May 2002

Market Expansion vs. Cannibalization By Stan Pohmer

It never ceases to amaze me that when business gets tough, companies generally take one of the following actions: Either they cease or decrease their advertising because they "can't afford it" or they increase their advertising and use low prices to draw customers into their stores.

Both of these actions may provide some short-term benefit (no guarantees) but are long-term suicide.

Promote for long-term gain

One of the classic definitions of "advertising" is the non-personal communication of information, usually paid for and usually persuasive in nature, about products, services or ideas by identifying sponsors through various media. The way most horticulture companies use advertising is to drive one-time sales of specific items. And in many cases, these ad-driven sales are not necessarily incremental or add-on to other purchases made during that transaction but in lieu of something else. The worst part about this is that the ad-driven sales are generally price-driven, with lower margins than the non-ad items; if we can't find a way to encourage consumers to incrementally purchase something else at regular price, was there any real positive benefit to running the ad in the first place?

Some may say that the reason to run an ad is to provide a reason for the consumer to shop your store rather than your competitor's. But again, if the defining moment in the customer's decision to shop your store is price, all you've done is "bought" her for one time; your competitor can steal her back with a better price, and the vicious cycle to decreased profits accelerates. Whether it's "stealing" sales from other items in the store or from a competitor, the bottom line is it's a cannibalization process — sacrificing one thing for another, a zero-sum outcome.

Don't take me wrong, advertising is an integral and important part of a comprehensive marketing strategy. But in and of itself, a total dependence on price-driven advertising alone cannot lead to long-term success for any business.

Though it may take longer to achieve, the process of promotion should be a strategy that gets more attention and support within the horticulture industry than it currently does. Compare the definition of advertising above to that of "promotion": a process that keeps the product or service in the mind of the consumer and helps stimulate demand for the product or service. Advertising generates more short-term gain than promotion does; it focuses on individual items one week at a time, while promotion focuses on a broader category with the aim of generating longer-lasting gains over time.

Meet the objectives

In a classic marketing initiative, there are three distinct objectives that need to be accomplished to achieve long-term success:

1. Create awareness. Tell the consumer what you are all about, the benefits of your product.

2. Change attitude. Give them reasons to be involved with your products; overcome barriers that keep them from purchasing your products.

3. Modify behavior. The call to action — encourage them to purchase and be involved.

Advertising can only really accomplish the first initiative, creating awareness; promotion can help achieve the attitude and behavior modification to build the consumption that will benefit everyone. I recognize, however, that most individual companies don't have the resources to execute and maintain a promotion strategy. Successful promotional campaigns emphasize industries and major product categories; individual companies develop advertising strategies that tie-in and support the bigger picture — industry promotion. Good examples of successful promotion strategies are those developed by the Dairy Council ("Got Milk?"), the Beef Council, the pork industry ("the other white meat"), the produce industry's "5 A Day For Better Health," and many of the produce commodity groups (raisins, grapes, apples, etc.). Two important footnotes common to all of these promotions: They represent national and major geographic industry interests, and they do not promote price in any of their consumer messages.

Support the industry

The good news is that there are some industry efforts in place that need your support.

• America In Bloom (www.americainbloom.org). A national beautification program fostering civic pride through community participation and the challenge of friendly competition. This grass-roots promotion encourages municipalities, businesses and residents to band together to enjoy the benefits of our industry. Modeled after the successful Communities in Bloom program in Canada, AIB also sponsors a beautification contest among towns and communities with independent judging. By using community involvement and civic pride as the focus, the benefits to our industry are realized by the local retailers, growers and wholesalers.

• Flower Promotion Organization (www.flowerpossibilities.com). Using the marketing umbrella of "Flowers. Alive With Possibilities." as its consumer message, this promotion shows consumers the endless uses of cut flowers. In addition to funding direct consumer marketing in six demonstration markets, the FPO works with communities throughout the United States (TV and radio spots, billboards, P.O.P. and other collateral materials) in local marketing campaigns. Because this promotion is consumer-direct and retail-channel neutral, everyone in the distribution chain — growers, importers, wholesalers, retail florists and mass marketers — benefits by the increased consumption.

• Perennial Plant Association (www.perennialplant.org). Promoting "June is Perennial Gardening Month," this group has developed consumer education information, P.O.P. materials and a PR campaign designed to extend the perennial season past Memorial Day, leading to increased consumption of perennials.