Rosetta Stone 2013 Annual Report Download - page 13

Table of Contents
Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our marketing expenditures.
Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our marketing expenditures, including our ability
to:
•create greater awareness of our brands and our learning solutions;
•select the right market, media and specific media vehicle in which to advertise;
•identify the most effective and efficient level of spending in each market, media and specific media vehicle;
•determine the appropriate creative message and media mix for advertising, marketing and promotional expenditures;
•effectively manage marketing costs, including creative and media expenses, in order to maintain acceptable customer acquisition costs;
•drive traffic to our websites, call centers, distribution channels and retail partners; and
•convert customer inquiries into actual orders.
Our planned marketing expenditures may not result in increased revenue or generate sufficient levels of product and brand name awareness, and we may
not be able to increase our net sales at the same rate as we increase our advertising expenditures.
Some of our radio, television and print advertising has been through the purchase of "remnant" advertising segments. These segments are random time
slots and publication dates that have remained unsold and are offered at discounts to advertisers who are willing to be flexible with respect to time slots. There
is a limited supply of this type of advertising and the availability of such advertising may decline or the cost of such advertising may increase. In addition, if
we increase our marketing budget it cannot be assured that we can increase the amount of remnant advertising at the discounted prices we have obtained in the
past. If any of these events occur, we may be forced to purchase time slots and publication dates at higher prices, which will increase our costs.
We also seek new customers through our online marketing efforts, including paid search listings, banner ads, text links and permission-based e-mails,
as well as our affiliate and reseller programs. We engage in an active public relations program, including through social media sites such as Facebook and
Twitter.
We opportunistically adjust our mix of marketing programs to acquire new customers at a reasonable cost with the intention of achieving overall
financial goals. If we are unable to maintain or replace our sources of customers with similarly effective sources, or if the cost of our existing sources
increases, our customer levels and marketing expenses may be adversely affected.
A significant portion of our business depends on our Rosetta Stone brand, and if we are not able to maintain and enhance our brand, our
business and operating results may be harmed.
We believe that market awareness of our  brand in the U.S. has contributed significantly to the success of our business. We also believe
that maintaining and enhancing the  brand is critical to maintaining our competitive advantage. As we continue to grow our business, expand our
products and services and extend our geographic reach, maintaining the quality and consistency of our language-learning solutions, and thus the quality of our
brand, may be more difficult. In addition, software piracy and trademark infringement may harm our  brand by undermining our reputation for
quality software programs. We must continue to update our marketing communications in order to maintain and enhance our brand awareness and the value
of our brand. Failure to do so may result in a decrease in brand value and related sales.
We depend on search engines and other online sources to attract visitors to our websites, and if we are unable to attract these visitors and convert
them into customers in a cost-effective manner, our business and financial results may be harmed.
Our success depends on our ability to attract online consumers to our websites and convert them into customers in a cost-effective manner. We depend,
in part, on search engines and other online sources for our website traffic. We are included in search results as a result of both paid search listings, where we
purchase specific search terms that will result in the inclusion of our listing, and algorithmic searches that depend upon the searchable content on our sites.
Search engines and other online sources revise their algorithms from time to time in an attempt to optimize their search results.
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