Franchise Information
Business Model Overview
Starpoint Digital Media Network is an innovative advertising media company within the digital signage narrowcasting industry.
Starpoint currently directly offers advertisers placement in 58 locations across the Southeastern United States. After a little over two years of growing this business, our team is ready to scale out. Starpoint’s strategy and pricing have been modified and has thus strengthened Starpoint’s sales strategy and business model.
Our company has developed a targeted system of fully managed, real-time accessible high definition display screens placed in the nation’s finest fitness clubs. Our state-of-the-art proprietary technology boasts a 99% connectivity rate and extreme flexibility in messaging, including the ability to customize and update advertisements in real time.
We seek out the biggest and best fitness centers as its partners, with core members who attend more than 100 days per year and who spend an average of 81 minutes at the club each visit. Starpoint, thus, serves a highly-valued demographic: affluent, discerning 18-49 year-olds who are image-conscious and likely to be trusted as word-of-mouth influencers and brand evangelists.
For these enthusiastic health club members, an attractive 42” LCD display with dynamic, useful content provides a pleasant focal point during their workout time, fostering positive brand associations for the advertisers that utilize Starpoint’s growing network.
Starpoint’s play-lists have a beautiful lay-out, no sound, and each one consists of paid advertising (24 ads, expandable to 36 ads), location specific content such as gym class schedules or announcements, feel good messages, trivia questions and answers, community events and quotes.
Our advertisers pay a minimum of $99 per month per screen, which includes original ad design, optional weekly ad updates, and optional monthly ad re-designs at no charge. The average advertiser currently pays $125 per ad for a 4 month period.
The Franchise Opportunity
Starpoint is now offering franchisees an unequalled opportunity to set up and own a digital media network franchise.
Use your own selling skills to fill up the advertising spots on your screens; Starpoint will provide you with play-lists including our ad design services; localized content for the screens (gym schedules, local community events, etc...), generic content changing daily (feel good messages, jokes, trivia questions), and more. You will have access to our latest web-based, patented display software. You will start with 10 screens at 10 locations, and as you expand your business, you are able to add as many as you like.
YOU SELL, WE DO THE REST!
Partner Acquisition
Because of our in novative and non-exclusive business model, we have found gym owners to be very amenable to the Starpoint model. We offer our partners (gym owners) a 20% revenue share and up to 20% of the display time for in-house messaging.
Screen Installation and Maintenance
Starpoint has developed a display system consisting of an LCD screen, a media-player and a dedicated internet connection.
To ensure that each location is treated with care and precision, we contract with national installation and maintenance companies.
As a franchisee, you will be given access to our Support Ticket system, which is administered through Pegasus. This will allow you to create a ticket if you ever have a concern or notice an issue with the presentation or the equipment at any of your locations, aside from the tickets that will automatically be generated. Tickets are automatically created when a location loses connectivity, the television is turned off, the display software shuts down or an error message appears on the screen.
The standard under which we operate is that if there is a problem at one of our locations, we will have the issue resolved within four hours.
YOU SELL, WE DO THE REST!
Our Database
Real innovation is found in Starpoint’s proprietary (patent pending) software that controls the internal workflow, including sales, design, play-list assembly, deployment and delivery of advertisements to the gym displays. Similar to the iPod’s play-listing software, this software allows Starpoint to “automatically” generate a play-list individually tailored to each club, and to monitor delivery in real time. This real-time content management allows true flexibility for clients, as advertisements, promotions and messages can be changed immediately without any system downtime. You simply enter your new customers to the database and Starpoint will take care of the rest.
Sales and Marketing
Our sales and marketing process is derived from a model that has shown tremendous success in other industries. This process is a combination of intelligent lead generation, outside sales, and up-selling. The materials and pitch are positioned to ensure at least a 33 percent closing ratio and an ongoing pipeline of prospects, leads, and sales.
Target Market: A Shifting Mix of Local and Regional Advertisers
In the current environment, marketers are eager to explore new media outlets, and larger advertising agencies are especially eager to do so for multiple clients. With the loss of television viewers to TiVo and the DVR, the increasing shift of the radio audience to satellite, and the decline in print subscribers, new avenues for corporate messaging are not simply trendy, they are a business necessity. Out of home advertising is gaining increasing ground because studies have shown that people are more receptive to messages.
In many ways, the development of the digital signage advertising market will mirror those of cable TV and the internet, with most of the early adopters being smaller companies with smaller decisions to make, and a need to make their message stand out from the clutter. As these early adopters begin to see success, ad agencies begin to take notice of the medium and national companies will begin to experiment with regional buys. Industry metrics are still being developed, which has slowed the growth and acceptance, but this process is underway. In the meantime, Starpoint’s target market will remain a mix of local and regional advertisers.
Currently, Starpoint’s mix of advertisers is approximately 75% local and 25% regional. As the company increases its screen capacity, it expects to increase the number of national and regional advertisers and decrease the percentage of local advertisers. Looking ahead, an estimated ideal mix when the company has 350 screens available would be 25% local, 50% regional and 25% national advertisers. Local advertisers will always be an important part of the mix, as it helps anchor the partner clubs in the local community, making the other information more personally relevant to consumers working out in the fitness clubs because it seems tailored to them.
YOU SELL, WE DO THE REST!
Local and Regional Advertisers
While regional sales are best, as they provide content and revenue based on buys for 5-25 screens (as opposed to local buys which provide 1-5 screens), at this point there must still be a number of local sales in the mix. Local sales can often be closed more quickly because there are fewer people needed to make a buying decision. Local sales also promote a sense that Starpoint displays and the health clubs they are in are part of the local community, a feeling of connection that resonates with consumers. There are several key industries that Starpoint targets for local and regional ad sales:
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Real Estate Agents and Brokers
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Insurance Agents, Brokers and Services
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Upscale Residential Communities, Condominiums and Apartments
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Health & Diet/Vitamins and Supplements Retail and Big Box
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Bicycle Shops and Sporting Goods Stores
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Automobile Dealerships and Maintenance Services
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Motorcycle, Recreational Vehicle and Boat Dealers
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Chiropractors, General Medical and Surgical Centers
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Health and Wellness Related Consumer Packaged Goods
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Cosmetic Surgery, Cosmetic Dentistry, Lasik, Hair Removal/Replacement
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Dining, Entertainment, Jewelry Stores, Travel-related Businesses, and more!
These industries all have a thorough understanding of the necessity of branding, and a particular interest in reaching the demographic audience found in our partner fitness centers. Because these consumers are more likely to be influencers and engage in word-of-mouth recommendations, reaching them is vital even if they are not currently in the market for the services being advertised. The services of these advertisers also match the psychographic profile of the fitness club member, who is proud of their decision to lead a healthy lifestyle and wants to maintain a positive image as well as rewarding themselves for their hard work.
National Advertisers
The growth of Starpoint’s network will significantly increase its ability to attract regional and national advertisers. As boutique marketing ROI and data mining firms spring up, national and global players are more willing to take risks on new marketing tactics, secure in the knowledge that they will be able to determine their effectiveness. Many national and global players have regional marketing departments, and these are Starpoint’s first contact with these companies. With success and increased screen capacity, regional and national contracts are not far off in the future. Fortunately, with increased national attention on narrowcasting, out of home advertising and the long tail, global companies have set aside funds for regional and brand-specific advertising through non-traditional methods.
As our franchise network grows, the franchisee will be able to benefit from national buys that will be solicited by the franchisor. These national ads will be placed in remnant spaces, and allow national ad dollars to flow to where the national companies would like to place them. They will also benefit from larger regional buys (i.e. the Southeast, Northeast, etc…).
Trends Affecting the Target Market
A confluence of several major societal trends is driving growth in both Starpoint’s partner industry (health clubs) and its target market (advertisers). With the rising rate of obesity and increased government and media focus on healthy lifestyles and preventive care, gym membership is on the rise. While some companies within the industry may be on shaky ground, the industry as a whole shows a strong growth trend, with the companies with larger market share focusing on growth through acquisition. As the number of fitness centers continues to grow, so does the number of members. While there has been growth in every demographic, the largest and fastest growth has come in the older age group demographic, a trend bound to continue as baby boomers retire. Strong growth in the younger demographics shows that this change is actually accountable for growing the market; it is not merely a demographic shift. Instead, as baby boomers age and medical advancements extend lifespans, a greater number and range of people see going to the gym on a regular basis as part of their routine.
At the same time, there is a marked interest in non-traditional marketing avenues. Large global marketers have substantially increased their budgets for innovative advertising solutions, including online, out of home, narrowcasting and “guerilla” marketing. While guerilla marketing has garnered the most attention, its effectiveness is the most difficult to measure and its reliance on small outside agencies carries significant reputational risks. The online market is growing, but it is already becoming a mature industry with a few dominant players. Narrowcasting and out of home advertising remain the strongest prospect for explosive growth in non-traditional advertising. Non-traditional advertising budgets will continue to grow as the major media markets become increasingly fractured and niche-oriented, and investment in narrowcasting will increase as the industry develops standardized performance metrics.
Increased marketing avenues have led to an environment in which the consumer is bombarded with advertising throughout their day, meaning that marketers must fight against more and more “clutter” to get their products noticed and their messages delivered. Narrowcasting allows marketers to target exactly the consumers they are seeking, and Starpoint’s choice of locations offers marketers a time and place to deliver their messages that reaches consumers when they are most receptive to receiving these messages. Starpoint offers advertisers the right medium to deliver their message to a receptive audience that is active, valuable and growing.
Several larger players have entered the space recently, with Cisco Systems being one of the largest and most well-known. Cisco has entered the space as a provider of hardware and software solutions. Other companies, large and small, offer various levels of bundled services to a variety of target markets. Major players in new media advertising, such as Google and Yahoo!, have shown an interest in entering this space as well. The interest of these larger companies in this space provides evidence that this is an attractive market, and acquisition by one of these players is one potential exit strategy for investors.
It is required that you use the standard Starpoint Digital contract to confirm sales.
Design and Deployment
You will have access to our team of designers, who are familiar with our screens, the set up at our gym locations, and the specifications for the monitors, to ensure that our viewers can read the screens and our advertisers will be satisfied with their ad presentation.
State-of-the-art internet connectivity and administration gives advertisers and gym partners complete flexibility. Customized specials, promotions, or new product announcements can be deployed and displayed rapidly.
Once a New Order Form has been entered to our database, the new advertiser’s information will automatically show up on our designer homepage. This alerts the design team that they need to contact the advertiser and begin working on the advertisement. Starpoint’s policy is that new ads will deploy within ten days of being entered into the database.
With the help of our sophisticated reporting features, our designers will be alerted to contact your advertisers once a month to ask if they would like their ad to be refreshed at no charge to them.
YOU SELL, WE DO THE REST!
Operations and Customer Service
Our Operations and Customer Service department is responsible for many functions in our organization. With the use of LogMeIn software, each location is monitored in real time, everyday. If an error is observed, the remote laptop can actually be accessed through our software and most problems can be fixed from our corporate office. If, in the event that the issue cannot be resolved via the internet, a support ticket is created by the department and forwarded to our national maintenance company.
This department also contacts advertisers in the rare event that a screen is off for more than 4 hours. If this happens, we will add one day, or longer, to the advertiser’s contract, depending on the circumstances. This proactive approach typically leaves our advertisers with the understanding that we are doing everything to resolve the issue and comfortable that they will receive the amount of advertising that they have purchased.
Maintaining a professional relationship with our gym partners is also a very important part of our business and imperative to the success of each gym location. To begin with, our Operations team helps foster a close relationship with our partners. On a weekly basis, a call is made to each gym location to monitor system status and partner satisfaction. Any concerns, questions or feedback that the partner may have can be addressed at this time. The Operations department also visits locations from time to time to check on Starpoint equipment, conduct member exit surveys and to simply have face to face contact with the employees and managers at our locations.
Our designers also maintain contact with partner locations in order to keep location specific content, such as gym schedules, membership specials, holiday hours, and website information, as up to date as possible. Once a relationship has been established, many partners will simply email content or new information to the design team when they wish to request an update to the screen. This system has proven to be an effective way to keep members informed and partners satisfied.
YOU SELL, WE DO THE REST!
Billing
The billing module of our database is currently under construction and should be fully functional sometime in early 2009. This module will generate invoices for our advertisers directly from the database, as well as create billing, payment and collections reports.
Currently, Starpoint uses Quickbooks in conjunction with our database to manage our accounting needs. As soon as an account is entered, we transfer the client information to Quickbooks, create a recurring template, and monitor billings and payments through their automated reports.
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The Narrowcasting Industry
The narrowcasting market is growing, particularly in the area of out of home advertising via digital signage networks. The Industry is still developing ROI measurement tools and benchmarks, but national advertisers often employ boutique evaluation firms with tools to measure return on marketing investment. These large national advertisers are becoming early adopters of new media technologies. Early anecdotal data collected by Starpoint shows that the consumers find the display screens to be a pleasant diversion during their workout, and prefer messages and products that help them to feel good about themselves and reward their healthy lifestyle choices. The ads seem to be most effective for brand awareness and positive brand associations, rather than as a vehicle to promote a specific product or offer.
Industry Overview: Narrowcasting & Digital Signage Industry Overview
Narrowcasting - A Growing Market
Narrowcasting has traditionally been understood as the dissemination of information (usually by radio or television) to a narrow audience, rather than broadcasting to the general public. Often called niche marketing or target marketing, narrowcasting involves aiming media messages at specific segments of the public defined by values, preferences, or demographic attributes. In the context of out-of-home advertising, this term increasingly refers to the display of content on a digital signage network. Marketing experts are interested in narrowcast media, since access to such content implies exposure to a clearly defined prospective consumer audience with specific demographic and psychographic attributes. Narrowcasting, particularly strategically placed digital signage networks, is gaining an ever-increasing share of marketing budgets worldwide.
Narrowcasting Trends
Business Week
, in its July 12, 2004 cover story “The Vanishing Mass Market,” reported:
“McDonald's now devotes a third of its U.S. marketing budget to television, compared with two-thirds five years ago. Money that used to go for 30-second network spots now pays for closed-circuit sports programming piped into Hispanic bars and for ads in Upscale, a custom-published magazine distributed to black barber shops.”
Certainly this trend has continued to grow – large companies no longer seek a single message that will appeal to all consumers, but instead seek opportunities to provide targeted messages to specific consumers, preferably at a time when they are particularly open to receiving these messages. Speaking about the explosion in out-of-home (OOH) advertising, Steven Fretty, co-founder and managing director of Johnsen, Fretty & Associates, a boutique investment-banking firm assisting media and communications companies, said in a November 2006 interview:
“The beauty of OOH in comparison to those mediums is that while technology is pecking away at the attractiveness and efficiency of TV, radio, and print (think TiVo, satellite radio, iPods, and the Internet), technology is only making OOH better.”
While this industry is still in its infancy, major companies are devoting an increasing share of their marketing budgets to narrowcasting and other non-traditional advertising venues. The following was reported on mediabuyerplanner.com on April 13, 2007:
“Marking a dramatic shift for an established company, Kimberly-Clark is expected to heavily spend on nontraditional media in the next few years, reports AdAge (via MarketingVox). … That comes at the same time the company is adding $200 million to its marketing budget and planning significant expenditures in new media. This year, 25 percent of Kimberly Clark's budget is expected to go to nontraditional media, compared with just 10 percent in 2004.”
With TiVo and other digital video recording (DVR) technologies gaining increasing penetration into American homes, television advertising is becoming less attractive. Witness this recent bulletin about Johnson and Johnson on March 19, 2007, also posted at mediabuyerplanner.com:
“Johnson & Johnson will once again sit out the television upfront marketplace, and in the meantime is quietly shifting larger parts of its marketing budget from traditional to digital media. J&J's measured-media spending plunged $250 million, or 22 percent, in the U.S. last year, to $1 billion - pretty much in line with a forecast that the consumer-products giant would move 20 percent of its marketing budget into unmeasured media, such as search and other direct marketing, according to Ad Age (via MarketingVox).”
Print advertising remains an efficient way to target specific demographics, but the constraints of the medium do not allow dynamic content. Narrowcasting via digital signage networks allow messages to be delivered via attractive, crystal-clear digital displays, utilizing dynamic video technologies. Digital signage networks allow marketers to tweak, change or replace their messages in real time, tailoring specific messages to demographics, markets and locations.
Digital Signage Network Industry Overview
Digital signage is still a nascent industry, but it is one of the fastest-growing segments of advertising , particularly in-store networks. The largest players in this space are large retail players themselves – big box stores looking for both another revenue stream and an opportunity to influence consumers at the point of sale. Despite the existence of a large number of players in this space, both newcomers and established companies, there are still a wide variety of business models and technologies in use. Analysts predict that the industry will see maturation and consolidation in the next decade, as best practices are identified and data collection allows companies to demonstrate ROI over time. The largest digital signage networks are currently those which are owned and operated by the retail outlets in which they reside. However, given that selling advertising and managing the technology of digital signage is not a retailer’s core competency, a number of companies have sprung up to provide these services – including Starpoint Digital Media Network. Starpoint is typical of most of these companies – young, growing, with a regional presence that is rapidly expanding. Major players have also begun entering the digital signage space, including Cisco Systems, who recently began offering their own digital media player and hosting services .
Starpoint is relatively unique, as a niche player in a niche industry, choosing to partner with upscale health and wellness centers in regions with strong clusters of metropolitan markets within close proximity of each other. By focusing on fitness clubs as the only partners for screen placements, Starpoint communicates a strong competitive advantage – Starpoint alone has invested the time and resources necessary to understand this particular market and its needs. Starpoint is also the only one-stop digital signage solution, offering hardware and software installation and maintenance, creative message design solutions, and external advertising sales to provide a reliable revenue stream to these fitness centers. By offering a full range of services, Starpoint provides a unique value proposition to its partners. Starpoint also has an advantage in selling space to advertisers, as it has a single, clearly-defined high-value consumer audience.
The greatest source of digital signage competition within the health-club market is the health clubs themselves, who may believe that they might be better off with their own network of screens. Starpoint’s operating model, in opposition to its competition, assuages some of these concerns by ensuring that their health club partners receive a steady stream of revenue in return for hosting Starpoint’s 42” LCD screens. Starpoint therefore minimizes the risks that would be assumed by clubs, eliminates the initial capital investment needed for screens, and provides IT, marketing and customer service support – meaning that the fitness centers do not need to get into the business of selling advertising. As more fitness centers attempt to do this on their own, we believe that will simply provide more satisfied customers for Starpoint.
Competitive Landscape
Narrowcasting, particularly digital signage, is an industry that has only recently emerged, but is poised for explosive growth. Barriers to entry have been reduced in the last several years, as flat-screen and technology costs have dropped and marketers have recognized the value of non-traditional forms of advertising while traditional media has become increasingly fractured.
Starpoint Digital is in a strong position to take advantage of this growth. Its focus on partnerships with upscale health and fitness centers provides marketers with access to high-value consumers who have specific, well-defined demographic and psychographic profiles. The company’s proprietary (patent pending) technology boasts 99% uptime/reliability, and the company’s focus on providing outstanding customer service to both its clients and partner facilities gives Starpoint a visible competitive advantage. Starpoint is also committed to taking advantage of its early-mover status, learning from early mistakes and adapting its strategy and business model to increase profitability and sustainability. Starpoint’s most valuable learnings to date have been in the areas of client prospecting and pricing, which demonstrate the company’s commitment to a first-class sales department. Starpoint’s position, providing a targeted system of fully-managed, real-time accessible and extremely flexible advertisements to a market filled with highly valued customers with a distinct demographic and psychographic profile, is unique in the industry. By providing a one-stop solution for hardware, software, advertising sales and creative support, Starpoint offers a unique value proposition to advertisers and partner host sites alike.