Shutterfly 2007 Annual Report Download - page 14

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Table of Contents
contests that promote sharing of photos by our customers. To save our customers time, we offer an easy
way to copy names, e-mail addresses and mailing addresses from various software such as Outlook,
Outlook Express, Entourage, Palm and Eudora into their Shutterfly address book.
Order and ship. We provide convenient ordering and flexible shipping options. To order a product after it
is created, the customer adds it to his or her shopping cart and completes the billing and shipping information.
Shipping addresses can be typed in or easily added directly from a customer’s Shutterfly address book. When a
picture or product is being ordered, we flag photos of poor quality, usually due to low resolution, to alert
customers of potential quality issues. This helps ensure that a customer does not order an out-of-focus or poor
quality picture. Customers can ship single orders to multiple recipients. We also offer several different shipping
options, such as next-day, two-day or regular service. Standard turn-around times from the time an order is
placed to the time it is shipped are one business day for most print orders and two business days for other photo-
based products manufactured by Shutterfly. For our photo-based merchandise manufactured on our behalf by
third parties, turn-around times vary, but generally range from two to five days from the time we receive the
order and transmit it to our manufacturer. We also offer premium services for addressing, stamping and mailing
greeting cards directly to recipients.
Archive. We provide customers with unlimited storage of their photos, Collections and projects at no cost
to the customer. Customers can also order a copy of their photos on a CD or DVD for an extra fee.
Marketing, Advertising and Promotion
We use a variety of integrated marketing programs, including advertising, direct marketing technologies,
channels, methods and strategic alliances to attract and retain our customers. These methods include direct marketing
over the Internet, e-mail marketing to prospects and existing customers, search engine marketing, and traditional
direct marketing mailings such as postcards and seasonal catalogs. In addition, because many of our products are
either shared via the Internet or given as gifts, the appearance of our brand on the products and packaging provides
ongoing distribution as well as viral advertising.
We place advertisements that cater to women and families on websites and in publications, contract for targeted
e-mail marketing services and contract for advertising placement on leading search engines. We also maintain an
affiliate program under which we pay program participants for referral sales generated from hyperlinks to our
website from the affiliate’s website and in promotional materials.
We maintain strategic alliances with complementary e-commerce companies. For example, we are the sole
photo services provider to Amazon.com’s customers. We have other co-marketing and promotion arrangements with
companies such as eTeamz, a leading website resource for parents, coaches and sports league administrators.
We also sponsor and manage photo contests as a turn-key offering for major corporations. In 2006, we
conducted photo contests for 1-800-Flowers.com, Home Shopping Network, and Procter & Gamble. These
corporations promote the photo contests to their own customers, which in turn introduces new users to Shutterfly.
In addition, from time to time we create co-branded versions of our website. In general, these arrangements
involve payment of a commission to or revenue sharing with these companies for sales of our products and services
generated through these websites.
Technology and Production Systems
We use a combination of proprietary and third-party technology, including the following:
Customer relationship management, or CRM, system.
Our integrated CRM system is comprised of various
sophisticated tools designed to convert first-time customers into repeat buyers. We seek to increase average
order sizes by expanding customer awareness, providing targeted, segmented offers to customers and
encouraging cross- and up-selling. The system uses a variety of data, including website usage patterns, order
size, order frequency, products purchased, seasonality factors, image upload and share usage, as well as
customer satisfaction information. This data is continually updated and refreshed in a data warehouse, from
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