2003 P-O-P Trends Report

Retail sales are down. The economy is about as sunny as a winter day in Siberia. Economists and analysts can't agree on whether the economy is in a state of recovery, poised for another downspin or simply taking a holiday. And Wall Street has more ups and downs than, well, Wall Street. While it's true the past year hasn't been stellar in terms of sales and corporate profits, the economy hasn't fallen into a complete tailspin like some cynics had predicted a year ago. Instead, 2002 was a year filled with uncertainty and anxiety.Reports on retail sales -- an economic indicator that is closely tied to merchandising and P-O-P -- are mixed. In September, retail sales dropped 1.2% from August figures, which constitutes the largest drop in 10 months. However, statistics don't always tell the whole story. While consumers haven't been flocking to malls, they have been taking advantage of the unusually low interest rates to purchase cars and homes. Many automobile manufacturers offered consumers 0% financing options during the late summer months. This may partially explain the drop in September retail sales figures, since auto sales make up nearly 25% of total retail sales.The key to retail sales, however, is consumer spending, which accounts for two-thirds of U.S. economic activity. Closely tied to spending is consumer confidence. And according to Kurt Barnard, president of Barnard's Retail Consulting Group, consumer confidence is weak. "Everybody knows somebody who has lost a job. That's not exactly a psychological climate that is conducive to buying binges and spending sprees," says Barnard in a recent Reuters report on retail sales. "Barring a sudden reversal of the job situation in the United States, we are looking at what is likely to turn out to be an anemic holiday shopping season."An October report from the Commerce Department confirms a pessimistic view of consumer confidence. A preliminary release of the report shows that confidence in the economy has sunk to a nine-year low.At press time, most of the major retailers, including Wal-Mart, Target and JCPenney, were expecting to meet fall sales projections. However, many analysts attribute those sales to consumer essentials, like food and basic clothing. Many analysts are looking for a reversal and are predicting a slowdown just in time for the holiday shopping season.That's the bad news. But how does this affect the implementation of P-O-P programs? According to product marketers responding to the P-O-P Times 2003 Trends Survey, the link between the economy and P-O-P spending is there, but other factors, such as a change in corporate strategy, have more of an effect. The survey polled product marketers across all retail market channels and asked a variety of questions relating to the execution of merchandising and display programs. P-O-P SpendingMarketers were most pessimistic about their budgets after Sept. 11. But their optimism was more evident when asked about their future budgets. Nearly 29% of survey respondents indicated that their promotional budgets would actually increase during the coming year. Another 62% reported that their budgets would remain flat, while less than 10% are anticipating a smaller budget. Steven Jamroz, marketing manager for special markets for Fairhaven, Mass.-based Acushnet Co., which markets the Titleist brand of golf products, is expecting his promotional budget to remain unchanged in the coming year. However, it isn't strictly because of the economy. "We'll probably be spending less and that is the result of a couple of things. It is the result of the state of our industry," he says. "The golf industry has been pretty flat. Also, we're being more responsible as a corporation with our spending and where we are allocating dollars." Regardless of the current economic climate and sales at retail, survey responses about the relative importance of P-O-P suggest that it is unlikely P-O-P spending will decrease dramatically at most companies. In fact, nearly 62% of respondents to the survey indicated that P-O-P is taking on a more prominent position in their overall marketing plans. When asked how often displays are integrated as part of a broader marketing campaign, nearly 30% reported that their P-O-P is always a component of the overall execution. That is in addition to the more than 43% who indicated that they usually incorporate P-O-P into their marketing plans. When asked how P-O-P budgets are changing in relation to advertising budgets, 60% reported that P-O-P budgets were keeping pace with advertising expenditures and another 25% reported that P-O-P budgets were actually growing at a faster rate than general ad spending.In short, P-O-P continues to be perceived as an essential element to successful marketing campaigns. And marketers are using P-O-P to educate and influence consumers in new and creative ways, especially when they're introducing a new product.Let's Get DigitalAt Elmsford, N.Y.-based Fuji Photo Film U.S.A. Inc., Marie Gutierrez, marketing manager for retail digital systems, spent the past year trying to educate consumers on new trends in digital photo printing. This was a tricky task, considering that she is promoting a service that many consumers don't know about yet.Company research initially indicated that by the end of 2002, 25% of all U.S. households would own a digital camera. Follow-up research revealed even more staggering results. "By July of 2002, that number was already up to 34%," says Gutierrez. "Sales of the cameras are up, but we're not seeing the growth in printing. Our research has shown that consumers don't know that they can get prints from digital media printed at their local retailer for the same price as regular prints."Gutierrez wants to communicate to consumers that prints from digital media are just as easy to get as prints from conventional film. And this is an important message to get across, she says, for both Fuji and retailers. Photofinishing centers generate a great deal of revenue for a lot of retailers. Unfortunately, the increased popularity of digital cameras has taken a bite out of photo processing sales.To educate consumers, Gutierrez launched the Digital Camera Developing Campaign. The program included a variety of both permanent and temporary P-O-P elements, such as counter mats, counter displays, hanging signs and window signs.The program was designed to inform consumers about digital printing services, as well as educate them on the quality differences between inkjet printing and photo processing. "An inkjet print is not a high-quality print," says Gutierrez. "How long is an inkjet print going to last? When you're a grandparent, will you be able to pull out those pictures? Not if we're not printing them."Gutierrez notes that the program has been extremely successful with both small retailers and large mass merchants. "At Wal-Mart, they have taken a huge initiative into digital," she says. "They have changed their in-store signage so it is clear that they are in the digital business."In Hot WaterIf the economy is dragging, you wouldn't know it at Jacuzzi Inc. The Chino, Calif.-based spa manufacturer reports that sales are up, and so is P-O-P spending. "Our fiscal year just ended and we are way up," says Charles Sterling, marketing manager. "From our standpoint, it hasn't been a critical time. Because we have been up, we are trying to develop more of our market share. As a result, we've created a lot of items to support our dealers."Jacuzzi uses a variety of P-O-P to promote its spas, including model I.D. stands, posters, and backlit light boxes, which are six-foot tubes with lights behind them. When lit, they promote the Jacuzzi Premium name."Our P-O-P has a primary goal of giving the retail salesperson the ability to tell the entire story through the merchandising materials that we provide," says Sterling. "When you look at our posters, they'll have a number of different elements. Each one tells a story about our pumps, jets, shell surfaces or the construction and insulation of the spa. It takes the potential customer through the process even if a salesperson isn't standing there talking to them."This past year, Jacuzzi launched a new initiative and provided dealers with "promotions in a box." These packages are designed to give dealers everything they need to launch a successful sales promotion -- including posters, counter cards, door hangers, mailers and complete instructions on how to execute the program. The four promotions include an annual sale, a weekend sale, a "by invitation only" sale, and a neighborhood sale. "We were able to give our dealers an easy system for running a successful campaign with instructions on how to plan it, how much it will cost them, how to advertise it and how to get referrals," says Sterling. "It was a very aggressive and large undertaking for our marketing department to get it out to our dealers."Strategic PlanningBruster's Ice Cream & Yogurt traditionally hasn't been very aggressive with its P-O-P, but that changed this past year with the hiring of Kim Piper as vice president of marketing for the company. "We'll definitely be doing more P-O-P," says Piper. "For us, it's a matter of becoming more organized, more structured and more strategic. I don't think our [stores] had a very good understanding of what point-of-sale can do, so there wasn't a lot of marketing emphasis on it. Now we're getting more sophisticated on what we can and should do."The Bridgewater, Pa.-based company owns and franchises 120 freestanding stores along the East Coast, from New Hampshire to Florida. Each store has now been outfitted with window clings, counter mats, freestanding sidewalk signage, marquees and a variety of window displays."We try to up-sell our customers to certain products that we may be featuring for the month," says Piper. "We have a flavor rotation where we'll have fresh fruit flavors in the summer. In the fall, we have apple and pumpkin flavors and products that go with those flavors."One of the newest additions to the company's promotional line-up is a sidewalk stanchion sign. "It's nothing revolutionary, but at our stores we typically have pretty deep lines at the windows so putting a stanchion sign out where people are standing gives them better exposure to products that they might not have seen until they got to the window."Though the management of the company has taken a more proactive approach to P-O-P, that doesn't necessarily translate into compliance from franchisees. Of the 120 stores, only seven are company-owned. The rest are franchised, so Piper and the operations team are training their field team to manage and install P-O-P. Also, Piper produces a newsletter that lays out the specifics of the different promotional programs and includes a plano-gram to show franchisees where P-O-P is most effective."Because this is all so new to our system, our franchisees are not accustomed to it," Piper explains. "It's just a matter of changing bad habits right now."On the Sweet SideAt candy maker Brach's Confections Inc., P-O-P spending is expected to slightly increase to correspond with increased sales. The company produces many large, permanent displays for supermarket chains. The displays are meant to hold, merchandise and dispense loose candies."We don't do a lot of advertising when it comes to loose candies," says Susan Athearn, corporate procurement buyer for the Chattanooga, Tenn.-based company. "Our displays are our advertising so they are very important to us. We also do quite a few corrugated, temporary displays for seasonal products."This past year, the company began experimenting with a corrugated eight-case shipper display. The display comes shipped on a half-pallet. Retailers simply flip down the sides, revealing four cases of product on each side. Clear, plastic lids fit over the top, and scoops and tongs are supplied to dish out candy."We've built more brand awareness in the past five years or so," says Athearn. "We have found that our sales increase considerably if we place our displays in the produce area. People are used to picking up produce and buying it by the pound. Therefore, it makes sense for them to buy candy by the pound as well."The company has also initiated a direct-store-delivery program. This includes depots to store product and a field force that helps retailers stock and merchandise loose candies.Space ConstraintsPaula Bregman, vice president and general manager for Addison, Ill.-based American Map Co. is expecting to spend less on P-O-P in the coming year. Trends at retail that limit display placement are the primary reason, she says. Survey respondents echoed the sentiment, with the majority reporting space constraints as the primary reason their displays get rejected by retailers. "Retailers are being a little stingy about space," says Bregman. "They only have so much floor space. Getting their attention, especially in a category like ours, is getting more and more competitive."Bregman has found that retailers are less receptive to large displays and instead prefer smaller, seasonal promotional vehicles that quickly sell through. She has also come around to the idea that creativity isn't a valued commodity in her product category. "In larger categories, creativity will earn you share of mind, but in smaller categories the added dollars spent don't always translate into more dollars earned."As a result, Bregman has focused her attention on power wings, endcaps and merchandising units that fit into a retailer's existing planogram. She is also utilizing standardized display components with interchangeable pieces. This helps with economies of scale and getting the most impact out of a display budget, she says.Donald Johnson, vice president of advertising for The Eureka Co., Bloomington, Ill., produces promotional materials for both mass merchants and independent dealers, though he notes that mass retailing is becoming more and more restrictive."Our P-O-P in mass channels is pretty much limited to what we do with our packaging," says Johnson. "The larger retailers are pretty locked in to how they present our category. There are more opportunities for P-O-P on the independent dealer side of the business because they are dealers and they are in control of their own stores."Johnson hasn't given up on merchandising in mass channels, though. Instead, he has developed creative methods for getting his message across to consumers. For example, for the company's bagless models of vacuums, he produced a cling sheet that attaches to the dust cup. The sheet supplies consumers with a variety of information about the specifications and features of the product. The company has also started using lenticular signs that hang from the handles of display models.On the independently owned, specialty vacuum shop side of the business, Johnson has more freedom to use freestanding displays, Eureka-branded pedestals and posters.Just the BeginningMarcia Goldfinger, product manager, technology accessories at Itasca, Ill.-based Fellowes Inc. has spent the last year using P-O-P to help gain entry for her products at retail. Goldfinger markets a variety of ergonomic office products that traditionally were sold through commercial channels, like wrist rests and computer glare screens. To get retail placement, she is using off-shelf displays to demonstrate the sales potential to retail buyers."We're trying to push P-O-P a little now," says Goldfinger. "I think it's a matter of a company that used to be very commercially driven and has now gotten into retail. It's a very competitive environment and we need to do what is necessary in that environment to get noticed."Even with the difficulties that lay ahead for retail sales in the coming year, it's unlikely that P-O-P will be scaled back dramatically across the board. What may change is the way marketers approach merchandising and find new ways to influence consumers at retail.As Acushnet's Jamroz says, "P-O-P won't get cut back because it is such a critical component. The dollars would be cut back elsewhere before P-O-P would be cut back. There are so many brands out there and so much clutter that you really have to use P-O-P to stand out above the rest."

2003 P-O-P Trends Report

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