Brand Building and Messaging when Updating Packaging

If you are in a business that sells products, the time will inevitably come when you will want to update the look of your packaging.  Overtime you will learn things about your existing package that need to be changed, you will desire to modernize the feel, you will want to evolve the logo or communication, etc.  Updates to packaging are perfectly natural and healthy as long as the changes do not erode your consumer base.  Frequent changes are unhealthy since it destroys your brand equity.

Brand Equity

What is brand equity?  In the world of accounting, it is considered an intangible asset which is quantified to add value to a companies assets.  In marketing, it can be defined as the awareness or recognition of a brand.  The stronger the equity of a brand, the more recognizable it is.  With that in mind, brand equity is a function of the things that help consumers to recognize the brand.

Let’s look at Goldfish by Pepperidge Farm as an example.  On the packaging examples below, you will see the original Goldfish Cheddar and a line extension – Goldfish Colors.  I’ve circled in red and pointed to in blue the significant points of recognition on this package that contribute to the brand equity.

Goldfish Brand Equity

You will see that whether on the original item or the line extension, Goldfish marketing has kept the following consistent to maintain the brand’s equity in order to help consumers recognize the brand:

  1. Central lock up with brand and product logo
  2. Goldfish illustrated character at the same location and same look and feel
  3. Product imagery to set consumer expectation on the bottom left
  4. The colored swivel shape that wraps around the central lock up (yes, a shape can be an equity!)
  5. The white background (believe it or not, color does contribute to the equity!)

I’m classifying these as the consistent factors that significantly contribute to the brand equity.  If Goldfish were to redesign their packaging, maintaining these 5 characteristics in the above would be a must and changing any of the five would result in severe risk to the equity that the brand has developed.

Communication Hierarchy

Another packaging component that you will want to consider is the ranking of the messaging that you want to communicate.  Typically a consumer makes an impulsive purchase decision within 2-3 seconds of looking at a product.  You may have 5 things that you want to communicate on your product, but in reality, only 1-2 of these will be seen within this 2-3 second window.  Therefore, you need to prioritize the messaging and the placement of the messaging to get your points of difference or product benefits across.  If you attempt to communicate too much, the package will look too busy and the messaging will be lost.

Let’s look at Fruitables for example:

fruitables packaging

I notice the following messages being communicated on this pack:

  1. Standard of Identity: Fruit & Vegetable
  2. Benefit: 1 Combined Serving of Fruits and Vegetables
  3. Flavor: Tropical Orange
  4. Pack Size: 8 Pack

The most prominent messaging is that this is made with Fruits and Vegetables. This is right in the center of the package and arguably communicated twice through the branding and the identity. The second most prominent message is the flavor, since this is second largest and takes up quite a bit of real estate on pack. I’m sure that the brand team did some decision tree mapping to determine how consumers shop. In this case, it appears that consumers first shop by positioning (fruit and vegetable beverage) and then by flavor. Lastly, the product benefit of 1 combined serving of fruits and vegetables is the third thing that pick up on since it is not as large and has more fine print.

What packaging related questions do you have?

The Basics of a Product P&L

Creating a P&L for all products that you sell will ensure the success of your small business.  The purpose of a P&L is that it allows you to have visibility into your profitability, costs, opportunities for cost reduction, and better management of your final retail price points.

My favorite P&L template divides your inputs and factors into four sections:

  1. Retail Price Drivers: Since the retailer that you are selling your product to typically will have a margin requirement to ensure their profitability, the price that you will be selling to them for ultimately determines the final SRP.  This is important because in small business marketing, we always want to be ahead of the game and make sure that we price competitively in-market by staying below key thresholds, undercutting or pricing in-line with competition, etc.
  2. Product Margin Factors: Your product margin is the area in the P&L that allows you to have visibility into the costs that you have control over.  For example, the cost to produce is controllable since you can always produce more efficiently, more cheaply (lower quality…not necessarily recommended!), etc.  The trade rate is the amount of funding that you want to allocate in market to offer discounts on scans (controllable) for the specific item that you are accruing a trade spend on (via the P&L).  The cash discount line is a way to incentivize retailers to order more product (i.e.: if you order a full truckload, I will knock off 2% off invoice).  And finally, if you are a food company, your spoils theoretically is a cost of manufacturing since you are over producing for what the market could bear – forcing you to buy back.
  3. Gross Margin Factors: The inputs that are typically out of your control.  For example, pre-negotiated rates if you sell through a broker, distribution costs, warehousing costs, selling expenses, and marketing spends.  Marketing spend is the odd ball here since you do have control over this spend.  However, at most companies the marketing spend is found below the product margin line since marketing dollars that you accrue don’t necessarily have to be used on the product that you accrued it on.  Therefore, removing this line from the product margin line frees up your marketing spend to be spent against any product that you sell.
  4. Profitability: The bottom line and how we manage to stay in business!

 

There are many things that I would like to explain to you on this P&L. In particular, two things that I will write about later are:

  • How to determine your trade rate and how to offer an EDLP (everyday low price)
  • How to improve your profitability while managing the retail price

In the meantime, what questions do you have on P&Ls?

Pricing Scenario: Shipping Through Distributor or Direct

If you own or manage a business that produces products or services (like essay writing where students are in search of where to pay to write essay ) that sell through a retail channel, there are two pricing scenarios that you need to develop so that you can determine what your selling price will be to either the retailer and the distributor that will sell to the retailer and within these two scenarios, two additional scenarios for a pick up price (at the manufacturing or warehouse location) or delivered price.  Potentially, you can have multiple delivered prices (full truck load, limited truck load, etc.) as illustrated below:

Pricing Scenarios

Because of the above, in order to sell efficiently as a small business owner or manager you should be creating two separate price lists if you sell your items both direct to retail or through a distributor (who then sells to the retail) – one price list for direct customers and another for distributors.  On each price list you should provide one set of prices quoted as both FOB (AKA pickup) and delivered for all of your products.  Although this is not really what I want to cover in this article, the benefits of separate price lists are:

  1. Easier to manage your targeted SRP by adjusting your sell price.  Typically, your selling price to distributors should be less than that to direct customers because ideally you want your SRP to be one price at any retail location (this will be further discussed below)
  2. Since more margin is added when going to distributor vs. direct, which results in two different sell prices, it becomes easier to manage your profitability by have P&Ls for direct customers and P&Ls for distributors
  3. Custom programs.  Some distributors are not properly educated on your product benefits.  Paying extra money for placement in their catalog so that you can drive messaging and awareness to the local reps within the distributor company could be the difference of a distributor pushing your product vs. not pushing it

Now going back to the original point of the article: how to develop the two separate pricing scenarios.  Let’s assume that the average retail margin is 40% and the average distributor margin is 10%.  Let’s also assume that at a sell price of $1.50/unit, you will be hitting your targeted profit margin.  Below are the SRPs for Direct and Distributor based on the above:

Direct Customers: $1.50/(1-.6) = $2.50 SRP

Distributor: ($1.50/(1-.9))/.6) = $2.78 SRP

As you can see from the above, you pricing structure will not be consistent in stores that ship through distributor vs. stores that ship direct from your plant.  In order for the Distributor pricing to lead to $2.50 SRP, the sell price would need to be $1.35 as opposed to $1.50. Or, your Direct price should bump up to $1.67 to deliver a $2.78 SRP.  You might be wondering what this has to do with marketing?  Well, if your direct price is the same as the distributor price then good luck trying to sell to large customers.  They will know and recognize that you aren’t giving them the best deal since going through a middle man is always more expensive.  Therefore, two separate price lists is the way to go so that you can have two different pricing structures.  Furthermore, your direct customers will never see your distributor pricing and vice versa, always giving you more leverage.

Timing of Marketing – Always

Typically, traditional forms of marketing can be expensive on the grand scale.  Print, billboard, radio, and TV can be very costly to get impressions up and consumers to your store or online shop.  For small businesses, a marketing budget is usually underfunded and can get cut easily as capital will be pulled for bigger items.  But if you have a very exciting (which does not imply expensive) marketing program around your shop or products, it is a better problem to chase your supply chain than to chase the sale.

Here is a simple model that will help you get sales lined up and pushed through in three easy steps:

  1. Pre-order Marketing:  Tell them before they want it
  2. Order Marketing:  Tell them when they want it
  3. Post Order Marketing: Tell them after they want it

Pre-Order Marketing

Lining up a demand or a pre-order sale helps in many ways.  By doing such, you have a better understanding of what your demand might be and you can therefore plan your supply chain to produce the supply plus a little more to ensure every customer gets what they want, when they want it.  Moreover, you do not have to invest the capital for something that may sit on your shelf and have some sort of inventory cost.

Order Marketing

Obviously, when you product is available, you need to communicate that it is.  Most small businesses forget to do this or stop doing this because their demand is too high and they cannot scale production accordingly – another problem that is better to have.

Post-Order Marketing

I often forget to use the product/service that I couldn’t wait to get and probably spent too much on simply because I find myself very busy with other things and forgot about it after the first 5 hours of use.  Don’t forget to remind your consumer how great of a product that you sold them is by showing the functionality of it.

Clorox, Price Discrimination, and Line Segmentation

Take a look at the above: Both product lines are within the Clorox family of products – one is branded Clorox and the other is branded Green Works.  Although the image of Green Works does not show it, Green Works also offers disinfectant wipes and detergent.  Essentially, the Green Works line has the same product types as the Clorox line.  This is an example of both price discrimination and line segmentation.  Below I will walk through both price discrimination and line segmentation in action so that you can learn and hopefully develop creative ways to utilize the same strategies in your small business marketing strategy.

Price Discrimination:

  • Clorox Bathroom Spray is $4.49 vs. Green Works Bathroom Spray at $5.79
  • Clorox Toilet Cleaner is $3.79 vs. Green Works Toilet Cleaner at $5.49
  • Clorox Disinfecting Wipes is $2.99 vs. Green Works Disinfecting Wipes at $5.99
  • Clorox Stain Fighter & Color Booster is $5.79 vs. Green Works Detergents at $5.99
Each of the compares in the above is an apples to apples analysis – same oz., similar product.  And as you can see, Clorox clearly marks up the price of its Green Works line vs. its generic brand.  Why is this?  There is a different value proposition behind the Green Works line – it is natural, and because of this, they believe that natural-seeking consumers are willing to pay the premium for better-for-you products.
Through the Green Works line, Clorox reaches a new set of consumers and potentially cannibalizes its own sales on its existing Clorox brand.  However, this cannibalization is positive cannibalization since the consumers are pricing up to a more expensive line.

Line Segmentation:

Clorox manages its cleaning products portfolio by segmenting the market into mainstream and natural and leveraging different brands, that are relevant to each market, within each market.  This benefit of creating two distinct brands is that Clorox has the ability to develop two distinct and targeted marketing plans.  It would be difficult for Clorox to develop a marketing plan to natural consumers without impacting its brand positioning within the mainstream channel (which is Clorox’ bread and butter).  Likewise, it would be difficult for Clorox to maintain its brand positioning in mainstream while also trying to effectively market to natural consumers.  There are also financial reasons for such a segmentation:  For example, since the Green Works line is premium priced, the financials behind a couponing or promotional campaign will look differently than that of the mainstream Clorox line.

Conclusion and Implications:

As a small business owner developing a marketing strategy, if you find a new need within your market that you would like to market against to generate incremental sales, consider a price discrimination and line segmentation strategy if the new need is a different type of consumers.  By following this rule, you will be sure to not impact your existing brand, products, or sales while taking advantage and capturing the new market opportunity.  This rule implies for both product, retail, or service driven companies.

Going From Small to Big Business: What You Need to Know as a Manufacturer

So you have a product that you sell locally, for now.  Whether it is a local cupcake business, bread producer, toy manufacturer, etc. this will apply to you because your goal is success and the more success, the better…right?

Growing your business requires incremental dollar sales month over month, year over year.  Holding everything constant (product, price, distribution, placement, etc.) there is no reason to believe that the customers that you currently sell to or the shop that you currently sell at  will produce more sales one year over the next.  Therefore, the only way to grow when holding everything constant is to increase the number of stores that you are selling to.

There are two ways to go about this: continue to sell locally or expand into national or regional accounts such as Costco, Target, Toys R Us, etc.  In either scenario from the above and similar to what you require for growth,what retail is looking for when deciding to take on new products in their finite space is also incremental dollar sales.  What I mean by this is the following:

If you sell locally your famous mustard recipe, why would a retailer want to replace an item on their shelf that is already profitable for an item that has yet to be proven?  The answer is this: you need to demonstrate to the retailers why your product will drive incrementality to their mustard category.

Incrementality within manufacturing is typically achieved through innovation or differentiation/unique characteristics of your product vs. the competitor.  Perhaps for mustard, it could be that your mustard is Kosher Certified and USDA Organic whereas Grey Poupon or Boar’s Head is not.  Also, maybe your mustard is incremental due to the unique packaging that doesn’t leave crustiness on the rim after closing the cap and storing in the refrigerator (I hate this!).  Whatever the differentiation is, you must prove that it is valuable differentiation and therefore, incremental in dollar sales because existing mustard consumers will switch to your product for whatever that added value is.

Now there are two ways to get in on shelf at bigger accounts:

  1. Analyze the competitors within the space that you want to compete in and recommend to the retailer a competitor that you would like to “pick-off” because it is slow moving, but nutritional label, etc.
  2. Present to the retailer via research (surveys, customer testimonials, consumer needs, etc.) why your product deserves a slot on shelf

Developing these stories is the tricky part.  Adam and myself have the experience of selling-in to national retailers over various industries and would love to hear your story and how we can help, if needed.

Service Industry: The Job is Not Done Once Complete

A few weeks ago, I wrote about 3 Keys for a Service-Driven Small Business.  These 3 keys are most important before and during a job.  However, today I want to expand upon how to succeed as a service-driven small business by discussing one of the most important thing to do after the job.  Similar to sales or selling, the job is not done and the relationship is not locked-in once contact information is exchanged.  Likewise, your job as a service small business company is not complete once the job is done.  You must continue to follow-up after the job multiple times to check that everything is still good, everything has gone as planned, etc.

Following up on a completed job is one of the most important things that you can do to solidify word-of-mouth referrals by taking your company/brand from ordinary to extraordinary.  Furthermore, aside from checking to make sure that the work you performed is still holding up as transacted, you will also be showing your customers that you are invested and take pride in the work that you do.  This ensures consistency, quality, and a level of satisfaction that one day you might be able to charge a premium for since your brand/company will become known as one of the best in your local market.

Below are three things that you will be guaranteed to see when implementing a plan of following-up:

Positive Brand / Company Perception:  Your customers will begin to view your business as “the step above” within your industry and even so far as among local service companies.  Word-of-mouth referrals is one of the biggest drivers for service driven companies and therefore, positive attitudes toward your company will without a doubt lead to more customers.

Quality Improvement:  Let’s face it, there are always errors, faults, things that go unplanned, etc.  Mitigate your own risk of failure or not fully meeting your customer’s expectations by following-up and addressing any concerns or problems after the fact.  This might wind up taking time away from another site to spend potentially hours fixing the site that was already paid for, however, you will never leave a customer unhappy.

Ability to Increase Price in the Long-term:  As you gain more customers via word-of mouth and as your quality becomes unmatchable, you will then gain leverage to charge a premium for your services since you offer proven outstanding services.

Is there a right number of times you should follow-up with individual customers?  I don’t think so.  Your customers paid a lot for the services that you performed and with that, they expect outstanding service.

Quality Assurance and 3 Small Business Solutions to Improve Quality

Here me out for a second: quality assurance is one of the greatest challenges of small businesses.  I know that some of you might not agree with this statement because small business owners take pride and ownership in their business and are producing their products/services in a much smaller quantity than any large business would therefore, you assume that lower volume equals higher quantity.  However, my argument is that this is not the case.  Although lower volume should equal higher quality, the issue that small businesses have is a limitation of resources, which impacts quality.

Take the example of a bagel shop in New York City – on a few occasions, if you ordered a bagel with egg, cheese, salt, pepper, and ketchup, they might forget the cheese.  For the amount of volume that a small bagel shop does vs. a large scale breakfast egg sandwich manufacturer (a product that you might find in the frozen aisle of your grocery store), the small bagel shop has a much higher % error than the large scale manufacturer.  This is so because a large manufacturer has the capital to invest in labor and systems to provide higher quality and assurance than a small business.

So what can you do as a small business owner to ensure quality assurance if you do not have the money to invest in systems or additional labor?  Below are my solutions for you:

Attention to detail:  This is the most obvious of solutions.  However, one that many small business owners forget as they get entrenched in a busy workday where the goal might be to produce “x” amount of product or finish “z” jobs.  In everything that you do, ensure that your T’s are crossed and I’s are dotted.  Don’t release product or finish a service without properly inspecting your product.  Although you might think that this will slow down your business and make you less efficient, in the long-run, your unprecedented quality assurance is a point of differentiation for your marketing strategy that you can charge a premium for or that you will receive more business for through word-or-mouth and referrals.

Kaizen: Japanese for “improvement”, the moment you or anyone that works for you comes across a problem, stop the service work or production immediately.  This will allow you to track back the source of any problem before you are too far along where you will never be able to find the source!  Finding the source of a problem will enable you to prevent future occurrences of a similar problem.

Check-ins: Enable a staging process in your production or service so that at the completion of each stage, you can review your work to ensure quality assurance (as well as anything else for that matter).  For example, review random samples of every 200 units that you produce.  Or if you are a service company such as gutter installation company, don’t focus on banging out your job and moving on to the next, stage your installation in 2 or 3 stages (old gutter removal = 1, new gutter sizing = 2, gutter installation = 3) to make sure that everything is still good after each stage.

Again, although you might think that the above quality assurance solutions will slow down your efficiency, the long-term benefits will lead to increased positive referrals and word-of-mouth, ability to use the quality assurance as a point of differentiation for your marketing strategy, or the ability to price your product/service at a premium due to the quality that you provide vs. any competitors.

Social Media Conversation Calendar for Better Planning

Have you ever wondered how large brands such as Popchips, Virgin America, Kraft, etc. have maintained a steady conversation flow on their social media accounts?  There is more to social media conversations than posting on the whim.  Although posting on the whim is within the rulebook, there is a deeper strategy to the daily tweets or posts that your favorite brands make.  The best thing about this is that you can take this social media marketing strategy right out of the playbook of these large brands so that you can adopt these for your small business social media strategy.

What is the secret?  A social media calendar of course!  It looks something like the following (this example could be for a local catering company)

The conversation calendar is simple in form: assign a post type (i.e.: Image, Recipe, Trivia, Poll, Fact, etc.) to each day and build a monthly calendar in advance.  By doing so, you will be preventing any lapse in social media conversations because you will no longer need to think of ways to generate engagement on the whim.  Furthermore, by utilizing a conversation calendar, you will now be able to divide your social media week by topic and therefore, always finding something to speak to.  For the days that you might not have a branded message that you would like to share for the daily post topic, you can use an un-branded message to keep your compelling conversations on-going.

Conversation calendars are used by all social media agencies that work with large brands – it is a way for these agencies to stay focused, provide on-going, compelling, and engaging content, and a way to measure and refine the daily post type based on measuring the reactions after making certain types of posts.

What Social Media Platforms Are Right For Your Small Business

A little over a month ago, I wrote an article that discussed the “Social Media Marketing Fallacy“.  It is very easy as a small business owner to get caught up in the latest marketing bubbles.  I truly believe that Social Media Marketing is a marketing bubble because many create social media accounts to develop a social media marketing strategy, even though it might not make sense to be on certain social platforms.  If you are doing social media marketing correctly, the rewards could be great but if you are are using social media incorrectly, you are just wasting your time.  Here are some things to consider in your small business social media marketing strategy so that you are using social media correctly:

What consumers are using what platforms?

The latest marketing bubble is Pinterest.  Many are recommending that small business owners create a Pinterest account to hop on this bandwagon.  However, sites like Pinterest might not make sense for all small businesses.  The Pinterest consumer is mostly females and moms that like digital scrap booking.  If you own a roofing company or a men’s store, Pinterest might not make sense for you.  The same holds true for any social media platform – Twitter users are different from Facebook users, who are also different from YouTube users.  Find the platform that is right for you before proliferating your small business social media accounts and wasting your time!

What platforms enable you to achieve your social media objectives?

Pinterest is more for sharing visual appeal, Facebook is for interacting, Twitter is for updating, etc.  If you have no images to show, then Pinterest clearly won’t be beneficial for your small business.  If your goal is to simply send updates to your consumers then Twitter and Facebook would be best.  However, if you do not have the manpower to monitor the Facebook conversations, then perhaps you should steer clear of having a Facebook account.  One of the worst things for your business is to have consumers ask questions on your Facebook wall and not receive a response!  Whatever platform(s) you choose to use, you need to own the conversation!