Accessory club exec preso 110513

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  • Accessory club exec preso 110513

    1. 1. “Accessorize Me” Business Case 11/05/13 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
    2. 2. Opportunity & Consumer Demand for Smart Accessories Robust growth in smartphone sales drives smart accessories sales • Spurred by smart-device sales growth, the mobile-device accessories market is forecast to grow 10.5% per year, reaching $62 billion by 20171 • Americans now have half a billion connected devices2,. Projections for growth: • 2013-17: Tablet sales will grow 79%; Smartphone sales will grow 71%; Smart home automation will grow 5x6 • By 2017, Smartphone-only accessories will be a $50 billion market4 • By 2018, Smartphone health and fitness device users will increase from 15MM to 96MM7 Sources: 1. ABI Mobile Handset Accessories, 2. NPD Group Connected Intelligence Report, 3. Nielsen, Sept 2013 and NPD Group, 4. ABI Mobile Handset Accessories, 5. IDC, 6. Forbes, 7. Jupiter, 8. Cisco Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 2
    3. 3. Opportunity: Accessory Demand Extends Through Customer Lifecycle Accessories sales over a six-month cycle Demand exists for accessories long after original point of device activation • Verizon retains “first accessory” sales as 50% of phone purchasers obtained accessory at retail POS • After activation, 62% of accessory purchases migrate online Verizon‟s lost revenue opportunity for downstream smart accessories By Month 4: After initial purchase, nearly two out of three accessory purchases are made via competitors‟ online channels • Post-activation, most customers do not consider carrier‟s website for accessories • Verizon captures only 5–7% share of overall accessory shoppers • 80% reported visiting a different retailer to purchase aftermarket accessories By Month 6: Three top players now control over 70% of the online accessories market Sources: RAUXA Qualitative Testing Report Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 3
    4. 4. “Accessorize Me” Concept START: Sign up > Select segment > Browse accessories: Accessories are boxed and shipped to member Member selects accessories for trial Member is emailed that the next box is on its way OR... member chooses to purchase an accessory Member trials and returns when ready to try a new item Accessories are reinventoried Accessories are tested and repackaged A subscription-based sampling/rental service for smart-device owners to try out new smart accessories How it works: 1. Sign-up for one, two or three accessories to rent or trial at a time (6 mo minimum) 2. Select accessories 3. Receive box of accessories in the mail 4. Return one or all accessories when you want to switch out of others • Subscribers can also choose to keep and purchase the accessory at a discounted price 5. Subscribers‟ returned items are cleaned, refurbished for use with other subscribers Service is available to customers and prospects All wireless competitors sell accessories but none offer trial or subscription. Opportunity to shift share to Verizon. There are no subscription commerce companies concentrating on the smart accessories space Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 4
    5. 5. Value Proposition and Business Benefit Consumer Value Proposition Verizon Business Benefits • Try accessories they might not have purchased otherwise • Increase in accessories market share from existing VzW accessories business. • Access to new-to-market accessory products • Steals share from non-traditional Verizon competition (i.e., Amazon, Best Buy, etc.) • Ability to rest and return products without risk • Gives Verizon access to other wireless carrier‟s customers. • Confidence in product quality and variety • Ongoing, dependable revenue stream from the subscription model …all for a predictable monthly subscription fee …and if the business is eventually branded Verizon, it will Increases the brand‟s perception as a technology leader. Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 5
    6. 6. Research Findings (incl Focus Groups) Positive sentiment towards concept of subscription service • Participants were very receptive to subscription model for smart-device accessories • Discovery based on personal tastes is driving subscription commerce growth For undecided customers, opportunity to try-before-you-buy with generous consideration window: • Most subscription models offer high-end, unique value for customers at reasonable (but recurring) price • Subscriptions provide foot-in-the-door to customers hesitant to pay high initial price • Increasing length of trial greatly increases likelihood to purchase (participants mentioned Best Buy as their de facto trialing service due to 30 day return policy) Opportunity for further customer interactions, touch-points and relationships • Consumers gain unique, unhurried sales experience to trial smart accessories over time • By paying monthly, customers stretch their financial obligation to even out cash flow and keep costs down by paying only for what they consume Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 6
    7. 7. Consumer Research Research indicates that the consumers will react well to this concept. Two target segments emerged: Segment Narrative Value Proposition Fashionforward Want to be seen with hottest accessory With so many accessories out there, a Accessorize Me keeps me in the know General Tech I have the best device and I want the best technology for it You want the best and you want it now; and Accessorize Me gives you the freedom to constantly try the best offerings “I know the choice of the right accessories helps exploit to the maximum the full potential of a mobile phone.” “I want accessories that help enhance the functionality and performance of a mobile phone.” 20% 80% • For complex products, “discovery” enables consideration time for purchase. Sources: RAUXA Qualitative Testing Report Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 7
    8. 8. Product Categories and Pricing Major product categories include Speakers, Headphones (entertainment), Cases/Sleeves, Chargers, Earpieces (utility), Fitness/Health, Connectivity, and Emerging Accessories. The purchase consideration time has major influence on accessory categories bestsuited for inclusion. Product Selection Criteria # Criteria Points (total = 100) 1 2 length of purchase consideration window Amazon.com 4+ stars 25 25 3 4 5 6 avg. monthly keyword searches avg. monthly units sold by VZ Accessory Sentiment Rating, positive intangibles / other 20 15 10 5 Total 100 Purchase Consideration Window: Amount of time (weeks) shoppers need to decide whether to purchase an accessory. Longer purchase consideration window = better fit Amazon Ratings 4+ Stars: Market-based metric representative of the broader population to assess product popularity and satisfaction outside Verizon Average Monthly Keyword Searches: Indicative of the degree to which shoppers are conducting research on upcoming purchases and suggestive that a future purchase is imminent Weights express the relative importance of each criteria. Sources: Amazon ratings, Verizon internal data 8 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 8
    9. 9. Accessorize Me Pricing Feature Premium Tech Segment Standard Tech Segment Fashion-forward Segment Demo one accessory at a time $35 / month $15/ month $15 / month Demo two accessories at a time $65 / month $25 / month $25 / month Demo three accessories at a time $90 / month $40 / month n/a Tech accessories with retail prices over $125 Tech accessories with retail prices from $75 - $125 Fashion-inspired phone cases Emphasis Price changes • Increases to monthly prices of 10% to 25% implemented each year, depending on year and segment Contract • No contract; no month-to-month Purchase Discount • • 20%–25% discount if keeping the actual item demo-ed 10–15% discount if buying a new version of the item demo-ed Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 9
    10. 10. Potential Ancillary Revenue Streams Two, additional revenue streams could enhance revenue generation: $205MM 1) Market Research and Inclusion Fees • Opportunity for OEMs to gather consumer research for product development and positioning • Accessories manufacturers could potentially have the Accessorize Me also ship out their samples 2016 est. 2) Gift Subscription Revenues $99MM 2016 est. $12MM (est) Enhance d LTV turns customer data into actionabl e insight and buyer profiles $10MM (est) Gift Inclusion Subscription E-commerce Revenues Revenues Subscriptions Fees Sources: RAUXA Qualitative Testing Report • Subscription commerce players derive a percentage of revenues from gift subscriptions Other Benefits (from strategic partners) • Build subscriber value by offering exclusive smart accessories from leading manufacturers • Opportunity to purchase significantly discounted CPO inventory from top accessories manufacturers 10 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 10
    11. 11. Attractiveness of Subscription Commerce Businesses Subscription-based models have many advantages: • Foot-in-the-door for selling to difficult-to-engage customers • Greater predictability of inventory needs over time • More efficient cash flow management • Collects substantial customer information beyond payment data for cross-selling and personalized database marketing “Sub-comm” model is attracting major investment from VCs, with many achieving remarkable financial results: • JustFab took three years to get to $200MM annual revenue • JustFab and Shoedazzle are merging with $400MM in revenue • Birchbox has $66MM in sales • Honest Company reached $50MM in revenues in 18 months • AdoreMe shipped 100,000 units within its first 12 months $12MM funding 400,000 subscribers $109MM funding $66MM funding $250MM revenue $200MM revenue 15 million subscribers 18 million subscribers $55MM funding $22MM funding 3 million subscribers 250,000 subscribers Kleiner Perkins backed Adding 100,000 subs/mo $11MM funding $45MM revenue 50,000 subscribers $19MM funding Series A None since 2011 $73MM funding All venture rounds Sources: Crunchbase, Red Herring Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 11
    12. 12. Other Specialty Accessories Accessory offerings in the smart device category are a burgeoning business for manufacturers and start-ups. Mint Tin Chargers Wireless Home Security For iPhone/iPad Wireless Smart Leash Wallet Tracker Detachable Video Lenses Remote Control Toys Wireless Baby Monitor For iPhone/iPad Speakers Solar Backpacks Wearable devices Weather clocks Automobile Diagnostics Digital Binoculars More smart devices introduced every day: Hand crank generator Credit card charger Phone controlled robots m-Printers Kitchen accessories BBQ accessories Mountable camera Thermoelectric generator Crash sensor Smart scale Blood pressure monitors Smart dice Airspeed calculators Pet/Child trackers Remote shutter release iPad/iPhone stylus Tripod mounts Location leashes Golf swing analyzers Pedometers Armbands and more… SLR Camera Lenses Providing hard-to-get accessories (via Kickstarter, GrandStreet , BiteMyApple, etc.) can enhance the Accessorize Me model • While existing VZ accessories will have strong representation, 20% of them can be devoted to “niche” or novel accessories • Smart accessory manufacturers are embracing Bluetooth standard (not 30 pin, USB, Lighting, etc.), setting stage for more connected devices • For example, wireless streaming speakers, most using Bluetooth, jumped 175% to $383MM in 2013 • Kickstarter is supporting a rise in niche accessory manufacturers, Source: Consumer Electronic Association, Digital America Report 2013 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 12
    13. 13. Sustainable Competitive Advantage Marketing Data/Financial Operations A ready pool of customers: Verizon‟s 100MM subscribers are “hand-raisers” as they have already signaled interest in mobile devices, accessories and technology Data and feedback loop: Infrastructure: A massive Verizon repository of data can drive accessory recommendations to trial and customer segmentation Verizon „s logistics platform for warehousing and fulfillment, billing, inventory management, shipping and returns, and customer support. Cost-effective marketing outreach: Cross-marketing to Verizon base is significantly cheaper than external marketing Accessorize Me can easily be pushed through Verizon‟s existing, well-defined advertising channels Best- and worst-selling item analysis enables continual product refinement Negotiating leverage: Verizon carries significant leverage over accessories providers for negotiating relationships Category Experience: Given its core business, Verizon has know-how to run this synergistic offering Shared platform: Leveraging shared resources within Verizon can help business grow more quickly Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 13
    14. 14. Test 1 (Low Fidelity) SEO, SEM, display advertising, etc. drives market traffic to a landing page Access great accessories for your smart device. We‟ll send you 3 to try for one low monthly payment Landing page visitors will be incentivized to provide their email to “request an invite” to the ASC Implement test to more deeply gauge interest in the specific concept : • Create various Google Ads or Facebook messaging to drive potential customers to 1 of 5 test landing pages • Each landing page will provide different details about Accessorize Me, response rates to each will be measured • Conduct consumer profiling of opt-in customers • Results to be analyzed and leveraged for subsequent high-fidelity test Partner: Launch Rock Estimated Cost: $50K Estimated Time: 30 days Thank You! We've received your request and added you to our beta list. We’ll launch soon and will let you know what’s in store next. Learnings: Pricing, percentage of people that would sign up, types most interested Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 14
    15. 15. High Fidelity Test • Offer limited test with a strategic partner such as Fab • Gain promotional carriage and presence on partner‟s homepage • Fulfillment is coordinated with partner logistics and warehouse team • Track various performance metrics, sign-up rates, churn, top accessories of value, etc. Estimated Cost: TBD Estimated Time: 6 months Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 15
    16. 16. Appendix Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement.
    17. 17. Accessorize Me: Key Features Suitability analysis and individual product ratings and reviews informed decisions on which products to offer subscribers. (1 of 2; see Product Gallery in Appendix) Category # Product Recommendation speakers 1 2 3 4 headphones for entertainment Jawbone Jambox Beats by Dr. Dre - Pill HMDX audio Jam Speaker Bone Collection Horn Bike existing existing new new Sub-Category Segment Justification exceptional Accessory Sentiment Score portable speaker PT (84.9%) portable speaker PT 4+ / 5 stars on Amazon unique speaker ST 115 reviews, 5/5 stars on Google Shopping unique speaker ST Winner of several design awards. in-ear headphones in-ear headphones ST PT 7 OtterBox existing designer case ST, F existing charging case PT 9 Lifeproof chargers new new 8 Mophie Juice Pack Charging Case cases & sleeves 5 Klipsch S4A Headphones 6 Shure SE425 Existing VZ Accessory, or New? existing protector case ST, F existing new new existing new designer case charging case designer case traditional solar-powered ST, F ST, F ST, F ST ST new new new new solar-powered solar-powered unique design unique design PT PT PT PT 10 11 12 13 14 15 16 17 18 Belkin PowerSkin Charging Case various designer brands Micro USB Dual Car Charger XD Design Solar Window Charger WakaWaka Power Compact Solar Charger Solio CLASSIC2 Powermat 3X PowerDoc 5 CNET exceptionally strong reviews for Klipsch Very positive review from CNET editors consumer sentiment as "most protective" case; top-10 in sales very strong positive sentiment amongst Verizon users "saved my phone" stories = most common positive feedback high scores on design, 78.8% Accessory Sentiment Score the dominant, #1 units-sold item consumer trend towards eco / solar chargers consumer trend towards eco / solar chargers consumer trend towards eco / solar chargers 9.5/10.0 score on Top10Reviews.com Price Lo Price Hi $180 $200 $40 $30 $65 $300 $65 $88 $49 $23 $60 $15 $24 $65 $80 $50 $79 $100 $78 $100 Note: “PT” = Premium Tech Segment; “ST” = Standard Tech Segment; “F” = Fashion Segment Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 17
    18. 18. Accessorize Me: Key Features Suitability analysis and individual product ratings and reviews informed decisions on which products to offer subscribers. (1 of 2; see Product Gallery in Appendix) Existing VZ Accessory, or New? Sub-Category existing new new new wireless wireless wireless wired / corded ST PT ST ST 23 Jabra Freeway existing speakerphone PT 24 FitBit One existing fitness PT 25 Jawbone Up Withings Smart Blood Pressure 26 Monitor 27 Jetpack 4G LTE Mobile Hotspot existing fitness PT Lower price ($30), high units sold, high Amazon review scores Excellent Amazon ratings (5/5), 590 reviews 2012 Red Dot Design Award Lightweight design (less than 2 oz.) exceptional Accessory Sentiment Score (80.5%) Fitbit = #1 most-mentioned high-end accessory in Social Analytics study frequently mentioned as substitute / replacement for Fitbit new existing health jetpack PT ST 4/5 stars on Amazon; 350 reviews 55.6% Accessory Sentiment Score $130 $50 Sony's Cyber-shot QX10 wireless 28 camera lens new photography PT $250 29 GoPro line of cameras new photography PT exceptional reviews by tech editors oversubscribed on Kickstarter by 3x of funding goal 30 StickNFind Location Stickers new lost item recovery ST $50 31 XiStera Accessory new tools ST 32 Automatic new car telematics PT Compatible w/ several devices; sold in 2-packs oversubscribed on Kickstarter by 3x of funding goal Beams data about engine performance to Automatic's app on the iPhone Category # earpieces: utility headphones, headsets, Bluetooth, etc. 19 20 21 22 fitness smart accessories wellness smart accessories connectivity cutting edge emerging accessories Product Recommendation Plantronics "M" series Bose Bluetooth Headset Series 2 Jabra SUPREME Bluetooth Headset Overture Cellular Headset Segment Justification Price Lo Price Hi $35 $150 $72 $55 $60 $88 $98 $130 $199 $399 $25 $100 Note: “PT” = Premium Tech Segment; “ST” = Standard Tech Segment; “F” = Fashion Segment Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 18
    19. 19. Product Gallery Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 19
    20. 20. Product Gallery Speakers Jawbone® Jambox™ Beats™ by Dr. Dre™ – Pill HMDX Audio Jam™ Speaker Bone® Collection Horn Bike Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 20
    21. 21. Product Gallery Headphones for Entertainment Klipsch® S4A Headphones Shure® SE425 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 21
    22. 22. Product Gallery Cases & Sleeves Otterbox® Cases Belkin Cases mophie® juice pack PowerSkin® Battery Cases LifeProof ® Cases Cases – various designer brands Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 22
    23. 23. Product Gallery Chargers Micro USB Dual Car Charger Solio® CLASSIC2 XD Design Solar Window Charger PowerMat™ 3X WakaWaka Power Compact Solar Charger Griffin‟s PowerDock 5 Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 23
    24. 24. Product Gallery Earpieces Plantronics® "M" series Overture Cellular Headset Bose® Bluetooth Headset Series 2 Jabra® SUPREME Bluetooth Headset Jabra® Freeway Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 24
    25. 25. Product Gallery Fitness Smart Accessories / Wellness Smart Accessories FitBit® One Up™ by Jawbone® Withings Smart Blood Pressure Monitor Connectivity Jetpack® 4G LTE Mobile Hotspot Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 25
    26. 26. Product Gallery Emerging Accessories: Cameras SONY® Cyber-shot QX10 wireless camera lens GoPro® Cameras Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 26
    27. 27. Product Gallery Emerging Accessories: Tools & Utilities Cameras StickNFind Location Stickers Automatic Car & Smartphone Connection XiStera Accessory Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 27
    28. 28. Key Assumptions of the Financial Model # 1 Source Driver a 2 Subscriptions by Year 2 Subscription Prices (2014-2019) 3 b Yearly Churn (2014-2019) 4 c Mo Purchases from Subscribers (1 Accessory) (2014-2019) 5 d Value 480,503 Justification/Source: Model assumes Verizon will be able to reach 400K+ subscribers by year 2 due to Verizon brand, marketing power, and large subscriber base. Birchbox attained 400K subscribers in year 3, while Netflix attained 400K+ subscribers in year 4. For Year 1, amongst Fashion and Tech segments, model assumes beginning pricing as low as $4.99 per month for one accessory (Fashion, 1-item demo) to $34.99 for 3 $4.99 - $64.99 accessories (Premium Tech, 3-item demo), so as to obtain a strong subscriber base in the shortest amount of time. Price increases in the ensuing years result in pricing of $9.99 and $64.99, respectively, for these same segments in 2019. 15% Customer churn of 10%-20% per year considered a fair benchmark by investors in subcomm businesses. 5% - 15% Birchbox converts 50% of subscribers into purchasing customers. Model conservatively assumes monthly conversions of 15% by year 6. This assumption grows retail revenue in 2014 from 24% of total revenue to 34% in 2019. Market share of mobile device accessories market captured by Retail Revenue of ASC, 2017 0.6% The mobile device accessories market is expected to be $62B by 2017, the most distant year that ABI Research forecasted 6 Wholesale Cost per Subscription Item Procured by VRZ (2014-2019) $43 Reflects the average cost to Verizon of an item which will be demo-ed in the subscription program. 7 Products purchased from Accessory box Discount 20% - 25% Product Purchased new item Discount 10% - 15% Average Retail Price of New Products (2014-2019) $84 This is the weighted average retail price of 30+ products recommended for the accessory box. 49% The gross margin amongst Amazon, Target, Zappos, and Blue Nile is around 28%, while for Verizon it is 60%. We have utilized a gross margin of 49%, approximately in the middle of the two, due to the discounts we expect the Accessory providers to give to us in exchange for the opportunity to demo their new products in front of millions of VZ subscribers, similar to the discounts that Birchbox suppliers extend to Birchbox for the 'showcasing' opportunity. 8 9 e Gross Margin of Purchased Products 28 Products kept and purchased by subscribers from accessory box receive 20% - 25% discount. New products purchased from online store by subscribers receive 10% - 15% discount. Utilizing LinkedIn to assess staffing, a similar subcomm business, Bag Borrow or Steal, shows a headcount of 30 employees. 10 Headcount by Year 2 11 Marketing as % of Revenue (20142019) 5%-->15% 12 Restocking / Cleaning Fee / product (2014-2019) $2.00 Benchmarked against, 1) VZ and competitors' restocking fee as a pct. of the device's value, and, 2) monthly insurance premiums for device insurance as a pct. of the device's value Standard shallow box from papermart.com costs $0.21. Model assumes VZ has better purchasing power to get boxes and wrapping for $0.20. 13 f Packaging (2014-2019) $0.20 14 g Shipping (2014-2019) $0.75 - $2.25 Expect marketing expenses to be aggressive in the first 2 years to attain subscriber base. Amazon shipping at $0.75 per pound. Sources: a) Birchbox, Netflix b) Churn Expectations c) PandoDaily d) ABI Research e) US E-Commerce Landscape and Trends (see slide 12), Yahoo Finance f) Papermart.com g) Amazon Shipping Confidential and proprietary materials for authorized Verizon personnel and outside agencies only. Use, disclosure or distribution of this material is not permitted to any unauthorized persons or third parties except by written agreement. 28

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