CONSUMER INKJETB d P ti & SWOT A l iBrand Perception & SWOT Analysis(Strengths – Weaknesses – Opportunities – Threats)

June 2012

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OverviewEpson Brand Analysis – What People are Saying

a) Quality and Efficiency are primary messages

b) Heavy Mac and technical savvy user base; color & output quality are most important

Epson SWOT Analysis (Consumer Inkjet)1. Strengths:

a) ‘Photo Creative’ theme messaging on consumer lines

b) Asserts they are #1 in Photo Quality (Artisan Series)

c) Individual Ink Tank Replacement & XL tank availability

d) Photo & Quality focus on Printer Packaging

2. Weaknesses:a) Epson CPPs Higher across all modelsa) Epson CPPs, Higher across all models

b) Ink Cartridge Costs are 2X over Kodak, on Avg.

c) Artisan Prints ‐ Substandard Print Longevity

d) Fastest Photo Claims based on Draft Mode)

3. Opportunities:a) Epson’s high ink cost – Kodak provides 35% lower average CPP

b) Epson’s ink packaging causes greater environmental impact

4. Threats:a) Expression Home Marketing Campaign,  Sub $99 Offerings w/Small ID

b) 34% Ink Savings Messaging (United Kingdom) 2

Brand Overview (USA, Kodak Research - May 2011)

WHAT PEOPLE ARE SAYING

Epson Conversations

Epson conversations are among the most technically focused (vs. those of HP, Kodak, Canon, Lexmark customers). They are also heavy Mac users and avid Apple fans.

Many mention software and drivers. Top software mentions are Photoshop, Photoshop elements, Adobe, InDesign. All

ti t lcreative tools.

Proofing and photos are hot topics. Color is very important to Epson customers Quality is a mustEpson customers. Quality is a must.

Epson Conversations

Designers and other tech savvy creatives who care about color and are printing

Epson’s Most Loyal

who care about color and are printing proofs at home or in office.

Support and access to self-help tools are pp pimportant to this audience.

Epson Conversations

Super hip, crafty chic. These girls don’t order their wedding i it ti th i t th t h Th k th i i t h d

Epson’s New Target: The DIY Home Creative

invitations, they print them at home. They work their printers hard. Ink cost isn’t the focus, but quality is a must. They need heavyweight, duplex and efficiency. They want self-serve solutions, not tech support If they can’t fix it themselves they want nothing tonot tech-support. If they can t fix it themselves, they want nothing to do with it.

High-burners with a knack for coolHigh burners with a knack for cool.

Epson Coverage Drivers

• During 2011 Epson focused its media outreach on theInkjet Coverage Q1 2011• During 2011, Epson focused its media outreach on the 

promotion of its WorkForce printers.

• Top coverage drivers for Epson in Q1 2011 include:

– Epson’s announcement of a partnership with Thinxtream to offer direct printing from mobile devices d l b h

Q1 2011

Mirna BardMobile

printing

Academy Awards

drove coverage in early February. The PrintJinnisoftware  works with any Epson wireless all‐in‐one, including WorkForce®, Artisan® and Epson Stylus® 

– The announcement that WorkForce® 60 printers will be used to print all official credentials for the 83rd annual Academy Awards.

– A March 30 release which explained how social media consultant Mirna Bard relies on the Epson WorkForce® 635 all‐in‐one printer to run her home office efficiently.  

• Other coverage was largely product announcements:16%

20%13%

Global Share of Voice

Kodak Canong g y p

– New Stylus models target photographers and artists

– New Workforce  models (840, 60) target small offices

27%24%

EpsonHPLexmark

(#2)

Epson Inkjet Product SOV (Q1 2011) Media Types:

Epson coverage in Q1 2011 was mostly online (including trade, consumer, news, business), both overall and for specific products

WorkForce coverage appears predominately in consumer bli ti hil St l i lik l f d i t dpublications, while Stylus coverage is more likely found in trade

publications than consumer publications.

Artisan coverage is divided between Consumer and Trade publications.

Epson Inkjet Brand Perception & Consideration• Epson’s key messages are Quality and Efficiency:

Epson is positioning WorkForce printers as fast space saving efficient product to run small business or home office– Epson is positioning WorkForce printers as fast, space‐saving, efficient product to run small business or home office. 

– Epson WorkForce printers also said to have “swiftly” printed thousands of “flawless” Academy Awards credentials. 

– “One of the most noticeable features is that it’s extremely fast for an ink jet printer. It can spit out a page of text in a matter of seconds. Photos slow it down, and a full page photo is not especially quick. The printing is mostly high quality. The black and white prints are pretty darned close to laser quality, text is clear and sharp, there’s no blurriness, and there are smooth 

” hi hi kcurves”.‐ ChipChick

• Epson also emphasizes a commitment to the environment/sustainability : 

– Its all‐in‐one printer was the first to be certified under EnergyStar’s new international third‐party certification requirement. 

– Epson has also promoted its accreditation as a Sustainability Leader in the SAM Group’s “Sustainability Yearbook 2011.”

• The majority of the Epson reviews this year were for the Epson WorkForce line• The majority of the Epson reviews  this year were for the Epson WorkForce line. 

– Two important reviews to note are CNET and PCWorld. Both outlets reviewed the WorkForce line (CNET ‐‐ 840 and PCWorld‐‐ 635) and gave the printers the Editor’s Choice Award and Top 10 award respectively. Included in all reviews was photo quality, which was regarded across the board as “outstanding.” The only outlet that listed photo quality as a con was PCMag.

Whil Ph t Q lit i t t d i th t t d t t E d t “ h t lit ”• While Photo Quality is touted in the most recent product announcements, Epson does not own “photo quality.”   

– Both Epson and Canon emphasize superior photo quality. However, the Inkjet Conversation Analysis revealed that photo enthusiasts are more likely to associate photo quality with Canon. 

–Global Message Delivery (Q1 2011)Epson and Inkjet Products Tone (Q1 2011)

67% of Epson Coverage featured “Quality” message55% of Epson Coverage featured “Efficiency” message39% of Epson Coverage featured “Sustainability” message_____________________________________________________

69% of Epson WorkForce Coverage targeted SOHO69% of Epson WorkForce Coverage featured “Efficiency” message

The Epson Owner+ Overall

+ Affluent, tech savvy consumer likes tangible experiences focused around design and photography+ Demographics

+ Households: 15.9 MM+ Median HHI $81K+ Median age 45Median age 45+ Urban/Suburb ‐West region

+ Segments+ Green Advocates (176i) ‐ the greenest of the Green. Nature and the environment are of paramount importance to 

this segment, whose members firmly believe their actions have an impact on the world. They not only recycle but also consider environmental impact an overriding factor in all their purchase decisions. And they actively support p g p y y ppenvironmental causes.

+ Buyers of Best (128i) ‐ Low price is not the objective to consumers in this segment; it’s quality that matters most. They are careful to buy the best, and brand loyalty trumps all other considerations in their purchases. They favor environmentally safe products, are extremely comfortable with new technology, and always check the ingredients and nutritional content of food products they buy.

+ Leisure+ Leisure+ Attended an art gallery show (past 12 months) (140i)+ Attend classical music/opera performances  (134i)+ Went to a live theater performance (139i)

+ Media Usage+ Over‐index for listening and contributing to National Public Radio (NPR)Over index for listening and contributing to National Public Radio (NPR)+ Online

+ 57% obtained the latest news/current events from the Internet in the past 30 days+ 17% read a blog in the last 30 days+ 13% used Gmail yesterday

+ Read magazines like Dwell, MacWorld, American Photographer

Source: 2010 MRI Doublebase

Strengths

Strength #1: ‘Photo Creative’ theme messaging on consumer lines

• Epson’s global brand tagline “Exceed Your Vision” is quite strong.

Consumer  Photo Products

High End  $149+ • Artisan

Midrange  $79‐129 • XP‐400

Epson’s Messaging                                                       GLOBAL BRAND  TAGLINE: “Exceed Your Vision”Consumer Professional

Low End  < $79 • NX/SX Stylus

Stylus (everyday use printer)Tagline: “Smart. Simple. Amazing.” …and…“Designed For Excellence”RTBs/Claims: Four amazing 

WorkForce (home office printer)Tag Line: “Engineered for Business”RTBs/Claims: Performance, speed, faxing from computer, 

Artisan (personal, photo & creative projects printer)Tag Line:  “Imagination Meets Innovation” …and…“Designed For Creativity”

Stylus Pro (wide format printer)Tagline: “Professional Quality Prints. Be Inspired.” RTBs/Claims: Wide professional 

Consumer Professional

features in one affordable machineXP‐400: / “Expression Home”Claims: Superior Performance, Tablet & Smartphone Printing

instant‐dry ink, water resistant prints.World’s Fastest All‐In‐One

RTBs/Claims: #1 preferred image quality • World’s fastest 4" x 6" photo print speed • Sleek, compact footprint

Versatility Quality Speed

prints at home (13” – 17” wide) • Industry‐leading pigment ink technology • Professional control

Versatility Quality Speed

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Strength #2: Asserts they are #1 in Photo Quality• Epson claims to be “#1 in Photo Quality” on Artisan printer models (supported by 

th t t t “P f d 3 t 1 b ”)the statement as “Preferred 3‐to‐1 by consumers”)

Epson Artisan 725/730/837 Printer Packaging

The consumer is deferred to Epson’s website (www.epson.com/artisan) with the supporting footnote: * #1 in photo quality when compared to photo all-in-one printers priced at $300 or less based on independent testing. [ Still waiting for response from Epson legal ] 12

Strength #3: Individual Ink Tank Replacement & XL tank availability• Individual ink tank replacement consumer benefit messaging is clearly shown, 

lti l l ll E k i “R l l th l d”across multiple panels, on all Epson packaging “Replace only the color you need”

• High Capacity (XL) messaging is prominent on higher‐end models, including all Artisan and Workforce Series printer models. 

KODAK Confidential

Epson NX430 (Walmart $68)

• Key messaging is ‘Small AiO’ & Print and Share from anywhere.

Strength #4.a: Photo & Quality focus on Printer Packagingy g g y

• “Space Saving Design”

• Photo printing EOU & output performance, “designed for excellence”, “replace only the color you need” “high‐quality copies”only the color you need ,  high quality copies . 

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• Key Messages include “#1 in Photo Quality” & “World’s Fastest 4x6” Photos”

Epson Artisan 837 ($249)

Strength #4.b: Photo & Quality focus on Printer Packagingy g Q y

• Photo Theme messaging (i.e. Lightning image seen across 5 panels)

• Other 1: Designed for Excellence / Replace only the color you need

• Other 2: High capacity inks available / Designed for Creativity / Premium Quality• Other 2: High‐capacity inks available / Designed for Creativity / Premium Quality

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Weaknesses

Weakness #1: Epson CPP, Higher across all models• Epson printer models do not offer a better CPP Average as compared to Kodak*

• Kodak provides a 35% lower CPP on average*

* Compared to leading inkjet AiO printers with an MSRP of less than $190 as of June 2012. Cost per page is for ink only and is based on continuous printing using manufacturers’ standard ink cartridges, in single quantity pricing (i.e. no multi-packs, high capacity, combo packs, value packs or special promotions), as of June 2012. Average cost per page is a weighted average for black text documents, mixed-color graphics and photos based on typical consumer printing behavior.

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Weakness #2: Ink Cartridge Costs are 2X over Kodak, on Avg.

• With Epson the average customer might be better off just to• With Epson, the average customer might be better off just to buy a new printer; Epson printers have the 3rd highest avg. ink load costs among all the major OEMs (load cost ranges between $38 and $81)* • Kodak’s ink load cost, at $33, is about half vs. Epson, on Avg.

$59 $55 $55 $49$33 $55$60 $59 $55 $55 $49$33

INDUSTRY AVERAGE

$55$60

* As compared to leading consumer inkjet printers using manufacturers' recommended standard ink cartridges available in single quantity pricing (i.e. no multi-packs, high capacity, combo packs, value packs or special promotions); excludes printers that use only one cartridge. Manufacturer ink pricing as of Q2 2012.

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Weakness #3.a: Artisan Prints ‐ Substandard Print Longevity

/• Artisan 7xx/8xx photos will generally have poor print longevity. While Epson’s low‐end NX/SX 4‐ink systems do have good longevity the Epson Artisan photos dolongevity,  the Epson Artisan photos do not unless they are framed/protected under glass.  While Artisan prints may initially come out looking great TPRinitially come out looking great, TPR testing demonstrates that within ~11 years, prints will rapidly fade when exposed to typical ambient air conditions p yp(…and even faster in urban cities) 

• Torrey Pines Research competitive comparison test report is posted on‐line: 

http://store.kodak.com/store/ekconsus/en_US/ContentTheme/pbPage.groundbreaking_technology

NOTE: As Artisan photo output has inferior print permanence  (longevity), Epson Artisan models should be disclosing ‘when framed under glass’.

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• Epson T099/T080 inks (Artisans) have inferior print longevity compared to Kodak AiO*

Weakness #3.b: Artisan Prints ‐ Substandard Print Longevity

Kodak AiO . 

KODAK AiO Epson Artisan 7xx/8xx

>20 Years Exposure

>20 Years Exposure

* Based on independent third party print permanence ozone testing on microporous photo papers – May 2009, Dec 2010 & June 2011.

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Weakness #3.c:  Unrealistic Longevity Claims• Epson print longevity is only valid when prints are placed into an album or protected under glass – never when exposed to the open air!

Epson Claim – Photos last over 200 Years• When place into an Album !!

p g p p

• When place into an Album !!• When protected Under Glass !!• Disclosure refers customer to www.epson.com for more information !!

Epson NX/SX125 Printer Brochure:

Kodak Claim –Photos/Documents last a lifetime* & Best in Class Print Permanence**

Kodak received high permanence ratingsKodak received high permanence ratings under all conditions:

Display permanence (light fade)………120+ YearsAlbum/Dark storage……….……………120+ YearsEnvironmental exposure (ozone)……. .100+ YearsHumidity …………………………………Very HighWater fastness…………………………..Moderate to High

* Under all common consumer display and storage environments. Based on testing by Wilhelm Imaging Research (WIR). **Based on print permanence testing by Wilhelm Imaging Research (WIR). WIR's image fade resistance testing included the five major longevity testing factors: light, temperature, unprotected exposure to ambient ozone, high humidity and contact with water. For comprehensive information on the permanence of Kodak pigment inks and print papers go to: http://www.wilhelm-research.com/kodak/index.html. Actual results may vary.

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Weakness #4: Fastest Photo speed claims based on draft mode• Quality Photo printing is what really counts; Kodak provides the world’s fastest photo speed printing for the highest quality prints2

• World's fastest 4" x 6" photo print speeds – 10 secs1

Epson Claim (Bordered photos in Draft Mode!!)

photo speed printing for the highest quality prints . 

• Draft Mode !!

• Bordered Print !!

• Who wants poor photo quality?Epson Artisan 800

1 Color photo in Draft Mode on Premium Photo Paper Glossy measured from start of paper feed. Actual print times will vary based on system configuration, software, and page complexity. See www.epson.com/printspeed for details, including complete ISO reports.

World's Fastest photo speed

Kodak Claim (Our Best vs. Everyone Else’s Best)

World s Fastest photo speed printing for highest-quality prints 2

2

4x6” Highest-Quality Photos in less than 30 seconds Kodak Hero 7.1

2 As compared to leading competitive consumer inkjet printers, June 2011. Based on independent third party testing using manufacturer's best 4x6 in. (10x15 cm) photo paper and recommended photo mode. Borderless mode used where available. Visit http://www.kodak.com/go/inkdata. 22

Opportunities

Opportunity #1: Epson’s high ink cost – Kodak provides 35% lower average CPP

• Epson has higher ink load costs (i.e. proposed tag line “the Epson consumer is better off to just replace their Epson printer rather than buy ink for it” ). 

Epson ink load cost ranges between $38 and $81 for majority of i i i kj AiO d l K d k’ i k l d i l $33competitive inkjet AiO models; Kodak’s ink load cost is only $33. 

• Epson has higher CPP.  Kodak offers the Lowest Avg. CPP compared to any printer model from Epson, Kodak CPPs are 35% lower on average*.

Epson’s printer model CPP Average ranges between 11 cents and 17Epson s printer model CPP Average ranges between 11 cents and 17 cents while the Kodak’s 30‐series platform CPP Avg. is 9.3 cents

Printer Models CPP Average (USA)

Epson NX230/430/420 13.3 cents

Epson Workforce 435/545/635/645/845 14.3 cents

Epson Artisan 725/730/837 11 2 cents

Kodak is 35% Lower on Epson Artisan 725/730/837 11.2 cents

Epson NX115/NX110/NX215 17.0 cents

Epson NX400 15.9 cents

Average

24* Compared to Epson inkjet AiO printers with an MSRP of less than $190 as of June 2012. Cost per page is for ink only and is based on continuous printing using manufacturers’ standard ink cartridges, in single quantity pricing (i.e. no multi-packs, high capacity, combo packs, value packs or special promotions), as of June 2012. Average cost per page is a weighted average for black text documents, mixed-color graphics and photos based on typical consumer printing behavior.

Kodak ESP 3.2 / Hero 3.1 / ESP Office 2170 9.3 cents

/ i l i i l i k id

Opportunity #2: Epson’s ink packaging causes greater environmental impact

• Waste / environmental impact: Single‐ink cartridges generate far more waste than ganged cartridges. Each individual cartridge is wrapped in plastic individually, has to be transported individually etc A ganged ink cartridge has a much smaller wasteindividually etc. A ganged ink cartridge has a much smaller waste and carbon footprint over individual ink tank system, on average. General packaging waste will be ~2X over Kodak, based on average consumer printing behavior over 3 year printer lifeaverage consumer printing behavior over 3 year printer life.• Hassle / ease‐of‐use: Single‐ink systems are highly annoying because they require far more user interventions based on different states of the printer error warning messaging. This 

It takes 1,000 years for a cartridge to decompose p g g g

equates to more inconvenient trips to the store and more downtime; often requiring the consumer to purchase a complete set of ink tanks, $38 to $81 on avg.

even more when it is inside a landfill. Each year 300 million of these cartridges are thrown away. This amounts to 75,000 tons of trash

Typical Epson NX115 error messaging:error messaging:

Threats

• New XP‐400 product messaging: ‘Expression Home’

Threat #1:  Expression Home Marketing Campaign,  Sub $99 Offerings

• New XP‐400 product messaging:  Expression Home

• Clearly targets ‘photo‐centric’ & ‘home creative’ consumers.

• Higher CPPs with new T‐200 ink supplies (lower yield tanks)

• Message ‘Superior Performance’, Tablet & Smartphone Printing

• Continued ‘Small‐In‐One’ messaging (similar to NX series models)

• Claim to have a 40% smaller design than SX130

Epson Stylus XP‐400 ‐ USA (~$99) Epson Stylus XP‐102 ‐ UK (£49.99)

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Threat #2:  34% Ink Savings Messaging (United Kingdom only)• Epson is using ink efficiency test results to support claim “Save up to 34% ink”. Consumers are led to believe this is an ink COST savings when in fact it is notConsumers are led to believe this is an ink COST savings, when in fact it is not.

• TUVRheinland Study (Aug. 2011) found that IIT systems use a greater percentage of the total ink vs. ganged printer systems.• Study applies to ‘color’ ink

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• Study applies to ‘color’ ink cartridges only, but this is not defined within Epson’s claim.