Pohmer On...Good, Better, Best… Or Bust?

September 12, 2006 - 13:42

Normally, an individual retailer’s merchandising strategy change doesn’t warrant a lot of analysis or have potential for widespread impact on its suppliers…unless this change occurs at the largest retailer of live goods in the United States, in this case the Home Depot.

Though Home Depot management is trying to keep all of the details under wraps for competitive reasons (i.e., not wanting to give its competition too much information so they can react to this new strategy) and the company has sworn its suppliers to secrecy, changes of this magnitude have a way of being leaked. Because we don’t have an official statement from Home Depot, we have to go with the information we have, much of which was published in GPN’s Green Alert on July 26, 2006, the day the changes were announced to Depot’s supplier partners. I understand this only affects the color category right now, but these aren’t small, incremental changes; they are fundamental changes that could affect the marketing philosophy and positioning of the entire garden center.

 

All Summed Up?

In a nutshell, this is what we think we know…

  • A national rollout of a “good/ better/best” offering of products.
  • The “best” line will consist of VIVA!-branded color products that will feature new and unique genetics (and the phase out of the current VIVA! herb and vegetable program) plus exclusive Proven Winners varieties.
  • The “better” line will feature Vigoro-branded products; Vigoro is a controlled brand by Home Depot with a large measure of exclusivity to its use and distribution. It has been Home Depot’s featured fertilizer program for the past few years, and now the company is looking to make it its core brand in annuals.
  • The “good” line will be grower brands and no-name/generic brands.
  • Bonnie Plants will be a national supplier for herbs and vegetables.
  • There’s speculation there could be one price point per brand, but it is also conceivable that there could be multiple price points within each brand.

In speaking with current Home Depot color suppliers off the record, there are still many details yet to be worked out and communicated to them so they can start playing catch up and roll out this program for spring 2007.

 

Consider An Example

As a consumer, I like the idea of good/better/best assortments, a strategy Home Depot employs very effectively in other parts of its stores. When merchandised properly, the program can help make buying decisions easier for consumers by showing comparative benefits and product features from one item to another. But to be effective there needs to be clear and easily discernable differences among the compared products.

Take for instance a good/better/best presentation and assortment of dehumidifiers I was considering purchasing recently at Home Depot. The “good” (opening) price point was a low-efficiency unit with a small reservoir, limited-function manual controls and a limited warranty. The “better” (mid-price) unit was more efficient, had a larger reservoir, multi-function manual controls and a longer warranty. The “best” (high-end) unit was extremely efficient both in energy use and performance, had programmable electronic sensor controls with infinite pre-set capabilities, a much larger reservoir with the ability to remote drain, a decorative cabinet and a longer-term, full warranty. All three units were displayed side by side so I could easily compare the features to my needs, and it definitely aided my purchase decision process…all without needing the assistance of a sales associate.

As a consumer, this good/better/best assortment/presentation worked because I could readily understand the differences among the products and the performance expectations. I could visually relate to them, and it helped educate me on a product I really don’t know much about and plan to purchase infrequently.

 

How Is Color Different?

Color product in the garden center is a bit different. The features and benefits of plants are difficult to differentiate. In most cases there is little ability to justify why one plant is more expensive than the other. Our consumer really doesn’t understand plant genetics or the difference between hybrids and standards, plants grown from seed or from propagated cuttings. Our customer is challenged to understand why a “good” or “better” plant is less expensive than a “best” plant when the better plant may be larger, fuller and have more blooms than the best plant.

Add to the differentiation problem the fact that, on average, the consumer purchases color in a home improvement store only 2.19 times Á per year (Ipsos-Insight Floral Tracking Study, 2005) and we have the additional problem that the low purchase frequency doesn’t allow consumers to readily grasp the good/better/best concept quickly or easily.

As an example, it has taken a few years of consistent marketing for the Home Depot consumer to start to recognize and develop a loyalty toward VIVA! as a complete herb and veggie program, and now VIVA! will be positioned differently. Will consumers view these changes as making the purchase experience easier or more confusing, and how long will it take them to understand and appreciate the changes? People inherently do not like change or anything that disrupts their routines, and they have little patience and tolerance for it…unless they can see immediate benefits for them.

Unlike the merchandising environment inside the store that facilitates easy comparison, as in my dehumidifier example, the display and presentation of plants in the garden center make this kind of comparison shopping difficult. Perhaps the good/better/best concept can be explained through educational signage, pot color/design differentiation, and creative merchandising and display, but that has been tried before. Even with something as basic as sun-versus-shade plants most consumers couldn’t understand what we were trying to tell them.

 

The Grower’s Perspective

From a grower’s perspective, the good/better/best program poses some additional concerns. Because it will be in a pay by scan environment, in-store service will be required. And with the trend toward vendor consolidation, I am assuming it would make sense that the same supplier would be asked to grow and service the good/better/best programs to keep the program manageable at the store level. This means the growers will be asked to supply smaller quantities of more items, increasing their production complexity. And because the plants will primarily be grown in program-exclusive containers, the ability for a grower to sell overstock to other retailers isn’t available (do you see the similarities to Kmart’s Martha Stewart-branded plant program?).

What about those growers who have worked hard and invested a lot of time and money in the past few years to position their own brands in Home Depot and to their other customers as a premium label? Under this new program, the growers’ brands will be positioned as the “good”-quality brand. What impact will this have on the growers’ brands with their other customers? Granted, this may be a moot issue for some growers where their own brands are exclusive to Home Depot, but it still poses challenges to many growers who have a broader customer base.

 

Details, Details, Details

Conceptually, what we know of the new Home Depot program makes sense, but the devil is in the details and how it will be executed. Without more details, some of which haven’t yet been provided to Home Depot’s supplier partners, one cannot pass judgment on whether it will be successful or not. The concern I have is that unless it is implemented well, the impact won’t only affect Home Depot’s sales; it will have a tremendous impact on the health and welfare of its suppliers. Because of its size, Home Depot controls its own destiny and that of many of its suppliers. Hopefully, the forethought and planning behind these changes will be enough to create the anticipated success for Home Depot and its suppliers.

Most importantly, consumers will hopefully benefit, allowing them to make more intelligent buying decisions that will make them better gardeners and increase their satisfaction with their plant experiences.

Because, at the end of the day, the customer is the only one that really counts…

 

About The Author

Stan Pohmer is president of Pohmer Consulting Group, Minnetonka, Minn. He can be reached at spohmer@pohmer-consulting.com or (952) 545-7943.

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