Rosetta Stone 2014 Annual Report Download - page 13

Table of Contents
In the U.S. and Canada, we offer consumers who purchase our packaged software and audio practice products directly from us a 30-day, unconditional,
full money-back refund. We also permit some of our retailers and distributors to return packaged products, subject to certain limitations. We establish revenue
reserves for packaged product returns based on historical experience, estimated channel inventory levels, the timing of new product introductions and other
factors. If packaged product returns exceed our reserve estimates, the excess would offset reported revenue, which could hurt our reported financial results.
Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our marketing.
Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our marketing, including our ability to:
• appropriately and efficiently allocate our marketing for multiple products;
• accurately identify, target and reach our audience of potential customers with our marketing messages;
• select the right marketplace, media and specific media vehicle in which to advertise;
• identify the most effective and efficient level of spending in each marketplace, 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;
• differentiate our products as compared to other products;
• create greater awareness of our new products like kids' literacy and brain fitness, and of our brands and learning solutions;
• drive traffic to our websites, call centers, distribution channels and retail partners; and
• convert customer inquiries into actual orders.
Our planned marketing 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, print, and online 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 engage in an active public relations program, including through social media sites such as Facebook and Twitter. 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. If one or more of the search engines or other online sources on which we rely for website traffic were to modify their general methodology for how
they display our websites,
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