Hot Product With No Substitutes = Retail Leverage

By Ben Smith

We introduced the primary concept that everybody who reads this blog would like to know, which is “How To Get It” – It being Retail Leverage.   We’ve come up with 5 strategies / paths / scenarios on how you get Retail Leverage.   This will start a series of posts that examine each of those 5 examples.

1.  “Have The Hot Product With No Substitutes”:

We all dream of being in this scenario.  You’ve got it.  Everybody wants it.  Not everybody is going to get it.  If you are Apple, this is a way of life.  If you are Ty (Beanie Babies) you had your 15 minutes of fame.

For the rest of us, it could be the first time in the drivers seat with retailers.  Nintendo’s launch of the Wii is a classic example of how the “Hot Product with No Substitutes” strategy leads to Retail Leverage.

HOT PRODUCT

Every year there seems to be a few products that go red-hot.  Companies get accused of limiting supply.  There are fights in store aisles onnews.   The product’s blackmarket price skyrockets on sites like ebay and craigslist.   And your kid(s) want one, or you promised them one  – god help you.  You could even wind up paying 400% markup to snag one from a guy in your office.  People are desperate to get your product.

NO SUBSTITUTES

A great example is when the Wii went red-hot during its launch a couple of holiday seasons ago.  Combine that with the reality that there were no Wii substitutes and they had the magic formula. One could argue that Playstation and Xbox were substitutes, but not in consumers eyes.   The lower tech Wii provided an new experience and physical interaction unlike anything on the market.   It was a must-have product for retailers.  The timing was perfect for Nintendo as their existing franchise were getting a little long in the tooth.  I would love to see a comparison of how quickly the average Nintendo sales reps calls were returned by the buyer before & after the Wii phenomenon exploded.

BIG BETS

This wasn’t all by chance though – Nintendo had to make big bets before it launched the product (an estimated $200 million marketing spend).  They invested in the Wii via a variety of marketing efforts to build demand before the product ever hit retail shelves, such as the Nintendo Fusion Tour and viral sampling events in cities across the country.  You might also remember the tv ads they unleashed featuring the two Japanese guys who showed up at homes across the country and say “Wii would like to play” with quirky Japanese music in the background.  The ads showed what made the Wii unique (with no substitutes) by demonstrating the motion sensing remote control.  So while Nintendo did have the right product at the right time in the right places, they made big bets that happened to come in.

FAST FORWARD TO TODAY

Nintendo is back in the game in a big way with the Wii serving as an instrumental piece of virtually every retailers gaming portfolio.  For Nintendo’s sake I hope they are working on the next big thing because as the Wii ages their leverage recedes too.  If they were going to market today with something new and sexy they would enjoy much more leverage than they had when they were making the initial sales calls for the Wii.

TAKEAWAYS

The Nintendo Wii example advocates channeling all of your resources into one product.  This is the highest risk strategy to gain Retail Leverage.  If you assume they understood the uniqueness the Wii would bring to the market you can start to rationalize their decision to go for broke.  The alternative – business as usual – spreading marketing dollars across your entire portfolio – will generally produce predictable results – and in Nintendo’s case – in an environment where they had little / no leverage.

For practical application to anyone working for challenger brand –Even if you don’t have $200 million such as Nintendo’s Hail Mary on the Wii, you do need to consider what type of big bets you can make.  Deep down you know you have a sense if your product has the potential to hit it big.

You’d like to think that when they were planning the Wii they knew they had something great on their hands.  Even with all the drooling focus groups and raving early reviews, I bet that Nintendo had to basically bet the company before it had the type of reassuring feedback that helps you sleep at night. The reality is that you likely don’t know until you hit the market.

So you put all this work in to try and get Retail Leverage – and you realize that the most important thing once you get it is to keep it.