Case Study

FedEx Vehicles:

Cross-Promotion and Advertising in Targeted Local Markets as a Means of Generating Additional Revenue in a Rising Crude Oil Economy

Matthew Mack2008

Fed Ex Orange Bowl 2007 Kansas v. Virginia Tech.

This is the type of ad that would run on trucks in Lawrence, Kansas (Home of the University of Kansas Jayhawks) as well as surrounding areas like Kansas City; and also in Blacksburg, Virginia ( Home of the Virginia Tech Hokies)

Potential Exposure(Impressions)

Lawrence and Kansas City Markets 2 million+ populationBlacksburg 150K population

*ad copy using the event sponsorship to generate revenue from secondary ticket retailer in local markets

*to scale view of the advertisement on a 20 foot sprinter van

Cross-promotion could include the following venues:

• Fed Ex Sponsorships - FedEx Orange Bowl • FedEx Cup• Fed Ex Field – Home of the Washington Redskins• FedEx Forum – Home of the Memphis Grizzlies• FedEx Racing – NASCAR

Using trucks as a means of cross-promotion maintains the brand without "sell out" advertising. As a means of revenue building these cross-promotion ads would need a realized revenue stream, or better yet multiple streams in order to meet the goal of cutting rising fuel costs.

These ads are a means of partnership, joint venture, a venue for fostering a long term professional relationship with fellow companies and advertisers.

In the Orange Bowl case study, the advertiser could be

• an online ticket vendor (StubHub)• a cable provider (Comcast, Time Warner, Cox)• an apparel and memorabilia retailer (Nike, Addidas, Under Armor)• and the list goes on and on.

There is so many opportunities for revenue by sacrificing relatively little space on the sprinters delivery vans and trucks.

Due Diligence

The FedEx sprinter van is 20 feet long with a panel on either side measuring 38.5 in x 22.5 in.

These panels make up less than 20% of the total truck, which leaves more than 80% for "brand preservation." The ads are cross-promotion of Fed Ex events, which means that even those two panels are working to promote the brand. This means that a portion of the panel is left for the advertiser. And this small space in relation to the brand and truck is worth a lot. Approximately $300/ month for a sign of similar size is the going rate.

Now for some fun number crunching:

$300/ month x 2 side panels per sprinter x 10 sprinter trucks = $6000/ month

10 FedEx Sprinter Vans x $6000/month = $60,000 additional revenue/ month/ station.

Which is an additional $720,000/ year to the bottom line.

Add the other trucks in the station, the 700 and 900, to the mix and that number just continues to rise.

Conclusion

Giving up very little relative space on individual sprinter vans may produce an income stream to the level that would offset station, and therefore, corporate, annual fuel costs in a rising crude oil environment. Cross promoting FedEx branded venues, events and sponsorships increase the upside potential of such a marketing program and could implement programs in a pilot or test market to gauge profitability and response. Due to the broad market exposure in individual markets, the program could expand nationwide and internationally relatively quickly.

The question for upper management will be, what is the tipping point? At which point do fuel prices have to rise to allow for a marginal devaluation of the FedEx brand?

Pursuing an advertising and cross promotion program of this magnitude would add to the bottom line, while sending a message to shareholders, executives, and competitors that FedEx thinks outside the box and will take calculated risks to achieve such goals.