Rosetta Stone 2010 Annual Report Download - page 9

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Table of Contents
Our Strategy
Our goal is to strengthen our position as a leading provider of language learning solutions and address the challenges facing our company. Our
challenges include a changing U.S. consumer market, an extremely competitive marketplace, a tightened media environment and evolving product delivery
platforms. These factors have contributed to a decline in our U.S. consumer bookings from 2009 to 2010. We intend to strengthen our position and address
our challenges through the following strategies:
Reposition U.S. Consumer Business and Increase U.S. Market Share. We are evaluating changes in our marketing, pricing, packaging and delivery
methods to strengthen our brand and improve the relevance of our offering. In addition, we are evaluating developing more targeted language learning
solutions for learners with different needs. We are also considering diversifying our product portfolio and marketing to address new segments in the language
learning market. In addition, we are exploring ways to provide greater lifetime values to customers, such as the introduction of Version 4 TOTALe, and thus
generate greater revenue per customer over time. We also plan to expand select retail relationships and to continue to review kiosk performance, as we close
our underperforming kiosk locations. In addition, we will realign our cost structure to focus on our areas of growth.
Increase Our Focus on the Institutional Market. We plan to intensify our efforts to engage new large institutional customers for which language
learning is critical. We expect to expand our direct sales force along with our institutional marketing activities.
Increase Our Focus on Sizeable Non-U.S. Markets. We generated approximately 18% of our revenue in 2010 from sales outside the United States.
According to the Nielsen survey, over 90% of the $83 billion spent in 2007 on consumer language learning products and services was spent outside the United
States. We therefore believe that there is a significant opportunity for us to expand our business internationally utilizing many of the successful marketing and
distribution strategies we have used in the United States. We have established subsidiaries in the United Kingdom, Japan and Germany as well as a branch
office in South Korea to develop our international business. In addition, we are exploring opportunities to expand our presence in Asia, Europe and Latin
America. Because our solutions do not rely upon translation from the target language into the learner's native language, they require only modest localization
to be used by learners from other native language backgrounds, and thus we believe that we can efficiently scale our business internationally. In February
2011, we launched Version 4 TOTALe in Japan and we intend to launch this offering in our other foreign markets.
Extend Our Technological and Product Leadership. We intend to apply new technologies to maintain our product leadership. We currently are working
on a variety of product development initiatives. For example, Rosetta Stone Version 4 TOTALe, which was released in September 2010, combines packaged
software with opportunities to practice with dedicated conversational coaches and other language learners to increase language socialization as well as online
language learning games. In addition, we are developing an English remediation solution targeting advanced learners in Asia. This online solution will focus
on both the foundational phonetic skills needed to properly hear and produce distinctions that are present in English, but absent in Asian languages and
activating learners' strong English grammar and vocabulary knowledge in conversational practice sessions designed to carefully advance learners to converse
fluidly and confidently with native speakers. In addition, we intend to explore developing new platforms for delivering our language learning content, such as
platforms for iPhones, iPads and similar devices. We intend to also continue to improve the efficacy of our solutions by continuing to develop products with
higher frequency of socialization and optimizing the content of our solutions.
Expand Our Core Product Portfolio. We plan to expand our product portfolio by adding more advanced course levels for our existing languages. We
give learners the option to purchase our solutions at a single level of difficulty, or as a bundle of all available levels. Currently, 7 of our languages are
7