Nautilus 2000 Annual Report Download - page 11

quantities and at an acceptable cost, and whether it can be sold at a price that satisfies our profitability goals. More specifically, we look for
high-quality consumer products that:
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Have patented or patentable features;
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Will have a retail price between $500 and $2,500;
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Can be marketed as a line of products with materially different features that facilitate upselling; and
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Have the potential for mass consumer appeal, particularly among members of the "baby-boom" generation, who are accustomed to
watching television and now have significant disposable income.
In addition, because of our relatively high retail price target, we typically require that a product have a potential television advertising life cycle
of at least five years and the possibility of an extended life cycle in retail stores.
Once we determine that a product may satisfy our criteria, we further assess the product's direct marketing potential by continuing to research
the product and its probable market and by conducting blind product and focus group studies. If we develop the product internally, or if we
acquire or license the rights to the product, we will then proceed to develop and test a direct marketing campaign for the product. In most cases,
our direct marketing campaigns will emphasize the use of spot commercials and television infomercials, which we supplement with print media
advertisements, written materials, marketing videos and our web sites.
Our growth strategy and financial performance depend in part on our ability to develop or acquire the rights to, and then direct market, new
consumer products. Our net sales and profitability would be harmed if we are unable to develop or acquire the rights to premium quality,
premium priced consumer products that satisfy our direct marketing criteria. In addition, any new products that we direct market may not
generate sufficient net sales or profits to justify their development or acquisition costs.
Nautilus Commercial Fitness Products
Our Nautilus commercial product development group develops and refines our commercial fitness products. The group's members gather and
evaluate ideas from various areas, including existing and potential customers, sales and marketing, manufacturing, engineering and finance, and
then determine which ideas will be incorporated into existing products or will serve as the basis for new products. Based on these ideas, the
group designs new or enhanced products, develops prototypes, tests and modifies products, develops a manufacturing plan, and finally brings
products to market. The group evaluates, designs and develops each new or enhanced product, taking into consideration our marketing
requirements, target price points, target gross margin requirements and manufacturing constraints. In addition, each new or enhanced product
must maintain the Nautilus standard of quality and reputation for excellence. We incorporate principles of physiology, anatomy and
biomechanics into all of our Nautilus machines in order to match the movements of the human body throughout an exercise. Our key objective
is to produce products that minimize the stress on users' skeletal systems and connective tissues and maximize the safety and efficiency of each
workout. In late 2000, the Nautilus Nitro line was introduced after extensive research and development by this group.
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2002. EDGAR Online, Inc.