Branding. What Do the Numbers Say? Part II

January 22, 2004 - 12:59

A study of how branding effects buying at independent gardens compared to the big box stores.

Last month's article laid some foundation on the basics of
branding. In that article, we defined branding, compared it to product
promotions and outlined some key elements of what works and what doesn't when
branding plants. This month, we dive deeper. This article examines the results
from a research study suggesting that a properly executed branding program can
indeed yield greater profits for the grower and the retailer.

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

The goal was two-fold: 1) To measure whether consumers
considered plants branded with point-of-purchase material as having a greater
value; and 2) 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 point-of-purchase
materials were displayed in close proximity to impatiens receiving no brand
support. For test purposes, impatiens with POP support were given the
previously unused brand name "Southern Shades," priced an average of
30 percent above the unbranded plants and given an end cap location 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 Four P's Formula: An effective POP program, higher
pricing and improved retail placement give you greater profits.

The Study

Six stores in the Dallas area were selected to participate in
this research study: three Calloway's Nursery locations and three Home Depot
locations. Four stores (two Calloway's and two Home Depot's) served as test
stores -- locations that received both the branded version and unbranded
version of the test product. The two remaining stores served as control stores
-- locations that received only the unbranded version of the product and had
complete latitude on how to price the product and where to merchandise it. (The
purpose of control stores is to provide a benchmark.) All six stores were
roughly equal in terms of square footage, seasonal sales volume and customer

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

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 the
branded version with POP support and $.95 for the unbranded without POP
support. Retail prices, as indicated in Figure 1 above, were suggested and
approved by the participating retailers. In all instances, the suggested
selling prices exceeded typical price points for similar products.

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

What is Southern Shades?

Southern Shades is a completely fictitious brand. Its
concept, however, is based on previous research of the types of promises
consumers would desire in a plant brand. The brand had three distinct promises
that were communicated via the POP material.

Alleviate consumers concerns over failure.

*                     #1
in university tests

*                     More
tolerant of Southern heat

Healthy, plentiful blooms.

*                     Engineered
for more blooms

*                     Bigger,
brighter flowers

*                     Blooms
spring to fall

Right for my geography/Better for Southern gardens.

*                     Southern

*                     More
tolerant of Southern heat

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

What Were The Results?

Calloway's. At
Calloway's test store 1, the branded product significantly outperformed the
unbranded version. The results from the control store were in line with the
sell-through experienced on the unbranded version.

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

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

Home Depot. At Home
Depot test store 1, the branded product clearly outsold the unbranded product.
Interestingly, the control store outperformed this test store. Home Depot test
store 1 (like its Calloway's counterpart) was a more urban store with a mixed
income clientele. The control store happened to be located at one of the
highest-volume Home Depot stores in the region -- and near a regional
headquarters for the company.

Home Depot test store 2 happened to be in a more upscale
area. Like its Calloway's store counterpart in a more affluent area, the
branded product clearly outsold the unbranded product and outperformed the
control store benchmark. Recall that in the Home Depot stores branded product
sold 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 product
version clearly outperformed the unbranded product.

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

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

*                     In
all instances, the branded product retailed for a higher price point than the
unbranded version.

The real kicker is that across the board retail price points
for both the branded product and unbranded product were higher than typical

Applying the results

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

End-cap displays can become even better profit machines by
using effective POP to call attention to the merchandise and/or add additional
purchase value for the consumer. For suppliers, this research strongly suggests
that POP is a wise investment -- especially when it can be used in conjunction
with proper product placement. A return on investment is possible on POP if it
is used to separate product from the masses.

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

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

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

About The Author

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

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