You know what makes Baskin-Robbins so great? The thirty other flavors. Vanilla is supposed to be safe, less-than-exciting, basic. A post-Seinfeld, “thanks, I’ll just have the salad” sort of choice. It shouldn’t apply to your account management strategy.
Which brings us to retail. Vanilla means you’ve shown up, put your name tag on, and grabbed a donut. It means you’ve done an exhaustive job of mastering the obvious, have found a way to validate your preconceptions, and stopped short of actually doing something. Vanilla means you calculated a reasonable revenue target for the year, figured out how much MDF that gives you to play with, and then ‘bought’ — at extraordinarily inflated prices — rate card merchandising options from your retailer for the quarter. And then told yourself that you’ve done your job. Nonsense.
How many marketing plans start with exhaustive analyses but never take the reader to a conclusion? How many retail brands actually do something at retail other than inertly hang on a peg? Few. The number of brands who actually earn their pay at retail can be listed on one hand with enough fingers left over to play the minute waltz.
Here’s an idea: let’s reward people for figuring out what to do, and then doing it well.
Marketing is about owning the hearts and minds of consumers and giving them the reason to buy. It’s about connecting you with something emotionally bigger. The iPod isn’t about portable audio, it’s about my music — how I select it, buy it, listen to it, and how I look when I listen to it. It’s a whole ecosystem, not a product.
OK, we all know about the iPod. So here’s a story you haven’t heard. Once upon a time, I was responsible for marketing blank VHS cassettes. Very sexy business. Thirty-six moving parts, all precision-tooled, that sold for less than a dollar at retail. It had 20% price erosion a year, over two-hundred competitors, and saw a 1,000% unit volume increase on ad. A pure commodity. Worse than ball bearings. And yet at the end of the day, we were #1 in the industry, had twice the market share of the #2 player, were sold at a premium price and were profitable. So what happened?
Good question. First, we made decisions. We walked away from the low end of the channel. This meant that we gave back some revenue. Not the easiest decision to make. Second, we positioned ourselves as a premium product. In a business like VHS cassettes, where you don’t run television spots, this meant packaging. And we raised our prices in a commodity market. Next, we invested the additional margin into real consumer value-added promotion. Not rebates, price decreases and promotional crack. Value-added promotion. And then we sold the story in to our channel.
Understand that this was like pulling the pin out of a grenade and hoping it was a dud.
Some retailers walked away. Some we had to walk away from, including Walmart. Some didn’t like the new price and others didn’t believe the promotion story. What happened? Our consumer promotions had more pull than our competitors. The retailer sold us for more money off the shelf and off ad, but as it turned faster and at higher margin, they made more money. We proved ourselves to the channel partners that stuck with us. And the ones we walked away from and the few who had walked away from us, including Walmart, came back. A year later, we were twice the size we were before the process had begun.
Our promotions weren’t about video tape. They were about entertainment. Movie tickets, CD’s , and software. We quantitatively tested our ideas against monster users of our products and found out exactly what worked and what didn’t, then executed very well in the channel. By the time we were done, we were creating unique video content, on-packing it with the blank cassettes, and selling the bundle for the price of the pre-recorded video. What was once a 6.5% margin product was now in the low 30% range. Crazy.
Our promotions were planned out 18 months in advance. Our retailers were anxious to hear what we had for them. They were excited. The promotions were bigger than the category they were sitting on.
This is what I mean by doing something. We didn’t analyze the category to death; if we had, we all would have gone on to other jobs a lot faster. We just created something bigger than the category and executed very, very well. Target named us their “Vendor of the Year” that year. All for blank tape.
Your buyers are bored with you. They want to be excited and to see more stuff get sold through their stores. If you want to divvy up your MDF, by all means, do so. But don’t stop there because you’ve only begun doing the work you’re supposed to get paid to do. This is where the money is made in retail. It’s exciting. Not vanilla.
I’d love to stay and chat, but my cone is dripping.
Copyright © 2006 Stephen Denny
(PS: I was lucky to be a part of the team that turned this Sony division around in 1996. The above strategy was the brain-child of Robert Striano, who has gone on to become CEO of Lipman Industries. The sales team was led by Tony Gomez, Ed Rivera and John Cullen. Other stars included Howie Lipstein, who now runs the NY office of Northstar Research, and the remarkable Sony Design Center team of Hiroshi Nakaizumi, Suzanne Morris, Miss Gemma and the inscrutable Mr. Hata).