Rosetta Stone 2009 Annual Report Download - page 9

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Table of Contents
online and locally installed, allowing for multiple delivery methods. We also use the same platform for all editions of our solutions: personal, enterprise,
classroom and home school.
Effective Multi-Channel Marketing and Distribution Model. We believe that our multi-channel marketing and distribution strategy is a competitive
strength because it enables us to market and serve our diverse customer base more broadly and make marketing impressions with a high frequency and at a
relatively low cost per impression. As compared to competitors that rely primarily on retailers or online vendors to sell their products, our direct marketing
and distribution strategy enables us to exert more control over our own growth and the customer experience. Our marketing, sales and distribution efforts are
highly integrated and focused on direct interaction with consumers. As a result, we are able to present a tightly controlled and unified message to the
marketplace. Our television, online, print and radio advertising includes a "call to action" that drives customers directly to our websites and call centers, where
we seek to convert them to sales. Our marketing tools and techniques allow us to attribute sales results to specific marketing initiatives. We utilize this data to
continuously improve the efficiency of our websites, call centers, advertising and media planning and buying. We also operated 242 kiosks as of
December 31, 2009, which extend our direct interaction with customers and allow them to experience our solutions with the guidance of one of our product
specialists. Our kiosks are located in airports, malls and other strategic, high-traffic locations. In our institutional markets, sales efforts are led by our direct
sales force. We conduct our institutional marketing primarily through tradeshows and customer visits. Our marketing campaigns also support this channel. We
augment our direct distribution network with select retailers, including Amazon.com, Apple, Barnes & Noble and Borders. We also offer our products in a
limited number of ZoomShop unmanned automated kiosks. During the year ended December 31, 2009, approximately 82% of our revenue came from our
direct channels, including our websites, call centers, kiosks and institutional sales force, and the remainder was attributable to sales through retailers.
Leading and Trusted Brand, with a Differentiated, High-Quality Positioning. According to the GMI survey, Rosetta Stone is the most recognized brand
of language learning solutions in the United States. Additionally, of those surveyed who had an opinion of our brand, over 80% associated the brand with
high-quality and effective products and services for teaching foreign languages. We believe we have positioned Rosetta Stone as a premium brand and a
trusted choice for learning languages. Our marketing message centers on key points of differentiation from our competitors' traditional language offerings by
focusing on our learners' own intrinsic competence. We believe that continued marketing and brand building will drive broader demand for our products and
help us pursue our goal of making Rosetta Stone the preeminent language learning brand.
Enthusiastic and Loyal Customer Base. Our customers exhibit loyalty and enthusiasm for our products and many promote sales of our products through
word-of-mouth referrals. Our latest survey of our individual customers in the United States, completed in August 2009, revealed that 90% of respondents
expressed satisfaction with our solutions, with a satisfaction rating of 6 or higher on a 10-point scale, and 88% would recommend our solutions to friends or
colleagues. Our latest survey of our institutional customers in the United States, completed in February 2010, revealed that 85% of respondents expressed
satisfaction with our solutions, with a satisfaction rating of 6 or higher on a 10-point scale, and 83% said that they would recommend our solution to other
organizations.
Effective Products. We believe our solutions are effective. According to a January 2009 study we commissioned from Roumen Vesselinov, Ph.D,
visiting assistant professor, Queens College, City University of New York, after 55 hours of study using our Spanish program the average WebCAPE score
will be at a level sufficient to fulfill the requirements for one semester of study in a college that offers six semesters of Spanish. Statistically, the study
concluded that such an outcome would occur with 95% confidence. WebCAPE, which stands for Web-based Computer Adaptive Placement Exam, is a
standardized test which, according to their website, is used by over 500 colleges and universities for
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