April 2005

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1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.0 Situation Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.2 The Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2.2.1 Market Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.2.2 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.2.3 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.2.4 Macroenvironment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

2.3 The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.3.1 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.3.2 Service Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.3.3 Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.3.4 SWOT Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2.3.4.1 Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.3.4.2 Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.3.4.3 Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.3.4.4 Threats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

2.3.5 Historical Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82.4 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2.4.1 Direct Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92.4.2 Indirect Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

3.0 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.1 Value Proposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.2 Critical Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113.3 Financial Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.4 Marketing Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.5 Target Market Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.6 Messaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

3.6.1 Branding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.7 Strategy Pyramids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

4.0 Marketing Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144.1 Product Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144.2 Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144.3 Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

4.3.1 Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.3.2 Public Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.3.3 Direct Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

4.4 Web Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164.4.1 Website Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164.4.2 Website Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164.4.3 Development Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

4.5 Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174.6 Implementation Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174.7 Sales Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

4.7.1 Sales Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184.7.2 Sales Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194.7.3 Prospecting Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

5.0 Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195.1 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205.2 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215.3 Expense Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225.4 Linking Expenses to Strategy and Tactics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235.5 Contribution Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Table of Contents

6.0 Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256.1 Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256.2 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266.3 Contingency Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266.4 Marketing Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Table of Contents

1.0 Executive Summary

The Riverview Hotel, Notown USA, is representative of the five star brand within the 'ExclusiveBusiness Hotels of the World' group. All Riverview Hotels are boutique properties, offeringbetween 25 and 35 exclusive rooms.

The Riverview properties are renowned for their convenient and strategic locations withinmajor cities throughout the country. Also synonymous with the brand are the high level ofpersonal service guests receive, and the extensive range of comprehensive business facilitiesavailable in luxurious settings.

The Riverview Hotel, Notown has 35 exclusive rooms and is targeting corporate guests with atwo to three night stay requirement. Target business segments include the IT sector, due tothe proximity of the property to Silicone Hill, USA; the automotive industry in order tocapitalize on the strategic location of the hotel in relation to the Overall Motors Plant and HQ inNotown and travel trade guests attending National and International Travel Fares at theNotown Exhibition Halls.

Differentiating the type of business service offered, from that of the competition, will assist notonly in building the Riverview brand as a whole, but will attract frequent business travelers,who require a higher level of personal service and recognition than they can receive atcompetitive five star properties in Notown. This will provide the Riverview with an opportunityto leverage its core competencies as regards servicing the business traveller in a luxuriousenvironment.

2.0 Situation Analysis

The 'Exclusive Business Hotels of the World' group is the ninth largest International Hotel chainin the world, with over 320 wholly owned and managed properties. The group specializes inoccupying strategic, inner city locations and serving primarily corporate clients.

The properties range from three to five star plus categories, and include the following brands:River Inns (3*), River Post Houses (4*), and Riverview Hotels (5*+). The group has a highinstance of repeat business across all its brands, particularly the Riverview Hotels properties,which account for 68% of total revenue across the group.

The Riverview Hotel, Notown, is dependent on annually contracted clients from the traveltrade, automotive and IT sectors with guaranteed room nights per year. This area of businessaccounts for 70% of the property's revenue.

The current market is somewhat depressed, due to the economic downturn and restrictionsbeing made on corporate travel within the U.S. This threat to the critical corporate sector couldbe considered as short to medium term, as indications of a return to business travel areobserved. Riverview Hotel, Notown, must continue to focus on delivering an exemplarybusiness service, at affordable rates, in order to develop the customer relationship beyond onestay.

Competitive room rates have been cut dramatically in order to attract contract clients over thenext 10-12 month period. The Riverview Hotel's survival in the current environment, will bedependent on repeat corporate contract business and customer loyalty to the brand. Thebrand must therefore continue to deliver on its promise and values.

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2.1 Market Needs

The Riverview Hotel offers value and benefits to our clients, over and above the standard ofour facilities and affordable rates. We seek to provide our guests with an exemplary personalservice, and level of recognition that they have come to rely upon. We provide our guest witha luxurious, relaxed environment within which to conduct their business.

An environment which they cannot find at our larger, more impersonal competitors. Ourguests need to know that they can develop a relationship with the hotel that will ensureefficiency, value for their money and reliability in supplying them with the support they need,when they need it. The Riverview Hotel operates in a city with a very strong sense ofcommunity, and we want to stay an integral part of that community.

2.2 The Market

The Riverview Hotel is a boutique 5*+ hotel comprising 35 luxury guest rooms and specializingin servicing business and corporate clients. It serves the business community, and visitingbusiness traveller, in the city of Notown USA.

Our key clients are contracted corporate clients originating from both international anddomestic markets from within the travel trade, automotive and IT segments. The strategiclocation of the property is key to its success in these areas due to the proximity of theExhibition Halls, Overall Motors and Silicone Hill, USA.

Key to our business success is the level of customer loyalty and repeat business we receive onan annual basis. We offer our guests the most up-to-date technical business facilities, bothinside the rooms and within the hotel's conference facilities.

Our guests feel that they can conduct their business from within a less austere atmospherethan can be experienced in our competitive properties, where there is less personalrecognition. They appreciate being called by name when they arrive, and having staffremember their specific requirements, time and again. This is key in developing therelationship beyond an initial stay and evidences our added value in relation to competitiveproperties in the vicinity.

Table: Market Analysis

Market Analysis2005 2006 2007 2008 2009

Potential Customers Growth CAGRTravel 7% 1,000 1,071 1,147 1,228 1,315 7.09%IT Industry 8% 1,200 1,296 1,400 1,512 1,633 8.01%Automotive 10% 1,500 1,643 1,799 1,970 2,157 9.51%Total 8.38% 3,700 4,010 4,346 4,710 5,105 8.38%

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Travel

IT Industry

Automotive

Market Analysis (Pie)

2.2.1 Market Demographics

Market Geographics: Notown, USA is a suburb of Seattle, Washington, with a population of150,000.

Market Demographics: The community is made up predominantly of households having two tofour children, either at home or away from home, with at least one parent/guardian havingattended college.

Market Psychographics: There is a strong 'small business' ethic in the community, and manyfamily-run enterprises have been prospering for generations. There is also a strong sense ofcommunity and a high level of awareness as regards to caring for the environment.

Market Behaviors: Businesses in the area choose to support one another wherever possible, beremaining loyal to long standing relationships with customers and suppliers. This acts as ameans of investing in, and supporting the community structure, rather than shifting alliancesto large 'newcomer' suppliers, despite the potential cost savings involved.

This attitude supports the brand principles of the Riverview Hotel, which has had a presence inthe city for 15 years, and is well supported by local business requirements for rooms,conference facilities and catering business functions.

Based on research carried out in 2001, more than 68% of the population had some awarenessof the Riverview Hotel. Awareness levels were highest amongst small- to medium-sizedbusinesses with 20 or more employees, who had utilized the hotel's facilities either for visitingbusiness guests, or for their own functions.

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2.2.2 Market Trends

Market trends can be categorized as follows: Corporate Travel Policies, Local Business Trends,and Economic Cut Backs.

Corporate Travel Policies: As a result of various security issues, as regards travelling inboth domestic and international markets, there has been a significant drop in corporate guestsvisiting the city. Although the level of corporate room business appears to be increasing again,it has had a significant affect on last year's result and consequent projections for the future.

Local Business Trends: There has been a period of low activity in the area of conferencingand business catering with local companies electing to conduct meetings and seminars on theirown premises in order to cost cut. This is changing however as group bookings, incomingvisitors and day use of conference facilities is on the increase.

Economic Cut Backs: The city cancelled three major trade events over the past threemonths, and exhibitions held at the halls had attendance figures much lower than expected. Allbooked events for the upcoming 12 month period however, including the Motor Show and theNorthwest Tech Exhibition, have pre-booked attendance figures in line with expectations and insome cases in excess of projections.

0

500

1,000

1,500

2,000

2,500

2005 2006 2007 2008 2009

Travel

IT Industry

Automotive

Market Analysis (Trends)

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2.2.3 Market Growth

The growth rate of the target markets has been steady over the past five years. The traveltrade sector has grown at an average of 7.1%, the automotive sector at an average of 9.5%and the IT industry at 8%.

Recent world events have caused a reduction in the growth rate, but current trends indicate areturn to projected growth figures within the next three to six months. Once re-stabilized,growth is anticipated to continue at a steady pace in line with the expansions in the region's ITactivities, the annual program of travel trade events taking place and the launch of a newoverall motors model this year.

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Travel IT Industry Automotive

Market Analysis (C.A.G.R)

2.2.4 Macroenvironment

The external, environmental issues that affect the Riverview Hotel are:

• Political: a stable environment where little affects our ability to generate revenue.

• Economic: the recent recession has seen many smaller business-oriented hotel chainsgo into liquidation, as they do not possess the infrastructure to support under-performing properties as the larger chains do. Although recovery is beginning, it maytake some time before corporate travel policy restrictions are fully lifted and businesstravel returns to the same levels of the past three years.

• Social: the trend towards cost effective business travel leads hotel guests to seekmore value for money, which is where our added value differentiation strategy comesinto play.

• Technological: the installation of 'on board' room reservations systems on certainaircraft, will require a systems integration with the hotel group's own centralreservation system. This will require a high level of investment.

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2.3 The Company

The Riverview Hotel, Notown USA, is representative of the five star brand within the 'ExclusiveBusiness Hotels of the World' group. All Riverview Hotels are boutique properties, offeringbetween 25 and 35 exclusive rooms.

2.3.1 Mission

The Riverview Hotel is dedicated to providing its guests with the highest quality of service andstandards. We seek to deliver on our promise of value and quality above all else. We value ourplace in the community and will work to develop those relationships and to respect and protectour environment.

We will continue to strive to create value for both owners and shareholders whilst honoring ourbrand values and encouraging our personnel to develop themselves in an environment of trust,loyalty and encouragement.

2.3.2 Service Offering

Service: high-quality facilities accompanied by exemplary personal service, differentiated fromcompetition in line with the overall brand strategy has proven to be a successful approachgenerating high levels of repeat business.

2.3.3 Positioning

The Riverview Hotel is positioned as a five star plus, business traveler's hotel, strategicallylocated and offering a high level of personal service. Our focus is on offering our guests addedvalue and differentiating ourselves in our levels of personal service. We provide a quality hotelexperience where guests are valued, respected and their business is truly appreciated.

2.3.4 SWOT Summary

The following analysis highlights the internal strengths and weaknesses of our organization andthe opportunities and threats facing the company in our external environment. We must workto improve our areas of weakness.

Organizational strengths must be leveraged in order to capitalize on external opportunities asthey arise, and contingency plans formulated in order to deal with threats presented by theenvironment.

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2.3.4.1 Strengths

• Strategy: established differentiation strategy.• Structure: flat, decentralized structure.• Skills: diverse range of service skills within management and staff.• Style: strong, participative culture.• Staff: specialized and experienced staff that are motivated and highly skilled. A well

trained team who are proud of their hotel and respect and promote the brand values.• Shared Values: clear and well communicated.• Brand Strength: brand values well represented engendering brand loyalty amongst

existing and new guests.• Reputation: a strong reputation within the local market and corporate and travel

trade markets for reliability, exemplary service and quality.

2.3.4.2 Weaknesses

• Strategy: differentiation strategy needs to be more clearly communicated externally,within local and national markets.

• Systems: formal systems result from the detail oriented work and environment.Interdepartmental communications could be improved.

• Staff: seasonal turnover requires ongoing training and orientation of new staff.• Facilities: certain rooms require renovation and upgrade as regards technical

equipment, such as high speed Internet access and laptop links.

2.3.4.3 Opportunities

• Market: returning growth after a period of slump.• Competitors: no direct competition exists at present, in terms of the five star

'boutique business property' niche.• Suppliers: strong, long-term relationships established with suppliers.• Guest Dependency: repeat corporate business based on personal service and quality,

in a small but luxurious environment.

2.3.4.4 Threats

• Market Entry: potential for a competitive, global brand to enter the market with asimilar product.

• Substitutes: fully furnished and serviced business apartments offering lower dailyrates.

• Economy: recovery from slight recession may take time.

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2.3.5 Historical Results

Marketing activity in previous years, has produced positive results. The areas that haveproduced the best results have been:

• Service: high-quality facilities accompanied by exemplary personal service,differentiated from competition, in line with the overall brand strategy has proven to bea successful approach generating high levels of repeat business.

• Price: pricing strategy has been consistent with the differentiation objective, to provideadded value for a reasonable rate as opposed to discounting and devaluing ourproducts and services.

• Place: service information is provided to the guest via personal selling, directmarketing, advertising and the Internet. Delivery channels include travel agents andinternational reservations systems.

• Promotion: primary focus has been on mass communication via print ads in tradepublications and on the Internet, direct mail campaigns to existing and prospectiveclients and personal selling in the local market. Personal selling provides the means todevelop relationships within the local community and generate high levels of corporateactivity through the business community. Public relations plays an important role in themarketing mix, presenting the hotel as a supportive member of the community andparticipating in significant local events to assist in developing ongoing cooperation,assures repeat business and good working relationships.

Table: Historical Data

Historical Data

Variable 2002 2003 2004Industry Revenue $100,000,000 $110,000,000 $115,000,000Company Market Share 2% 2% 3%Company Revenue $2,000,000 $2,200,000 $3,450,000Industry Variable Costs $70,000,000 $80,000,000 $80,000,000Company Variable Costs $1,500,000 $1,700,000 $2,700,000Industry Gross ContributionMargin

$30,000,000 $30,000,000 $35,000,000

Company Gross ContributionMargin

$500,000 $500,000 $750,000

Marketing Expenses $300,000 $350,000 $650,000Company Net Contribution Margin $200,000 $150,000 $100,000

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2.4 Competition

Although no direct competition exists, in terms of the five star plus boutique-style property,other five star hotels and serviced apartments do compete for the same corporate businesssectors.

2.4.1 Direct Competition

• Hilton, Notown: 5 star city hotel, room rates on par with Riverview, older facilities.• Marriott, Notown: 5 star city hotel, room rates approximately 10% higher than

Riverview, facility only four years old.• Glendale Apartments, Notown: 5 star furnished apartments, daily rates vary

between Riverview's double deluxe and suite rates.• Hyatt Residence, Notown: 5 star furnished apartments, daily rates 15% higher than

Riverview's double deluxe rates.

These properties offer similar facilities, although somewhat less focused on business needs,and incorporate more leisure facilities than we currently provide.

Table: Growth and Share Analysis

Growth and Share

Competitor Price Growth Rate Market ShareHilton $105 6% 20%Marriot $115 8% 33%Glendale Apts $105 6% 5%Hyatt Residence $120 5% 12%Riverview Hotel $105 8% 30%

Average $110.00 6.50% 20.00%Total $550.00 32.50% 100.00%

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Table: Competitive Analysis

Competitive Analysis

#1 #2 #3 #4 #5 #6Competitor Hilton Marriot Glendale Hyatt Riverview Name me

Product and/or Service Hilton Marriot Glendale Hyatt Riverview Name meQuality 6 7 4 8 9 0Selection 5 7 5 6 9 0Price 6 6 6 6 8 0Other 0 0 0 0 0 0

Location and PhysicalAppearance

Hilton Marriot Glendale Hyatt Riverview Name me

Traffic 4 5 7 7 8 0Appearance 4 7 6 8 9 0Visibility 7 6 7 9 8 0Convenience Factors 7 6 6 8 9 0Other 0 0 0 0 0 0

Added Value Factors Hilton Marriot Glendale Hyatt Riverview Name mePre and Post Sales Service 3 5 4 7 9 0Experience 7 8 6 9 9 0Expertise 6 7 5 8 9 0Reputation 5 9 6 8 9 0Image 6 9 4 8 8 0Stability 6 8 4 9 9 0Strategic Alliances 0 0 0 0 0 0Other 0 0 0 0 0 0

Other Marketing Activities Hilton Marriot Glendale Hyatt Riverview Name meEstablished Sales Channels 0 0 0 0 0 0Advertising 0 0 0 0 0 0Post-purchase Support 0 0 0 0 0 0Incentives 0 0 0 0 0 0Loyalty Components 0 0 0 0 0 0Other 0 0 0 0 0 0Total 72 90 70 101 113 0

4%

5%

6%

7%

8%

9%

86 88 90 92 94 96 98 100 102

Hilton

Marriot

Glendale Apts

Hyatt Residence

Riverview Hotel

Competitor by Growth and Share

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2.4.2 Indirect Competition

Riverview's indirect competition is "distance" meetings in the corporate world. The morecompanies decide to conduct meeting over the phone, using web conferencing technology, andvideo phone technology, the less business people travel and the more it affects RiverviewHotel. Riverview has to keep abreast of all new distance meeting technology, and continue toreinforce with clients that there is no better way to do business then face to face.

3.0 Marketing Strategy

Our marketing strategy's objective is to communicate the unique set of services that we offerto discerning hotel guests. We attempt to direct the focus of our guests to the issues of qualityand value for the money as opposed to simply the bottom line costs associated with their stay.

Our marketing strategy will allow us to communicate our brand values, develop close workingrelationships with our customers and suppliers and to identify the needs of our guests in aneffective manner. Continued differentiation and growth are two goals we have set forourselves. Growth will take place by targeting new areas of business within both local andnational communities.

3.1 Value Proposition

Riverview Hotel offers the best, most personalized service for the corporate traveler. Weinclude business essentials in every room, such as a nice desk, internet connection, wirelessaccess, and provide easy to access meeting rooms with all AV and technology needs as well ascatering for longer meetings.

3.2 Critical Issues

We have many strengths including our differentiation strategy, our flat structure and highlyskilled and well trained staff. Our weaknesses involve the need to communicate our strategymore clearly in the external environment, our high staff turnover and training requirementsdue to seasonal fluctuations.

Although there is a low to medium threat of a competitive brand entering the market, thereare also opportunities as regards the high level of dependency of our guests for our particularservice and our strong position within the community with both customers and suppliers.

Critical issues for the Riverview include:

• Continuing to differentiate from our competition and offering added value to ourguests.

• Retaining our current levels of repeat business and developing further customer loyaltyin a competitive market.

• Attract new market sectors such as the Notown University-based business sector.• Continue to be perceived as a supportive member of the Notown community.

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3.3 Financial Objectives

• Increase overall room revenue by 10% on the past year.• Accomplish growth within the given budget of $250,000.• Increase corporate contracted rates to reflect the return of confidence in the corporate

travel market.• Keep payroll expenses down and reduce the level of overtime within the workforce.

3.4 Marketing Objectives

• To continue to communicate our strategic objectives to our target markets effectively.• To provide a positive hotel experience to all our guests.• To accomplish our growth targets within the given time and budget.• Expand our markets and identify new markets for our product and services.

3.5 Target Market Strategy

Our primary targets continue to be professional visitors to the region from the followingindustries, where annual corporate contracts can be entered into:

• Travel trade;• IT industry;• Automotive.

Local firms will be targeted for day use of conference facilities, room nights for visitingexecutives and long stay professional guests.

3.6 Messaging

It is critical to the success of the Riverview Hotel to make sure that the hotel is kept up to thehighest level in order to keep the high quality branding that Riverview properties are knownfor. Our messaging will reflect this high standard that we want to be associated with. We needto print brochures with high quality photographs as well as on high quality paper. It will beimportant to spend a little bit extra on marketing materials to ensure that they keep our "highquality" message in front of our customers.

3.6.1 Branding

The Riverview Hotel, Notown USA, is representative of the five star brand within the 'ExclusiveBusiness Hotels of the World' group. All Riverview Hotels are boutique properties, offeringbetween 25 and 35 exclusive rooms.

The Riverview properties are renowned for their convenient and strategic locations withinmajor cities throughout the country. Also synonymous with the brand are the high level ofpersonal service guests receive, and the extensive range of comprehensive business facilitiesavailable in luxurious settings.

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Table: Target Market Messaging

Target Market Messaging

Market Segments MessagingTravel Most Luxurious Small HotelIT Industry Business Ammentities and Proximity to IT IndustryAutomotive Best Business Ammentities

3.7 Strategy Pyramids

Our marketing strategy is to focus customers' attention on the high quality of the services weoffer. Within this strategy are three main points aimed at different market segments.

We will provide:

• The Best Business facilities• Personalized Services• Luxurious Amenities

Strategy Pyramid

Strategy

Best Business Facilities

Free wireless access

Executive Business Rooms

Personalized Service

Employees trained to always provide first name personalized service

Keep customer file with all preferences

Luxurious Amenities

Include Spa Quality Bathroom amenities

Include Plush Bathrobes in every room

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4.0 Marketing Mix

Place: product and service information are sold to the guest via personal selling, directmarketing, advertising and the Internet. Delivery channels include travel agents andinternational reservations systems.

4.1 Product Marketing

Product: high quality facilities accompanied by exemplary personal service, differentiated fromcompetition quality with the overall brand strategy has proven to be a successful approachgenerating high levels of repeat business.

4.2 Pricing

Pricing strategy has been consistent with the differentiation objective, to provide added valuefor a reasonable rate as opposed to discounting and devaluing our products and services.

Room rates quoted are net of tax and service, are per night, per room with continentalbreakfast included:

• Corporate single - $95.00;• Corporate double - $125.00;• Corporate double deluxe - $ 175.00;• Corporate suite - $225.00 (maximum occupancy 2 persons).

Conference room rates are net of tax and service, quoted per day use with tea and coffeebreaks (2) included:

• The Riverview Boardroom - $260.00;• The Riverview Conference Hall - $320.00;• The Riverview Ballroom - $875.00.

4.3 Promotion

Promotion: primary focus will remain on mass communication via print ads in tradepublications and on the Internet. Direct mail campaigns to existing and prospective clients willincrease as a cost effective means of targeted campaigning.

Personal selling in the local market will remain an important element of the mix in order tocontinue to build long-term relationships within the local community and generate high levelsof corporate activity.

Public relations activities will continue to play an important role in the marketing mix,presenting the hotel as a supportive member of the community and participating in significantlocal events.

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4.3.1 Advertising

The following table shows our primary advertising milestones.

Table: Advertising Milestones

Milestones

Advertising Start Date End Date Budget Manager DepartmentContract media space 1/1/2005 4/1/2005 $20,000 Geoff MarketingAd agency liasonon print ad material 1/1/2005 3/28/2005 $11,000 Geoff MarketingDispatch/monitor campaign results 5/1/2005 8/1/2005 $2,000 Sally MarketingTotal Advertising Budget $33,000

4.3.2 Public Relations

The following table shows our primary PR milestones.

Table: PR Milestones

Milestones

PR Start Date End Date Budget Manager DepartmentPublic relations functions to schedule 2/1/2005 3/1/2005 $0 Anne PREvaluate sponsorship requests 3/1/2005 4/1/2005 $0 Anne PREstablish list of sponsorshipevents/companies

4/1/2005 6/1/2005 $6,000 Anne PR

Total PR Budget $6,000

4.3.3 Direct Marketing

Our direct marketing will be handled by our PR agency. We will buy select targeted list ofcorporate companies and send them information about Riverview Hotel. We know that we areno experts in direct marketing so it will be important that our PR agency handles every aspectof direct marketing for us.

Table: Direct Marketing Milestones

Milestones

Direct Marketing Start Date End Date Budget Manager DepartmentDirect mail lists to purchase/prepare 2/1/2005 3/1/2005 $6,000 Sally MarketingAd agency liason on direct mailmaterial

3/1/2004 3/1/2005 $7,000 Sally Marketing

Total Direct Marketing Budget $13,000

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4.4 Web Plan

Our website is already up and running, but needs to be revamped to give it an updated lookand feel, as well as to add secure interactivity. The content is good -- it just need a littlerefresher.

We need:

1. New home page design and navigation2. Online reservations capability3. Printable brochure

4.4.1 Website Goals

Our website needs to be able to do the following:

1. Convey our messaging of high quality, luxury business accommodations2. Be indexed on major travel websites so that people find us3. Be able to take reservations online and make changes to reservations online

4.4.2 Website Marketing Strategy

Our main website marketing strategy hinges upon making sure all major travel sites such asExpedia.com, Orbitz.com, and Hotels.com list our hotel when customers search for hotels inour area.

4.4.3 Development Requirements

To attain the level of interactivity we want in our redesign, we need to increase the featuresallowed (security for reservations and credit-card processing, daily back-ups, and real-timedatabase linking) and service-level of our hosting service. This will slightly increase ourmonthly hosting fee.

Sally has contracted with a database developer to update our reservations system to becompatible with the online reservation requirements. The new website will be ready to launchin April.

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Table: Pay-per-click ROAS

Pay-Per-ClickROAS

Network MonthlyCost

ClicksLeads

GeneratedOrders

MonthlyRevenue

ROASCost-per-

clickCost-per-

leadGoogle $3,000 600 75 10 $5,000 167% $5.00 $40.00Yahoo! $2,000 300 40 5 $4,000 200% $6.67 $50.00Other $500 100 30 3 $1,500 300% $5.00 $16.67Total 5500 1000 145 18 10500 222% $5.56 $35.56

Table: Website Milestones

Milestones

Web Development Start Date End Date Budget Manager DepartmentHomepage Re-design 1/1/2005 1/15/2005 $1,000 Shelly MarketingPrintable Brochures 1/1/2005 1/15/2005 $2,000 Shelly MarketingOnline reservations 1/1/2005 1/15/2005 $6,000 Shelly MarketingTotal Web Development Budget $9,000

4.5 Service

Our hotel provides guests with an alternative to the impersonal, large five star properties inthe city. Strategically located, our property enables our guests to be at the heart of thebusiness community and yet in an environment of calm and professionalism. We seek todifferentiate our product and services in the following areas:

• Personal recognition of our frequent travelers who return time and again.• Luxurious rooms that offer a sense of doing business from 'home.'• Staff that have a strong customer-service ethic.• Business facilities second to none in town.

4.6 Implementation Schedule

New marketing campaign efforts will be focused from January through April, aimed at thelaunch of the redesigned website in April. We will continue to track the results of this capaignfor the remainder of the year.

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Table: Milestones

Milestones

Advertising Start Date End Date Budget Manager DepartmentContract media space 1/1/2005 4/1/2005 $20,000 Geoff MarketingAd agency liasonon print ad material 1/1/2005 3/28/2005 $11,000 Geoff MarketingDispatch/monitor campaign results 5/1/2005 8/1/2005 $2,000 Sally MarketingTotal Advertising Budget $33,000PR Start Date End Date Budget Manager DepartmentPublic relations functions to schedule 2/1/2005 3/1/2005 $0 Anne PREvaluate sponsorship requests 3/1/2005 4/1/2005 $0 Anne PREstablish list of sponsorshipevents/companies

4/1/2005 6/1/2005 $6,000 Anne PR

Total PR Budget $6,000Direct Marketing Start Date End Date Budget Manager DepartmentDirect mail lists to purchase/prepare 2/1/2005 3/1/2005 $6,000 Sally MarketingAd agency liason on direct mailmaterial

3/1/2004 3/1/2005 $7,000 Sally Marketing

Total Direct Marketing Budget $13,000Web Development Start Date End Date Budget Manager DepartmentHomepage Re-design 1/1/2005 1/15/2005 $1,000 Shelly MarketingPrintable Brochures 1/1/2005 1/15/2005 $2,000 Shelly MarketingOnline reservations 1/1/2005 1/15/2005 $6,000 Shelly MarketingTotal Web Development Budget $9,000Other Start Date End Date Budget Manager DepartmentName me 1/1/2006 1/15/2006 $0 ABC DepartmentName me 1/1/2006 1/15/2006 $0 ABC DepartmentName me 1/1/2006 1/15/2006 $0 ABC DepartmentOther 1/1/2006 1/15/2006 $0 ABC DepartmentTotal Other Budget $0Totals $61,000

4.7 Sales Plan

Our sales plan hinges upon our sales strategy, sales process and, prospecting plan. As long aswe follow the plans laid below we should be in good shape.

4.7.1 Sales Strategy

Riverview Hotel's sales strategy hinges upon repeat visits by key corporate accounts. We needto develop a relationship with the companies listed in our Sales Account Plan, as well asactively generate new accounts by soliciting first time corporate visitors.

It will be important to remain competitive on price, as well as amenities. The corporateaccounting department wants to make sure they limit the amount of money spent per nightper employee on a business trip, but the business traveler will be able to express preference.If the price is right, and the business traveler knows that they will have all amenities they needwhile at the Riverview Hotel, we will be assured of keeping and attracting key accounts.

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4.7.2 Sales Process

We will be sure to mail out corporate packets every 6 months to our key accounts, as well asany new accounts we acquire. The packets will have information about corporate pricing anddiscounts, as well as information about rooms and amenities for the companies to share withbusiness travelers.

The biggest piece of our sales process will depend on personal relationships. We will need tomake every business traveler feel like we remember them and we know their likes anddislikes. We also need to cultivate good relationships with the person at the company whomakes travel arrangements.

Table: Sales Account Plan

Sales Account Plan

Target Accounts History Status Annual Sales Potential Key AccountManager

Company A disappointed w/current

proposal made$20,000 Geoff

Company B referral from Jack designingproposal

$15,000 Geoff

Company C request on 12/15 draftingresponse

$10,000 Sally

Existing KeyAccounts

History StatusAnnual Sales Potential

Key AccountManager

Company 1 3 years Stable $40,000 SallyCompany 2 5 annual conferences check next

month$60,000 Geoff

Other - - $0 -Total $145,000

4.7.3 Prospecting Plan

Whenever a new customers stays at our hotel we need to be able to determine whether it isfor leisure or business. If it is for business -- we need to make sure to get the customersbusiness name and address so that we can send a corporate packet to the company lettingthem know about corporate pricing and special business amenities.

5.0 Financials

Our annual marketing budget is $100,000. Sales are anticipated to achieve revenue of$1,172,925. Our marketing expenses will equate to approximately 8.5% of the overall revenue.

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5.1 Break-even Analysis

Table: Fixed Costs

Fixed Costs

CostRent or Lease $0Professional Services $1,000Payroll $10,000Interest Payments $2,000Utilities & Telephone $5,000Non-discretionary marketingexpenses

$0

Other $0Total Fixed Costs $18,000

Table: Break-even Analysis

Break-even Analysis

Monthly Units Break-even 145Monthly Revenue Break-even $19,929

Assumptions:Average Per-Unit Revenue $137.14Average Per-Unit Variable Cost $13.28Estimated Monthly Fixed Cost $18,000

($20,000)

($15,000)

($10,000)

($5,000)

$0

$5,000

$10,000

0 40 80 120 160 200

Monthly break-even point

Break-even point = where line intersects with 0

Break-even Analysis

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5.2 Sales Forecast

Room revenue for this year is based on an average growth rate of 10%. This is based on thenumber of pre-contracted corporate rooms, and an anticipated return to business levelsprojected.

Table: Sales Forecast

Sales ForecastFY 2006 FY 2007 FY 2008

Unit SalesCorporate Single 1,925 2,118 2,118Corporate Double 3,665 4,032 4,032Corporate Deluxe 2,695 2,965 2,965Corporate Suite 268 294 294Total Unit Sales 8,553 9,409 9,408

Unit Prices FY 2006 FY 2007 FY 2008Corporate Single $95.00 $95.00 $99.00Corporate Double $125.00 $125.00 $135.00Corporate Deluxe $175.00 $175.00 $195.00Corporate Suite $225.00 $225.00 $240.00

SalesCorporate Single $182,875 $201,210 $209,633Corporate Double $458,125 $504,000 $544,253Corporate Deluxe $471,625 $518,875 $578,175Corporate Suite $60,300 $66,150 $70,560Total Sales $1,172,925 $1,290,235 $1,402,620

Direct Unit Costs FY 2006 FY 2007 FY 2008Corporate Single $7.86 $11.00 $11.00Corporate Double $13.92 $13.50 $13.50Corporate Deluxe $17.50 $18.50 $18.50Corporate Suite $0.84 $0.00 $0.00

Direct Cost of SalesCorporate Single $15,138 $23,298 $23,293Corporate Double $51,033 $54,432 $54,425Corporate Deluxe $47,163 $54,853 $54,853Corporate Suite $225 $0 $0Subtotal Direct Cost ofSales

$113,558 $132,583 $132,570

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$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Corporate Single

Corporate Double

Corporate Deluxe

Corporate Suite

Sales Monthly

5.3 Expense Forecast

Marketing expenses are projected to be approximately 8.5% of overall annual revenue. Thebreakdown of expenditures is as follows:

Table: Marketing Expense Budget

Marketing Expense Budget FY 2006 FY 2007 FY 2008Print Advertising $10,600 $11,600 $12,826Internet Advertising $21,000 $23,100 $25,410Public Relations $6,000 $6,600 $7,260Other $21,000 $23,100 $25,410

------------ ------------ ------------Total Sales and Marketing Expenses $58,600 $64,400 $70,906Percent of Sales 5.00% 4.99% 5.06%

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$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Print Advertising

Internet Advertising

Public Relations

Other

Monthly Expense Budget

5.4 Linking Expenses to Strategy and Tactics

Our marketing expense is structured to reflect the corporate strategy differentiation. Quarterlytravel trade publications and interim monthly press ads communicate our message to keycorporate clients in one of our most significant target markets. Monthly Internet advertisingexpenses include banner ads, and strategic links with car hire, airline and destinationmanagement companies' websites to drive business to the hotel. Direct mail activity builds ourtargeted customer database, not only in terms of improving the quality of the data wecurrently hold, but on increasing the size of the database with prospective customerinformation. Public relations expenses cover PR events, participation at local functions andsponsorship funds. Overall, the percentage of total revenue required to support the marketingexpense is considered a moderate amount.

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$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Sales

Expenses

Sales vs. Expenses Monthly

5.5 Contribution Margin

Contribution margins should increase due to:

• Differentiation/focus strategy increases ability to specialize.• Maintenance of expenses within specified levels.• Increased efficiency in capacity utilization.• Economies of scale due to increased purchasing efficiencies.

Table: Contribution Margin

Contribution MarginFY 2006 FY 2007 FY 2008

Sales $1,172,925 $1,290,235 $1,402,620Direct Cost of Sales $113,558 $132,583 $132,570Other Costs of Sales $0 $0 $0

------------ ------------ ------------Total Cost of Sales $113,558 $132,583 $132,570

Gross Margin $1,059,368 $1,157,653 $1,270,050Gross Margin % 90.32% 89.72% 90.55%

Marketing Expense Budget FY 2006 FY 2007 FY 2008Print Advertising $10,600 $11,600 $12,826Internet Advertising $21,000 $23,100 $25,410Public Relations $6,000 $6,600 $7,260Other $21,000 $23,100 $25,410

------------ ------------ ------------Total Sales and Marketing Expenses $58,600 $64,400 $70,906Percent of Sales 5.00% 4.99% 5.06%

Contribution Margin $1,000,768 $1,093,253 $1,199,144Contribution Margin / Sales 85.32% 84.73% 85.49%

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$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Contribution Margin Monthly

6.0 Controls

Our marketing plan is structured to enable us to achieve the strategic goals we have set forourselves, in terms of increasing overall revenue as a result of differentiating our products andservices from the competition.

Our marketing team will ensure that the plan is implemented to the best of their ability andwith the highest levels of efficiency and accuracy.

6.1 Implementation

All figures will be monitored on an ongoing basis in relation to projections versus actuals, andthe ongoing plan will be altered or manipulated as necessary in order to react to and,wherever possible, anticipate external changes to the environment.

Annual results will be evaluated at the Region General Manager's meeting where the structureof the plan for the approaching year will also be established.

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6.2 Keys to Success

• Continue to develop ongoing relationships with frequent and new guests.• Continue to develop and implement a strong communications plan in both national and

international markets.• Leverage our strength in the local market as a member of the community by

supporting local events.• Identify new markets for our services such as University-based target groups.• Continue ongoing staff training and skill development to ensure the highest standards

of service.

6.3 Contingency Planning

Contingency plans have been made for the following unexpected developments:

• A slower recovery from the recession than public opinion: this has been reflected in themoderate increase in levels of corporate business expected.

• The entry into the market of a competitively aligned hotel: differentiation wouldcontinue to be the strategic approach with the development of added value andbenefits to leverage long standing relationships and repeat business based onfamiliarity and personal attention to detail.

6.4 Marketing Organization

Our marketing director, Geoff Watkins, leads our PR and marketing team of four in alladvertising, promotional and public relations related activities. Geoff works closely with themembers of the team, to implement and monitor the effectiveness of the marketing plan andevaluate results.

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Appendix Table: Sales Forecast

Sales ForecastApr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar FY 2006 FY 2007 FY 2008

Unit SalesCorporate Single 0% 180 175 175 160 150 175 175 125 100 160 175 175 1,925 2,118 2,118Corporate Double 0% 280 260 375 300 280 375 360 280 200 300 375 280 3,665 4,032 4,032Corporate Deluxe 0% 260 240 250 225 200 250 220 225 175 225 200 225 2,695 2,965 2,965Corporate Suite 0% 10 5 45 15 5 75 60 15 3 15 5 15 268 294 294Total Unit Sales 730 680 845 700 635 875 815 645 478 700 755 695 8,553 9,409 9,408

Unit Prices Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar FY 2006 FY 2007 FY 2008Corporate Single $95.00 $95.00 $95.00 $95.00 $95.00 $95.00 $95.00 $95.00 $95.00 $95.00 $95.00 $95.00 $95.00 $95.00 $99.00Corporate Double $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $125.00 $135.00Corporate Deluxe $175.00 $175.00 $175.00 $175.00 $175.00 $175.00 $175.00 $175.00 $175.00 $175.00 $175.00 $175.00 $175.00 $175.00 $195.00Corporate Suite $225.00 $225.00 $225.00 $225.00 $225.00 $225.00 $225.00 $225.00 $225.00 $225.00 $225.00 $225.00 $225.00 $225.00 $240.00

SalesCorporate Single $17,100 $16,625 $16,625 $15,200 $14,250 $16,625 $16,625 $11,875 $9,500 $15,200 $16,625 $16,625 $182,875 $201,210 $209,633Corporate Double $35,000 $32,500 $46,875 $37,500 $35,000 $46,875 $45,000 $35,000 $25,000 $37,500 $46,875 $35,000 $458,125 $504,000 $544,253Corporate Deluxe $45,500 $42,000 $43,750 $39,375 $35,000 $43,750 $38,500 $39,375 $30,625 $39,375 $35,000 $39,375 $471,625 $518,875 $578,175Corporate Suite $2,250 $1,125 $10,125 $3,375 $1,125 $16,875 $13,500 $3,375 $675 $3,375 $1,125 $3,375 $60,300 $66,150 $70,560Total Sales

$99,850 $92,250 $117,375 $95,450 $85,375 $124,125 $113,625 $89,625 $65,800 $95,450 $99,625 $94,375$1,172,92

5$1,290,23

5$1,402,62

0

Direct Unit Costs Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar FY 2006 FY 2007 FY 2008Corporate Single 0.00% $9.50 $9.50 $0.50 $9.50 $9.50 $0.50 $9.50 $9.50 $9.50 $9.50 $9.50 $9.50 $7.86 $11.00 $11.00Corporate Double 0.00% $12.50 $12.50 $12.50 $12.50 $12.50 $12.50 $12.50 $21.50 $12.50 $21.50 $12.50 $12.50 $13.92 $13.50 $13.50Corporate Deluxe 0.00% $17.50 $17.50 $17.50 $17.50 $17.50 $17.50 $17.50 $17.50 $17.50 $17.50 $17.50 $17.50 $17.50 $18.50 $18.50Corporate Suite 0.00% $22.50 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.84 $0.00 $0.00

Direct Cost of SalesCorporate Single $1,710 $1,663 $88 $1,520 $1,425 $88 $1,663 $1,188 $950 $1,520 $1,663 $1,663 $15,138 $23,298 $23,293Corporate Double $3,500 $3,250 $4,688 $3,750 $3,500 $4,688 $4,500 $6,020 $2,500 $6,450 $4,688 $3,500 $51,033 $54,432 $54,425Corporate Deluxe $4,550 $4,200 $4,375 $3,938 $3,500 $4,375 $3,850 $3,938 $3,063 $3,938 $3,500 $3,938 $47,163 $54,853 $54,853Corporate Suite $225 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $225 $0 $0Subtotal Direct Cost ofSales

$9,985 $9,113 $9,150 $9,208 $8,425 $9,150 $10,013 $11,145 $6,513 $11,908 $9,850 $9,100 $113,558 $132,583 $132,570

Appendix

Page 27

Appendix Table: Marketing Expense Budget

Marketing Expense Budget Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar FY 2006 FY 2007 FY 2008Print Advertising $2,000 $400 $400 $2,000 $300 $300 $2,000 $300 $300 $2,000 $300 $300 $10,600 $11,600 $12,826Internet Advertising $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $21,000 $23,100 $25,410Public Relations $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $6,000 $6,600 $7,260Other $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $21,000 $23,100 $25,410

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Sales and MarketingExpenses

$6,000 $4,400 $4,400 $6,000 $4,300 $4,300 $6,000 $4,300 $4,300 $6,000 $4,300 $4,300 $58,600 $64,400 $70,906

Percent of Sales 6.01% 4.77% 3.75% 6.29% 5.04% 3.46% 5.28% 4.80% 6.53% 6.29% 4.32% 4.56% 5.00% 4.99% 5.06%

Appendix

Page 28

Appendix Table: Contribution Margin

Contribution MarginApr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar FY 2006 FY 2007 FY 2008

Sales$99,850 $92,250 $117,375 $95,450 $85,375 $124,125 $113,625 $89,625 $65,800 $95,450 $99,625 $94,375

$1,172,925

$1,290,235

$1,402,620

Direct Cost of Sales $9,985 $9,113 $9,150 $9,208 $8,425 $9,150 $10,013 $11,145 $6,513 $11,908 $9,850 $9,100 $113,558 $132,583 $132,570Other Costs of Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Cost of Sales $9,985 $9,113 $9,150 $9,208 $8,425 $9,150 $10,013 $11,145 $6,513 $11,908 $9,850 $9,100 $113,558 $132,583 $132,570

Gross Margin$89,865 $83,138 $108,225 $86,243 $76,950 $114,975 $103,613 $78,480 $59,288 $83,543 $89,775 $85,275

$1,059,368

$1,157,653

$1,270,050

Gross Margin % 90.00% 90.12% 92.20% 90.35% 90.13% 92.63% 91.19% 87.56% 90.10% 87.52% 90.11% 90.36% 90.32% 89.72% 90.55%

Marketing Expense Budget Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar FY 2006 FY 2007 FY 2008Print Advertising $2,000 $400 $400 $2,000 $300 $300 $2,000 $300 $300 $2,000 $300 $300 $10,600 $11,600 $12,826Internet Advertising $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $21,000 $23,100 $25,410Public Relations $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $500 $6,000 $6,600 $7,260Other $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $1,750 $21,000 $23,100 $25,410

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Sales and MarketingExpenses

$6,000 $4,400 $4,400 $6,000 $4,300 $4,300 $6,000 $4,300 $4,300 $6,000 $4,300 $4,300 $58,600 $64,400 $70,906

Percent of Sales 6.01% 4.77% 3.75% 6.29% 5.04% 3.46% 5.28% 4.80% 6.53% 6.29% 4.32% 4.56% 5.00% 4.99% 5.06%

Contribution Margin$83,865 $78,738 $103,825 $80,243 $72,650 $110,675 $97,613 $74,180 $54,988 $77,543 $85,475 $80,975

$1,000,768

$1,093,253

$1,199,144

Contribution Margin / Sales 83.99% 85.35% 88.46% 84.07% 85.10% 89.16% 85.91% 82.77% 83.57% 81.24% 85.80% 85.80% 85.32% 84.73% 85.49%

Appendix

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