bubbl°
Financial Indications
Market Analysis
Submarkets and their potential for growth
To determine the market size, it first must be identified which market bubbl° PSS belongs to. bubbl° does not have direct competitors, as there is no company that would conduct its business in the same branch. To still determine the market size, the total market was divided into different submarkets where bubbl° indirect competitors are. These submarkets are based on the functions bubbl° PSS has. The submarkets are smart homes, air controlling products, concentration/meditation apps and space-in-space solutions. The next step is to determine bubbl°’s competitors in these markets and analyze them.
Smart homes
The smart homes can be considered as a submarket because it has a lot of interfaces with our product. There are functions in bubbl° PSS which perfectly align with the definition of smart homes. According to a report by Grand View Research, this market size was valued at USD 79.3 Billion in 2020 and has an expected CAGR of 14,6% from 2021-2028. The big market leaders are Amazon, Google, Apple and Philips which provide customers with products such as smart light bulbs, smart speakers and thermostats which they can control and customize with their smartphones.
Air controlling products
​This submarket consists of different devices that control are as: humidifiers, purifiers, and scent diffusers. This market size is approximately 14.6 billion according to MarketsandMarkets and has an expected CAGR of 8% from 2021-2026. The companies with the largest market shares are Dyson, Honeywell international and Air aroma. They are focusing on producing humidifiers, purifiers, and scent diffusers.
Concentration or meditations applications
The aim of bubbl° is to create, for example, the perfect study of our working environment, we also compete in this market. In a report of MarketsandMarkets the estimated the market value on 1.2 billion and has an expected CAGR of 12,2% from 2021-2027. The leading companies in this market are Headspace, Calm and Insight timer. These companies offer the customer an app that has mediation guidance, relaxation aids and insights in your efficiency. There are also other companies such as Focus@will and Brain.fm active in this market. They apply science to engineer specific sounds and music that improves human concentration. These services are also very interesting for us because we have the same goal.
Space-in-space solutions
Dutch company Ahrend is the only one producing the so-called space-in-space solutions. A SIS solution is, essentially, a separate enclosed volume that offers privacy with certain environment control aspects. In some SIS solutions users can control the air circulation, but mostly what this kind of solution is offering is an opportunity for users to get away from many surrounding distractions to have, for example, an hour of deep focus to execute an important task. However, this is a pricey kind of solution: on average that starts from EUR 5,000 and it makes the space-in-space solutions hardly accessible for individuals. Although there is no market size and growth data because this branch is brand new, Ahrend proves that the market is seeking for an individually accessible solution to improve human concentration.
Market trends and opportunities
Environmental factors, as was established in a research conducted by our team, that affect concentration in somebody’s living space include room organization, temperature, noise, lighting and air quality – last 3 being the most influential. People tend to solve concentration problems caused by environmental factors in many different ways: they try to eliminate distractions, take breaks, use time management techniques, and most importantly they try to change and improve their living environment – they buy speakers, humidifiers and scent diffusers to make the space more comfortable, more personal.
Studied societal trends seem to demonstrate that:
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Rise of remote work after the COVID-19 pandemic makes people responsible for their productivity at home.
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The widespread use of interaction technology does not promote prolonged concentration on other kinds of important activities.
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Big players of different consumer markets continue finding ways to keep people distracted at their products and ads to spend their money on.
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More people are diagnosed with ADHD and ADD
Market research of submarkets (of a synthetic market that our product can possibly create) shows that they range from USD 1.2 billion to 79.3 billion in market sizes in 2020, and their CAGR in 2021-2026 ranges from 8% to 14.6%. As stated in the market analysis these numbers don’t represent the synthetic market size and its forecasted growth, but it does set an indication benchmark for the market value and it shows the capability of growth.
So, these societal trends and theoretic growth opportunities can sum up to the following:
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Amount of people experiencing concentration problems is growing.
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Circumstances are becoming less appealing in terms of concentration in people’s living environments.
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Market demonstrates industry movement toward a certain complex solution.
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While new markets seem to have impressive financial indicators, it would also boost development of conventional correlated markets (i.e., existing separate conventional solutions) therefore increasing the opportunity to grow.
Which, in turn, means that preliminary this can potentially be a very strong market.
Value proposition
The bubbl° PSS stimulates concentration and an effective working environment, by delivering a modular product-service system that is operated by an application.
bubbl° offers a controlled environment by implementing sounds, lights and air quality adjustments via a highly customizable product-service system that helps users with concentrating on their activity. Bubbl lets users effortlessly create their own environment that suits whatever users are doing in the best way.
Marketing strategy
For determining our marketing strategy we used the four p’s (product, price, place, promotion). This together with research from the target customer and their needs (which can be found on the history and reasons page), forms the basis for our marketing strategy.
Product
We offer a modular system, which you can locate in your room and control the settings via an app. The system is optimal for creating an environment for study, relaxation and more. This system consists of a speaker, air humidifier, air purifier, lights, and scent diffuser. The modularity of the system means that the size of the room does not matter, because new devices can be added in order to achieve the desired environment. The service includes a scan of the room, which we use to determine the number of devices the customers need, maintenance, and modes designed by us. The modes are designed for specific activities and the user can alter them to a certain extent. We also offer custom modes, meaning that the user can create their own mode from scratch.
Price
Determining the price for our complex and innovative product requires careful consideration. As a startup, our primary objective is to maximize profit. Since our product is unique and there are no direct competitors, we cannot rely on demand or competitor prices as indicators.
To establish a thoughtful price, we analyzed the costs associated with the product and services provided. We set a pricing goal of 30% profit after one year for one product and its services. We considered production costs, including the product itself, filters, scent paths, assembly, and shipping. Additionally, we factored in service costs such as shipping and supply management. Our marketing costs were set at 5% of the combined service and product costs.
Taking into account these costs and profit goal, we arrived at a subscription price of 39.99 euros per month. While we may not generate as much profit in the first year, our profit margin will be 90,7% annually. This high margin accounts for additional costs associated with running a startup.
Please refer to the graph below for a visual representation of the costs, revenue, and profits over a two-year period.
Place
Since the product is relatively common on the market, meaning that there are similar options to what is offered by us (lights, speakers, humidifiers, scent diffusers, focus-enhancing applications, etc.), it is better to lure the customer to our product or in other words, use a pull strategy when designing the distribution channels. Considering that our product consists of a number of products, it is best to use a dual distribution channel. The complete product would be showcased in retail stores - in a similar way as Dyson’s products are showcased in a designated aisle - as well as on our website. Putting the product in retail stores serves as an advertisement and makes it easier for the customers to get a hold of the product. However, the option to order the get the subscription from our website is still there. This results in a higher control over our product and a better end-of-life cycle, since when the customers do not desire to use our product anymore we can collect them and then rent them out again, instead of throwing them out.
Promotion
The most important part of a marketing plan is to define and know the target audience because then it is easier to tailor advertisements which are more likely to reach the target. But before that, the core values of the brand must be set. These values can be sustainability, customer satisfaction, and quality.
Sustainability will be implemented in our product life-cycle by collection of products that the users’ do not wish to use anymore. These will be later maintained and fed back to the system, thus making our product more sustainable.
Customer satisfaction can be ensured by providing great customer service as well as customizable among other things. Great customer service can come in many forms, such as clear communication of different product functions, and providing help to customers through a FAQ page or live support chat. Customizability is also an important aspect because research shows that people like to be in control of their products. Therefore we enabled them to change certain features that might increase customer satisfaction.
Quality is a must, mainly because we are designing a PSS, meaning that we are providing service and product. If the product is cheap quality, not only would we lose the trust of customers, but it also means we would need to fix components more often, which ultimately results in more expenses than if we would use high-quality materials from the beginning. Nonetheless, service also plays a part in giving a higher quality feel to the customers.
Now that the values are defined, we must include them in our marketing campaign.
Since Home Enthusiasts, Interior Design Enthusiasts and Tech-Savvy homeowners are our main target group, we should focus on a strong online presence on social media platforms like Pinterest, Twitter, Instagram, YouTube, TikTok and Facebook. Short promotion videos could be made which showcase our product and services. On these platforms it is important to be as relatable to the target audience as possible, in order words, it is important to not look like a corporate brand that takes themselves too seriously. Moreover, it is possible to run ads on such platforms which target specific demographics and interests of consumers.
However, the focus should not only be on the digital world. Clever ads can catch the attention of the target group on billboards and posters as well. For physical ads the placement is paramount. Reasonable locations would be in train stations, near cafes, in gaming/internet cafes, or esport events.
Investment indications
An important notice is that all production associated calculations so far were rather pessimistic. We are aiming to provide high level figures because we believe that this potentially puts the investor on the better side when it comes to realizing the project. Especially that, in practice, there is a high chance of the actual production figures being lower than estimated so far.
Given that bubbl is a startup in a fresh market, it is challenging to estimate the initial investment requirement. We have looked at the cost-to-duplicate, market multiple and the discounted cash flows valuation approaches. There are reasons against all 3 valuation models: there are major difficulties to use the first 2 models because there are no closely relatable companies, while the DCF formula is imprecise when cash flows are not stable. It seems, still, that the DCF formula is the most suitable one to use because we, at least, are able to estimate the cash flows to discount.
Another question is the discount rate. Ideally we should use the Weighted Average Cost of Capital, but WACC is hard to estimate when the company is not yet established because there is no division of debt and equity. What we found more suitable in our case is general startup associated risk of return. Many sources give many different rates, but given the niche market and the purchasing capabilities of our target audience we estimate the risk to be at 25%
Given the sales price of subscription per product per month (with all associated costs) is EUR 39.99 we were able to calculate EBIT of year 1 to 6 and use the average rate of corporate tax in the Netherlands and discount cash flows against the risk of 25%.
Therefore, what we are asking for is EUR 200,000 of capital investment at 40% of investor equity. The calculated investment gain over 6 yeaers would be ca. EUR 93,693, providing the ROI of 46.85% and the annualized ROI of 6.61%.