Marketing Strategy

Egbert van Acht

CMO Philips Consumer Lifestyle
The economic downturn is impacting demand in
Consumer Lifestyle’s mature markets
All figures given as percentages 06- YTD Sep ’08, percent
Western Europe 1) US3) * UK Spain
’06 ’07 ’08 ’06 ’07 ’08 ’06 ’07 ’08 ’06 ’07 ’08
18.7
14.6 14.9
CL Value 5.4 8.6 7.6
1.8 4.8
growth,
YoY -2.2 -5.0
-7.1
-12.8

17.0 17.8 20.3

5.0 6.4 6.0 6.9

CE Value 2.1
growth, -1.0
YoY -4.7
-8.5
-12.9
26.2

SDA 2) 8.0 11.2 11.3

6.0 5.0
Value 2.4 0.4 1.5
growth,
YoY -7.6 -6.0
-12.0

1) Europe: UK, NL, IT, D, FR, SP 3) CE Includes: DVD, Home Theatre Systems, Audio Home Systems, excluding TV.
2) SDA = Small Domestic Appliances SDA Includes: Men Shavers and Power Toothbrushes
Source: GFK, NPD, AC Nielsen
Through August / September ’08, Consumer Lifestyle markets
developed positively in emerging markets
All figures given as percentages

CEE 1) BRIC countries YTD Aug ’08 growth

’06 ’07 ’08 Brazil4 Russia2 China3

33.2
22.7 20.0 22.1
CL Value 13.3 7.8
growth,
YoY

29.4 27.5
24.1 26.5
13.5
CE Value 7.9
growth,
YoY

34.0
SDA Value 16.4 18.8 10.5 8.8
growth,
YoY -0.8

1) Russia and Poland for CL and CE; Russia, Poland, Turkey and 3) Estimation based on low coverage panel data for key categories
Ukraine for SDA 4) Estimation based on low coverage GfK panel data for key categories
2) YTD Sept 08 was considered Source: ZYK, SINO, CEC (China), local GfK (Brazil)
We maintain or increase our market share in most key
categories around the world
All figures given as percentages

Western Europe US
Philips
+10.7
Share
Gain, MAT +5.6
Aug08 vs +2.6 +3.0 +2.5 +3.6
+1.3 +2.1 +1.9
+0.9 +0.6 +0.6
Last Year
-0.4 -0.8
-2.0 -2.3
DVD Home Men’s Oral Mother
TV DVD DVD Home Men’s Female Coffee Juice Garment Oral Mother Player Theater shavers Health and Child
Player Recorder Theater Shavers Depilation Extractor Care Health and Child System Care Care
Systems Care Care**

+16.5
Russia China Brazil
+8.2
Philips +8.6
+2.1
Share +2.3 +3.1 +2.2 +2.3
+1.1 +3.8 +4.4
Gain, MAT +0.5

Aug08 vs +0.2
-1.9
Last Year -5.7 -1.7 -1.0
-12.4
TV Audio DVD Men’s Female Juice Garment Oral TV DVD DVD Home Irons Shavers Female TV Home DVD
Home Recorder Shavers Depilatio Extractor Care Health Player Portable Theater Depilati Theater Player
System n Care* System on System

* Power Toothbrush including Refills **UK only

Source: GFK (WE countries, Brazil,Russia), SINO,CEC,ZYK (China), NPD(USA)
Philips has clear global leadership positions
Male shaving, Power Toothbrushes, Mother & Childcare, DVD players
and portable DVD

Philips is global #1 leader:

Value Share Index2)
Philips Category Key Competitor Philips vs. Key Competitors

1 Male dry shaving 240

2 Power Toothbrush 124

3 Mother & Childcare 101

4 DVD players 195

5 DVD portable 143

1) Market share: 14 key markets: 6WE countries, US, BRIC, Poland, Turkey, Ukraine, MAT Aug 2008; US excluded for DA categories and hair care
2) Index: 100 = as good as the best competitor; > 100 better than the best competitor; < 100 less good than the best competitor
Source: market share data: GfK, NPD, AC Nielsen, CEC, SINO, ZYK;
Philips has a number of regional leadership positions
Drip Filter Coffee, Female Depilation, Garment Care, Haircare and Food Preparation

Philips is regional leader: #1 / #2 in key regions Value Share Index2)

Philips vs. Key Regional
Philips Category Key Competitor Competitors Leader in

307 WE
6 Drip Filter Coffee

55 WE, CEE
7 Female Depilation

130 WE, CEE,

8 Garment Care China

90 CEE, China
9 Haircare

95 WE, CEE,
10 Food Preparation Brazil, China

1) Market share: 14 key markets: 6WE countries, US, BRIC, Poland, Turkey, Ukraine, MAT Aug 2008; US excluded for DA categories and hair care
2) Index: 100 = as good as the best competitor; > 100 better than the best competitor; < 100 less good than the best competitor
Source: market share data: GfK, NPD, AC Nielsen, CEC, SINO, ZYK;
Net Promoter Score drives profitable growth

%
Only excellence drives growth !
promoters
(Score 9/10)

Growth

% Acceleration

detractors
(Score 0-6)

Best in class NPS

4% market share growth
%
net promoters
Worst in class NPS
-4% market share growth
We drive NPS improvement across all touch points
in a structured and disciplined manner
50% China NPS Repair

40% Benchmark
%
+10 & deploy target
30% NPS

20%

H1 - 08 H2 - 08
2007 2008 2009 2010

Tracking NPS at Risk Measure at key

key touch point Management touch point

Action – win
promoter plans
Global and Regional Leadership positions correlate with
higher Net Promoter Score and higher profitability

EBITA multiple vs.

Leadership Net Promoter average Consumer
Philips Category position Score Lifestyle

Shavers Global No 2 3-4x

Oral Healthcare Global No 1 3-4x

Mother & Childcare Global No 1 2-4x

Garment care Regional No 2 2-4x

We have applied the unique marketing competence
which was a core element of DAP’s success

Insights
& Marketing Net Organic
Value Plans Promoters Growth
Propositions NPS®

What will “win” How do we get Are we on track? End-result

promoters for PHILIPS promoters? Are we competitive?
PHILIPS?
We have already a number of great proofpoints that this
marketing competence works to drive profitable growth

Arcitec Health Wake-Up- Ambilight Flexcare

Shavers Juicers Light

Sales
Actual In-
market – 112 115 142 128 110
Index vs. plan

EBIT 156 133 1266 153 125

Index vs. plan

NPS No. 2 No. 2 No. 1 No. 1 No. 1

Note: In-market data in first 18 months after launch

We manage innovation with rigorous discipline to
maximize return of R&D and Marketing investments
• Early agreement on what to deliver; multidisciplinary teams
• Predict chances of success by consumer validation. Stop earlier.
• Quality function ensures products released to the market meet consumer expectations.
• Hard gates for key projects are approved by the management team.
• Investments are visible and traceable through Intranet tool: Marketing @ Investor.

Project Strategic Direction Product Development Commercial Release

Start • Validated Positioning • Product Specification • Product validation
• 3 yr Marketing Strategy • Global Marketing Plan • Local Marketing Plan

Hard Hard Hard

Identification Preparation Implementation Launch
Gate Gate Gate

R&D funding Capex funding Launch

A&P funding decision
We are structurally making our Marketing investments more
effective and efficient to improve ROI and Brand Strength

2006/2007 2008 2009

Shift more funds to A from P 35 : 65 40 : 60 50 : 50

Increase investment in growth

Index 100 Index 120 Index 150
markets

Advertising support for Mission

36% 42% 73%
Critical Initiatives

many campaigns in fewer campaigns in fewer markets,

Funds allocated for Advertising
many markets many markets focused campaigns

Campaign Effectiveness /
ROI - % positive 45% 70% >70%

Interbrand ranking: Philips +8% in brand value: $ 8.3 billion 2008

Online Sales and Marketing a great and incremental
profitable opportunity!

A very solid • 100M consumer visits in 57 countries to

base in 2008 our web environment; growth of 45%
• 36% of consumers positively influenced
after their web visit; best in our industry
• Solid consumer loyalty online, 47% repeat

Mid term key • One Billion Euro online sales at higher

targets profitability; direct and via e-retail
• A social network of 200M online
consumers
Key Takeaways
• We are maintaining our market shares and have several strong global and
regional leadership positions

• Net Promoter Score is key to profitable growth and we drive it

in a disciplined and structured manner

• Proven in former DAP, we have built a clear and unique marketing

competence with great concrete proofpoints

• To optimize Return on Investment on R&D and Advertising & Promotion we

have a thorough product creation and investment allocation process in place

• We have an incremental profitable growth opportunity in online sales

and marketing