1. 0307-43-001 Product Promotions Effectiveness Chris Tantakis Canada

2. 2 Background – Current Process n Product Promotions: n Product Price Discounts n Rep / Manager Commission incentives n Direct Customer incentives n Origin of promos n Corporate objectives / focus n Marketing objectives / focus n Vendor objectives / focus n Analysis n Run Rate Trend Analysis n Product life cycle / replacement n Response to Competition More effective measurement, analysis, and benchmarking will improve effectiveness

3. 3 Background – Current Process n Currently: n A significant portion of our promotions are applied after the sale is complete (Survey to determine current %) n Creating a commission enhancement n Increasing Selling Expense n Adversely affecting ROI

4. 4 Project Definition n Problem Statement: n Total INA Marketing Spend requires greater impact assessment. n Track $ spent to benefits realized … Canada Region product specific marketing promotions for IBS sales reps. n Project Definition: n Summarize and define current marketing spend and re-align it to maximize benefit … n identify Key Input Process Variables effect on sales success rate (close rate)… n Project Metric “Y”: n Big Y = Effectiveness of Marketing Spend n 2nd Level Y = Product Promotions Effectiveness n 3rd level Y = ROI from Product Promotions n Y 1 = closing rate per proposal n Y 2 = number of proposals per promo n Scope n All product promotions for Canada (including Canon / Ricoh dealer channel promos)

5. 5 Project Evolution Mkting Spend Effectiveness = f (Promos Effectiveness, Advertising Effectiveness, x 3, x 4,...x n) -------------------------------------------------------------------------------------------------------------- Promo Effectiveness = f (ROI, Inventory adjusted, Branding, x 4, x 5,...x n ) -------------------------------------------------------------------------------------------------------------- ROI = f(Cost, Return) -------------------------------------------------------------------------------------------------------------- Return = (Close rate, number of proposals, size, x 4,...x n )

6. 6 Project Definition n Project Benefits: n Operating Income will improve by $402k in the 12 months following project completion, through an improved closing rate per promotion n Close rate will increase by 15% n Financial Benefit: n Every current new product is eligible for some kind of promotion n only 65% of all sold products are billed with a promo n $129M FY04 Equipment budget Canada n @ 65% of deals apply promos = $83.85M eligible product sales n @ 15% improved close rate = $12.57M incremental Revenue n @ OI from Eqmt Rev @ 3.2% = $402k incremental OI n Leveragability: n Project can be leveraged across the balance of INA through the Malvern Marketing team.

7. 7 Process Map – High Level Project focus Spin off benefits

8. 8 Potential Inputs “X’s” Y1 = Close Rate (per proposal) Close Rate = f(price discount, customer direct incentive, rep commission incentive, rep training, x 5,...x n ) Y2 = Number of proposals (per promo) Number of Proposals = f(rep commission incentive, market need, price discount, x 4,...x n )

9. 9 Measurement System for Y n Track success rate of proposals with a cross section of the sales force: n Different Success levels: n 5 reps above 100% of Plan n 5 reps between 80% - 100% of Plan n 5 reps above 60 - 80% of Plan n 5 reps below 60% of Plan n A Mix of Rep Types: n 4 AE 3 n 8 AE 2 n 4 AE 1 n 4 ASR n Other considerations: n Reps and Teams with higher forecast accuracy vs. On Target

10. 10 Measurement System for Y n Data Collection Methodology: n Collect Data by e-mail n Develop operational definitions for the reps n Reps to complete a convenient tic box survey weekly n Validation methods for rep data n Proposals written (& on file with Admin assistant) n On Target Phase 3 n Sales Commission System Data

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12. 12 Next Steps n Sept 21 – Oct 3 n Set Survey Questions based on FMEA n Oct n Collect data on inputs n Oct End n Identify “Key Process Inputs” from data n Nov Week 1 n Build test promos based on “Key Process Inputs” n Nov n Collect data on inputs n Analyze data n Dec n Provide guidance for future promo design n Provide revised process map

13. 13 Project Team n Process Owner – Terry Ryan n Team Members: n Data Support – Anne Quigley, Daryl Hahn, Danny Ponich n Order entry – Kismet Weiss, Lisa Jackson n Sales Commission System – Shirley Pym n Marketing – Suzanne Payer, Angie Tinto, Michael Gorman n Program Directors – Jim Moschos, Pat Forrest n Sales Manager – Bill Ibberson n Black Belt – Chris Tantakis n Champion – Sean Smith n Cross Functional Champion – Steve Poole n Financial Analyst – Connie Thorp n Master Black Belt – Dan Douglas Strategy and Resources Knowledge and Data Knowledge Methodology and Statistics Progress Validation Financial Benefit Validation Six Sigma Methodology