Attachment.ashx 4

Team 3Divye GoyalRebecca PapilloJoseph SakrPatrick Tehan

iRobotStrategic Recommendations

iRobot’s business is based on three key pillars

Management expertise

- Financial position

Concentrated customer base

R&D expertise- Employs nearly 50% of staff

Military- Tender process- Spiral development

Non-military- Variable demand- Limited product awareness

How can iRobot reduce demand volatility and thus build a platform for profit growth?

Cost Cutting


Growth from existing operations

Growth from new operations

New products

New customers

Geographic expansion

iRobot needs to leverage existing operations and look at new areas for growth

Collectively, these three strategies will address the key question


New target market Existing target market

Enhance product integration Improve volumes

“Mowbot” gardening robot TV advertisingCommercial cleaning

robotNPV: USD 116.9m NPV: USD 280.2m NPV: USD 73.6m

Commercial Cleaner | Mowbot | Marketing

Commercial cleaning provides a ripe opportunity for iRobot’s expansion into a new market

• New customers provide diversification benefits

• Less volatile demand because of differences between commercial and private usage.

• Cleaning equipment market is growing quickly

• Have industry expertise

2009 2010 2011 2012 2013 2014 2015 -

1

2

3

4

5

6

7

8

9

Source: BCC Microelectronics Cleaning Report, 2010

Global market for microelectronics cleaning equipment, 2010 ($USD Billions)

Commercial cleaning robotics is a viable and lucrative market


We propose a new paradigm - increased speed, battery life and capacity – scaling towards industrial robotic cleaning

2002- Roomba Robot

initial launch

2004- Red- Discovery

2005- Scheduler

2006- Dirt Dog- Intellibin

2007- 560 range

2010- 610 range

Specifications Roomba 610 “Comm-bot 1000”

Speed 80m2/hr 200 m2/hr

Weight/diameter 8.3 lbs/13-inch 30 lbs/30-inch

Capacity 1 x regular bin1 x high capacity bin

4 x high capacity sweeper bin

Battery life 2 hours, 3 hours recharge 8 hours, 15 hour recharge

Source: iRobot.comCommercial Cleaner | Mowbot | Marketing

The commercial cleaner’s cost-effectiveness will render it an attractive proposition for its target markets

• Focus where cleanliness is necessary but not core to business

• Factories• Libraries• Educational institutions

• Attractive pricing allows quick break-even points

• Warranties and associated maintenance provide feedback channels

1 4 7 10 13 16 19 22 25 280

2000

4000

6000

8000

10000

12000

Source: Payscale, iRobot financial report

Comparison of manual cleaning and automated cleaning vs. time


A specialised sales team will enable marketing that specifically targets the concentrated customer bases

Manufacturing

• Continue current manufacturing processes

• Focus manufacturing in the US plant

• Allows better monitoring

Research and Development

• Continue team model for R&D expenditure

• Hire 20 staff and group them under a new team

• Cross functional- commercial expertise

Sales

• New product requires different selling approach

• Outsource dedicated sales team

• Target developed countries


The risks associated with a commercial cleaner can be mitigated

Sales personnel not meeting expected targets

Performance management procedures for sales personnel

Production delays after orders taken Contract financial penalties for delay which are then passed onto consumers

Loss of control of sales message Initial training regarding product specifications and updates every year


Introducing a new product will ease volatility through diversification and entrenchment in customers’ lives

Diversification

Entrenchment in consumer products

market

Reduced volatilityReduced reliance on

single product

Reduced volatilityEnhanced customer

loyalty

New “Consumer

goods”product


Expanding into horticulture represents the most attractive proposition


“Mowbot” will be fully automated and will leverage off existing Roomba technology

• Multi-functional device• Lawnmower• Line trimmer• Water’s gardens• Weed spray

• Uses existing Roomba sensory technology

• Has safety lights, plastic guard and rubber wheels for wet weather navigation


The “Mowbot” will be US-focused using existing operational expertise

• Predominantly distribute through US retailers and online channels

• Target similar customer base as Roomba

• Middle-high class segment

• Research and Development will require extra 30 personnel

• Manufacturing to continue at three plants


The risks associated with Mowbot can be mitigated

Perception of dangerous product Automatically turns off when bumped, protective case and guard railing installed

Local regulation regarding unmanned robots

Work with local councils to address further noise/safety concerns. Similar approach to competitors

Disruption to factory production Use of multiple, geographically diverse factories diversifies factory-specific risks


The use of traditional mass media will raise consumer awareness of iRobot products

Social Media:Trust in Advertising Characteristic Traditional mass media:

Trust in Advertising

Wealthy

45-55 years old

Tech savvy

Time poor


Television represents the most attractive advertising medium


Advertising will be carefully targeted towards wealthy, time poor consumers

Mad

Men

Leve

rage

The Closer

Burn Notice

0.00

500000.00

1000000.00

1500000.00

2000000.00

• Advertise during shows with wealthy viewers

• Use advertisements to demonstrate the value of household robotics

• Grow customer interest within industry

• In turn, sales growth of existing products

Source: Neilson Media Research, 2009

Number of viewers (USA) with income > USD 100K, 2009 (millions)

Advertise during high rating television shows between 7-11pm weeknights


The risks associated with television advertising can be mitigated

Brand is tied too closely to a particular television show

Advertise during several high rating television shows

Price of advertising during selected time slot increases

Look to alternative advertising options including radio and print media


The commercial cleaning strategy will return a net present value of USD 116.9m over ten years

NPV = USD 116.9m

IRR = 55.92%

Revenue Drivers Cost Drivers

Sales R&D costs

Cross-selling Manufacturing costs

Sales team costsYear

1Year

2Year

3Year

4Year

5Year

6Year

7Year

8Year

9Year 10

$-

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

$140,000,000

$160,000,000

$180,000,000

Total RevenuesTotal Expenses

The Mowbot strategy is predicted to have a net present value of USD 73.60m

NPV = USD 73.60m

IRR = 36.05%


Sales R&D costs

Cross-selling Manufacturing costs

Administrative costs

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

Total Revenues

Total Expenses

The marketing strategy also creates value for iRobot, returning a net present value of USD 280.2m

NPV = USD 280.20m

IRR = 34.29%


Additional sales Agency fees

TV network fees

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

$-

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

$400,000,000

$450,000,000

Total Revenues

Total Expenses

Collectively, these strategies will add USD 470.7m to iRobot’s bottom line

NPV = USD 470.7m

IRR = 37.33%

Payback period = 4.1 years

Growth RateWACC 2% 4% 6.76% 8%

6% 34.67% 36.49% 39.20% 39.98%7.32% 33.02% 34.76% 37.33% 38.08%

10.00% 29.80% 31.37% 33.69% 34.37%12.00% 28.31% 29.80% 32.01% 32.65%

Sensitivity Analysis

Value added to iRobot by each strategy in USD (m)

Implementation timeline

Recruit R&D staff

Design, develop, modify

Launch productPartner with sales org

Continuous monitoring and improvement

Evaluate sales team performance

March 2011 March 2012 March 2013 March 2014

Com

mer

cial

cl

eane

rM

owbo

tAd

verti

sing

ca

mpa

ign

Recruit R&D staff

Design, develop, modify Launch product

Continuous monitoring and improvementExpand distribution

capacity

Contract ad agency

Negotiate with network

Develop and produce ad Launch ad

Measure effectiveness

Begin subsequent campaign

Launch ad




“Mow-bot” gardening robot TV advertisingCommercial cleaning



Appendices

Commercial cleaning Mow-bot TV ads Financial General

Social costs Market price Television ad message Key Statistics Scope for vertical integration

Performance management Harvey balls- cooking Harvey ball data Assumptions Risk of obsolescence

Why outsource Harvey balls- bathroom

Decline of TV effectiveness

Comm. Cleaning - Modelling Effect of doing nothing

Where to outsourceHarvey balls- laundry Why TV the preferred

advertising methodComm. Cleaning - Revenues

Usefulness of 10-year horizon

Returns policy Competitor analysis Alternate strategy if ads become too expensive

Comm Cleaning - Expenses Geographic expansion potential

Cleaning area assumptions

Competitors "free-riding" off our marketing

Mowbot - Modelling Resources available to implement strategies

Advertising location Mowbot - Revenues Rejected strategies

Mowbot - Expenses Role of military customer

Marketing - Modelling Presentation Slides

Marketing - Revenues

Marketing - Expenses

Funding mix

How will these strategies be funded?

• Funding is of fundamental importance

• iRobot has been savvy in its financing decisions to date

• As well as avoiding downturns, cash creates opportunities

• As such, we propose adopting an identical funding model as currently stands

• The equity component will be raised through a rights issue

31.26%

2.00%

66.73%

Current liabilities

Non-current liabilities

Equity

Current financing arrangements for iRobot

Source: Annual Financial Report

What would happen if we were to reject these strategies?

• Not only do these strategies provide a positive effect on iRobot’s bottom line, but they also help avoid the negative base-line case of doing nothing.

• What does this mean? Industry analysts, such as Roger Christian, VP at Motoman, agree that the robot industry must grow strongly, and quickly, in order to survive

• Inaction may well cripple the industryYear 1 Year 2 Year 3 Year 4 Year 5 Year 6

0

100

200

300

400

500

600

700

800

Revenues with our strategies

Revenues without our strategies

Revenues in USD (m)

Source: Financial modelling

Do you have the resources to implement two new products at once?

• There is a real and present danger that iRobot faces, in terms of spreading itself too thinly

• This issue is particularly acute for iRobot, because of the relative scarcity of good personnel – robotics is still only an emerging field

• To mitigate this risk, our recommended implementation timeline staggers the new projects a year apart, in order to have more time to attract staff

Recruit R&D staff

Design, develop, modify

Launch productPartner with sales org

Continuous monitoring and improvement

Evaluate sales team performance

March 2011 March 2012 March 2013 March 2014

Com

mer

cial

cl

eane

rM

owbo

t

Recruit R&D staff

Design, develop, modify Launch product

Continuous monitoring and improvementExpand distribution

capacity

What strategies did you reject and why?

Strategy Description Reason for Rejection

Alternative energy

Devoting R&D expertise to booming area of renewable energy generation

Requires highly specialised knowledge, beyond mere robotics

Medical procedures

Applying robotic controls to common surgical procedures, such as prostate surgery, minimises blood loss and speeds recovery time

Requires highly specialised knowledge, beyond robotics

Creation of prosthetics

Using expertise in robotics to create sensate, responsive prosthetics for amputees – DARPA grants are available

Already a highly competitive and innovative field, and it would be difficult to quickly gain market share

Military projects

Creating a new robotic military technology, as has occurred in the past with UAVs and the like

Tender-based, so independent innovation is wasteful, and relationships are already developed

Consumer & commercial cooking

Either domestic or mass-produced meals produced by automation

Quality would likely suffer, and any robotic meal preparation would likely have limited appeal

The future role of the military in iRobot’s future

• The role of the military, as iRobot’s largest customer (making up around 40% of revenue), is critical.

Dealings with government

Sales Relationship

Tender-based Alternative is unviable

Spiral feedback

Nature of government

On this analysis, iRobot will maintain both its relationship with the military, as well as its sales.

Why did you pursue television advertising despite its failing effectiveness in advertising?

• While its effectiveness may be decreasing, we believe this is more of a normalisation than a decline.

• Television has enjoyed decades of being the central entertainment hub, and with the expansion of consumer technology (social media, computer gaming, iPods, internet, cable), it is reasonable to see a decline in its popularity.

• Indeed, television is still an effective mechanism of advertising – this is indicated by the value the market places on it (see graph, left).

Source: Signtel.com

Commercial Cleaning – where to outsource sales teams

• Sales team locations• 2 x North America

• Boston• Los Angeles

• 1 x Asia• Tokyo, Japan

• 1 x Europe• London, UK

• Targeting wealthy, industrial cities with established sales outsource teams and reputation for technology uptake

Source: NASA, SalesForce Inc, Sales Inc, Lighthouse sales

Strategy 2 – Criteria for judging the attractiveness of other types of products (Cooking)

Criteria Reasoning Horticulture

Large Market sizeUSD 13.5b

Fast food spending used as proxy: Key Note consulting

USD 16.4bFreedonia Market Research

Ongoing Market growth5% until 2015

Bain industry analysis report

3.4%Freedonia Market Research

Quality of Output expectedHygienic Concerns

Consumers expect higher levels of output for food.

No hygienic concerns. Consumers are not too concerned with quality

control.

Strategy 2 – Criteria for judging the attractiveness of other types of products (Bathroom Cleaning )


Large Market size USD 4.7bFreedonia Market Research


Ongoing Market growth 27%PackagedFacts.com



Consumers expect higher levels of output for bathroom cleaning.


control.

Strategy 2 – Criteria for judging the attractiveness of other types of products (Laundry equipment)


Large Market sizeUSD 10.0b

MindBranch Industry Report


Ongoing Market growth6.4%

MindBranch Industry Report



Consumers expect higher levels of output for laundry

cleaning.


control.

Key Financial Statistics

Strategy Net Present Value Internal Rate of Return Initial Capital OutlayCommercial Cleaning USD 116.9m 55.92% USD 41.2mMowbot USD 73.6m 36.05% USD 50.3mMarketing Strategy USD 280.2m 34.29% USD 186.3mOverall USD 470.7m 37.33% USD 470.7m

Key Financial Assumptions

WACC Item Data SourceEquity 133,194,000$ iRobot Financial ReportsDebt 62,376,000$ iRobot Financial ReportsValue 195,570,000$ (E/V) 68.11%Return on equity 9.26% (R(f) = 0.25%, beta = 1.10, R(m) = 10.69%)(D/V) 31.89%Return on debt 3.17% iRobot Financial ReportsWACC: 7.32% WACC = (D/V) x RoD + (E/V) * RoE

Strategy Data SourceRisk free rate 0.25% US Federal ReserveBeta 1.10 Yahoo Finance and Capital IQReturn on Market 10.69% S&P 500 average growth over 3 years

Strategy Growth Rate SourceCommercial Cleaning Strategy 15.00% BCC Microelectronics Cleaning Report, 2010 quotes 18.60%Mowbot Strategy 3.40% The Freedonia Group Market Research Report, 2009Marketing Strategy 4.20% GroupM Analyst Report, 2010Overall Growth Rate 6.76% Average of the three, weighted by size of NPV

Financial Modelling Excerpt – Commercial Cleaning

Strategy 1 - Comm Cleaning Year 1 Year 2 Year 3 Year 4 Year 5RevenuesDirect sales revenue 61,811,299$ 69,537,711$ 77,264,123$ Cross-selling revenue 61,811$ 69,538$ 77,264$

Total Revenues -$ -$ 61,873,110$ 69,607,249$ 77,341,388$

ExpensesResearch and Development Costs 2,866,140$ 2,866,140$ Sales Team costs 640,000$ 736,000$ 846,400$ 973,360$ Manufacturing costs 34,768,856$ 39,984,184$ 45,981,811$ 52,879,083$ Total Expenses 2,866,140$ 38,274,996$ 40,720,184$ 46,828,211$ 53,852,443$

Net Profit 2,866,140-$ 38,274,996-$ 21,152,926$ 22,779,037$ 23,488,944$ Discount Factor 1.07 1.15 1.24 1.33 1.42 Present Value of Profit 2,670,695-$ 33,232,963-$ 17,113,992$ 17,172,882$ 16,500,545$

Revenues – Commercial Cleaning Strategy

Direct sales revenue Cross-selling revenueAve sq m per library(Salt Lake City Public Library) 2055.555556 Robot revenue 77,264,123$ No of libraries in USEstimate 30000

Uptake proportionEstimate 0.10%

Ave sq m per schoolEstimate 3000No of schools in US(Centre for Education Reform) 132000Ave sq m per university(Based on NYU as a proxy, but reduced by 40%) 36000No of universities in US(US Department of Education) 4861Ave sq m per factory(US Energy and Information Administration) 1933.333333No of factories in US 1000Total area 634596000No of sq m covered in a night 1600Proportion on east and west coastsEstimate 10%Proportion of schools who adopt 10% p.a. for 5 yrsNo of sq m covered 3966.225Proportion of sales in the US 46%No of robots required 8584.902597Price per robot 9000

77,264,123$ 77,264$

Revenues from Commercial Cleaning Robot

Expenses – Commercial Cleaning Strategy

Research and Development Costs Sales Team costs Manufacturing costs

Using a team structure: No of members 4% of revenueAnnual Report indicates 32.6% 45%

No of team members 20 No of teams 4 Total revenue 77,264,123$

Average annual wage at iRobotAnnual Financial Report 143307

Average wage (including bonus)Payscale (increased by 15%) 40000 *Adjusted from 32.6%

No of years for project 25,732,280$ *$35360 (Payscale) 640,000$ 34,768,856$

Expenses from Commercial Cleaning Robot

Financial Modelling Excerpt – Mowbot

Strategy 2 - Mowbot Year 1 Year 2 Year 3 Year 4 Year 5RevenuesSales 55,757,576$ 62,727,273$ 69,696,970$ Cross-selling 557,576$ 627,273$ 696,970$

Total Revenues -$ -$ 56,315,152$ 63,354,545$ 70,393,939$

ExpensesR&D Costs 4,299,210$ 4,299,210$ Manufacturing Costs 34,848,485$ 36,033,333$ 37,258,467$ 38,525,255$ Administrative Costs 6,969,697$ 7,206,667$ 7,451,693$ 7,705,051$ Total Expenses 4,299,210$ 46,117,392$ 43,240,000$ 44,710,160$ 46,230,305$

Net Profit 4,299,210-$ 46,117,392-$ 13,075,152$ 18,644,385$ 24,163,634$ Discount Factor 1.07 1.15 1.24 1.33 1.42 Present Value of Profit 4,006,043-$ 40,042,266-$ 10,578,585$ 14,055,811$ 16,974,502$

Revenues – Mowbot Strategy

Sales Cross-sellingUS Lawnmower Sales(Freedonia Market Research) 3220000000 Revenue 69,696,970$ Proportion of market captured 1% p.a. for 5 yrs Proportion of cross-selling 1.00%Projected US sales 32200000Proportion of sales in the US 46%

69,696,970$ 696,970$

Revenues from Mowbot

Expenses – Mowbot Strategy

R&D Costs Manufacturing Costs Administrative Costs

Using a team structure:% of revenue(Financial reports quote 32.6%) 50% Warranties 1%

No of team members 30 Total revenue 69,696,970$ Marketing 5%Average annual wage at iRobot(Annual Financial Report) 143307 Training & admin 4%No of years for project 2 Total 10%

Revenues 69,696,970$ 8,598,420$ 34,848,485$ 6,969,697$

Expenses from Mowbot

Financial Modelling Excerpt – Marketing Strategy

Strategy 3 - Marketing Year 1 Year 2 Year 3 Year 4 Year 5RevenuesAdditional Sales 275,308,950$ 286,871,926$ 298,920,547$ 311,475,210$

Total Revenues -$ 275,308,950$ 286,871,926$ 298,920,547$ 311,475,210$

ExpensesAdvertising fees 199,680,000$ 208,066,560$ 216,805,356$ 225,911,180$ 235,399,450$ Advertising Agency 250,000$ 260,500$ 271,441$ 282,842$ 294,721$

Total Expenses 199,930,000$ 208,327,060$ 217,076,797$ 226,194,022$ 235,694,171$

Net Profit 199,930,000-$ 66,981,890$ 69,795,129$ 72,726,525$ 75,781,039$ Discount Factor 1.07 1.15 1.24 1.33 1.42 Present Value of Profit 186,296,597-$ 58,158,247$ 56,468,465$ 54,827,780$ 53,234,764$

Revenues – Marketing Strategy

Revenues from Marketing

Additional Sales

% expected increase in sales 5%

Existing sales 262199000

$ 275,308,950

Source: McKinsey Advertising Industry Report, 2010

Expenses – Marketing Strategy

Advertising fees Advertising Agency

No of 30 second slots:Ave cost of advertising campaign(Adage.com) 250000

No. of ads per hour 1 national advertisingAmount of hours per night in PT 4 campaignNo of days per week 4No of weeks in campaign 26Total no of 30 second slots 416Ave price for PT 30 second slot(Adage.com) 320000

133,120,000$ 250,000$

Expenses from Marketing

Advertising Harvey ball data

Access to target ConversionConveys product

experienceCost per customer

Television

Wealthy consumers watch the shows targeted

1-4% Copernicus marketing

Engages most senses. Easiest way to demonstrate capabilities

320 000/7.6m = 4.2c USA network viewing figures, adage.com

Print

Wide demographic which includes but not targets high income individuals

2-3%

HTG industry report

Relies on sight, can grab attention but not experience

1500/876,638 = 0.17c New York Times, Boston Globe

Radio

Wide demographic which includes but not targets high income individuals

1.5-4%

HTG industry report

The functionality of Roomba can’t be exploited. Cannot see.

20 000/1m = 0.2cRadio marketing bureau, WABC listener numbers

Direct mail

No targeting at all, can mail based on suburb income but nonetheless haphazard.

1-3%Copernicus marketing

Cheapens image and relegates brand to ‘junk mail’ status

$1,500/1,000 = 1.5cSmallbusiness.com

Speed assumptions for Commercial cleaner

roomba 610 source Commbotrooms per hour 4 -

size of average room (m2) 20international residential code 200

battery life (hours) 2 8Charge time (hours) 3 15total area per run/charge cycle (m2) 160 1600cycles per night 1.8 (9 hours) 1total cleaned area per night 288 1600

Is it reasonable to make a ten year projection?

• It can be argued that a ten year financial projection in the robotics industry is misplaced, as the industry and technology change so swiftly.

• However, we believe that the following is more convincing:

• First, the robotics industry has long lead times, and hence needs long-term thinking

• Secondly, sophisticated decision-making requires long-term thinking, even if the future is not perfectly clear

• Thirdly, our projection is for current projects only, and is not a projection of iRobot’s business as a whole. The outlook for those projects should be relatively stable.

Geographic expansion

• We considered, and then rejected, the idea of a geographic expansion strategy, for three reasons:

• First, iRobot already has a booming international presence, and is quickly growing

• Secondly, the nature of iRobot’s business is such that there is no need for a physical expansion – it already utilises global channels such as its partnership with Amazon

• Thirdly, we believed that other avenues of diversification, namely in commercial cleaning and gardening, would be more profitable in the long run, as they would continue iRobot’s success in pioneering ‘blue ocean’ markets

Mowbot Competitor analysis

• The robotics industry as a whole has not proved to be a necessity in the consumer electronics market

• Hence, competition will help push this market into customers’ minds and lower prices

• As a cost-leader, iRobot has the ability to fight price wars and hence wants to encourage competition which will increase the market as a whole.

• Incumbent products are: RoboMower and LawnBott• Still blue-ocean given iRobot was the last entrant in the automated vacuum

market but still captured majority of market. • Additionally, Mow-bot will have more features: line trimming, weed spraying and

watering

Returns policy for Comm-bot

• Given the higher price margin and higher usage load, offer a longer warranty to appease consumer indecision regarding product.

• Roomba has a 1 year warranty, the Comm-bot 1000 will have a 3 year warranty which includes battery life and full parts warranty

• High level of manufacturing expertise and design will ensure this expense is kept to a minimum

• Further, the higher price charged allows greater flexibility in warranty options on behalf of iRobot

What message will the television advertisements convey?

• The television advertisements will promote the iRobot brand as an essential part of stylish living, adding a layer of serenity, ease and freedom to the everyday lives of its consumers

• The advertisements will convey the functionality of the products, with a focus on the best selling Roomba, and how the products integrate seamlessly into family life

• Overall, stress the importance and usefulness of robotics within the home and ensure it is a ‘must-have’ item

Should iRobot consider vertical integration or broader manufacturer arrangements?

• Vertical integration addresses two problemsa) Lowers costsb) Increases certainty of supplies

• Neither of these is an issue for iRobot, • Already cost leader • Has a long term contract with one manufacturer and two other reliable

manufacturers

• Further to this, manufacturing is beyond iRobot’s core areas of expertise and may add unnecessary complexity to the organisation, which would prove costly

How should iRobot deal with the risk of obsolescence?

• R&D is one of the core competencies of iRobot:• 6% revenue reinvestment• Nearly 50% of staff in R&D

• iRobot must maintain organisational focus on innovation• Recruit the best people – hire graduates from the best engineering schools and

experienced hires from firms with similar specialisations• Provide good remuneration to attract and retain staff• Continue to invest heavily in R&D

What are the social costs of introducing a commercial cleaner?

• Unemployment may result from the introduction of a commercial cleaner into industries and commercial organisations

• Labour is very costly and often an overhead expense which business’ seek to reduce

• iRobot is in the business of creating solutions and improving the efficiency of everyday tasks

• Innovation is necessary to continue to minimise the costs that businesses face, allowing them their ability to improve products and services delivered

Performance management of sales staff for commercial cleaner

• Utilisation of trusted sales organisation• Salesinc – 12 years experience, created $1b in sales for clients• Salesforce- One of the largest sales organisations in the world. Provides online

and telephone support as well• Lighthouse sales – focus on emerging and new technology companies

• Work closely with sales organisation to train staff in iRobot products and experience• 2 day intensive course• Regular information packs with updated information• Helpline

• Regular monitoring and evaluation of sales performance• 10% success rate requirement which is the rate used in financial analysis

Commercial Cleaning – why outsource

• Focus on core competencies- design, develop and market robotics

• Given the multinational sales channel, would need to establish a cross-country sales team which would be both labour and capital extensive

• In addition, don’t have local knowledge which helps in sales techniques

• iRobot of successful alliances.• Although mainly manufacturing firms, highlights in the importance placed on

quality and choosing the best people for the job, not the cheapest. • Use same thought-process for sales team.

Mow-bot price

• High variability in lawnmower prices from competitors• Robomower RM200: $900 at lower end• LawnBott LB 3510: $4000 at upper end Source: Amazon.com

• Thus, iRobot can safely price within this range which allows a margin enhancement to the current Roomba product line

• Also, given the proposed “Mow-bot” will have added features, we can once again charge a greater premium

• As iRobot is the cost leader, can ensure a price war can be fought if eventuated

Alternative if ads become too expensive

• TV advertising is a great way to enhance brand exposure but must continue to look at cost-benefit analysis

• If too expensive, not worthwhile to pursue this avenue

• Look at radio and print media which were the next best advertising alternatives to again drive customer knowledge and provide enhanced experience

Why TV is the prefferred option to increase robotic industry exposure

• Average American watches “3 hours and 46 minutes of TV each day” – AC Nielsen

• Fast, effective way to quickly impart knowledge regarding Roomba and robotics as a whole

• Facebook advertisements have click-through rates of approx. 0.01% which is a highly passive marketing strategy

• TV advertisement allows greater engagement and thus conversion from viewer to customer

• Engages more senses which allows greater emotional connection to the message• More interactive than listening to radio ads or print media ads

What is stopping competitors from emulating our advertising campaign?

• It can be argued that increased competition will serve well for the slowly diminishing robotics industry by increasing awareness of the products amongst a wider base of consumers.

• This is supported by Industry analysts, such as Roger Christian, VP at Motoman, who agrees that the robotic industry must grow strongly, and quickly, in order to survive.

• This will increase the market size of the industry and it is assumed that the increase in market share will be outpaced by the increase in market size leading to an overall rise in absolute market share

Why isn’t advertising campaign occurring in areas other than US?

• Initially need to be very selective about the locations in which we advertise as it is capital intensive.

• US is the most developed nation yet it has been shown that there are large amounts of the population who still are not aware of robotics.

• US is the market in which iRobot has the greatest understanding of and can use their current national networks to gain maximum exposure

• Therefore the US serves as the optimum starting point for the advertising campaign

Presentation Slides Index

Introduction Strategy 1 Strategy 2 Strategy 3Financials and Implementation

Front Page Strategies Strategies Strategies Strategy 1

Pillars Cleaning Market Diversification & entrenchment

Mass media vs social media Strategy 2

How to reduce volatility

New paradigms - what is a commercial cleaner?

Which is the most attractive market?

What is the most attractive mass media market?

Strategy 3

Cost-effectiveness What is a Mowbot? Targeting of advertising OverallSpecialised Sales Team

Implementing the Mowbot Risks and mitigation Implementation

Risks and mitigation Risks and mitigation Summary

Attachment.ashx 4

Business

Transcript of Attachment.ashx 4