Retail Leverage

What Is Your Retail Leverage Factor?

admin — Sun, 13 Mar 2011 19:23:00 +0000

What in the world is a RLF Rating?

We now have over 40 articles here at RetailLeverage.com detailing many examples on vendors utilizing retailers successfully to achieve their own ends. Because the amount of retail leverage a particular company holds is a highly subjective matter of discussion, the experts at RetailLeverage.com are introducing a way to measure this “power” in terms of a 1-10 rating scale, which we call a Retail Leverage Factor, or “RLF” rating for short.

Is Your Retail Leverage Factor A Fear Factor?

A RLF-10 rating represents the highest amount of retail leverage possible that a particular vendor may possess vis-à-vis the largest retailers. In these rare cases, retailer make very little if any margin but must feature aggressively in order to steer the strong consumer foot traffic through their doors. Conversely, a RLF-1 rating is indicative of a company with little to no leverage to conduct business at main-stream, big box retail. You will not find these products at retail and they have no consumer pull whatsoever, barely making them exist at all but for perhaps some tax shelter benefits.

Some ratings may be obvious, others may surprise you. This is because there are many factors being considered when generating a retailer’s RLF score. Let’s take a look at some of these factors.

Here Are The 5 Components Of The Retail Leverage Factor:

Overall Size of Business of Vendor to Retailer: Obviously, when a company does hundreds of millions of annual dollars of business or more with a particular retailer, the vendor and retailer often feel the necessity to work collaboratively together to hold those significant dollars “in situ”. However, sheer size of business is not enough to generate a perfect “10” score since sometimes large companies can fall asleep at the wheel and let new upstarts quickly become retailer darlings and get the premium features in ad and on the floor over the big guys.
Growth Categories of Participation with the Retailer: The higher the growth curve of the category, the more interested a retailer becomes in giving those vendors what they want. Consumers are asking store associates for the product and are pulling this product through retail shelves and off retail endcaps without much selling effort on behalf of the retailer. Consequently, retailers want to feature these categories aggressively so that they can establish themselves as a category destination.
Innovation Level of Company: Certain companies consistently bring new innovations to market helping participating retailers capture new, incremental sales early and at the highest retail price points. Beyond the direct revenue and margin benefits of showcasing new products, offering new innovations also helps solidify the image of said retailer as a destination for the uber-new, hot items.
Margin Dollars and Rate Given to Retailer: When growth, innovation or sheer vendor size is not in a particular manufacturer’s favor, often margin dollars can compensate for this and work to garner attention and support by the retailer for rather obvious reasons. Throwing money at a retailer in various forms can produce results in the short run if spent correctly. Quality defects or dismal results however will usually trump margin dollars every time.
Consignment or Other Retailer-Incented Sell Through Incentives: Similar to #4 above, providing other go-to-market financial incentives such as consignment can effectively add to a retailer’s bottom line and go a long way to compensate for lack of substance in topics discussed in numbers 1-4 above.

Stay tuned to RetailLeveragec.om as we rate some of your favorite companies and assign them their first RLF score.

UNDERSTANDING THE SCALE RATINGS

As with any scale, the meaning of the rating is best interpreted when one understands the what the boundaries of the scale really mean. Therefore, the retail leverage consultants have unanimously assigned Apple with a “RLF-10” rating. Retailers make very little selling Apple products vis-à-vis other manufacturers. But the foot traffic and thus the opportunity for other market-basket filling items (i.e. high margin accessories) that featuring Apple can generate is quite considerable. Retailers sit by the phone and just hope they will receive allocations commensurate with their forecasted demand on the latest Apple widget. If Apple even has “sales persons” employed , they must be fully trained in the art of telling retailers “no” in hundreds of creative ways. That is, Apple decides when and how high to turn the retailer faucet among its vast array of innovative products.

Since a “RLF-1” rating means a company is completely irrelevant to retail, it is not necessary to name an example. By definition, it would be an oxymoron to even be able to do so. We will not spend much if any time on companies with a score of RLF-1 since you most likely would not be able to find them at retail anyway.

Here are a few examples of our RLF scores for various manufacturers.

HP: RLF-8
Samsung: RLF-8
Vizio: RLF-6
Panasonic: RLF-6
Brother: RLF-5

TAKEAWAYS:

We’re trying to quantify the intangibles that we’ve all recognized when it comes to competing with other brands. We haven’t patented the algorithm yet but we think we’ve got a unique angle that can help provide reference within categories and among vendors at a retailer. If you are interested in obtaining an RLF rating for your company, please reach out to us.

Twitter: @retailleverage

Email: retailleverage@gmail.com

Retail Leverage – An Agency Executive’s Perspective

admin — Mon, 24 Jan 2011 07:01:09 +0000

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:

Where does the agency fit in the retail marketing equation?
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?
How do you help brands gain advantage vs. private label?
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

How To Maxx Out Retail er Leverage (With Unwilling Help From Apple’s IPAD)

Ben Smith — Fri, 19 Nov 2010 07:01:44 +0000

By Benjamin Smith

Image courtesy of Engadget

I don’t care whether you are a retailer or a brand marketer, I just know that at some point on Friday November 19, 2010 you wished you had the same idea that some genius(es) at TJ Maxx did.

Imagine you’re sitting in a conference room in the bowels of your corporate office back in June 2010, trying to figure out what your Black Friday strategy and offers are going to be. At a retailer like TJ Maxx, in the past that could have included the sweet deal on a pair of PJ’s or a cashmere glove / scarf set. Settle down, I know the thought is intoxicating. Mind you, the previous year TJ Maxx didn’t think too much of going bonkers for Black Friday, as you can see the played down Black Friday 2009 on their own facebook page. That person probably got fired.

So the pressure is on the new guy/gal. What are you going to promote – the same old, or something better. You’ve got your agency making a proposal for how to spend your dollars. Do I smell a 2 week media flight of 30 second ads, and they said something about “activating” people via social media? Well you can probably rest assured you won’t have to worry about any trampling incidents at your store on Black Friday if that is the case.

HOW TO BUILD AN ATOMIC BLACK FRIDAY PROMO:

Shut the conference room door, dim the lights, and make sure the skittish managers aren’t within earshot. Now that it is safe, let’s talk about the most sacred of cows, offering a discount on something that is never on sale, expensive, possibly overpriced, yet on everybody’s shopping list. No, I’m not talking about discounting printer ink (you get fired for that).

How about the holy grail of pricing, even by Apple standards: The hot, irresistible IPAD? What if you carved $1 Million dollars from whatever drek you were going to run to advertise the same boring me-too Black Friday offers, and poured that into a true retail exclusive, an IPAD for only $399, savings of $100 off. The largest savings on the hottest item of the last 2 years. The math is pretty simple:

MARKETING BUDGET:
Take the $1 Million you were going to dedicate to Black Friday advertising / PR / promotions and plow that into offering subsidizing the IPADS. By the way, this could easily be scaled. I used $1 Million to make it easy and relatively painless for any brand playing in big box retail.

SUBSIDIZED PRICING:
If you just quietly started acquiring the $499 model IPADS from various authorized resellers, there’d be no discount + an average of 8% sales tax. High end, you’re looking at paying $540. Of course, if you are able to find somebody willing & able to move volume, without alienating Apple or them knowing about it, then you might get a break. Let’s say you get 5% discount, but still have to pay sales tax. Low end you’re in for $513. Split the difference and it is approx. $525/unit. You’ve got to hit a magic price point + high optic of savings, so $100 off it is, to hit $399.
NET SUBSIDY = $125/unit.

NUMBER OF STORES:
You have 900 Stores. Run it in 50% of them. You don’t have to put it in every store – most markets will have more than 1 store, and people are willing to hunt for treasure like this.
Net = 450 stores.

NET IMPACT:
8,000 IPADS ($1M / $125/unit subsidy)
17 IPADS per store (8000 units / 450 stores)

That is a honest to goodness Black Friday promo if I’ve ever seen one, and I don’t care if it is sold out before Black Friday. Read the fine print in your Best Buy insert this Thursday while you are waiting for your turkey. For some hot products you are lucky to get 10 per store. So 17 per store isn’t out of the question. And for the nerds who might read this, yes I do know it was supposedly in some Marshalls stores too (owned by same parent company). Just spread the same units over a larger number of stores, or increase the budget. Regardless, this is a viable but different promo.

HOW TO MAKE IT GO NUCLEAR:

Well, you gave everybody something to talk about. You must have been in a cave if you are involved in retail and didn’t hear about this today.

And to push things over the edge, you poked the King. Steve Jobs responded, or at least it sounds like he did. Which got even more people talking. It doesn’t matter who they got them from, or how they got them, but even commenting on the issue lets you know that this is a big deal.

And whether or not you agree with the adage, there is no such thing as bad press / pr, in this case, you can definitely guarantee TJ Maxx will be on more people’s minds come this Black Friday & Holiday Season than before. And inside of TJ Maxx, somebody’s career will forever be referenced as Before IPAD, and After IPAD.

FROM THE HORSE’S MOUTH (posted on TJ Maxx’s website):

We have received many inquiries about a particular item recently sold in our stores. A small number of T.J.Maxx and Marshalls stores received a very limited quantity of electronic tablets this week. These were first quality goods sourced from a retailer. They sold out in one day, and they were not advertised in the media.

This speaks to the excitement of our business model to deliver ‘wows’ this season and always. You never know what unexpected deals, designers or hot items you will find as part of the more than 10,000 new items that arrive at every store each week!

Check out their twitter feed:

RETAIL LEVERAGE TAKEAWAYS:

The worst thing is to blend into the crowd of me-too’s, unless you are the market leader. By definition, since the majority of the market in most cases is not the leader, I am continually amazed that brand marketers and retailers continually anniversary the same promos, or iterate the latest trend. If you aren’t the leader, rarely will you ever beat the big guys at their own game. That is why you have to change the game. We salute you, Mr or Mrs TJ Maxx Black Friday discounted IPAD idea guy/gal, for showing everybody involved in retail how you gain Retail Leverage!

RELATED READING:

All Hail the Kings of Retail Leverage – Monster Cable

admin — Mon, 25 Oct 2010 07:01:33 +0000

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.

Shelf potato alert – Microsoft Kin mobile phone

Ben Smith — Thu, 22 Jul 2010 19:01:33 +0000

This article appears courtesy of The Shelf Potato Blog, by Doug Garnett. The article was originally published on July 1, 2010, by Ben Smith.

“From half baked spud to dud in 2 months is no way to go through a life-cycle son.”

Article: “Death of the Microsoft Kin: A Look at the Evidence”

Article: “Microsoft’s Kin smartphone: No, it kin’t”

If you saw the commercials or talked to a rep in store, you probably couldn’t figure out what problems Kin solved or unmet needs it satisfied. The fact that it was pulled from the market so soon by a company with so deep of pockets leaves only a few conclusions and bigger questions.

How bad were sales – did anybody buy it?

Did Microsoft launch something it knew was bad but needed the flop to validate something? Was it a really expensive live focus group?

Article: “Microsoft Kin Gets a Price Cut…Already”

I always have a problem with companies willingness to make price moves once it is too late. Just 2 days ago the phones prices were effectively cut in half. Why not launch at those price points or heck it’s a mobile phone – why not free. At least they might have gained momentum out of the gate and gotten enough in peoples hands to see if it has legs.

What can we learn from Kin?

Don’t launch it if it is flawed.

Know your level of commitment going in. What are you willing to do if your product doesn’t get off to a good start. A powerhouse like MSFT can pull a stunt like this and still get the buyers to return their call. The rest of us don’t have that luxury.

Communicate what you do that is unique or you do better than anybody else – understand and share whatever your value is. I still have no idea what Kin does that you can’t do with an iPhone, droid, or whatever that motoblur feature is. They had an 8 figure budget to tell their story with and still failed.

Fight where you can win. They weren’t going to out apple apple on tv ads – and other players such as htc are running ads that are pretty clear with their value prop. How did anybody at msft or their agency convince themselves that their story would work. Beyond iPhone I am willing to bet the majority of phone choices occur in-aisle. If MSFT truly believed in the product they should have paid to staff demos 40 hours / week in the verizon stores / best buy.

Above all – be realistic.

If you liked this article be sure to check out Doug Garnett’s Shelf Potato Blog. You can follow Doug on twitter @drtvguru, and of course at www.theshelfpotato.com

What Is A Shelf Potato?

Ben Smith — Wed, 21 Jul 2010 02:41:52 +0000

By Ben Smith

The term “Couch Potato” has made it into pop culture, with its own wikipedia listing. So when my friend Doug Garnett mentioned a concept he kept coming back to when describing dud products at retail, “Shelf Potatos”, I knew exactly what he was talking about, and I figure that anybody who is reading this retail oriented blog can start to get the picture. Here is the concept, in Doug’s own words:

For years I’ve written about a type of retail product that my agency calls a “shelf potato“. It’s a well loved product — loved by the manufacturer, loved by the retail buyer who brought it in, and loved by the consumers who buy it. Except, the product mostly lounges on the shelf instead of rushing out the door.

It doesn’t need to be this way. Communication can bring shelf potatoes alive – especially communication with direct response television. (That’s DRTV – short-form and long form.)

There are many important examples of shelf potato success. Grills identical to the Foreman grill sat on shelves for nearly 20 years before that infomercial brought them to life. The Drill Doctor drill bit sharpener was languishing on retail shelves until our half hour made them into a superstar and a brand. The Kreg Jig sold well to cabinet shops, but came alive at retail once a half hour infomercial showed homeowners what they could do with it.

For more, read my article with tips for finding those shelf potatoes that communication can bring alive. The article was published by Home Channel News on May 5, 2010 as part of their Hardware Show Daily at the National Hardware Show.

Maybe your shelf potatoes can come to life if you put them on the right program for retail fitness.

What do Shelf Potatos have to do with Retail Leverage? Well if you’ve had experience with Shelf Potatos, you know that they are enemies of gaining leverage at Retail. They can stop you in your tracks, or set you back to square one, all the while sucking time and resources away from your primary mission, which is to drive growth for retailers and improve your standing at retail.

From time to time, I will syndicate content from The Shelf Potato Blog. I think you will find it to be retail infotainment! Let’s be realistic – if you are reading a retail blog, you think about what makes some products fail and some products succeed. If we can save one spud from being a dud, then it was all worth it.

Martha Stewart Called To Carpet For Benefiting From A Legal Trade

Ben Smith — Sun, 11 Jul 2010 17:30:06 +0000

By Ben Smith

I wanted to provide an update to Vince Young’s prior coverage of Stainmaster carpet’s move to Lowe’s and share an article by Chris Burritt that just appeared in Business Week detailing how the dust has settled.

“Martha Stewart can thank a move by Invista’s Stainmaster unit for her good fortune. Stainmaster had been a major Home Depot carpet brand since 1996. Invista recently dumped the leading home improvement retailer to boost its sales through No. 2-ranked Lowe’s and a string of smaller distributors. Home Depot managers figure Stainmaster was under pressure by its independent carpet dealers, who had trouble competing with the big box retailer’s low prices. “We were selling a lot of carpet at very good prices,” says Gordon Erickson, Home Depot’s senior vice-president for decor. “We were a bit surprised.”

The net is that Martha Stewart now has the featured brand of carpet at the #1 carpet retailer in the US, Home Depot.

Retail Leverage Notes:

In today’s environment it is rare that a brand drops a major retailer. Once the shock wears off, you can see how major moves by competitors, particularly exclusive deals, can create retail leverage opportunities.

The void left by Stainmaster at Home Depot created the opportunity that Martha Stewart (via Shaw Industries) capitalized on. As the old quote goes, “Luck is what happens when preparation meets opportunity.” I’m guessing that both Home Depot, Shaw, and maybe even MSO had thought about this possibility before, although Home Depot was obviously shocked by Stainmaster’s move.

One has to wonder how much better business terms Stainmaster got from Lowes to move there. In addition, Stainmaster must expect to gain a greater share of Lowes carpet business than they had at Home Depot, the #1 carpet retailer.

I expect the case was they offered tangible growth to Lowes, who was eager to steal Stainmaster away from their rival in their own bid for leverage. In turn Lowes is probably doing everything short of guaranteeing a certain percentage of their business. This can be done via shelf space and ad features. That combined with more favorable terms and you can see why Stainmaster would take the leap.

What will be interesting is if the Martha Stewart brand does extend well to carpet at Home Depot. While Stainmaster must be considered more of a “sure thing” in carpet, one could argue there may be upside for Home Depot and Martha Stewart. For now, it is just one more extension of the Martha Stewart brand at Home Depot.

Forget Perfection – Just Worry About Good Enough

Ben Smith — Tue, 29 Jun 2010 03:34:12 +0000

By Ben Smith

So I thought I had come up with this revelation, but apparently I’m not the only one. The good news is that as you read this you’ll likely realize you’ve had the same thoughts too. Type A personalities might want to stop reading now.

We are in the age of “Good Enough”.

Wired magazine called it “The Good Enough Revolution - When Cheap and Simple Is Just Fine”.

They lead with the example of how in camcorders, the fancy expensive football size gave way to Flip’s pocket sized basic video camera with built-in USB. The ability to easily upload & share short video clips proved “good enough”. Of course Flip can’t be feeling too cocky. One day they’ll be the victim of “Good Enough”. See the next few examples I’ve supplied and you can probably imagine why …

Cameras (10 years ago)- Film and even one-time use cameras gave way to at the time inferior picture quality point&shoot digital cameras. The instant gratification of the LCD made the lower quality pictures “good enough”.

Digital Cameras (today) – Sure your digital cameras can take 14 megapixel pictures. But your mobile phone’s camera – especially starting this year with next generation, led by Iphone 4, for many people it takes good enough (and getting better) pictures and is already connected to the internet. This seems easily repeatable for video also.

TV’s – do you remember people in the early days of Plasma & LCD’s telling you how your Tube TV had a better picture. Who cares – I just gained 2 feet deep of space in my living room, and by the way, it doesn’t take 3 guys under the age of 30 to move it around.

Consumer Package Goods- This one is scary because we’ve all thought about buying Private Label products before – the recession just gave enough of us a nudge to try them that they gained critical mass. Not only does the cereal not cut the roof of your mouth anymore (or you’ve decided the pain is worth the $ gain), but private label in many cases has thrown the price/value equation out of whack. Private label brands have in their arsenal shiny new packaging, quality that is the same or in some cases better, and ability to price at parity or significantly lower if need be. Line 2 or 3 weapons up and you have a killer proposition.

Retailers – okay warehouse clubs and Walmart already fit the “good enough” mold for some people who held their noses to make it through a trip for the savings. But dollar/discount stores – that’s a whole ‘nother story. See my recent article about why marketers should re-examine their biases against retailers like Dollar General and Big Lots.

Implications To Our World Of Selling Stuff:

Your Value Proposition To Consumers: Can your products take advantage of the “good enough” revolution? Or are you vulnerable? How can you reformulate / repackage / reposition what you are already doing to address this?

How You Build Programs To Communicate & Go To Market: For starters, coming up with original ideas and programs is just as valuable if not more than perfecting something. Yes, I know I am veering dangerously close to 80/20 rule territory, but if that helps drive the point home – so be it. The armchair marketers in all of us tend to gravitate towards the imperfections in other people’s original work / ideas. I’m not saying throw the kitchen sink out there, but rather re-frame your expectations. You might find something that resonates. Very little in life is one shot only. If it is “good enough” you will get a chance to refine it. That is a conundrum in itself – but don’t refine it to perfection – just refine it until it is “Better Enough” – or as the chart that I borrowed from Mr. Scott W. Ambler suggests, is “Just Barely Good Enough”.

What Trumps “Good Enough”?

Not an exhaustive list by far, and I welcome your suggested additions:

Connectivity. Everybody wants it – but not every company can offer it. Those who can are well positioned. Anything related to mobile phones and convergence.
Anything that deals with your health or well being and/or safety. Well except for Universal Healthcare – maybe – that depends on the government’s definition of “Good Enough”. And I’m still trying to decide what Toyota’s definition of Good Enough is.

Related Reading / Resources:

2009 Wired Magazine Article on “Good Enough” Revolution
Content about “Agile Modeling” by Scott W. Ambler that coins the phrase “Just Barely Good Enough”, and while written for something technical, is just as applicable to marketing.
I wanted to credit the header image I am linking to as originating from Scott W. Ambler.

Sharp Quattron TV’s Add Yellow But Their Marketing Makes Me Blue

Ben Smith — Wed, 09 Jun 2010 01:56:27 +0000

By Ben Smith

We’re not fans of 360 marketing plans here at Retail Leverage – partly because the term is overused, and partly because the terminology leads you to believe that your plan is incomplete if you don’t cover all your bases, spreading your dollars around. For most of us, you have to choose – have a crappy 360 plan, or focus your dollars to own something.

You might think that the big players have seemingly unlimited funds that allow them to execute plans that cover the marketing spectrum, but that doesn’t mean their spend makes sense.

SHARP QUATTRON TV’S

Today we’re focusing on Sharp and the launch of their new line of TV’s branded as “Quattron”. Sharp likely had a big budget to launch – table stakes to market products in the television category are likely in the hundreds of millions. Still though – they aren’t going to out advertise Sony & Peyton Manning, or Samsung & the NFL sponsorship, and their budgets will never come close over multiple quarters.

MOVE OVER SHATTNER – THERE’S A NEW PITCHMAN IN TOWN

Sharp tried to launch with a big bang, most visibly with the TV ads featuring some guy from Star Trek (not the Priceline guy). Note to Star Trek geeks – I know his character was Sulu, and his name is George Takei, but I guess the point I’m making is that it wasn’t Peyton Manning. I’m thinking his Q rating isn’t that high, and for the purpose he serves in the commercials, the generic annoying “WOW” guy from the Staples ads probably works cheaper.

If you’ve seen the ad, hopefully you walked away understanding Sharp’s raison d’etre. If you haven’t seen the ad then the point that they won’t ever out-sony Sony rings true. Well Sharp’s key differentiator is that you supposedly see yellow better. They call the technology “Quad-Pixel”, whatever that means to customers. Of course since you don’t have a Sharp tv with this new technology, it’s kind of hard for them to demonstrate what you are / are not missing. The ads poke fun at this, but I don’t know if somebody outside of the circle of trust would necessarily get the joke.

So here’s what we’ve seen so far from Sharp in this campaign, including the TV ads that I just armchair quarterbacked.

TV ads
National FSI insert
Front page Retail Circulars ad
Full page Retail Circular ads
Web site
In-store displays
Demo days / staffing

I give them credit for consistent messaging and purpose throughout the campaign. It looks and feels very professional. They are upfront that their goal is to get people in the stores. I can’t argue with getting people in the stores – after all, regardless of the stat you choose to reference, a great deal of purchase decisions occur in the aisle. However – that is where I sour on their campaign.

SHARP MINDS, DULL STRATEGY

Let’s go back to where most decisions are made – particularly in this category. Even if it is not a fair comparison, have you ever watched people shopping for tv’s? Heads craned, scanning up and down the wall. They stare at TV’s that are all tuned to the same picture (on purpose), and customers and associates alike try to divine which “picture” they like better. The decision is made in-aisle.

My guess is they are spending all this money on TV ads that MIGHT drive some people in the stores. And maybe they lock up the Trekkies. What if there isn’t somebody there from Sharp to assist the sale. The customer has to find the Sharp TV’s and then most important – buy into this whole “I can see yellow” key differentiator. Otherwise, there is a decent shot that once customers get to the stores, they’ll walk out with another brand, or no purchase at all.

DULL & INVISIBLE

Sure Sharp said that demo days were part of their strategy. While they can check that box off on the 360 strategy chart, I’d be shocked if demos were the 2^nd or 3^rd highest line item in their budget. Focus group of 1, but I’ve yet to encounter a Sharp rep yet myself, and unfortunately I enjoy going to Best Buy multiple times per week, every week, just to see what’s going on in the aisles. Multiple stores. Different states.

CAN I SUGGEST AN ALTERNATIVE?

All I can think of is that all that money they spent on TV ads could be wasted. From an article in TWICE online, a Sharp representative is quoted saying that the ad budget “is in the tens of millions of dollars, and is consistent with campaigns we’ve run in the past.”

While it would be daring – if you have something that you think needs to be demonstrated in person, I’d sink the overwhelming majority of my dollars on demo staffing. Let’s assume they will spend $30M on TV ads between the mid-April launch and the end of the year (which by the way, pales in comparison to the multiples Sharp’s budget that Sony & Samsung spend). What kind of difference could you make in-store with $30M?

DEMOS ON STEROIDS

How about covering the top 800 Best Buy’s, along with 100 high volume HH Gregg’s/ Sears / BrandSmarts?

TOTAL: 900 high traffic retail stores.

How about covering them 40 hours per week, for 26 weeks (of the 36 remaining weeks they are on-shelf), and assume that you’ll pay a marketing firm an average of $32/hour for demo coverage.

TOTAL: $33,280 per store covered.

Side benefit – I think those Blue shirts / associates might pick up a little of Sharp’s selling story by osmosis. In basketball there is the 6^th man; for the Seattle Seahawks football there is the 12^th man; in retail, there is the demo rep. Their impact is felt beyond the time they actually spend in store. Not to mention it adds credibility when the retail associate can tell your story, versus the rep paid by the brand.

NET: $30,000,000. Mission accomplished.

RETAIL LEVERAGE TAKEAWAYS

From 30,000 feet:

While it was easy for me to re-route Sharp’s $30M (hypothetically estimated) ad budget, it wouldn’t be that easy in real life. Factors such as reliance on agencies for marketing strategy and 360 plan creation, as well as unwillingness of managers to make bold moves that break from past campaigns. Life is short though.

Begin your strategy with the End in Mind. When the dust settles, will the traditional 360 plan have made any significant impact. Will you out-sony your Sony? Peyton Manning isn’t walking through that door anytime soon.

On the flip side, what do you have to lose if you depart from the traditional 360 like strategy? Unless you were using the campaign as a band-aid to keep from getting thrown out, you probably won’t lose much. Leave the 360 plans to the big guys to inefficiently spend their fat budgets. Compete where you can win.

From the ground:

Beginning With The End in Mind is also relevant when you think about the consumer’s purchase. How are products sold in your category? Where does the consumer make their decision? Can they be swayed at point of purchase?

In the case of Sharp, so I’m saying you could cover the top selling Consumer Electronics stores, on the weekends and in the evenings, for all but the really slow weeks the rest of the year. You’d never see an ad, but you now have a shot at sniping the customers that are already in the stores shopping for TV’s, showing them something that nobody else can show them. Sowing those seeds of doubt that if they don’t choose your brand, somehow the picture just won’t look the same – especially in yellow.

WHAT DO YOU THINK?

What would you do if you were Sharp? Do you think you can win by driving customers to the stores alone? Or do you win by converting customers that are already in the store by locking down the aisle? How did Sharp get to their strategy? Do you disagree with my thoughts or can you add to them? I’m not looking to prove I’m right – I just wanted to show an alternative “Retail Leverage” path. Let me know. I’m posting this to our LinkedIn group and will be tweeting the article to solicit input. Add a comment below, email me at retailleverage@gmail.com, or tweet me @retailleverage . Thanks!

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CAN I SUGGEST AN ALTERNATIVE?