iRobot 2014 Annual Report Download - page 81

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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. Customer service for the RP-VITA
product is provided by InTouch Health. Customer service for the Ava 500 is provided by iRobot.
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. The RP-VITA product is marketed
to healthcare customers by InTouch Health while our Ava 500 Video Collaboration product is marketed to enterprise customers
by a combination of our sales and marketing teams in conjunction with select Cisco partners. 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 15.5%, 14.7% and 15.2% of our total revenue in 2014, 2013
and 2012, 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.
We believe that we have built a trusted, recognized brand by providing high-quality robots. We believe that customer
word-of-mouth has been a significant driver of our brand's success to date, which can work very well for products that inspire a
high level of user loyalty because users are likely to share their positive experiences. Our grass-roots marketing efforts focus on
feeding this word-of-mouth momentum and we use public relations as well as advertising to promote our products.
Our innovative robots and public relations campaigns have generated extensive press coverage, and iRobot and our
consumer robots have won several awards. Through these efforts, we have been able to build our brand, and we expect that our
reputation for innovative products and customer support will continue to play a significant role in our growth and success.
Manufacturing
Our core competencies are the design, development and marketing of robots. Our manufacturing strategy is to outsource
non-core competencies, such as the production of our robots, to third-party entities skilled in manufacturing. By relying on the
outsourced manufacture of our consumer, military and remote presence robots, we can focus our engineering expertise on the
design of robots.
Manufacturing a new product requires a close relationship between our product designers and the manufacturing
organizations. Using multiple engineering techniques, our products are introduced to the selected production facility at an
early-development stage and the feedback provided by manufacturing is incorporated into the design before tooling is finalized
and mass production begins. As a result, we believe that we can significantly reduce the time required to move a product from
its design phase to mass production deliveries, with improved quality and yields.
We outsource the manufacturing of our consumer products to four contract manufacturers, each of which manufactures at
a single plant in China. We outsource the manufacturing of our defense and security robots to three contract manufacturers, all
of which are located in the United States. We outsource our Ava mobile robotics platform to one contract manufacturer located
in the United States.
Research and Development
We believe that our future success depends upon our ability to continue to develop new products and product accessories,
and enhancements to and applications for our existing products. For the years ended December 27, 2014, December 28, 2013
and December 29, 2012, our research and development expenses were $69.4 million, $63.6 million and $57.1 million, or
12.5%, 13.1% and 13.1% of revenue, respectively. We intend to continue our investment in research and development to
respond to and anticipate customer needs, and to enable us to introduce new products over the next few years that will continue
to address our existing and adjacent market sectors.
Our research and development is conducted by teams dedicated to particular projects. Our research and development
efforts are primarily located at our headquarters in Bedford, Massachusetts and our office in Pasadena, California.
Competition
The market for robots is highly competitive, rapidly evolving and subject to changing technologies, shifting customer
needs and expectations and the likely increased introduction of new products. We believe that a number of established
Form 10-K