PlusAuto Revenue Modeling Exercise

Autonomous driving is something that$$s not only for new vehicles, but a number of startups are working on developing retrofit kits that allow vehicles on the road today to drive autonomously. Such kits typically come with a number of additional sensors$,$ graphic processors and the possibility to use existing vehicle components and sensors$.$

You are a PlusAuto, a new autonomous driving platform company and have partnered with Google to provide a wide range of app services to the market along with your autonomous driving kit. You are trying to determine if you should adopt a B$2$B or B$2$C business model. The options you are considering are:

$1.$ Fleet management services $($FMS$)$ to companies that can benefit from real time vehicle monitoring and reporting services leveraging onboard vehicle diagnostics along with road condition and traffic analysis.

$2.$ On$-$board infotainment services $($OIS$)$ to passengers including video streaming, mobile office, and other related apps

B$2$B Channel Forecast FMS

For FMS your initial target market is the New England states $($not including New York$).$ Your target customer has a fleet size on average of $100$ vehicles. There are $50$ such companies in the target region.

$$ You have chosen a direct sales model due to the complex nature of the service offering. You only have budget for one sales person which costs $$75,000$ annually plus a $12\%$ sales commission. You have learned that competitive FMS offerings take on average $6$ months cycle time. A sales$-$person can only manage $20$ customers during that period and has a close ratio of $10\%.$

$$ For the FMS you are planning on charging a per vehicle price of $$1,250$ per year with an average bundle size of $125$ units. You expect only $50\%$ of your clients to renew annually. You will add an account manager for $$50$K in the second year to manage client satisfaction and renewal.

$$ The Bill of Materials for the service model has three labor elements of $$25,000,$ $$15,000,$ and $$15,000$ per bundle, and two materials components at $$10,000$ and $$5,000$ per bundle. There is also a CRM fee of $$1,200$ annually per user for tracking the campaigns.

B$2$C Channel Forecast OIS

For OIS your initial target market is the New England consumers of your system $($not including New York$).$ Your target customer is a family of four with two school aged children. They typically purchase an electric SUV as a second vehicle and are located in the suburbs around metropolitan areas. Your research indicates that there are approximately $1$ million consumers in this market. You intend to run two different types of campaigns to attract consumers to this offering.

$$ The two campaigns are a direct email campaign and the other is leveraging your partnership with Google to run a Google$-$ad campaign. Each campaign runs for $3$ months. $($Assume each month has the same conversion volume per type of campaign$)$ You alternate campaigns starting with a Google$-$ad campaign in Q$1.$

$$ The campaigns require will be managed by a marketing associate with an annual cost of $$50$K in the first year, and an additional associate to manage client service and renewal in the second year.

$$ You have decided to launch with average pricing based on competitive data. You have found three competitors with similar products pricing at $$1,365,$ $$1,295,$ and $$1,270$ per year. You anticipate a $50\%$ Churn Rate annually.

$$ Each email campaign will need to reach $5,000$ target customers with a $2\mathrm{.}5\%$ conversion rate and CPM of $$300,$ and each Google$-$ad campaign will also need to reach $5,000$ target customers with a $1\mathrm{.}5\%$ conversion rate with a CPM of $$150.$

$$ The Bill of Materials for the service model has three labor elements of $$250,$ $$150,$ and $$150$ per unit, and two materials components at $$100$ and $$50$ per unit. There is also a CRM fee of $1,200$ annually per user for tracking the campaigns.