By Vincent Young

The battle for power at retail often provides very black and white perspective to those on the brand side, or the retailer side.  Let’s face it – we both think the other needs us more than we need them – unless of course you are a challenger brand, in which case you better be good at showing why they need you.  We’ve tried to illustrate both perspectives, with articles highlighting successful strategies by both brands and retailers.  Now we’re bringing a new perspective – from an angle that is uniquely positioned to see it from both sides – the agency.

The team at Retail Leverage recently caught up with Jon Genese, Senior Vice President of Account Services at AMP Agency (Boston, MA) to get an agency’s perspective on some of the greatest challenges facing their national brand clients at retail.

We asked these questions, which helped cover a wide range of retail / shopper marketing issues:

1. Where does the agency fit in the retail marketing equation?
2. How has your agency had to evolve its capabilities given changes in the retail environment, in particular the changes in relationship between brands and retailers?
3. How do you help brands gain advantage vs. private label?
4. What skills do retail brand managers need to be successful in the future?

In case the video doesn’t play in your browser, here is a link directly to it:

http://www.youtube.com/watch?v=eXCBs3q_5oo

By Vincent Young

A Monster Strategy:

The strategy is nothing short of genius – find a high-demand, high dollar consumer electronic product category and profit by selling the low-cost, high-margin accessories that complement the device and make it actually work.  The key, however, is to market the accessory as “premium” because, after all, when you spend top dollar on electronic equipment, what’s a few extra dollars to get optimal performance out of the thing? That’s basically the bottled-water-like business model and marketing strategy of Monster Cable.  In 1978, Monster Cable pioneered the model by marketing so-called “high-end” speaker wire to stereo retailers.

By the early-mid 2000’s, Monster Cable had evolved beyond premium stereo speaker wire and was the undisputed market leader in the “boutique” cable market  that served as a substantial source of revenue for retailers of electronics such as DVD players, stereo systems and TVs. Since the profit margins of DVD players and TVs were relatively low, the profit margins of Monster Cable products provided supplemental revenue for these retailers. Employees of consumer electronics retailers were all trained to market and bundle Monster Cable and similar products in order to boost retailer profitability. Monster Cable was everywhere!

And then, it happened. The so-called retail “partners” of Monster Cable realized two very important things: 1. Greed is good. There simply was too much profit associated with boutique cables to allow Monster to have it all; and 2. The retailer actually owned and controlled the most important part of Monster’s business success – the retailer sales associate who convinced inexperienced, naive video and audiophiles like me that spending top dollar on these cables was absolutely necessary.  Soon, Monster Cable was basically undercut by their retail partners and replaced by lower-priced private label offerings and the store employees were incentivized to push their own house brands.

Do It To Me One More Time:

So what did Monster do? They learned that simply representing a hefty source of profit for a retailer is not enough to have any type of leverage against the retailer who is predisposed to want to take a cut of profits under a house brand – the key for Monster to continue its business model was to continue to sell high-margin accessories for growing hardware categories, but to do it by building a “call brand” that was so strong that it would be nearly impossible for a retail store associate to switch the consumer over to a lesser-known private label.

By the late 2000’s, portable music players (MP3s, IPODS, etc) represented a large and growing category of consumer electronics. Therefore, the complimentary headphone market was exploding! Players such as Bose, SkullCandy, Koss, Sony, Altec Lansing, and JVC were all competing in the headphone space and driving prices down in a battle for market share. Monster entered the market and completely changed the category experience by forming licensing partnership with hop-hop producer Dr. Dre. “Beats by Dre” were introduced as a premium headphone offering that promised that people could hear their music the way a producer hears it in the recording studio (the Monster brand name was minimized to that of a manufacturer’s credit). Because of this approach, Beats by Dre entered a price-depressed category at a $399 price-point, nearly 8x the category average (over 80% of headphone skus at bestbuy.com are under $100 with most itemized as “under $50”). Based on the success of Beats by Dre, Monster extended its very successful  headphone offering earlier this year by introducing line extensions via partnerships with record producer Sean “P-Diddy” Combs (Diddy Beats) and recording artist Lady Gaga (Heartbeats by Lady Gaga).

Today, Monster is back to being everywhere and now they have substantial leverage against the retailers who nearly “private labeled” Monster out of business just a few years ago. Each of Monster’s product lines are supported by numerous displays inside each Best Buy store. Monster has recently expanded its portable audio product offering by also introducing a line of amateur DJ equipment under the Beats franchise.  In a large number of Best Buy stores, there is now a dedicated area called “Club Beats” which serves as the Monster-exclusive showcase for the latest recording artists, DJs and products that support the live entertainment experience (now that’s retail leverage)!

Key Takeaway:

As brand marketers, the moral of the Monster Cable story is simple – if a retailer can switch your consumer (and profit stream) to a house brand alternative, they will! The only defense is to build (or borrow) a national brand that is simply “unswitchable.”

Editor’s Note:

This case also proves the power of marketing – how else can you explain people shedding their small modernistic “earbud” style headphones for 1970’s huge style headphones like Beats By Dr Dre?  In other news, look out for the next trend in LCD TV’s – the cabinet style.

By Vincent Young

As long as I can remember, only two brands of toothpaste have mattered – Crest and Colgate. I use Crest. Why do I use Crest, you ask? Because, as a very young child, our family dentist used Crest during my annual check-up and he then gave it a tacit recommendation that we should be using it too when he gave me a sample tube of Crest (along with floss and a new toothbrush). From that moment on, my Mother would look for the Crest brand of toothpaste for our family to use.

When a brand is either directly or indirectly specified as “appropriate for optimal effectiveness” by an expert or by a complimentary good, then your brand’s ability to wield assortment, pricing, and promotional power at retail increase significantly.  Sounds like a recipe for Retail Leverage (or inoculation against private label).

So how do you protect yourself and build Retail Leverage?

BUILD A SHIELD THROUGH PRODUCT SPECIFICATION:

Leveraging the power of specification should be seriously considered as a part of the product commercialization strategy of all national brands, if retail is your path-to-market of choice. Rather than setting aside monies for “launch” efforts that are anchored by the traditional advertising campaign or national consumer promotions, it may make sense to plow those same funds into sampling, co-packing, or buying favor with key sources of product specification that can be leveraged with retail to support your desired assortment or positioning strategy. If your budgets are tight, then seriously consider barter or putting free product samples in the hands of key, relevant specifiers as a way to establish your brand as a “call brand” prior to entering the world of retail.

While there are many ways to approach product specification as a means to gaining leverage at retail, there are three sources of product specification that seem to give brands the greatest advantage at retail.

THREE SOURCES OF PRODUCT SPECIFICATION:

Product Specification Source #1 – Schools: When the school specifies “Elmer’s Glue” on its school supplies list, then we, as usually very logical parents, would never consider buying any other brand of something as generic as glue. The power that Elmer’s has at retail to minimize the threat of retail substitutes or private label is greatly enhanced by being specified on most elementary school supply lists. If your product is one that participates in a category that is relevant to teachers of students, then you should devise a strategy to become a specified brand by schools before approaching retail with your next new product or line extension.

Product Specification Source #2 – Physicians/Veterinarians: In addition to the aforementioned example of toothpaste, consider the power that various dog food brands and contact lens solutions providers have at retail given their sampling and specification footprint with the medical professional industry. Brands ranging from Science Diet and Eukanuba Dog Foods to Ciba-Vision and Johnson and Johnson have a tremendous advantage at retail given the reluctance of most consumers to switch away from the brand recommended by their trusted medical experts.

Product Specification Source #3 – Complimentary Goods further Up the Value Chain: One of the best examples of product specification as a form of retail leverage is represented by Avery Dennison. At its peak, Avery commanded as high as 88% market share in the “inkjet and laser labels” category at retail. In addition to offering a broad variety of relatively easy-to-use products (identified by name and template number), the Avery brand name and its label templates were pre-specified in the “Labels and Envelopes” function within Microsoft Office software. Avery’s product and brand specification model through its integration with Microsoft makes Avery Dennison virtually untouchable at retail As a result, Avery has long maintained its position as the dominant brand of labels within the mass, office supplies, and education channels.

RETAIL LEVERAGE TAKEAWAYS:

The next time your new product approaches the commercialization phase of product launch, it may be worth your while to gather your team together to create a “specifier’s map” as part of your brand’s go-to-market strategy/plan. Determining a path to becoming specified by credible sources of influence may be far more important than optimizing the traditional media mix or even securing a celebrity endorsement when selling through retail.

By Vincent Young

Most categories at retail have room for a “good-better-best” stratification of category players. In today’s culture at retail, the retailer is predisposed to seek ownership of the “good” position by introducing an opening price-point category alternative under a private label or house brand. As a result, branded suppliers typically feel compelled to justify a position in either the “better” or “best” lanes within a category in order to survive on shelf long-term.

Herein lies the opportunity for a paradigm shift for branded suppliers at retail – why not offer both? In order for branded suppliers to have greater control over the rules of category engagement, many branded suppliers at retail have realized that the key to success is to offer branded solutions for both “Better and Best” simultaneously to the retail marketplace. How do some do it – by expanding their own brand portfolio and purposely introducing and managing a new category competitor through licensing agreements?

THE RETAIL LEVERAGE PRINCIPLE OF PHYSICS:

The concept of protecting your own brand by purposely creating a new category competitor through licensing may sound counterintuitive to a discussion about how to improve your company’s brand presence at retail until you consider the following: the discipline of Physics teaches us that objects in opposition create friction and from friction, energy is created. Today, many successful brand strategists understand how to apply this basic principle of matter to create a form of leverage against retailers and to dominate a category at the same time.

Here are a few examples of how some branded suppliers have been able to gain greater control over a category at retail by applying the Retail Leverage Principle of Physics:

Office Supplies Category

For many years, the Office Paper category has operated like a commodity with too many paper mills, too much production capacity, and too little pricing discipline. Retail private labels now make up over 1/3 of all office paper sales, thus putting many national paper mill brands out of business at retail.  Today, however, International Paper, owners of the “Hammermill” brand of office paper since 1987, has the ability to significantly influence the rules of engagement in the office paper category at retail by complimenting its Hammermill brand with an offering of a full portfolio of hp-branded office papers (through a licensing arrangement). By offering and managing a seeming competitor along with its own brand, International Paper is now able to control the rules of engagement for both “Better” and “Best”, thus increasing their ability to protect the positioning of the two brands in the marketplace – especially its own brand Hammermill.

Consumer Electronics Category

Western Digital (WD) competes in the growing, yet very competitive segment of external hard drives/storage at retail. Recently, WD has complimented its branded portfolio at retail by adding a licensed set of hp-branded external hard drives. By offering both brands together, WD now has the ability to provide retailers with a more complete category solution while also providing some category guiderails within which the WD branded products can live and thrive long-term.

Toy/Game Category

For many years, toy-maker Bandai America has successfully secured “master licensor” status for many popular kids properties/programs in America. By complimenting its portfolio of Bandai-branded games and toys with the exclusive rights to offer a full-suite of licensed toys (eg. Power Rangers, Roady the Race Car, and others), Bandai is able to maintain a certain level of category and retailer control/ influence over the extent to which the Bandai brand is represented in each participating category.

SUMMARY: TO GAIN CONTROL YOU HAVE TO LOSE CONTROL:

All manufacturers want to own the brand names associated with the goods and services that they sell. Why? Because there is greater profit, personal pride, and control over a company’s long-term fate if every time a customer is created and satisfied, positive equity is assigned to the company’s brand and stored as a reference point for future consumer purchases.  There are times, however, when, in order to establish your company’s brand value proposition within a category over the long haul, it may make sense to create (and control) a new category competitor in order to gain leverage in the retail marketplace.

Related Reading / Sites:

• “Licensing Love Triangle” roundup by New Market Builders – a must read and I swear it is safe for work

By Vincent Young

WARNING: YOUR PRODUCT DEVELOPMENT PROCESS IS HARMFUL TO YOUR HEALTH

Your company/brand has spent many years attempting to honor a classic “product development” process. You have flowcharts in conference rooms and in PowerPoint decks that detail each of the steps (along with owners, stakeholders, approvers, etc). In many companies, that process has some variation of five steps or “stage gates” that the product marketing team tries to follow religiously:

5 Typical Product Development Stages / Gates:

1. Discovery/Scoping
2. Building the Business Case/Plan
3. Development
4. Testing & Validation
5. Product Launch

Each of these gates typically is completed when a series of deliverables, criteria, and outputs are defined by the collective meeting of the minds between Marketing and R&D.

THE TRAGIC FLAW:

This process has one major flaw if you are a brand whose business case is primarily built on accessing the consumer through the world of retail – the retailer is predisposed to prefer a private label solution to compete with your new product type or class.  In today’s product development process, the supplier brand diligently takes the retailer through all of the consumer insights upon which the new product is based, showcases the research & development capabilities of the company that make the new product possible, and shares the market research around all aspects of the new product ranging from the product name, packaging design and predictive demand models based on various price options and advertising/promotions investment levels.

Shortly after launch (assuming successful national brand sales), a funny thing happens – the retailer plans a private label derivative of your new product (without so much as a “thank you” for your efforts in hand-delivering them all of the upfront inputs that they need in order to launch a lower-cost version of your branded product). You didn’t account for such copy-cat behavior in Gate 2 (Building the Business Plan) of your product development process. So in the end, your branded unit sales, revenues, and gross margins are lower than anticipated and your advertising expense dollars are higher because you have to more aggressively compete against the very retail “partner” with whom you enthusiastically shared your new product marketing inputs in the first place.

Any Parallels To The Story of The Scorpion & The Frog?

In the story, a scorpion and a frog meet on the bank of a stream and the scorpion asks the frog to carry him across on its back. The frog asks, “How do I know you won’t sting me?” The scorpion says, “Because if I do, I will die too.” The frog is satisfied, and they set out, but in midstream, the scorpion stings the frog. The frog feels the onset of paralysis and starts to sink, knowing they both will drown, but has just enough time to gasp “Why?” Replies the scorpion: “Its my nature…”

How could this be the fault of your company’s product development process? Because if a retail reseller model is your primary path to market, then you have the wrong people in the room as you are managing through the product development process as a supplier brand and you have the wrong requirements to move a product from gate to gate.

YOU MUST OWN THE CAPABILITY:

Today’s stage gate process breaks down for many consumer brands at retail between Stages 2 (Building the Business Plan) and Stage 3 (Development). For brands at retail, it is no longer good enough to defend your offerings against private label through product differentiation alone – your company must also “Own the Capability” around making the product or supporting it in the market while also being different in terms of feature and/or performance.

Brands at Retail must seek to “own the capability” associated with their new products in one of three ways:

1. Patent the Product/Process – If your brand is planning to launch a new flavor, color, or functionality to your line-up and your company cannot patent these differentiators, then odds are that you will never generate the profits from the R&D investment that you are anticipating. Adjust your future profit expectations downward or STOP the product from moving through the stage gate process to launch. Add your legal department as a key input to the development process to assess the level of legally defensible/ownable aspects to your new product while in Gate 2.
2. Control Production Capacity – If, between Stages 2 and 3, your company concludes that it has the ability to own and/or manage most of the production capacity required to make a product with your new features on a global basis, then you can also expect minimum private label threats. If not, then expect a private label derivative within months and adjust your outlook accordingly.
3. Dispense the “Kill Pill” – Some business models prevent private label or knock-off brand alternatives by building products that simply won’t work unless branded products are purchased. For example, many desktop inkjet printer companies build printers that simply won’t fire unless original equipment manufacturer cartridges are loaded.

RECAP:

If your brand depends on retail and your company cannot “own the capability” associated with making or supporting your new products based on one of these three methods, then DO NOT MOVE THE PRODUCT THROUGH THE STAGE GATE PROCESS. Your marketing insights, research and development, and marketing investments will only become inputs to a retailers’ new private label growth strategy.

By Vincent Young

Kudos to Wichita, Kansas-based INVISTA who recently announced that Lowe’s will become the only major home improvement retailer to offer STAINMASTER(R) carpet — North America’s most recognized carpet brand. The new deal with Lowe’s gives the STAINMASTER Carpet brand access to Lowe’s nearly 14 million shoppers every week.

While the STAINMASTER brand has considerable equity in the home furnishings and flooring industries, the team at INVISTA was able to gain distribution at the world’s second largest DIY/Hardware chain by thinking like a challenger brand and adopting two key strategies to gain Retail Leverage.

Retail Leverage Principle #1: Bring Pent-up Demand to Stores

Since its introduction in 1986, STAINMASTER(R) carpet has revolutionized the industry with its stain and soil protection technology. Historically, however, STAINMASTER(R) carpet styles have only been offered by local STAINMASTER(R) Flooring Centers and aligned dealers in the U.S. and Canada. As a result of this new arrangement, Lowe’s will now become the exclusive DIY Home Supply Retail Chain to carry STAINMASTER branded carpet.

Retail Leverage Principle #2: Offer Product or Program Exclusivity

Under the multi-year agreement, the strategic alliance with INVISTA will deliver to Lowe’s customers more innovative, stain-resistant flooring options that are both stylish and durable under the STAINMASTER Brand. Quality-conscious, value-seeking consumers looking for the well-known brand will soon find an expanded selection of STAINMASTER(R) carpet in the more than 1,700 Lowe’s stores across the United States and Canada. In today’s economic climate, carpet remains an affordable flooring option, and with 89 percent aided brand awareness, STAINMASTER(R) is the brand most often recognized by consumers.  In addition, INVISTA expects the alliance will continue to enhance the STAINMASTER(R) brand as a result of Lowe’s targeted advertising, merchandising and promotions.

“This is a ‘win-win’ situation for consumers, INVISTA and Lowe’s,” said Steve Griffith, vice president of INVISTA’s residential flooring segment. “Today’s consumers are seeking products and retailers that deliver exceptional value, as well as brands that they know, love and trust. Our high-quality products and trusted STAINMASTER(R) brand is a great fit with Lowe’s commitment to its customers.”

“When shopping for carpet, customers look for products that deliver durability, repellency and soil resistance features,” said Patti Price, Lowe’s senior vice president of merchandising. “When our customers choose STAINMASTER(R) carpet, they know the product will perform in their active household. To further help customers, Lowe’s will feature a STAINMASTER(R) Carpet Gallery to help them choose the right carpet and simplify the shopping experience.”

The STAINMASTER/LOWE’S marriage is a wonderful example of how supplier brands can gain retail leverage by helping the retailer achieve its growth goals (by drawing new, incremental foot traffic into stores that were previously inaccessible by the retailer). Well done INVISTA!

SOURCE:

Press Release on the partnership between Lowes & Invista

By Vincent Young

For more background on Walmart sku reductions and the insight from a valuable community of retail contributors, read the Retail Wire article “Brands Hit By Wal-Mart’s SKU Reductions”. Here is Retail Leverage’s take:

It is extremely rare to find a national brand that actually has leverage at retail. The vast majority are in fact challenger brands and marketers of challenger brands often times fail to realize that FINANCIAL GROWTH POTENTIAL is the great equalizer between the all-powerful retailer and lesser yoked vendors.

In order to effectively compete, challenger brands must learn to package innovative product offerings together with marketing programs designed to represent at least one of the following four forms of retailer financial growth:

FOUR WAYS TO OFFER RETAILERS FINANCIAL GROWTH:

1. Increase overall category demand - Retailers are measured based on year-over-year growth, excluding new store openings. A challenger brand with a plan to increase consumer demand for a good will always have greater leverage than one who simply offers a more robust feature set than the market leader.
2. Increase the attach-rate of high-value complimentary items – Developing a product line and promotional strategy that has the ability to uniquely grow the market basket is sure to maximize the support that challenger brands receive from retailers.
3. Motivate a “trade-up” within the category – What is it about your brand or product line that is sure to entice consumers to give the retailer more of their money? If your answer is “very little,” then remember that retailer margin dollars also serve as trade-up motivation to the retailer when making category assortment decisions!
4. Help a given retailer win the war against another retailer – Successful challenger brands understand the importance of winning with key retailers. Anchoring a new product launch with a sub-set of exclusive products and/or industry-leading, retailer-specific promotions can generate an over-indexing share of category for the challenger brand.

The most difficult thing for brands like Glad and Hefty is viewing themselves as challenger brands when their histories have been more reflective of the rare “power” brand.

FURTHER READING / RESOURCES:

• Carol Spieckerman, of New Market Builders, with an article on “Art of Retail” with an interesting parallel to Glad’s situation (she’s a Retail expert)
• Follow Carol Spieckerman on Twitter, @retailxpert
• Chris Durham’s website, My Private Brand (he’s a Private Label expert).
• Follow Chris Durham on Twitter, @MYprivatebrand
• The ad age article that was sparked all these discussions and was fully discussed on Retail Wire.

By Vincent Young:

Whether you are the dominant brand player in your category or a challenger brand just trying to hold shelf position during a troubled economy, there are certain common realities that will bind us all in 2010. Some are current trends that will continue to increase in importance as the landscape of retail continues to evolve, while others reflect my humble opinion as an army of one.  So, without further adieu, I give you five Retail Leverage Predictions for 2010…

Five Retail Leverage Predictions for 2010:

1) The CMO Will Become the CCMO (Chief Customer Marketing Officer): It started years ago with opening price-point private labels, then we saw the premium positioning traditionally occupied by the leading national brands come under attack by the upscale “house-brand”- and then before any of us realized it, retailers themselves evolved from being simple margin-hungry supply houses to becoming incredibly influential consumer brand marketers themselves. With that change, marketing leaders (CMOs) of supplier brands to retail are forced to understand as much (if not more) about the retailers’ brand strategies as they know about their own stand-alone consumer brands. The implication here is huge – this means that, starting with the consumer and working backwards, brands who sell into retail will need to validate their consumer marketing strategies by proving that the supplier’s brand compliments and adds value to the overall brand goals of the retailer.

2) Creative Services Agencies Will Learn the Language of Retail: In 2010, a set of additional language will be added to the traditional “agency brief.” A description of the umbrella brand positioning & strategies of the key retailers that will sell your brand has to be relayed to the agency creative department as a way to insure that your messages, look, feel, and recommended programs not only support your individual brand architecture, but are also complimentary to the retailer’s overall brand approach. Creative agencies that fail to understand retail branding as the highest order of supplier brand hierarchy will lose billings to those who speak the language of retail.

3) It Will Take a Village to Make Social Networking a Relevant Marketing Tool for Retail Leverage: Let me give an example: I love sports, I love potato chips, I love beer, too! In the world of social networking, why do I then need to follow/track/keep-up with both Frito-Lay and Anhueser Bush in the world of Twitter and Facebook?  I shouldn’t have to – they should combine their efforts, partner with a national grocery chain and create ONE community for people looking for great tailgating ideas/new products/offers! Brands who partner with retailers to create and manage consumer “solution” based social networking strategies stand a much better chance of keeping consumers within the sprawling world of digital communities engaged. This will create totally new processes and paradigms for social networking administration, promotion, and advertising. But remember, the brand that gets it right and co-creates relevant sized social networking communities within partnership with retail gains a significant amount of leverage with the given retailer.

4) “Co-operative Planning” Content Will dominate Best Selling Marketing Publications: Currently, most marketing textbooks serve as roadmaps for how to build brand strategies and supporting marketing plans for the largely inexperienced.  The classic “Kotler” marketing instructions still apply and are sound for learning marketing in a pure environment. However, if your brand is a good or service sold via today’s world of retail where your brand is more like a building block that supports a retailer’s umbrella brand, then the classic approach will need a little tweaking. In 2010, the new “best seller” will be dedicated to providing strategic marketers with the tools, best practices, and measurement systems that allow for retail leverage strategies to become institutionalized within the standard marketing planning process.

5) The New “All-in-One” Brand Will Dominate the Retail Landscape: Historically, consumer brand managers had the ability to choose how to best position their brands within a given category – price, value, or premium were the traditional options available to brand marketers. In many cases today, retailers are looking to consolidate vendors while expanding their own brands across all of the traditional positioning lanes (not just opening price-point), thus driving national brands to become a niche player if its focus is only on one positioning segment. As a result, the new power brand will have to be able to generate volume across all three positioning segments in order to remain viable on-shelf. “Price-leading” national brands will be forced to become viable in higher-end segments, while historically premium national brands will be forced to make offerings within the lower-priced segments of most categories.

WRAP-UP:

We will revisit these predictions as the year progresses and hope to provide examples of brands who are successfully adapting their go-to-market strategies and programs to reflect the ever-changing realities of retail in 2010. Feel free to share your examples of how you plan to increase your leverage with retail in 2010 and what predictions you have that have guided your thinking!

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By Vincent Young

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At first glimpse, it may appear to be an odd marriage. On the one hand, there’s the Apple Store – Apple’s creative, stylish, and nouveau-tech personality brought to life in the form of a chain of over 200 retail locations.  A place so hip that a greeter is referred to as a “concierge” and a repair technician works in an area called a “Genius Bar.”

On the other hand, there’s Lexmark – the printer manufacturer that built its consumer reputation as a poor man’s “Hewlett Packard” by fulfilling the lower-quality, “you-get-what-you-pay-for” opening price-point position at mass merchandisers or as the “free” printer given away in net-to-free PC-bundles.

Despite its apparent misfit with the Apple Store panache, Lexmark announced last month that it successfully secured distribution of a new Lexmark-branded All-in-One Printer called “Interact” in Apple Stores and at store.apple.com. So how did Lexmark accomplish the seemingly impossible?

By enacting a  retail leverage strategy that aligned the Lexmark brand and product offering with the needs, wants, and expectations of the interconnected, tech & fashion-forward, high performance Apple-nation.

Priced at $199, Lexmark’s Interact Printer is a wireless, 3-in-1 web-connected machine featuring new touch-screen technology.

CUSTOMIZED & INTEGRATED THE PRODUCT WITH APPLE

In order to increase its leverage with the retail merchandise buyers at the Apple Store, however, Lexmark’s new printer showcases three unique attributes that are really less about Lexmark, and more about driving incremental demand/usage of the key products that are important Apple:

• iPhone/iPod touch photo printing – The LexPrint App is available from the App Store featuring wireless printing from an iPhone or iPod touch directly to the Lexmark Interact.
• MobileMe SmartSolution – Interact’s compatibility with Apple’s MobileMe will allow users to access their stored photos directly from their Interact touch screen.
• Apple News RSS feeds – Stay up-to-date with the latest news from Apple Hot News directly on your Interact touch screen

The Lexmark Interact / Apple Store marriage is a wonderful example of how challenger brands can gain retail leverage by engineering value propositions that help the retailer’s financial performance by driving the attach rates of high-value, complimentary items (see my previous article  “Financial Growth” is a Challenger Brand’s Best Friend). Whether through the marketing of product features/attributes, promotional programs, or service offerings, challenger brands should design value propositions for their products that can drive a total market basket for the retailer – even if the complimentary add-on is from another category.

Well done Lexmark!

By Vince Young

Personally, I’ve been debating for a few weeks now as to whether or not I should write this post. I will admit right now that I’m going to a very controversial place, but one that those who have ever managed a challenger brand at retail will find all too familiar.  (Not saying this situation is on the same level as what Aron Ralston faced, but it is a critical retail dilemma).

THE DILEMMA OF TEST STORES:

What should you do when your fate at retail is dependent on your product’s performance in a handful of “test stores?” If your sell-through is strong, then your product line gets rolled out to all stores nationally – if not, then your door practically closes forever at that retailer with that product line, even down the road when the “new and improved” version hits the market. The real question that we all struggle with is “Should my company put forth any efforts to stimulate demand in a test store environment, even though we know that those efforts will not likely be replicated upon national roll-out?” The answer is an unequivocal, “yes!”

THE DECK IS STACKED AGAINST CHALLENGERS:

Test store situations are rarely fair to the challenger brand and are not predictive of performance if the brand were supported by national chain distribution – the deck is highly stacked to favor the house. Why? There are several reasons: 1. Because sometimes, slotting fees and other “buy-in” allowances are sometimes still required even though your product line is not really benefiting from the things that those costs should afford your product line; 2. Your product line is excluded from national support vehicles such as the retailer’s circular, employee training programs, etc. because your line is not distributed nationally; and 3. Your marketing investment to support a small test store launch will be highly inefficient given the spotty nature of your retail presence.

So what should a challenger brand do to maximize its performance in a “test store(s)” scenario with retail? It depends…

If you know the locations of the test stores and markets, then there are several things that you should consider in order to maximize sell-through.

IDEAS TO DRIVE SELL-THROUGH IN TEST STORES:

1. Advertise Your Product’s Presence at Retail via Facebook Targeting– The audience on Facebook is massive and Facebook ads can be highly targeted. By leveraging key words in user profiles, you can efficiently promote your product’s retail presence to the consumers who are most likely to buy while communicating to only those people who are in the same markets as your test stores.  Today, targeted Facebook ads are fairly inexpensive and they can be designed and placed in a matter of minutes.
2. Leverage Digitally Printed Direct Mail with Variable Data Fields – Digital printing allows for shorter, customizable runs and the quality today almost equals that of traditional offset printing. Direct mail allows you to feature your product line in both images and words while the variable data field(s) can be used to direct targeted end-users to the specific store location where your product is stocked.
3. Mobilize Your Own “Nation” – Send targeted e-mails and launch an outbound telesales campaign to every database to which you have access. Pool the contact information from your historical promotion campaigns, your product registrations, your customer support calls, etc to identify consumers who are in the same market as your test stores and drive them to the stores to buy.
4. Install In-store “Advocates” – Invest in an “anonymous”  3^rd party team of advocates  to praise your products in-store with store management, talk it up to store associates/clerks, complete favorable consumer feedback forms and place them in the “guest feedback” box in-store, etc.

CURVEBALL: THE TEST STORES ARE “SECRET”

Sometimes, however, the retailer stacks the deck against your brand even more and they keep the location(s) of your test stores a secret. If you do not know the locations or markets of your store tests, then you need to make it your goal to find out where they are. Once you find out, then you can use some of the approaches listed above to optimize your performance. To find out the locations of your test stores, you should consider the following.

HOW TO FIND THE LOCATIONS OF YOUR TEST STORES:

1. Ship your product to the retailer on RFID-tagged pallets. There are many suppliers today to choose from and it is unlikely that the retailer will use a distribution center to get your product to store.
2. Print 2D barcodes on your outer pack and your individual product package – Lots of consumers today use their camera phones to read 2D codes in an effort to find promotional offers/coupons, product reviews, or additional product information. The companies who develop the 2D code reader software should be able to tell you where the scan came from.
3. Conduct a query with the retailer’s website – Sometimes, a retailer may only assort your products in a few test stores, but add your skus to their on-line assortment. If you get lucky, the on-line customer support rep may mistakenly tell you where you can find the product in retail if you ask as a consumer.
4. Partner with Another Company who Services Chainwide Distribution – Offer to pay a partial labor fee to a non-competing company who goes into all stores to support their products (eg. Direct-Store Delivery models). Leverage those service forces to complete a simple audit of whether or not your product was present in-store. A list of stores can be provided to you in a matter of days.

Successful performance in a test store environment is oftentimes critical to gaining retail leverage. Spare no expense to insure your product line’s sales results are impressive.

How far have you gone to maximize performance in a test market environment? Share your stories with us!