Smartphone Travel App Business Plan MBA Thesis

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By Alexander Hoskinson
Corvinus Full-Time MBA Thesis
July 2014
Alexander HoskinsonAugust 4, 2014

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A Business Plan for a Mobile Travel
Application that provides Guided Walking
Experiences on Smartphones

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OUTLINE
Strategy Overview
Industry
Background
Product
Description
Revenue
Information
STP Model
Market ResearchPricingAdvertisingDistributionCompetition
Company
Structure
Financial
Information
Future Goals
Summary &
Recommendations

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STRATEGIC BACKGROUND
The primary strategy and framework for this study came from the following two sources
Blue Ocean Strategy
By W. Chan Kim and
Renee Mauborgne,
2004
Business Model Generation
By Alexander Osterwalder and
Yves Pigneur, 2010

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BLUE OCEAN STRATEGY
This is the overall framework that acts as a map for my study
The Blue Ocean Strategy (BOS) has many tools, and they will appear at various points
throughout the presentation
 For example, these are three of the tools I will use:
 Value Innovation
● Helped decide how to increase value while decreasing cost
 Strategy Canvas
● Helped determine competition and make sure this business model isn’t going head to head with them
 6 Paths Framework
● 6 paths to keep on track with the BOS (Kim & Mauborgne, 2004)

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BUSINESS MODEL GENERATION
This is a canvas
designed to make
sure a business
model includes all
necessary parts and
doesn’t have any
weak points
(Osterwalder &
Pigneur, 2010)
Source:
http://www.businessmodelgeneration.com/canvas

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INDUSTRY BACKGROUND
Why is it a good idea to enter this industry?
It can be broken into two segments:
 Technology
 Travel Technology
Both of these are growing segments with ample
opportunities (IDC, 2014; Eurostat, 2014)

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TECHNOLOGY (SMARTPHONE) INDUSTRY IN 2014
Smartphone shipments increased significantly last
year, and are predicted to increase again this year
Samsung and Apple have largest
market share, but there are an
increasing number of competitors
entering the market to give more
options to more people
(IDC, 2014)

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TRAVEL TECHNOLOGY INDUSTRY
People are turning to technology
to plan trips, and for resources
while traveling
It isn’t used just for travel booking,
but for many other aspects while
on the go (cite all)
Social media allows much
more feedback from
customers about all things
related to travel (Offutt, 2013)
Laptops are becoming less popular
than smartphones, and the same
could happen with hands free devices
and other options

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PRODUCT DESCRIPTION
App Name:
ExploreGuide
Virtual tour
EXPERIENCE
Uses an app on
smartphones
Users follow
pre-designed
“tours”
Multiple
choices of tours
based on
various factors
Basic
Idea

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PRODUCT DESCRIPTION
Asks users about location, interests, and time limit before
suggesting tours
Gives a starting point (a local restaurant), and then
gives clues to each location
At each location, gives interesting information about it
Doesn’t require internet access (all information
downloaded before) or GPS (to save battery life)
Doesn’t give too many details of tour before in order to
make it an adventure

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BOS VALUE INNOVATION
• This product gives the customers a
new value by providing a user-
created experience, not just
following a tour guide
• Also, it guarantees that exploring
independently will still result in
finding interesting places
• Cost is reduced to customer by not
having to pay
• Cost is reduced to the company by
not having to pay tour guides for
every tour
Source: http://www.blueoceanstrategy.com/concepts/

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BOS STRATEGY CANVAS
The Strategy Canvas is one
of the fundamental tools of
the Blue Ocean Strategy.
This tool shows how the main competitors act and how this will be different.
(From author, framework by Kim & Mauborgne, 2004)

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BOS FOUR ACTIONS FRAMEWORK
This tool helps determine how to different from the values of the current industry.
(From author,
framework by Kim &
Mauborgne, 2004)

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BOS ERRC GRID
The Eliminate – Raise – Reduce – Create Grid helps tie the values to this company.
(From author, framework by Kim & Mauborgne, 2004)

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BUSINESS MODEL CANVAS FOR EXPLOREGUIDE APP
(From author, framework by Osterwalder & Pigneur, 2010)

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POTENTIAL REVENUE MODELS
Revenue Models
Type: Traits:
Sell the app  Sell it one time
 Sell per “tour”
 Sell it for a certain time limit (like a license)
Advertising  Integrate advertising into the interface and collect money from the advertisers
Sponsorship  Businesses will pay in order to have the app bring customers to them (i.e. a tour
starts/ends at a restaurant)
Freemium  Offer basic services for free, but charge for better services
 For example:
o Basic tours could be free, but there could be subscription options for other tours
o The ability to get extra features (i.e. upload/download capabilities)
o Unlimited usage (only allow a certain amount of free usage)
o Better profile (i.e. allow to connect with other people)

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REVENUE MODEL CHOICE
Different through product evolution
Start with one very simple method, and integrate the others when
possible/necessary
1. Start free
 At the very beginning, generate zero revenue to gain a slight following
2. Move to sponsorship
 Once there is a slightly established customer base, recruit sponsors and get
them to pay
3. Charge small amount for very unique tours
 If possible to offer very unique tours, charge a small amount from them to
generate more revenue

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Attempting to narrow
down the market
segment, I came to the
following conclusions
Segmentation Targeting Positioning
International travelers English speakers
Users of technology
(at this point, not limited to
smartphones)
Have a desire to explore
(common in most, but not
all, travelers)
STP

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STP
Target Market - General Traits
Facts: Personality Traits:
 Age: 18 – 27
 Male and female
 Low income (causing higher price sensitivity and desire for good
deals)
 Tech savvy
o Comfortable using technology (and embrace it)
o Have access to different platforms (especially smartphone –
this is absolutely necessary)
o Quickly learn/adapt to new programs
 Smartphone users
 Social media active
o Use many forms of social media
o Have network of friends to share with
 Curious/eager to learn and experience new things
 Open-minded
 Want to contribute to/feel part of a “community”
 Trust their networks
o Listen to advice from friends and family
o Like to share their own opinions
 Not afraid to try new things and go new places
o But, want some help in doing this
Segmentation Targeting Positioning

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STP Segmentation Targeting Positioning
Theproductwillbe
positionedaccordingtothe
followingideas
Unique product that is uncommon and
unusual
Free (or so cheap that it could be compared
to free)
Solves a problem that the consumers didn’t
even realize they had
Makes the life of the consumer flexible,
easy, and carefree while remaining
successful in their travels
Changes the options they have while
traveling

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MARKET RESEARCH
Key lessons learned from the interviews I conducted
Interviews
Industry
Reports
The product is interesting
to all different age groups
The younger age groups
were more interested (and
able) to share on social
media
Most don’t use mobile
data while traveling
abroad, and generally
believe the GPS requires
this (which is not true)
They would be interested
in using the product while
traveling, but not really in
their hometown
They would be willing to
pay a small amount for
the tours if they were
unique and high enough
quality

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ESEARCH
Key learnings from industry reports
Interviews
Industry
Reports
The majority of people don’t
use cellular data abroad
(European Commisson,
2014)
The Android (Google)
operating system is the most
common, but the iOS (Apple)
operating system has
significant market share
(Kantar, 2013)
Consumers are increasing
turning to mobile devices for
travel needs
Free apps receive
significantly more downloads
(App Annie Index, 2013)
MARKET RESEARCH

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PRODUCT PRICING OPTIONS
Free • Could achieve more
downloads
Paid • Could gain revenue
more directly
or

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PRICE CHOICE
Low price
 High price value for price sensitive consumers
Free as long as possible
 Revenue can come from sponsorship
Following the Business Model Canvas, there are other ways this product could
create value, so it isn’t necessary to offer it free.
However, a free product creates value for the business partners who are potential
sponsors by having a larger customer base, so that satisfies more parties.
(Osterwalder & Pigneur, 2010).

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ADVERTISING
Online
 These will be used minimally with a close
scrutiny on success statistics
 Social Media
● Targeted, promoted posts
 Google Ads
● Targeted ads
Offline
 Posters/fliers in partner businesses
 Stickers in window of partner business
 Stickers given to finishers

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SOCIAL MEDIA
Interact with other social networks as much as
possible
 Ability to share information on maximum amount of
networks
 Create a Virtual Postcard that is attractive and
makes customers want to share
 Utilize hashtags and other popular trends
No attempt to build own social network
 Many apps attempt to create their own, and this
increases difficulty and frustration among
customers

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DISTRIBUTION CHANNELS
App Markets
 Google Play
 App Store
Websites
 Owned
 Website(s) we create and run
 Earned
 Reviews and other discussions on outside
websites (i.e. blogs)
 Unearned
 Paid reviews on other websites (used very
minimally, if at all)

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COMPETITOR ANALYSIS
UtilizetheBOStheory
ofredrawingmarket
boundaries

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COMPETITOR ANALYSIS
Competing with two different industries: Guided and Self-Guided Tours
Land somewhere in the middle

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MAJOR COMPETITORS
There are three main types of competitors, and each one has different breakdowns
Guided
• International Tours
• Organize whole trip
• Just the tour
• Local Tours
• Just the tour
Self-Guided
• Sources
• Guide Books
• Websites
• Local People
• Types
• Pre-planned
itineraries
• Random suggestions
Alternate Activities
• Museums
• Cinemas
• Theaters
• Restaurants
• Parks
• Shopping

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NO DIRECT COMPETITION
Even throughout the massive
amount of apps, there doesn’t
seem to be a direct competitor.
There are travel and tour apps, but
there isn’t one that offers users a
gamified challenge to discover a
city on their own, but also provides
them with knowledge and
information about their
surroundings.
no direct competitor
gamified challenge
discover a city
provides knowledge and
information

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EXPLAIN COMPETITIVENESS
Functional-Emotional
Orientation is a significant
differentiating factor
 Instead of competing with
quality and/or price like the
majority of competitors
(functional), try the emotional
strategy
 Sell this product as an
experience where customers
are responsible for their own
adventure and success

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COMPANY STRUCTURE
Centralized Headquarters
• Only office till expansion is necessary
Outsource IT (cheap country abroad)
• More affordable way to develop product
1 person per city/region
• Have one person to manage quality, local partners, and local knowledge in each
region
Updates/Maintenance
• Regional person performs routine maintenance
• Headquarters makes decision about necessity of outsourcing IT for more difficult
tasks

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TWO POSSIBLE METHODS FOR CONTENT CREATION
Internal External
Pros:
• Complete control over content
• Can quickly edit/update tours
Pros:
• Only pay when receiving something
• More perspectives and creative ideas
Cons:
• Cost of constant employment
Cons:
• Inconsistent work and topics
• (Potentially) challenging to update
Who is actually writing the tours?

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CONTENT CREATION CHOICE
Start with internal only
• Simple and cheap
With growth, consider
external
• Wider variety
If using external, use
royalty payment method
• Lower risk
• Higher likelihood of quality

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DEVELOPMENT COSTS
Impossible to judge without actually paying a developer
Based on many factors including hourly wage of the software
developer and the amount of features it will need (Angeles, 2012)
A survey of 96 apps found an average development cost of $6,453
(Ahlund, 2010).
This seems a reasonable estimate for this product

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STARTING INVESTMENT
These are the
potential
methods which
the initial
funding can
come from (in
order of
preference and
likelihood)
• Potentially easier for lower amount because they want to support you as much as the
business
Family/friends
• Helpful for other resources (i.e. networking) as well as funding
Incubator Funding
• Promising if idea is sound enough
Angel Investors
• Usually have to find something to offer in return
Crowdfunding
• Difficult without already being established
Venture Capital

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SALES FORECAST
Potential Revenue From Sponsors
Number of Tours (2 Sponsors/Tour) 5 10 15 20 5 10 15 20
Sponsor Fee/Month $15 $15 $15 $15 $25 $25 $25 $25
Revenue Generated/Month $150 $300 $450 $600 $250 $500 $750 $1,000
Revenue Generated/Quarter $450 $900 $1,350 $1,800 $750 $1,500 $2,250 $3,000
Revenue Generated/Year $1,800 $3,600 $5,400 $7,200 $3,000 $6,000 $9,000 $12,000
Number of Tours (2 Sponsors/Tour) 5 10 15 20 5 10 15 20
Sponsor Fee/Month $35 $35 $35 $35 $50 $50 $50 $50
Revenue Generated/Month $350 $700 $1,050 $1,400 $500 $1,000 $1,500 $2,000
Revenue Generated/Quarter $1,050 $2,100 $3,150 $4,200 $1,500 $3,000 $4,500 $6,000
Revenue Generated/Year $4,200 $8,400 $12,600 $16,800 $6,000 $12,000 $18,000 $24,000
Difficult to forecast
because it depends
on too many factors
Number
of Tours Number of
Downloads
Other
Sponsors
City
Size of
the
Sponsor
Length of
Contract
Sponsors will be the main form of revenue. Earnings will vary.

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BLUE OCEAN STRATEGY SUMMARY
Value Innovation
• Helped create the core value from the beginning
Strategy Canvas
• Made Sure the product existed in a blue ocean
4 Actions Framework
• Helped create the value curve for the strategy canvas and challenge current industry thinking
ERCC Grid
• Helps turn the 4 Actions Framework into usable ideas
6 Paths
• Ensured the thinking remained in the blue ocean, and not in head-to-head competition
3 Tiers of Noncustomers
• Helped search for new customers and understand how to lose current customers
Sequence of BOS
• An overall map to show the progress

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FUTURE GOALS
• Start with simple, basic version, and update to newer versions with growth that have more features
and functions
Release Multiple Versions
• Develop a strong brand and customer base
• Attempt to sell the product to a larger company who is searching for technology or brand name
Strong Intent to Sell
• The EU is currently in the process of attempting to regulate mobile markets (i.e. banning roaming
fees within member states)
• Follow closely and update product to match
Update for Regulatory Changes

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FINAL RECOMMENDATIONS
It won’t generate revenue
immediately, but could grow
exponentially with more
customers, partners and tours.
The product is a
feasible idea.
Many factors were
decided following the Blue
Ocean Strategy and the
Business Model Canvas,
but the most important
trait is offering an
“experience” to
consumers.

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REFERENCE INFORMATION
For a detailed summary of the references cited in this presentation, please see the printed
executive summary of my thesis:
A Business Plan for a Mobile Travel Application that provides Guided
Walking Experiences on Smartphones

Smartphone Travel App Business Plan MBA Thesis

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