Fundamentals of Branding

Branding is one of the most important aspects of any business, large or small, retail or B2B. An effective brand strategy gives you a major edge in increasingly competitive markets. But what exactly does "branding" mean? How does it affect a small business like yours?

Simply put, your brand is your promise to your customer. It tells them what they can expect from your products and services, and it differentiates your offering from your competitors'. Your brand is derived from who you are, who you want to be and who people perceive you to be.

Are you the innovative maverick in your industry? Or the experienced, reliable one? Is your product the high-cost, high-quality option, or the low-cost, high-value option? You can't be both, and you can't be all things to all people. Who you are should be based to some extent on who your target customers want and need you to be.

The foundation of your brand is your logo. Your website, packaging and promotional materials--all of which should integrate your logo--communicate your brand.

Brand Strategy and Equity of the Brand

Your brand strategy is how, what, where, when and to whom you plan on communicating and delivering on your brand messages. Where you advertise is part of your brand strategy. Your distribution channels are also part of your brand strategy. And what you communicate visually and verbally are part of your brand strategy, too.

Consistent, strategic branding leads to a strong brand equity, which means the added value brought to your company's products or services that allows you to charge more for your brand than what identical, unbranded products command. The most obvious example of this is Coke vs. a generic soda. Because Coca-Cola has built a powerful brand equity, it can charge more for its product--and customers will pay that higher price.

The added value intrinsic to brand equity frequently comes in the form of perceived quality or emotional attachment. For example, Nike associates its products with star athletes, hoping customers will transfer their emotional attachment from the athlete to the product. For Nike, it's not just the shoe's features that sell the shoe.

Defining Your Brand

Defining your brand is like a journey of business self-discovery. It can be difficult, time-consuming and uncomfortable. It requires, at the very least, that you answer the questions below:

What is your company's mission?

What are the benefits and features of your products or services?

What do your customers and prospects already think of your company?

What qualities do you want them to associate with your company?

Do your research. Learn the needs, habits and desires of your current and prospective customers. And don't rely on what you think they think. Know what they think.

Because defining your brand and developing a brand strategy can be complex, consider leveraging the expertise of a nonprofit small-business advisory group or a Small Business Development Center.

Once you've defined your brand, how do you get the word out? Here are a few simple, time-tested tips:

Get a great logo. Place it everywhere.

Write down your brand messaging. What are the key messages you want to communicate about your brand? Every employee should be aware of your brand attributes.

Integrate your brand. Branding extends to every aspect of your business--how you answer your phones, what you or your salespeople wear on sales calls, your e-mail signature, everything.

Create a "voice" for your company that reflects your brand. This voice should be applied to all written communication and incorporated in the visual imagery of all materials, online and off. Is your brand friendly? Be conversational. Is it ritzy? Be more formal. You get the gist.

Develop a tagline. Write a memorable, meaningful and concise statement that captures the essence of your brand.

Design templates and create brand standards for your marketing materials. Use the same color scheme, logo placement, look and feel throughout. You don't need to be fancy, just consistent.

Be true to your brand. Customers won't return to you--or refer you to someone else--if you don't deliver on your brand promise.

Be consistent. I placed this point last only because it involves all of the above and is the most important tip I can give you. If you can't do this, your attempts at establishing a brand will fail.

Importance of Retail Merchandising

For a business to make sales, its products and services should be visible and displayed in an appealing manner, a process referred to as merchandising. Merchandising includes product display and packaging, as well as all the advertising techniques used to promote and sell goods to consumers.

Increases Traffic

Good merchandising drives visitors to your store. An attractive exterior influences a customer's decision to come inside and do business. Brightly colored sales signs, a well-kept structure and a clean, well-organized parking lot are some factors that encourage customers to come into your store.

Increases Sales

Effective merchandising has a significant positive impact on sales. Pricing, proper product display, packaging, promotional marketing and sales signs can shoot sales upwards and give the customers a memorable shopping experience. Customers are more likely to return in the future if they find your store attractive and well organized.

Builds Loyalty

Customers are more likely to return to a store that offers top quality products in a customer-friendly and easy-to-access setting. Offering fresh product arrangements in appealing displays entices shoppers to return frequently, building long-term loyal customer relationships.

Better Space Management

Good merchandising involves the proper arrangement of aisles, display fixtures, shelves and the entire layout of the retail space. Efficient space management creates usable space that accommodates more people and makes the whole shopping process a pleasant experience. If space is efficiently managed, there may not be need to renovate or expand the existing retail space.

Modern Category Management

Traditional category management is an old concept in a brave new world. Retailers need a new solution as they enable the level of differentiation necessary to attract consumers with an ever-grow­ing number of shopping alternatives.

Merchants need a better way to create differenti­ated customer experiences, build solid category strategies, design compelling assortments, plan productive planograms, and efficiently price and promote to the market—and they need it now. Enabling all this will, in most of today’s retailers, require changes to processes tools and organiza­tional structures. It also means better connecting existing processes, and bringing together disparate parts of an organization like never before to deliver a seamless customer experience.

Today, successful category management encom­passes a broader set of capabilities than in the past, including: category role and strategy, macro space allocation, financial budgeting, assortment plan­ning, planogramming, price optimization, private brand development, promotion and event plan­ning, and joint business planning with vendors. In addition to an expanded functional footprint, the beginning and end of the processes a category manager needs to manage have expanded. Many are now defining this work as spanning from the initial development of the category strategy and role, through to the completed reset of the store shelf and online assortment. This is a much wider view of the world than what category management traditionally included, and creates a big part of the challenge.

Leading retailers are already planning for the changes and tools needed to integrate these capabilities and define new ways of planning and managing categories, and these efforts are paying dividends. Retailers such as Target, Kroger and Walmart have seen impressive results from re­vamping category management, including a 2% to 4% increase in sales, a 2% to 3% increase in margin and a 10% to 15% increase in inventory productivity.

But despite these positive efforts, most retailers remain stuck in the past, partially due to fatigue from traditional category management. And even those who have addressed parts of the issue would benefit from a more sophisticated approach. Leading retailers will invest in holistic changes to their processes, tools, organization and culture to enable a necessary shift in the way they plan and manage categories.

Tackling these historical inefficiencies and problems requires addressing seven key facets.

1. Real customer centricity—walk a mile in your customer’s shoes

Today, many retail organizations are far less customer-centric than they claim to be. But in the modern retailer-customer relationship, the customer holds all the cards, and the retailer can’t afford to be anything but hyper-attentive to her expectations. As a result, everyone throughout the organiza­tion—including everyone involved in the category management process—needs to have a laser focus on the consumer and her needs and wants at all times. Creating truly compelling products and customer experiences should be the common thread linking all parts of the organization and category management process.

Leading organizations are going about this in several ways. Some, like Hy-Vee and Lowe’s, are creating the position of chief customer officer to drive customer-focused improvements across channels and functional groups. Others are taking a closer look at loyalty and social media data to understand how their core customers shop their stores and identify opportunities to capture share by satisfying unmet needs. For example, consider a retailer who found that a key customer segment shopped only 20% of their basket with that retailer across four categories. By taking a customer-centric approach, the retailer was able to identify catego­ries in which the needs of that customer were going unmet and exploit that gap to increase basket ownership to 40% across 10 categories.

2. True integration—you’re probably not as integrated as you think

Highly siloed organizations—within functional groups and across channels—have led to processes choked by a series of handoffs and put category management, and ultimately the customer experi­ence, at risk of falling victim to a game of telephone. Given the breadth of processes that need to be successfully orchestrated to improve category management, handoffs must be effective and efficient. In other words, integration is key. This means removing handoffs wherever possible, and when not possible, ensuring everything is done to make them as smooth as possible. Process and organizational design can provide some relief here by carefully considering what can be lost in translation.

However, integrated systems are providing the biggest benefits in tackling these challenges. Software plat­forms have made significant gains in the past 10 years to expand the functionality required to span the gaps between planning, execution and functional areas. Traditional supply chain solutions now offer tools to plan space, assortments and financials, and conversely, planning suites are expanding into supply manage­ment. These tools have fundamentally changed how processes are executed and have made syncing data, timing and weighing tradeoffs much simpler. But they’re big, expensive and can stress organizations ill-equipped to manage this magnitude of change. Adoption is picking up, but slowly.

3. Strong category strategies—if it’s not strategic, it’s not a strategy

Today, many category strategies are lacking neces­sary consumer insights and are ultimately not linked back into the category management process in an efficient way. Developing a strong category strategy takes a well-crafted process in which a wide array of data inputs drive unique insights, which narrow in on a set of opportunities and thereby define required initiatives and potential benefits. The process should culmi­nate in a game plan for the category that defines the steps, required investments, and expected finan­cial or operational benefits. As category manage­ment has grown in breadth and sophistication, it has driven up the need for a robust go-to-market strategy the team can rally around and cascade across support teams. Successfully cascading category strategies starts with defining each category’s role within the portfo­lio. It’s also important to coordinate strategies and tactics related to assortment, pricing, promotions and placement across channels, and categories and functions and financial plans should be tied to category-level targets, providing a means for measuring success.

Throughout this wide array of processes—from financial budgeting to planogramming, in-store execution and marketing—it’s critical that the consumer can identify the strategy as it was intend­ed. For example, the value presented in a pricing strategy—competitiveness, brand consistency and value—needs to be aligned with the products that make up that product line—good, better, best. If these are disjointed, the value proposition is muddled, the customer will be confused, and the experience falls flat.

4. Clean, accurate data—it’s true what they say about garbage in

Retailers are awash in an ever-growing flood of data and information, but many are not positioned to use it to its fullest. For example, while most organizations have a data quality strategy in place, 94% suspect the data is inaccurate in some way, according to Experian. Accuracy is clearly a signifi­cant hurdle to many organizations’ abilities to harness analytics to drive decision making and improve the customer experience.

Getting the most out of all this data also means integrating it across the business, providing one version of the truth across integrated planning processes and connecting the dots across channels, categories and competitors to develop a true picture of the consumer’s needs and behavior. This includes a better understanding of past perfor­mance and consumer needs than currently exists for most retailers. Retailers who can achieve this soon will hold a tremendous competitive advantage, as only 37% of retailers currently have a contact data quality strategy in place that supports a single view of the customer, according to Experian.

5. Actionable insights—in the end, you have to do something

Ensuring the data is accurate and integrated is only half the battle—retailers are also challenged to derive actionable insights from that data and use it to drive smart decision making. Many organi­zations don’t devote enough time to this important exercise. As a rule of thumb, category manage­ment teams spend 80% of their time gathering and organizing data and only 20% of their time using it to develop actionable insights. Plus, insights are often supplier focused—as they provide much of the data—at the expense of the retailer’s customer experience and loyalty.

To really unlock value from their data, retailers first need to create a centralized analytics team that can identify and develop core insights for category teams. Secondly, these insights should be organized into three key categories—customers, clusters and channel; we call these lenses. The first lens, customers, prioritizes using data to figure out how to influence key customer segments. The second lens, clusters, focuses on harnessing demographic and consumer data to develop store clusters that require similar go-to-market strategies. Finally, the channel lens helps address the growing omnichannel challenge as click-and-collect and delivery models expand.

The key is to derive insights with an eye toward decision making and action. Organizing, funneling and interpreting data requires the correct structure and people to make it work efficiently.

6. Localization and personalization—how will you manage expanding complexity?

One of the industry’s biggest mandates is develop­ing personalized and pervasive relationships with customers across channels—one-to-one retailing. Consumers expect to be recognized and treated as individuals, and those expectations are spurring significant changes to all aspects of retail opera­tions. Modern category management is tasked with “assorting to the individual,” whether that’s an individual consumer or an individual store. Localized and customized pricing is the first push for many retailers, including Target, Kroger and Staples, which recently made news with its sophisticated pricing system that changes online pricing based on a customer’s proximity to competitors’ stores.

But this focus on granularity will also drive other changes. In assortment planning it will mean a continued evolution from national to regional to store-level, and finally, to individually curated assortments and experiences across channels. In space management, retailers will need to switch from a “one-size-fits-all” standardized approach to a store-level approach that’s flexible enough to allow localized adjacencies and shelf and product arrangements. And of course, marketing, promo­tions and pricing will change as well, as all move from a market-based approach to one that’s highly dynamic and individualized. These shifts will mean an exponential increase in complexity as increas­ingly granular decisions need to be made across more and more stores, customers, channels, func­tional areas and processes. While tools and systems will relieve the burden of computational work and coordinating decisions, this increasing granularity will require a significant redesign of key processes and organizations.

7. Clear roadmap—manage and measure progress

Of course, fixing so many problems won’t be a cinch, and benefits require investment. The neces­sary changes span many processes and organiza­tional silos—and we’ve seen that one cannot be optimized without making improvements to another. Additionally, modern category management can add operational complexity that will need to be supported by enablers such as new process, tools and organizational structures. (See Exhibit 1.)

Organizations that are able to successfully trans­form their category management processes will start with a clear vision, multiyear roadmap, and consensus and commitment among key leaders across functions. The new approach to category management will also require new tools—with considerable data needs—and new processes and organizational change, both of which come with significant cultural implications. Starting small will help prove out the value opportunities, while a focus on change management will ensure that new ways of thinking take root. Finally, focusing on set­ting and measuring key metrics helps demonstrate benefits and build accountability and ownership.

Although it’s not easy, transforming category man­agement is quickly becoming necessary. As more and more retailers start to address bits and pieces of the issue—78% of retailers plan to revamp their category management processes, according to RSR— those who pull it off now will be well positioned for what the future holds. Meanwhile, those who stand still run the risk of watching their customers jump ship for retailers who are proactively improving their category management capabilities to be more cus­tomer-focused, integrated and analytically driven.

CASE STUDY: HOLISTIC CATEGORY MANAGEMENT

Issue: A large, multiregional North American grocer struggled with flat or declining sales for several years—the result of a hypercompetitive market, rising supply chain costs and intense margin pressure from a heavy reliance on discounts and promotions.

Solution: The grocer built customer-centric clusters based on key demographic data to inform localized assortments and implemented leading assortment planning capabilities to build these assortments. They also established a robust and easily repeatable category strategy development process supported by robust analytics. Finally, a new space planning organization and tools helped the retailer build better planograms optimized to inventory turns.

Result: Sales increased 2% to 4% for pilot categories across stores, and that was with only 10% to 15% of each cluster’s assortment differentiated from the core assortment.

Retail Merchandising vs Retail Buying

Retail stores in the fashion industry depend on keeping the latest styles in stock. Fashion buying and merchandising are two primary roles in establishing a store full of clothing and accessories that meet the demands of customers. The jobs are related with some similar duties, and some employers may combine the duties into one position, but there are subtle differences in the jobs.

Merchandising Purpose

A fashion merchandiser aims to create a store experience that appeals to customers. She is sometimes involved in selecting the items that are available in the store, but she also focuses on how to set up those items within the store. The way the store is set up affects the flow of customers through the space as well as which pieces are highlighted through prominent display. The goal of a fashion merchandiser is to meet the needs of the customers while increasing sales for the business.

Buying Purpose

The primary focus of the fashion buyer is to choose the clothing and accessories that will go into the store. This duty is sometimes incorporated into the merchandising position, or the two may collaborate to make buying decisions. The buyer stays current on the latest fashion trends to decide what customers might want to buy next. She wades through the various upcoming trends to decide which ones are ideal for that specific store. She orders and tracks the merchandise as it is shipped from the supplier.

Merchandising Skills

Merchandisers need both fashion and business skills to succeed. They need a sense of the target demographic and what they want to see when they walk into the store. He/she needs an understanding of how to display items to make them more appealing to increase sales. Her fashion knowledge enables her to decide which pieces to highlight through displays. He/she must have the skills and physical ability to set up store displays for the merchandise. Some aspects of marketing are possibly included in the job description.

Buying Skills

A fashion buyer needs a clear understanding of what type of merchandise the store wants. This requires the analysis of the typical customer, as well as fashion trends. She needs the mathematical skills to buy within the target budget to supply the store with products that fit the customers' desired price range. He/she works with a variety of people, including store management, merchandisers and the clothing suppliers. Dealing with the suppliers requires the business knowledge to negotiate prices, communicate and ensure the items are shipped on time.

Merchandising and Sales

If you're thinking of starting a retail business, two prominent terms you'll likely come across are sales and merchandising. Both functions are part of the marketing mix, which includes product, pricing, promotion and place, also known as channels of distribution. While the two functions are closely related, there are some key differences to be aware of.

Merchandising

Merchandising is the process of presenting products for sale in a retail environment in ways that influence shoppers' buying decisions. This includes determining the optimal shelf location for each product, building eye-catching displays that attract potential buyers, and using signage to provide pricing and other product information. Merchandising also involves the selection of the proper product mix to carry in the store. Special pricing and promotions are another part of the merchandising process.

Sales

Sales occur when the consumer actually selects the product and completes the purchasing transaction. In a retail environment, stores often employ salespeople to service customers and to facilitate the sales process. Retail salespeople help implement the store's merchandising program by performing tasks such as executing current sales promotions. In many stores, salespeople also perform merchandising functions like building displays and arranging products on shelves to conform to predetermined layouts called planograms.

Relationship

Although sales and merchandising are two different functions, they are closely related. Effective merchandising leads to sales, even without the aid of a salesperson, as it induces customers to make purchases. For example, a prominently displayed mannequin attractively adorned in the latest fashions can entice customers to try on and possibly purchase the clothing. The technique of cross-merchandising, where two compatible items are displayed together, can lead to additional purchases.

Skill Differences

While workers in a retail environment may be required to perform sales and merchandising functions, there are some differences in the skills needed for each. The sales function requires strong verbal presentation skills to persuade customers to make a purchase, as well as customer service skills. Merchandising typically requires more creative skills, such as the ability to come up with ideas for interesting displays and to make merchandise appear as attractive as possible.

Marketing and Category Management

When I was offered to lead a team of a newly formed department called Category Management in a beauty and health retailer in 2010, I was given a briefing by the Vice President for Human Resources as to the scope of the job, as it is their first time to have these division in their corporate structure, they would want to initially merge it with their marketing department.

It took me more than two weeks to finally came up with the written and approved job scope of their category division, nonetheless, it is still a merchandising related job however there were several additional scope in the job that pertains to marketing and branding.

So here, I am sharing what that responsibility means and how it has developed me further in my retail dynamic skills and experience which I find very valuable.

Category Management

is a collaborative continuous process between manufacturers and retailers to manage a shopper need state which we refer to as a ‘category’. The purpose of this process is to optimize shopper satisfaction and fulfill the role chosen by the retailer for that category within the overall portfolio of categories in the retail format. The end state of the category management process is that combination of assortment, price, shelf presentation and promotion which optimizes the category role over time.

Category management is data intensive and analytical in character. Category management is about understanding data. By contrast, shopper marketing is more about understanding emotions or motivations.

Most importantly the category serves as the platform from which shopper marketing  initiatives can be collaboratively launched because the retailer and the manufacturers ideally are aligned around a common solution to a need state of the shopper. Large complex consumer need states such as a ‘family dining‘ solution or a ‘birthday party‘ solution often involve a multi-category solution which necessitates the collaboration of multiple manufacturers and the retailer.

Marketing

is an effort to change attitudes and thereby change behaviors. Marketing has many requirements. It must create awareness, stimulate desire and ultimately differentiate the product by giving consumers a reason to purchase in preference to competition. Marketing is a continuous and all-encompassing activity. It is not a single campaign or initiative such as event marketing, a social media program or an in store shopper marketing event. These are components of the larger multi-faceted activity known as marketing.

Marketers have many tools to attain their objectives. These include research protocols and various promotional and communication options ranging from print to TV to all the newer social and digital media.  Marketing begins by understanding consumer attitudes towards a particular need and then proceeds to product design and strategy development. Great marketing is built upon an insight, a profound understanding of some critical aspect of the consumer need. Marketing consummates at two moments of truth, the first at the shelf when the product is purchased and the second when the product is consumed.

The ultimate end of marketing is creating equity in the consumer’s mind such that consumers identify that product as uniquely theirs, a trusted contributor to a more satisfying life, one that meets a perceived need in a superior manner.

Shopper Marketing

For the CPG manufacturer, shopper marketing is an occasion based component of the larger marketing armamentarium.  It is preceded by the shopper’s perception of a need state and possibly by previous experience with other products in the category which satisfy the need. Shopper marketing is  preceded by and influenced by all the advertising and information collected from months perhaps years of advertising exposure and in many cases actual usage experience.  The objective of shopper marketing is the enhancement of the brand’s equity at the point of sale. Such that a purchase occurs.

 The initiative called ‘shopper marketing’ begins as the consumer perceives a need and starts down the path to purchase perhaps by taking the mundane first step of preparing the shopping list. Shopper marketing may include a range of information gathering and communication interactions including seeking and receiving promotional incentives or exploring websites for product recommendation or product availability. 

The key point is that shopper marketing is an episodic  time bound activity, occasion specific and immediately linked to a transaction consummated at retail at the end of the path to purchase.  

The larger and more comprehensive ecosystem of marketing surrounds and influences the more immediate transactional activity known as shopper marketing.  What differentiates shopper marketing is its inextricable link to the retail point of purchase. Therefore truly effective shopper marketing requires some level of collaboration with the retailer who, after all, controls the point of sale. Let’s put it this way: the single most effective and efficient ‘shopper marketing’ tool is a display at retail. Can any manufacturer get display without the retailer’s collaboration? This basic fact requires the manufacturer to align with retailers who understandably have their own objectives regarding the shoppers and the need states involved in any given shopper marketing initiative.

For the retailer, shopper marketing is a more important component of the overall marketing activity because the   ‘product‘ the retailer is selling is the shopper experience. That experience has as its objective satisfying the need states which the drive the shopper to the store or digital shopping location. Many important aspects of that shopping experience are not time bound. For example, store appearance, in store service level, pricing and promotional policies etc. are permanent, continuous components of and contributors to the shopping experience and the overall marketing platform of the retailer.

But many important aspects of the retailer’s overall marketing platform are occasion specific or target shopper specific.  

These overlap with and often align with the manufacturer’s ‘shopper marketing’ initiatives. These are initiatives aimed at a specific shopper need state that add excitement and urgency to the shopping experience. In these cases, shopper marketing for the retailer centers on categories which themselves are satisfiers of shopper’s needs. The brands within the category are competing to satisfy the basic shopper need. The retailer is agnostic to the brand except in so far as one brand somehow does a superior job in meeting the shopper need.  For the retailer, shopper marketing is about categories and needs not brands and their initiatives.

The retailer has the same weaponry as the manufacturer with which to influence the shopper but has two unique weapons unavailable to the manufacturer.  Through its proprietary loyalty card data, the retailer knows every aspect of the shopper’s buying behavior in the store. Even more importantly, the retailer controls one critical moment of truth, the  point of purchase itself, the shelf, the alter of  the shopper experience. Without the retailer’s collaboration, the manufacturer is virtually powerless at the shelf. 

Therefore the manufacturer’s capability to succeed at shopper marketing requires aligning with the need states or categories chosen by the retailer to attract and satisfy the shopper.