Vonage 2012 Annual Report Download - page 11

5 VONAGE ANNUAL REPORT 2012
effective media mixes.
We make use of marketing research to gain consumer
insights into brand, product, and service performance, and utilize those
learnings to improve our messaging and media plans. Market research
is also leveraged in the areas of testing, retention marketing, and product
marketing to ensure we bring compelling products and services to
market for our customers.
SALES AND DISTRIBUTION
Direct Sales
Our primary sales channels for our home telephone
replacement services have been in-bound telemarketing and online
direct sales. Customers can subscribe to our services at our websites,
http://www.vonage.com, http://www.vonage.ca and http://
www.vonage.co.uk, or through multiple toll free numbers including
1-877-4VONAGE. We are also increasing efforts to focus on promising
international long distance markets. In 2012, we continued to enhance
our complete Spanish language experience for our customers, including
24 hour per day inbound telesales, full customer service, a Spanish
language online environment and purchasing experience, television
advertising, as well as direct mail.
Retail Sales
In addition to our direct sales channel, we also offer sales
through our retail channel. In 2012, we continued to increase our retail
presence at leading regional and national retailers, including Walmart,
Sears, Kmart, Best Buy, Fry’s Electronics, and Microcenter, and with
the addition of Radio Shack we are currently present in over 8,000
locations. We believe that the availability of our devices through premier
retailers enhances and reinforces the Vonage brand, and that the retail
channel increases our ability to acquire mainstream consumers by
reaching them in a familiar and interactive shopping environment.
National and regional retailers provide Vonage with a wide footprint to
distribute our service.
Community Sales Channels
We have opened Vonage kiosks throughout the United States
and continue to look at ways to optimize sales performance at each
kiosk location while looking at growth opportunities in favorable
geographic markets. We refined our kiosk operations in 2012 by
supplementing our fixed cost kiosks with pay for performance cost
structures in certain markets. In addition, we have expanded our key
market presence in markets with high ethnic concentration with the
introduction of community sales teams in 2010. Our community sales
teams provide culturally relevant ways to connect with customers at a
grass roots level. We expanded our community sales team presence in
2012 and now operate in over 35 markets across 20 states and Canada.
Customer Service
We offer our customers support 24 hours a day, seven days
a week through both our comprehensive online account management
website and our toll free number. Many customers use our self-service
website when they have a question or problem with their service and
are able to resolve their concerns online without needing to speak to a
customer care representative. Our customers can manage almost all
aspects of their accounts online. This capability empowers our
customers through self-service and reduces our customer care
expenses.
Customers who cannot or do not wish to resolve their
questions through our website may contact a customer care
representative through our toll free number. We staff our customer care
organization through a combination of our own employees and
outsourced customer care representatives. All new customer care
representatives are trained through an established program developed
by Vonage. We also have a separate team that provides advanced
technical support for resolving customers’ complex issues. We use
extensive monitoring of call quality and customer satisfaction scores to
determine additional training or coaching requirements for individual
associates and to drive continuous improvement in our processes,
policies, and technology. We offer support in English, Spanish, and
French Canadian.
Billing
All customer billing for our broadband telephone replacement
services is automated through our website. We automatically collect all
fees from our customers’ credit card, debit card or electronic check
payment (“ECP”). By collecting monthly subscription fees in advance
and certain other charges immediately after they are incurred, we are
able to reduce the amount of accounts receivable that we have
outstanding, thus allowing us to have lower working capital
requirements. Collecting in this manner also helps us mitigate bad debt
exposure, which is recorded as a reduction to revenue. If a customer’s
credit card, debit card or ECP is declined, we generally suspend
international calling. Historically, in most cases, we are able to correct
the problem with the customer within the current monthly billing cycle.
If the customer’s credit card, debit card or ECP cannot be successfully
processed during three billing cycles (i.e. the current and two
subsequent monthly billing cycles), we terminate the account.
INTELLECTUAL PROPERTY
We believe that our technological position depends primarily
on the experience, technical expertise, and creative ability of our
employees. We routinely review our technological developments with
our technology staff and business units to identify the aspects of our
technology that provide us with a technological or commercial
advantage and file patent applications as necessary to protect our
technology in the United States and internationally. Our company
policies require our employees to assign their intellectual property rights
to us and to treat proprietary know-how and materials as our confidential
information.
In addition to developing technology and intellectual property,
we evaluate for potential licensing and acquisition technology and
intellectual property of third parties to identify opportunities that may
provide us with a strategic or commercial advantage in exchange for
royalties or other consideration. From time to time we receive letters
from third parties inviting us to obtain patent licenses that might be
relevant to our business. As a result of these efforts, we have acquired
multiple U.S. and foreign patents, and obtained licenses to numerous
other patents. From time to time, we also have become involved in
litigation alleging that our products or services infringe on third party
patents or other intellectual property rights. See “Item 3. - Legal
Proceedings-IP Matters.”
We are the owner of numerous United States and
international trademarks and service marks and have applied for
registration of our trademarks and service marks in the United States
and abroad to establish and protect our brand names as part of our
intellectual property strategy. Examples of our registered marks include
Vonage®, Vonage Mobile®, Vonage Visual Voicemail® and Vonage
Extensions®.
We endeavor to protect our internally developed systems and
technologies and maintain our trademarks and service marks. Typically,
we enter into confidentiality agreements with our employees,
consultants, customers, and vendors in an effort to control access to
and distribution of our technology, software, documentation, and other
information.
COMPETITION
We face continued strong competition from traditional
telephone companies, cable companies, wireless companies, and
alternative communication providers. Because most of our target
customers are already purchasing communications services from one
or more of these providers, our success is dependent upon our ability
to attract these customers away from their existing providers. We believe