units sold → $80,920 ■ 3%= 6068 units sold→ $121,230 ● Prediction of units sold and Profits for Segment 2 (POTENTIAL) ○ SEGMENT 2: 685 101 millennials ○ 31.98% of 685 508 = 219 225 ○ Prediction of profits and units sold at percentage of segment captured: ■ 1%= 2192 → $43,840 ■ 2%= 4385 → $87,700 ■ 3%= 6577 → $131,540 Our research showed: ●

Between 2013 and 2017, there was a 54% increase in the number of people who use NFC technology in the form of mobile payments (Appendix D). ● More consumers are becoming familiar with how this technology works. ○ Allowing us to assume that they would welcome and adopt O’PASS. Since we are a startup company, our costs will greatly outweigh our revenue in the first year. Assuming we captured 1% of our target market within the first year, we formulated revenue and cost estimates. We further calculated the potential profit if we were to capture two and three percent of our target market (Appendix F). EXCELLENT QUANTITATIVE APPROACH TO THIS PART OF THE EXERCISE

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THE MARKETING MIX Product O’PASS is an application that stands to revolutionize the way public transit users go about their commutes. Being offered directly to consumers for their personal use, O’PASS classifies itself as a consumer product. As transit fares are a necessity for our users, they are often purchased frequently, and with little comparison and buying effort, we classify O’PASS as a convenience product (Armstrong et al. 280). With O’PASS being offered on both iOS and Android devices, we are able to target most public transit users who own a smartphone with a readily available application to help optimize their commute. Although there is an increase in the familiarity with NFC technology and the use of smartphones, we understand that the current public transit system has not seen an upgrade in its services for quite some time. Coupled with the STM having full control over Montreal’s public transit system, we will have a significant amount of effort put into advertising our application to the public. We strive to offer our users a much more convenient alternative to the traditional public transit system, which is why we kept this in mind when developing O’PASS. Although the current system in place works, we believe there is always room for improvement and optimization, which is exactly what our product offers its users. With the control the STM has over the Montreal public transit system, O’PASS will introduce variety to users who are looking for a more efficient alternative. The application’s design will be minimalistic and user friendly, providing an optimal customer experience when navigating the application. With the familiarity people have with mobile phone applications, we believe O’PASS will be a seamless addition to peoples’ lives. While the focus on convenience and efficiency is important to us, we do not want to forget the ecological benefits of our product. Not only will O’PASS make the public transit system more efficient, it is also in line with promoting a more efficient way to travel. We envision that O’PASS will be on all smartphones in the future, making public transit cards obsolete and helping in the reduction of the carbon footprint that comes with producing them. Our team will be offering a customer support email service for inquiries regarding a users’ account, recharging one’s fares, getting started, and all other questions users may have while using our product. This service will not bring forth supplementary cost. NEED TO PUT EVEN MORE EMPHASIS ON THE “WHY” BECAUSE THAT IS WHAT PEOPLE WILL REALLY BUY Price There were many factors which went into determining the price to charge consumers for using O’PASS. The first being the cost of any alternatives. In our case, as O’PASS is only debuting in Montreal, we looked at the price of OPUS cards. Our second focus were the ...