Branding. What Do the Numbers Say? Part II By Kip A. Creel

Last month’s article laid some foundation on the basics ofbranding. In that article, we defined branding, compared it to productpromotions and outlined some key elements of what works and what doesn’t whenbranding plants. This month, we dive deeper. This article examines the resultsfrom a research study suggesting that a properly executed branding program canindeed yield greater profits for the grower and the retailer.

In spring 2003, Horticultural Printers, Inc., SwansonRussell Associates and NQuery Research wanted to test the debate regardingbrand promotions — specifically point-of-purchase programs — in the retailgarden center.

The goal was two-fold: 1) To measure whether consumersconsidered plants branded with point-of-purchase material as having a greatervalue; and 2) to find out whether consumers would pay a higher price for plantsthat used branded promotions.

This test was conducted in six retail garden center storesin Dallas, Texas, during April 2003. Impatiens supported by point-of-purchasematerials were displayed in close proximity to impatiens receiving no brandsupport. For test purposes, impatiens with POP support were given thepreviously unused brand name “Southern Shades,” priced an average of30 percent above the unbranded plants and given an end cap location in theretail setting. (This additional price margin was enough to cover the cost ofthe POP materials, plus an additional amount to allow for a greater profit forthe plant supplier and retailer.)

The findings of this research yielded powerful results thatsupport the notion of the Four P’s Formula: An effective POP program, higherpricing and improved retail placement give you greater profits.

The Study

Six stores in the Dallas area were selected to participate inthis research study: three Calloway’s Nursery locations and three Home Depotlocations. Four stores (two Calloway’s and two Home Depot’s) served as teststores — locations that received both the branded version and unbrandedversion of the test product. The two remaining stores served as control stores– locations that received only the unbranded version of the product and hadcomplete latitude on how to price the product and where to merchandise it. (Thepurpose of control stores is to provide a benchmark.) All six stores wereroughly equal in terms of square footage, seasonal sales volume and customertraffic.

On day one of the research study, the four test stores wereshipped 300 units of the branded product and 300 units of the unbrandedproduct. The two control stores received 300 units of the unbranded product.For the test stores, merchandising teams were dispatched to set up thedisplays.

The study lasted nine days, encompassing two weekends.Inventory was counted two times daily — at store opening and store closing.Sell through numbers were recorded and reported daily to NQuery.

The wholesale price for impatiens was set at $1.20 for thebranded version with POP support and $.95 for the unbranded without POPsupport. Retail prices, as indicated in Figure 1 above, were suggested andapproved by the participating retailers. In all instances, the suggestedselling prices exceeded typical price points for similar products.

The branded product was merchandised with point-of-purchasesigns, bench wrap and large custom pot stakes. The unbranded product wasmerchandised with a pricing sign and standard 1- x 4-inch stakes common in theindustry.

What is Southern Shades?

Southern Shades is a completely fictitious brand. Itsconcept, however, is based on previous research of the types of promisesconsumers would desire in a plant brand. The brand had three distinct promisesthat were communicated via the POP material.

Alleviate consumers concerns over failure.

* #1in university tests

* Moretolerant of Southern heat

Healthy, plentiful blooms.

* Engineeredfor more blooms

* Bigger,brighter flowers

* Bloomsspring to fall

Right for my geography/Better for Southern gardens.

* SouthernShades

* Moretolerant of Southern heat

Each store sold the product at different rates.Replenishment dates following day one of the research study varied based oneach individual store’s sell through. However, each store always maintained amaximum inventory: The test stores had 300 units of branded and 300 units ofunbranded product; control stores maintained 300 units of unbranded product.

What Were The Results?

Calloway’s. AtCalloway’s test store 1, the branded product significantly outperformed theunbranded version. The results from the control store were in line with thesell-through experienced on the unbranded version.

With Calloway’s test store 2, the results were moreequivalent. The branded and unbranded versions sold at relatively the samerate. Test store 2 was a more urban, mixed income locale, while test store 1was in an upscale northern Dallas suburb.

Regardless of the relatively equal turns for the branded andunbranded products in test store 2, the branded product still earned highergross margin for the grower and retailer. Recall that the unbranded version soldfor $1.99 and the branded version sold for $2.49. The name of the game is tomaximize the amount of profit contribution per square foot of selling space.

Home Depot. At HomeDepot test store 1, the branded product clearly outsold the unbranded product.Interestingly, the control store outperformed this test store. Home Depot teststore 1 (like its Calloway’s counterpart) was a more urban store with a mixedincome clientele. The control store happened to be located at one of thehighest-volume Home Depot stores in the region — and near a regionalheadquarters for the company.

Home Depot test store 2 happened to be in a more upscalearea. Like its Calloway’s store counterpart in a more affluent area, thebranded product clearly outsold the unbranded product and outperformed thecontrol store benchmark. Recall that in the Home Depot stores branded productsold for $1.59 per unit and the unbranded sold for $1.20. Á

The Bottom Line

So, after this research, what is the bottom line?

In three of our four test stores, the branded productversion clearly outperformed the unbranded product.

* Inthree of the four test stores, the branded product outsold the control stores.

* Inone test store, the branded and unbranded products sold at an equivalent rate.

* Inall instances, the branded product retailed for a higher price point than theunbranded version.

The real kicker is that across the board retail price pointsfor both the branded product and unbranded product were higher than typicalretails.

Applying the results

There is validity to the Four P’s formula. Combined use ofeffective POP, higher pricing and proper placement in the retail store can leadto higher profits for everyone in the supply chain. Retailers need to maximizethe visibility (and value) of end-cap locations with attention getting POPmaterials. For retailers, this research highlights the importance of managingyour most valuable real estate.

End-cap displays can become even better profit machines byusing effective POP to call attention to the merchandise and/or add additionalpurchase value for the consumer. For suppliers, this research strongly suggeststhat POP is a wise investment — especially when it can be used in conjunctionwith proper product placement. A return on investment is possible on POP if itis used to separate product from the masses.

Both retailers and suppliers need to continually worktogether on ways to maximize the gross margin contribution of every square footof retail selling space. This will become increasingly important as the overallsales growth rate in the industry slows.

POP material can add value. For common plant material likeimpatiens, POP material can be used to add additional value to the purchase.The Southern Shades branding effort successfully positioned the product as abetter alternative.

There is unnecessary waste during opportune times. Duringtimes of high seasonal demand, the industry is leaving money on the table. Whatis the difference between $1.99 and $2.49 for 4-inch impatiens? For theconsumer it is $.50. For the supplier and retailer, that 25 percent amounts toa significant boost to the bottom line.

Kip A. Creel

Kip A. Creel is president of NQuery Research, a marketing company specializing in horticultural research. He can be reached by E-mail at kcreel@nquery.com.



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