LeapFrog 2002 Annual Report Download - page 9

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Our Market Position
We believe we are well positioned to capitalize on the increased emphasis on education and the trend to
alter the traditional ways in which education is delivered. As parents and educators seek new ways to improve
education levels both within and outside of schools, we believe our innovative technology-based learning
products that evolve along the learning curve of a child’s development process provide a clear solution to an
increasingly important market need.
Unlike traditional toys, our technology-based learning products, which are developed on sound pedagogy,
help educate and evolve with the child in a truly interactive way. As a result, we believe our broad and expanding
line of branded products and content provides an engaging and cost-effective solution. Our products supplement
traditional learning methods and are designed to give parents and teachers a set of tools that are adaptable to each
child’s skill base and age. Our combination of proprietary platforms and related content offers parents and
teachers a variety of engaging, affordable and age-appropriate solutions to supplement their children’s
educational needs.
Competitive Strengths
We combine our innovative technologies with our proprietary content to design and develop award-winning
and engaging, technology-based educational products primarily for infants, toddlers, and children from preschool
through 8th grade. We attribute our success to date and our current opportunities to increase our sales, profit and
market share to the following competitive strengths:
We Have Established LeapFrog As A Leading Brand For Quality Technology-Based Educational Products
We design, develop and market several of the leading products in the categories in which we compete.
According to NPD, we are the leader in the U.S. preschool electronic learning aids sub-segment of the preschool
category (ages 3 to 5) of the toy industry, with approximately 75% market share and eight of the top ten best-
selling products in that sub-segment in 2002 based on total dollar sales. We are also the leader in the U.S.
electronic learning aids category (ages 6 to 12) with over 70% market share and the eight of the top ten best-
selling products in that category in 2002 based on total dollar sales, according to NPD. In addition, our LeapPad
platform and related LeapPad interactive books were among the best-selling products in the overall U.S. toy
industry in 2002 based on total dollar sales, as measured by NPD. Our company and our products have won over
175 awards from educators, publishers, retailers, print and broadcast media, consumer groups and industry
organizations. For example, our LeapPad platform was named the Toy of the Year and the Educational Toy of
the Year for 2000, our My First LeapPad platform was named the Educational Toy of the Year for 2001, and our
Quantum Pad platform was named Educational Toy of the Year for 2002 by the Toy Industry Association. We
believe that this industry recognition has helped establish LeapFrog as a leading brand of quality technology-
based educational products.
We Leverage Our Series Of Platforms With A Growing Library Of Higher-Margin Content
We design our platforms to be affordable and easy-to-use. The suggested retail prices for our six core
products range from $29.99 to $59.99. Children can use our platforms without supervision in most cases, and can
generally make the necessary content switch on their own, simply by inserting a content cartridge and the related
book or activity sheet into a slot in the respective platform. Our platforms are designed to function essentially
like hardware, changing with the “software” or content being used. We incorporate age-appropriate design and
user interfaces into our various platforms, from our Imagination Desk learning system, geared for children ages 3
to 5, through our iQuest handheld, geared for middle school and high school students. With new content, our
platforms can remain educational and engaging as a child grows within each platform’s target age range. As of
December 31, 2002, we had sold more than 14 million platforms. Our existing installed base of platforms
provides a ready market for our content, and this market will grow as our sales of platforms grow.
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