Shutterfly 2013 Annual Report Download - page 7

brands. We realize the benefits of premium brands through high customer loyalty, low customer acquisition
costs and premium pricing.
Our customers are a central part of our business model. They generate most of the content on our
service by uploading their photos and storing their memories. In addition, they share their photos
electronically with their friends and families, extending and endorsing our brand and creating a sense of
community. Finally, by giving our branded products to colleagues, friends and loved ones throughout the
year, customers reinforce our brands. Through these various activities, our customers create a viral
network of new users and customers.
In addition to driving lower customer acquisition costs through viral marketing, our customers provide
input on new features, functionalities and products. Close, frequent customer interactions, coupled with
significant investments in sophisticated integrated marketing programs, enable us to fine-tune and tailor
our promotions and website presentation to specific customer segments. Consequently, customers are
presented with a highly personalized shopping experience, which helps foster a unique and deep
relationship with our brands.
Our operations and financial performance depend on general economic conditions in the United
States, consumer sentiment and levels of consumer discretionary spending. We closely monitor these
economic measures as their trends are indicators of the health of the overall economy and are some of the
key external factors that impact our business.
Business and Marketing Strategy
We drive business and marketing strategies within two key categories: Consumer and Enterprise. To
support our business strategies within these categories, we use a variety of integrated marketing programs,
including advertising, direct marketing technologies, and strategic alliances. These methods include direct
marketing over the Internet, e-mail marketing to prospects and existing customers, search engine
marketing, strategic marketing relationships, traditional direct marketing mailings such as postcards and
seasonal catalogs, and a national cable TV campaign during the holiday season. In addition, because many
of our products are either shared over the Internet or given as gifts, the appearance of our brands on the
products and packaging provides ongoing viral advertising. We place targeted advertisements on websites
and in publications, contract for targeted e-mail marketing services and contract for advertising placement
on leading search engines.
In addition, to support our Enterprise category, we have hired a small sales force to engage with
marketing fulfillment organizations and advertisers for Enterprise services.
The following paragraphs summarize our business strategies within these two categories:
Consumer
Our Consumer revenues include sales from all seven of our brands and are derived from the sale of
photo-based products, such as photo books, stationery and greeting cards, other photo-based merchandise,
photo prints, and the related shipping revenues as well as rental revenue from our BorrowLenses brand.
Included in our photo-based merchandise are items such as mugs, mouse pads, desktop plaques and
puzzles. Photo prints consist of wallet, 4x6, 5x7, 8x10, and large format sizes. In addition, Consumer
revenues also includes revenues from advertising and sponsorship activities. We also provide website
services which include our share platform called Share Sites and our recently launched enhanced cloud
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