categorystrategy

If you are a retailer there are three important steps to maintaining and improving your business. You must get consumers to your store, get them to buy your product, and get them to return as a repeat buyer. Here’s how blogging will help you accomplish two of those objectives.

A growing percentage of consumers, especially the young and the members of Generation Specs, are going online to find and research products. I personally begin nearly every purchasing decision with an online search and a scan of reviews. Many people I know are so plugged in during their day I wonder how they would even find something at a retailer without web access. And soon, smartphones, wireless networked devices, and improved local search will enable online search from anywhere. While you no doubt know the importance of having an online presence you may not realize how much blogging can add to your visibility.

Blogs are remarkably search friendly. They are frequently updated and linked to, so they tend to get higher search result placement than static web pages. They also speak to the younger generation in the more informal language they expect. If you want to be found online, and believe me you do, then a blog will help. This is not about gaming the results of search engines. It’s about creating the type of online presence that gets found and gets viewed. It’s a way to bring customers to you.

Blogs also do something very important to help you retain loyal customers. They create a sense of community. While we’ve long been in the age of the big box retailer and seen the near demise of the neighborhood store, and online community can bring back some of the sense of chatting with the knowledgeable local store owner. A great example of this is MenEssentials, an online retailer of skin care products for men. Through open and candid conversation about products the carry and even those they don’t, plus the welcome participation by market insiders and experts, the owner’s postings and the discussion forums have created measurable loyalty. New customers offer testimonials, and repeat (satisfied) buyers discuss the incremental purchases they made from suggestions they read on the site.

Community can’t be faked or forced. It has to begin with genuine desire, openness, and honesty on the part of the owner. And I believe that a blog is one of the fastest and most effective ways to communicate that you are different than other retailers. Since a blog is an addition to your regular web property it takes nothing away from what you already have and it will only be found by those who are interested in it anyway. If nothing I have said is compelling to you then a blog is probably not the right thing for you. You have to get it before you can communicate it. But if it makes sense and you can see the benefits of communicating to the connected generation, then get started. Start talking in your own voice not that of a corporation. Openly, honestly, and candidly. Be smart if you officially represent a company, but be yourself and have fun. Customers will find you and reward you for it.

I’ve commented earlier on my disappointment with consumer goods retailers putting their private label products between the facings of like branded products. This may seem trivial, but I am talking about the broader issue of using the physical appearance of a section to direct consumer behavior. One of the strengths of effective shelving strategy is the development of subcategories. When my job was developing planograms I focused on moving the consumer up to higher priced premium items. I positioned them in such a way as to draw the consunmers’ eye while they reached for the popular standard items. I shelved items together in a block to build a premium subcategory.

Let’s take a look at what a new large-format Kroger is doing in the cereal section.

I find that less than asthetically pleasing, but even more importantly I find that it undermines the segment of adult complex cereal that Post is trying to create. We all know that the shelf belongs to Kroger and that they can put their private label cereal any where they want. We also know that they make a better profit margin on their own product. But, let’s look at the reasoning behind this little subcategory.

Ready to eat cereal (the kind you pour in a bowl and add milk) is a $7 billion market. It appeals, and is marketed, mostly to kids. Today adults are increasingly skipping breakfast or eating on the run. So cereal manufacturers are trying different methods to appeal to adults and increase consumption. They try adding benefits, in the form of vitamins, antioxidents, fiber, etc. They also try developing more complex flavors to appeal to grown up tastes. In the case of the Post Selects (formerly Post Morning Traditions) line, these are cereals with complex adult tastes and are shelved at the top of the section with the shredded wheat. They carry the sub-brand Selects and have similar packaging elements. Shelving them together in a block is a method of visually drawing the consumer to a subcategory. Shelved haphazardly they would get lost in the section. But to the extent that they can draw the consumer’s eye they can increase awareness and ideally create a cereal customer out of an adult that was only buying cereal for the children.

The typical retailer approach to shelving is to stick the private label item directly next to the item it is designed to take customers from. That’s fine from a profit-per-item approach, but short-sighted from a category strategy approach. Let’s take a look at what Super Target is doing in the same section.

You can see a different strategy here. Target has expanded the concept of the adult complex cereal into a comprehensive subcategory. Post Selects are still located on the top shelf where the consumer would expect to find them. But now there is an entire block of similar items shelved below. This is a private label subsection influenced by the successful strategy of Post cereals.

While Kroger is eyeing tenths of a percent of market share with dollar signs in their eyes, Target is actively building the category. I propose that retailers work together with manufacturers for the benefit of the entire category. Finding ways to bring more consumers to the section and giving them something to buy is the right strategy. Shifting market share from one product to another is not the path to growth.

There’s no mistaking the increasing importance of having an online strategy in retailing. And it’s actually about to increase faster than many are predicting. It’s common for market researchers to extrapolate future trends by mixing recent historical patterns with some educated guesswork. But when Gartner, Jupiter, Forrester, and the rest predict how important the Internet is going to be to retailers they might not be looking at the looming sea change in consumers. I’m talking about the rise of Generation “Specs.”

These are the young consumers who have grown up in a connected world. Who methodically research the specifications and features of products before they buy. Who readily share their preferences and experiences. These consumers are the future and they are going to change the way goods are sold. Savvy manufacturers will embrace them through access to the information they seek and through dialog the way they prefer. In other words, online.

Generation Specs wants to know everything about your products and wants to decide on their own which of those features matter to them. They want to feel that you are communicating openly. They are going to use every means available to compare prices and features and they will buy on value. So the opportunity is to present a sophisticated value proposition to these consumers now while you competition is still using last year’s theme of marketing with irony. Tell them truthfully why they should shop at your store and why it might even be worth paying more with you than somewhere else. If you are right, and you engage them where they are – online – you will be rewarded.

Consumer goods are becoming more like consumer services. As I mentioned below in my discussion of the value chain, a product can acquire more value by integrating an additional consumer benefit. This benefit is often found at a different level of the value chain from where the actual product fits. The key to unlocking additional revenue potential for a consumer products company is to integrate that value into the product. To make the product more like a service.

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When I worked for Cisco I fully embraced the corporate mantra that Cisco would “Change the way we live, work, play, and learn.” By building the world’s networking infrastructure, we were enabling new forms of collaboration, new access to education, and new market efficiencies. It’s a great feeling when you believe that no matter your job position, you are not simply one cog in a great machine, but part of something important.

I’ve been thinking about whether most companies could adopt a similar posture of changing the world for the better. Would employees be better off if they felt part of something important? Would there be more pride, more sense of accomplishment, more dedication to excellence? Or would would the very idea collapse under corporate cynicism?

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