iRobot 2012 Annual Report Download - page 57

7
Our strategy of working closely with third parties extends to the design of our products. By offering extensible platforms
designed to carry payloads, we have designed and manufactured our products to leverage the work of those individuals and
organizations that offer specialized technological expertise. The PackBot, Warrior and FirstLook robots are designed with open
interfaces that allow third-party developers to add payloads to our robots, improving their functionality.
Sales and Distribution Channels
We sell our products through distinct sales channels to the consumer and defense and security markets. For the fiscal
years ended December 29, 2012, December 31, 2011 and January 1, 2011, sales to non-U.S. customers accounted for 57.3%,
45.5% and 42.1% of total revenue, respectively. For the fiscal years ended December 29, 2012, December 31, 2011 and
January 1, 2011, U.S. federal government orders, contracts and subcontracts accounted for 15.1%, 36.1% and 38.4% of total
revenue, respectively. For the fiscal years ended December 29, 2012, December 31, 2011 and January 1, 2011, we generated
4.5%, 9.4% and 17.4% of total revenue from The Boeing Company as a subcontractor under U.S. federal government contracts.
For the years ended December 29, 2012 and December 31, 2011, we generated an aggregate of 30.6% and 23.6% of our
revenue, respectively from our home robots distributor in Japan (Sales on Demand Corporation) and a network of affiliated
European distributors of our home robots.
Home Robots
In the United States and Canada, we sell our consumer products through a network of national retailers. In 2012, this
network consisted of more than 30 retailers which often sell either one or some combination of our products. Certain smaller
domestic retail operations are supported by distributors to whom we sell our products directly. In support of these sales
activities, we maintain an in-house sales and product management team. Outside of the United States and Canada, our products
have been sold in more than 40 countries, primarily through a network of in-country distributors who resell to retail stores in
their respective countries. These distributors are supported by our international sales and product marketing team.
Our retail and distributor networks are our primary distribution channels for our consumer products. We also offer
products direct-to-consumer through our domestic and international on-line stores, representing 6.3% and 9.6% of total home
robots business unit revenue for fiscal 2012 and 2011, respectively. We have established valuable databases and customer lists
that allow us to target directly those consumers most likely to purchase a new robot or upgrade. We believe we maintain a close
connection with our customers in each of our markets, which provides an enhanced position from which to improve our
distribution and product offerings.
Defense and Security
We sell our defense and security products directly to end users and indirectly through prime contractors and distributors.
While the majority of defense and security products have been sold to date to various operations within the U.S. federal
government, we also sell to state and local as well as to international government organizations and research labs and
universities. Our military products are sold overseas in compliance with the International Traffic in Arms Regulations, or
ITAR. We have sold our products to the governments of various countries in the past several years, including the United
Kingdom, France, Germany, Sweden, Norway, Italy, Israel, Australia, Republic of Korea, Singapore, Bosnia, Lithuania, Qatar,
Taiwan, South Africa and Canada.
Our government products are sold by a team of sales specialists with significant experience in selling to government and
defense agencies. All of these individuals have years of experience selling military products to government procurement
offices, both in the United States and internationally. We maintain a direct sales and support presence in Europe.
Customer Service and Support
We also provide ongoing customer service and support. Consumer customer service representatives, the majority of
whom are employees of outsourced service organizations or our distribution partners, are extensively trained on the technical
intricacies of our consumer products. Defense and security customer representatives are usually former military personnel who
are experienced in logistical and technical support requirements for military operations.
Marketing and Brand
We market our home robots to end-user customers through our sales and marketing teams as well as through our
extensive network of retailers and in-country distributors. We market our defense and security products directly through our
team of government sales specialists to end users and indirectly through prime contractors. Our website is also playing an
increasing role in supporting brand awareness, addressing customer questions and serving as a showcase for our products.
Our marketing strategy is to increase our brand awareness and associate the iRobot brand with innovation, reliability,
safety and value. Our sales and marketing expenses represented 16.4%, 12.6% and 12.6% of our total revenue in 2012, 2011
and 2010, respectively. We expect to continue to invest in national advertising, consumer and industry trade shows, direct
marketing and public relations to further build brand awareness.
Form 10-K