Branding. Here We Go Again. Part I

December 12, 2003 - 07:51

How branding really effects buying and what can we do to help it along?

Say the word "branding" to any group of
horticultural executives, and you are likely to get some sighs, rolled eyes and
under-the-breath utterances of "Here we go again." In addition to
being oft maligned, it is also the most widely misunderstood concept in the
industry. Various consultants (myself included), tag and label vendors,
promotional companies and advertising agencies are all guilty of jumping on the
branding bandwagon. Do success stories exist? Absolutely. Are there a number of
failures? You bet. Is this still a viable strategy for the industry? Yes. And,
that's the main reason for this article.

The problem with branding is that we use the word to
describe point-of-purchase (POP) materials, promotions and a host of other
marketing efforts. What is currently done in the industry is not really
branding but in-store promotion. One of our goals in this article is to explain
the difference between brands and promotions. We will also discuss some
observations and research-supported facts about what will and will not work.
Lastly, we will lay the groundwork for a successful branding formula that was
researched in spring 2003.

Consumer Branding 101

There are many definitions of branding, but the common theme
among versions is that branding is a long-term organizational commitment. A
true brand must have focus, alignment and linkage.

Focus is the process used to define the product or service's
personality. What is its unique selling proposition? What is its core essence
or personality? What promise is the product making to the purchaser? With
respect to the "core essence," brands are differentiating, compelling
and enduring.

Alignment is the process that makes branding an
organizational commitment. Here, the brand's core essence is translated into
strategies that will determine how the brand will behave in the marketplace.
The job of the marketing manager is to make very calculated decisions on the marketing:
brand name, brand promise, packaging, price, communication with the consumer,
channels of distribution, product mix, selling volumes, financial contribution
to the company and selling season. In most instances, all of these issues are
planned before the brand is even launched.

In large corporations, a brand manager oversees these
activities and employs the services of advertising agencies, graphic design
firms, research companies, merchandising companies, media, etc. Over the long
term, the job of the brand manager is to maximize market share and
profitability by constantly altering the marketing mix variables in response to
changes in consumer tastes, channels of distribution and competition.

Undoubtedly, this is an expensive process, which is why branding
must be a long-term organizational commitment. It takes significant time and
resources to break the clutter, create brand awareness, drive demand and yield
an acceptable return.

Promotions are very different. Mostly what is done in the
horticultural industry is in-store promotion. Typically, promotions are a
combination of merchandising, POP materials, in-store events and
advertising/direct mail.

The main differences between brands and promotions is that brands
always have a real or perceived difference from other products, endurance in
the marketplace and a strategic intent.

Because of their endurance in the marketplace, demand and
price sensitivity for brands can usually be measured (through research). Depending
on the product class, brands may or may not yield a higher margin to the
retailer. (In supermarkets, for instance, private label goods can be more
profitable. Branded items are stocked because they create traffic, and the
retailer earns rebates, co-op advertising and other perks.

Can a product launched as a promotion become a brand?
Absolutely. A good example in the horticultural industry is Wave petunias. This
product has built a loyal following. Among consumers, the Wave petunia has a
real or perceived difference in garden performance, the company is willing to
dedicate resources to support this product for the long haul (endurance) and
the brand's personality is fairly compelling. After some time in the market,
customer demand and awareness could be measured scientifically via research.

In this industry where marketing resources are scarce, our
recommendation is to launch any new product using a promotional strategy. If
the product is truly different and compelling, retailers and customers (over
time) will build the brand for you.

10 Brutal Facts of Branding

Over the past five years, we have conducted numerous
research studies on the topic and have collected some anecdotal evidence about
what will and will not work in branding plants. Below, are these 10 brutal
facts of branding.

1. Branding (as we are defining it in this article) makes
sense if it is intended to be a galvanizing organizational initiative.

2. If branding cannot generate sustained demand, improved
margins or increased market share, what's the point?

3. Today, retailers (especially the independents) hold all
of the brand equity.

4. It is important to know which kind of brand you want to
build. This article only discusses consumer branding. Trade branding is an
entirely different subject. It is possible for a consumer brand to influence
the trade; it virtually never happens in reverse.

5. As it relates to branding plants, NQuery's research
suggests that consumers care about quality, garden performance, unique colors
or varieties, reducing the fear of failure and new uses of the product.

6. Branding is more difficult on plant material where there
is no perceptible difference from existing options, which is why garden
performance is typically the most powerful point of differentiation.

7. For plant material where there is virtually no product
performance differences between two or more options, branding will only work if
a supplier can garner enough shelf space in a retail setting to create an
impact via tagging, labeling, merchandising and pricing.

8. Suppose you have a similar plant from two suppliers, both
priced the same at retail. One product version is supported by effective
tagging and labeling, and the other carries a standard plant tag. If these two
items are merchandised together, consumers will cherry pick and look for the
best looking plant. Here, the merchandising is not working in conjunction with
the POP materials to create a meaningful vignette for the branded product.

9. As a retailer, it is often necessary to buy similar plants
from multiple suppliers. Suppose two annuals are merchandised together but
priced differently. One version is supported by crafty tags and labels; the
other is not. If there are no perceptible differences in the plant itself and
the only difference is tagging, labeling and price, the consumer will always
default to the less expensive option. Á

10. In some instances, clever labeling, packaging
innovations and new uses of the product (regardless of merchandising) can
induce the customer to trade up. Will this continue to work in the long run?
Yes, if the product itself is unique.

The bottom line to these "Brutal Facts" is that
ultimately it is the product and its performance that sells. For more common
plant material, ad-hoc promotions can work to increase turns and margins, but
it is not the POP materials alone that make it work. To effectively do in-store
promotions, suppliers and retailers must work together and adhere to the
"Three P's" Formula.

The Three P's Formula

The Three P's are POP, pricing and placement. Put simply, a
POP program combined with higher pricing and better store placement can result
in higher profits. Yes, higher profits. We've done the research and have the
data to support it.

Why invest in POP? First, customers need to be more self-servicing.
I'm not saying abdicate the personal touch and install self-checkout lanes, but
during peak demand, POP can help sell the product. Secondly, our research has
shown that tags and labels are the most widely consumed source of gardening
information, including magazines, television and the Internet. Last, POP is one
of the most cost effective ways to communicate with consumers at the point of
sale, adding value to the purchase occasion and reducing fears of failure.

Why higher pricing? We are leaving money on the table. (The
big box stores (more than anyone) need to re-read the preceding sentence.) Here
are some observations to support my position.

According to research conducted by DIY Retailing, home
center lawn and garden departments are one of the least productive when
compared to hardware, plumbing and electrical. As the growth in box stores
slows and the market becomes saturated, the emphasis will be on improving
departmental productivity and overall profits.

Our research shows that consumers place a
"subconscious" limit on the amount of plant material they purchase in
one visit to the garden center. They realize the product is perishable and will
only purchase an amount that can be consumed in the allotted time for
gardening. (Remember, the average gardener is only giving us 4-5 hours per
week.) According to research by Harris, the percentage of U.S. adults who say
gardening is their favorite pastime is going down.

Growth in the overall gardening market is slowing.

Gardening sales can only be increased by raising the average
transaction and/or increasing the frequency of purchase. Increasing the
frequency of purchase requires changing consumer behavior, and it costs a lot
of money to change consumer behavior. There are numerous ways to raise the
average transaction, and pricing is one of them.

Achieving greater profits. In spring 2003, Horticultural
Printers, Inc, Swanson Russell Associates and NQuery Research wanted to test
the debate regarding brand promotions -- specifically POP programs -- in the
retail garden center.

Our goal was two-fold: to measure whether consumers
considered plants branded with POP material as having a greater perceived value
and to find out whether consumers would pay a higher price for plants that used
branded promotions.

This test was conducted in six retail garden center stores
in Dallas, Texas during April 2003. Impatiens supported by POP materials were
displayed in close proximity to impatiens receiving no brand support. For test purposes,
the impatiens with POP support were given the previously unused brand name
"Southern Shades," priced an average of 30 percent above the
unbranded plants and placed on an end cap in the retail setting. (This
additional price margin was enough to cover the cost of the POP materials, plus
an additional amount to allow for a greater profit for the plant supplier and
retailer.)

The findings of this research yielded powerful results that
support the notion of The Three P's Formula. Greater profits are possible
through effective POP and improved placement in the retail setting. Next month,
we will provide significant detail regarding the results of this research test.

About The Author

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

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