Rosetta Stone 2011 Annual Report Download - page 16

Table of Contents
year presentation. Home school sales accounted for approximately 2% of our consumer revenue for the year ended December 31, 2011.
Institutional
Institutional sales accounted for approximately 23% of our revenue for the year ended December 31, 2011. Our institutional distribution model is focused
on targeted sales activity primarily through a direct sales force in four markets: schools, colleges and universities; the U.S. armed forces and federal
government agencies; corporations; and not-for-profit organizations. Regional sales managers are responsible for sales of our solutions in their territories and
supervise account managers who are responsible for maintaining our customer base.
Educational Institutions. These customers include primary and secondary schools and represented approximately 56% of our institutional revenue for
the year ended December 31, 2011. In our experience, colleges, universities and schools frequently rely on references from peer institutions and an official
request-for-proposal, or RFP, process when selecting a vendor. We generate sales leads from sources such as visiting potential customer sites to provide
briefings on our solutions and the industry, interacting with attendees at trade shows and conferences, responding to inbound calls based on recommendations
from existing customers, and monitoring and responding to RFPs.
Federal Government Agencies and Armed Forces, Not-for-Profit. These customers include governmental agencies, armed forces and organizations
developing workforces to serve non-native speaking populations, offering literacy programs and preparing members for overseas missions and accounted for
approximately 20% of our institutional revenue for the year ended December 31, 2011. Many customers in this market license our products through online
subscriptions.
Corporations. We promote interest in this market with onsite visits, trade show and seminar attendance, speaking engagements and direct mailings.
Many of our customers in the market prefer online subscription delivery of our products. Corporations represented 24% of our institutional revenue for the
year ended December 31, 2011.
International
International sales accounted for approximately 21% of our revenue for the year ended December 31, 2011. In the near term, our international activity is
primarily focused on successfully growing our business in the United Kingdom, Germany, South Korea, Japan and Brazil, where we are utilizing many of the
same strategies that we developed in the U.S. market. We opened our United Kingdom office in 2005, our Japan office in 2007, our South Korea office in
2009, our Germany office in 2010, and our Brazil office in 2011. Over time, we believe that we will be able to develop a similar business model in other
markets in Europe, Asia and Latin America.
Product Development
Our product portfolio is a result of significant investment in product development over 19 years. Our product development focuses on both software and
content development. Our development efforts include both creating new solutions and adding new languages to existing solutions. Our development team
has specific expertise in speech recognition, interface design, immersion learning and instructional design.
Our research and development expenses were $24.2 million, $23.4 million and $26.2 million for the years ended December 31, 2011, 2010 and 2009,
respectively.
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