LeapFrog 2005 Annual Report Download - page 14

In 2005, we introduced our screen-based Leapster handheld products into the classroom and expect to
launch pilot programs for our FLY Pentop Computer in 2006 as well.
Advertising and Marketing
Our advertising and marketing strategy is designed to establish LeapFrog as the leading provider of
engaging, effective, quality technology-based learning solutions for the infant through high school audience and
as a brand that parents and educators will seek to supplement a child’s educational needs. We use a variety of
advertising and marketing methods to support our brands and products. Our strategy includes use of network and
national cable television advertisements and national print campaigns featuring our LeapFrog brand. In addition,
we direct our advertising both at parents as well as children. For example, we have pursued promotional
campaigns with partners such as Tropicana where our logo was featured on cartons of Tropicana orange juice
providing widespread exposure of the LeapFrog brand.
Globally, we have also employed a public relations strategy to gain additional brand exposure through
television appearances by senior management and our international marketing and sales teams where they
showcase our products, often during the key holiday selling period.
In the U.S. this year, our FLY Pentop Computer was featured on various television programs including:
Good Morning America’s “Hot Holiday Toys,” Dr. Phil’s “Hot Holiday Gifts,” ABC World News’ “Tonight
with Peter Jennings—The Incredible Shrinking Computer,” and ABC World News Now “Ahead of the Curve—
Tech Toys for Children.” We continue to expand our marketing reach using online advertising media and
websites designed to preview game play and product functionality. In addition, in 2005, we launched our Mexico
and U.S. Hispanic websites. For a discussion of risk factors related to our advertising and promotional activities,
see “Item 1A.—Risk Factors—Our advertising and promotional activities may not be successful.”
Globally, we have well-established retailer relationships and utilize an aggressive campaign to gain print
advertising through cooperative print advertisements in local newspapers. These advertisements run by our retail
partners such as Toys “R” Us, Wal-Mart, Kmart and Target, highlight promotional activities and the availability
of particular LeapFrog products at these retail outlets.
In key retail stores, we use in-store demonstration display units to highlight our LeapFrog products and
provide an in-store user experience.
Our SchoolHouse division utilizes a variety of advertising and marketing tools to build brand awareness in
the education market, including placing advertisements in leading education publications targeting school
administrators and teachers, and participating in key education trade shows and events.
Sales and Distribution
A limited number of customers historically have accounted for a substantial portion of our net sales. In
2005, sales to Wal-Mart (including Sam’s Club), Toys “R” Us and Target accounted for approximately 29%,
20% and 15% respectively, of our consolidated net sales. In 2004, sales to Wal-Mart (including Sam’s Club),
Toys “R” Us and Target accounted for approximately 28%, 23% and 13%, respectively, of our consolidated net
sales. For a discussion of this concentration risk see “Item 1A.—Risk Factors—Our business depends on three
retailers that together accounted for approximately 64% of our consolidated net sales in 2005, and approximately
80% of the U.S. Consumer segment sales, and our dependence upon a small group of retailers may increase.”
U.S. Consumer
We market and sell our products primarily through national and regional mass-market retail stores as well as
specialty toy stores. Sales of our products to Wal-Mart (including Sam’s Club), Toys “R” Us and Target
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