ANDREA IMPERIALI

THE PIRELLI BRAND

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2012-2015 BRAND STRATEGY

BRAND ACHIEVEMENTS 2011

OUTCOME 2015 AND VISION

AGENDA

PIRELLI BRAND IN 2015: GLOBAL PREMIUM LEADER

Our Brand will further increase its value

and translate it into tangible business results, ensuring a key contribution

to achieve Pirelli strategic goal for 2015, becoming

GLOBAL LEADER

Making our Brand truly global,

raising its awareness

and image to consistent levels

across all our markets, giving

priority to those which

are key to our 2012-2015 Plan

Further reinforcing our Brand

Premium positioning,

consolidating it as the most

admired and desired in the key

segments of the Premium market

and becoming the industry top

value-generating Brand, based

on Interbrand studies

Growing our Brand ability

to guide and influence the

customer purchase decision

process, by ensuring the

achievement of top Initial

Consideration Set (ICS) scores

across key markets

PREMIUM

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VISION 2015

The history of innovation behind Pirelli

gives its Brand legitimacy, recognition and relevance beyond the

Tyre industry, providing a clear and inspired overarching vision

OUR MANIFESTO

WE CHANGE THE DRIVING EXPERIENCE BY

CONSTANTLY CHALLENGING THE BOUNDARIES

OF TYRE TECHNOLOGY, STYLE AND

SUSTAINABILITY, SETTING TRENDS IN

COMMUNITIES ACROSS THE WORLD

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OUR BRAND MANIFESTO

"Glamourous/Cool" "Sporty" "Prestigious" "Fit for high-end

vehicles/prestigious

"Premium/

High level"

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PIRELLI BRAND VALUE IN 2011: CONSISTENTLY HIGH

SCORES IN PREMIUM POSITIONING ITEM PERCEPTIONS

2011 RESULTS

Source: Interbrand/GFK, Global Primary Research, 2011

PIRELLI

Our Brand plays the highest role among all global players in driving purchase decisions.

Measured through Interbrand’s proprietary Role of Brand Index (ROBI),

Pirelli’s impact on customer choice is on average 15% higher than the nearest competitor’s.

This makes our Brand an engine of growth and profitability in the Replacement channel.

Pirelli Role of Brand Index

(industry highest)

+15%

vs. nearest competitor

Source: Interbrand – October 2011

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PIRELLI BRAND VALUE IN 2011: TOP ROLE

IN DRIVING PURCHASE DECISIONS

“Modern and innovative”

“Unique, inimitable”

“Sporty”

“I would be willing to pay an above

average price for this brand”

0% 20% 40% 60% 80% 100% 120%

“Offers technologically cutting

edge products”

“Involves me/makes me

passionate about it”

“Fitted to the top prestigious car

manufacturers”

“Premium/high level”

“Glamorous/cool”

“Best Brand in its category”

COMPARISON BETWEEN

RESULTS ON:

sample aware of Pirelli’s role as

exclusive F1 supplier but unaware of

other Pirelli brand-building initiatives

sample unaware of all initiatives

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AFTER ONE YEAR, PIRELLI’S F1 COMMITMENT ALREADY

HAS A DECISIVE IMPACT ON PERCEPTION SET ON

“AWARE SAMPLE”…

Source: Interbrand/GFK, Global Primary Research, 2011

+72% INCLUSION OF THE BRAND

IN THE CONSIDERATION SET IN

SAMPLE AWARE OF PIRELLI’S ROLE AS F1 SUPPLIER

BUT UNAWARE OF OTHER

BRAND-BUILDING INITIATIVES

vs.

SAMPLE UNAWARE OF ALL INITITIATIVES

Source: Interbrand/GFK, Global Primary Research, 2011

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…AND AFTER JUST HALF A SEASON,

PIRELLI’S F1 COMMITMENT ALREADY HAS A DECISIVE

IMPACT ON “INTEREST” AND

“LIKELIHOOD” TO PURCHASE…

~ EUR 200 MLN

CONSERVATIVE ESTIMATE OF IMPACT

OF PIRELLI

F1 INVOLVEMENT

ON PIRELLI BRAND VALUE

The contribution tends to increase given the expected rise

in global awareness of Pirelli role as exclusive supplier of F1

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F1 HELPS THE BRAND HELP THE BUSINESS

(AND THIS IS JUST THE BEGINNING)

Source: Interbrand/GFK, Global Primary Research, 2011

Source: Interbrand, Brand valuation October 2011

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2.27 €/Bln

PIRELLI BRAND VALUE IN 2011:

ECONOMIC VALUE ASSESSED BY INTERBRAND

Source: Interbrand

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+26%

yoy

2010

1.8 €/bln

2011

2.27 €/bln

2008/2009

1.5 €/bln

F1

0.2 €/bln 0.47 €/bln

0.27 €/bln

Other

initiatives

Total 2011

Increase in brand

value

PIRELLI BRAND VALUE IN 2011:

A VALUE GENERATOR FOR THE BUSINESS

(1) Interbrand Brand Valuation Methodology, Oct. 2011

(2) Geographies: Emea + Latam + Nafta + Asia Pacific + Russia. Segments: Moto, Car, Truck. Channels: OE, Replacement

(3) Based on 2011 - 2015 Plan

(4) Net present value + Terminal value

Financial analysis (3) Demand analysis Competitive analysis

Brand Value Calculation Method (1)

Segmentation by Region, segment, channel (2)

Economic Value Added Role of Brand Index Brand Strength Score

Brand Earnings Brand Risk Rate

Brand value: ~ 2,27 bln €

(economic flows from brand) (discount rate)

A B

C

X

=

(4)

ALL METRICS

LINKED TO BRAND VALUATION METHODOLOGY

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LEVERAGING OUR BRAND ASSET:

TRANSLATING BRAND VALUE

INTO BUSINESS PERFORMANCE

AND STRATEGIC ACHIEVEMENTS

PIRELLI BRAND: 2011 – 2015 STRATEGY

BRAND PLAN

Brand value / EBIT

4X vs. global

competitors

average

OUR UNPARALLELED

BRAND VALUE / EBIT

SHOWS THAT THROUGH INCREASED SUPPORT

THE BRAND CAN EXPRESS ITS POTENTIAL,

FURTHER FUELLING PIRELLI GROWTH AND PROFITABILITY

Source: Interbrand

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THE RELATIVE VALUE GENERATED BY OUR BRAND

DRAMATICALLY OUTPERFORMS GLOBAL PEERS,

UNVEILING ITS POTENTIAL…

COMPETITOR 1 COMPETITOR 2 COMPETITOR 3 COMPETITOR 4 PIRELLI

Source: Nielsen based on Carat analysis

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OTHERS

GLOBAL COMPETITORS

PIRELLI

However small its share of voice in terms of media expenditure,

Pirelli scores high on metrics typically associated with high spending:

Sponsorship recall

Logo recall

Touchpoints recall

… WHICH WILL BE UNLOCKED AS WE REBALANCE

OUR SHARE OF VOICE IN KEY MARKETS

…improves

Brand Value

Brand economic value

F1

Pzero

in APAC +50%

in NAFTA +30%

+40%

~400 €/Mln

in Russia +120%

~ 200 €/Mln

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RISE IN MARKETING SPENDING WILL IMPROVE BRAND

VALUE DRIVERS, ENHANCING OVERALL BRAND VALUE

BY 40% IN 2015

Focused Marketing

spending…

Marketing Budget

Media and Advertising

expenditure

2x

2.5x

…with strong impact on

Brand value drivers…

Facebook posts 20 Mln (2015 yearly target)

Brand exposure F1

media equivalent > 300 Mln (yearly basis)

Brand exposure – The Cal +20% (vs. 2011)

Brand exposure – PZero +150% (vs. 2011)

(vs. 2011)

(vs. 2011)

Contribution to Brand value in 2015:

In the 10 key markets:

Top of mind level

Initial Consideration Set

Active Evaluation

+20% (vs. 2011)

Top 3

Top 3

Intention to buy

in Premium segments +150% (vs. 2011)

Brand awareness in RDEs +40% (vs. 2011)

THE CAL FORMULA 1 PZERO FASHION ADVERTISING

GLOBAL PREMIUM LEADER

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SYNERGIC INVESTMENTS TO RAISE OUR SHARE OF VOICE

WILL HELP US REACH OUR STRATEGIC GOALS

ANNEX

BRAND VALUATION APPROACH

Financial performance measures an

organisation’s financial return to its

investors.

For this reason, it is analysed as economic

profit, a concept akin to EVA (Economic

Value Added). To determine economic

profit, taxes are removed from net

operating profit to get to net operating

profit after tax (NOPAT). From NOPAT,

a capital charge is subtracted to account

for the capital used to generate the

demand revenues: this provides the

economic profit

for each analysed year. Financial

performance is studied across each

individual segment.

FINANCIAL PERFORMANCE

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BRAND VALUATION APPROACH

IMPORTANCE OF BRAND

The Role of Brand Index (RBI) measures

how much of the decision to purchase is

attributable to the Brand Power,

regardless of other aspects, like product

price or features. RBI is defined through

an in-depth analysis based on primary

research data. Because the Brand’s role

in driving demand differs depending on

geography, type of tyre and channel, this

analysis is carried out for each individual

segment.

RBI is combined with the economic profit

of the branded products to determine the

amount of branded earnings that

contribute to the total value.

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COMPETITIVE BENCHMARKING

Brand Strength Score (BSS) measures the

ability of the brand to secure the delivery of

future expected earnings. Brand strength is

reported on a 0-100 scale, where 100 is

perfect, based on an evaluation across 10

dimensions of brand activation.

Performance in these dimensions

is judged relative to other brands in the

industry, and is based on quantitative

primary research carried out in 2011.

BSS inversely determines, through a

proprietary algorithm, a discount rate. That

rate is used to discount branded earnings

back to a present value based on how

likely the Brand is to withstand challenges

and deliver the expected earnings.

BRAND VALUATION APPROACH

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BRAND VALUATION APPROACH

BRAND VALUE

Brand value is calculated as the net

present value of future brand earnings,

discounted back to a present value.

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Our Brand is a powerful value creator.

It drives choice, generating margins. It secures demand, mitigating risk.

In doing so, it provides a vital and quantifiable contribution

to our business results.

OUR WAY OF LOOKING AT BRAND VALUE

DEMAND GENERATION DEMAND CONTINUITY

HIGHER EXPECTED RETURNS LOWER RISK

BRAND VALUE

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The value generated by the Pirelli Brand is now also a Key Performance Indicator

(KPI), which will be tracked year on year with advanced techniques for the analysis and

financial valuation of brands.

The valuation is carried out in over 20 segments, combining

business units (Car, Moto, Truck)

channels (Original Equipment and Replacement)

geographies (Regions).

This provides Pirelli with a granular and constantly updated understanding

of the way Brand Value is generated across the business,

increasing marketing effectiveness and efficiency

FROM BRAND MANAGEMENT

TO BRAND VALUE MANAGEMENT

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The first to be ISO-certified, Interbrand’s Brand Valuation methodology

is the most widely accepted approach worldwide.

Consistently with modern corporate valuation approaches, it looks at the ongoing

investment and management of the brand as a business asset.

It takes into account all ways in which a brand benefits the organisation,

from driving demand to attracting and retaining talent.

BRAND VALUATION APPROACH

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Pirelli focus on long-term Brand-building initiatives has

created a Premium Brand with a considerable potential.

The opportunity is now to leverage that potential by

increasing shorter term, purchase driving investments.

Through a rebalanced advertising pressure and F1

unparalleled strength and speed in creating Brand

awareness worldwide, we will pursue top three positions

in ICS scores, directing the purchase process in the

Premium segment across key markets.

WE SHALL FOCUS ON INCREASING

BRAND AWARENESS AND INTEREST AND ON DRIVING

PURCHASE ACROSS ALL KEY MARKETS

FORMULA 1 ADVERTISING

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LEVERAGING BRAND VALUE (Short term / purchase driving)

WE SHALL ENSURE ONGOING INVESTMENT

TO CONSOLIDATE A CONSISTENT PREMIUM

POSITIONING ACROSS ALL MARKETS

THE CAL FORMULA 1 PZERO FASHION

There will be ongoing investment on those initiatives that have proven successful in providing a unique profile to our Brand and setting it apart from the competition.

All efforts will go into ensuring that Pirelli is recognised as a Premium Brand with the same level of perception on a global scale.

The contribution of these investments to Brand Value will be constantly measured with the aim of producing the highest economic value in the industry.

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CREATING BRAND VALUE (Long term / equity building)

CREATING, LEVERAGING AND MEASURING BRAND VALUE

WILL BE CRITICAL TO BUSINESS PERFORMANCE

AND THE ACHIEVEMENT OF OUR STRATEGIC GOALS

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