2004 P-O-P Trends Report

We live in an age of instant gratification. Not surprisingly, P-O-P, with its ability to impact the buyer at the moment of decision, has become a more important part of the marketing mix than ever before. More than half the respondents to our recent survey said it has become more important as a component of their company's marketing effort."P-O-P is an extension of our 'air cover,' which includes our print advertising," says Michael Lavilla, director of national retail development for Tampa, Fla.-based AT&T Wireless. "While broadcast and print serve our branding objectives, P-O-P is a call to action to the consumer at the point at which they are most interested."However, completing that call to action at a lower cost is a larger focus now in this tough economy. Hot button issues between marketer and supplier are the role of RFQs (Request for Quotations) or reverse auctions and tapping into cheaper sources in China.That said, the increasing importance of P-O-P, according to our respondents, is its ability to drive impulse purchases in the face of a tough economy. "P-O-P has taken an upswing in the past two years because of the more difficult retail environment and poor economy," says Scott Greenberg, vice president of visual merchandising for Skechers USA, Manhattan Beach, Calif. "Retailers are looking for every possible advantage, and an eye-catching P-O-P display can give them an opportunity for a sale that they might not otherwise make."New marketing strategies may also necessitate the use of P-O-P, according to Kim Janzik, group marketing manager for Microsoft Corp., Redmond, Wash. "Microsoft has been moving into new businesses over the last five years, many of which are marketed and sold in the retail environment," says Janzik. "As a result, P-O-P has become more important as the company's business has grown."Marketers also like to take advantage of the flexibility of P-O-P in a fast-changing marketplace. "Our industry is very fast-moving and we are constantly introducing new products," says Greg Mangum, manager of all channel merchandising for SunCom, a member of the AT&T Wireless Network based in Richmond, Va. "Temporary P-O-P displays give us the capability for fast turnaround at reasonable cost."RFQs and Reverse AuctionsSome respondents indicated that in an attempt to hold down costs, they routinely used procurement techniques such as detailed RFQs and reverse auctions. Although Janzik indicated that Microsoft uses RFQs, the other marketers we interviewed indicated a disdain for these techniques.The scope and amount of information requested on some RFQs is, according to many P-O-P producers, "getting out of control." Far beyond basic information such as price and delivery, some brand marketers are now requesting data formerly considered confidential, such as material and labor costs and even, in some cases, profit margins. Many producers consider such requests too intrusive.Reverse auctions are, as the name implies, exactly the opposite of a normal auction, in which participants bid up the price of a product or service until no one is willing to bid higher. In a reverse auction, however, vendors bid down the cost of a project until no one is willing to bid lower."I am very familiar with these practices and they are not something we engage in," says Skechers' Greenberg. "We have long-established, healthy partnerships with our display suppliers and find this approach to be quite productive."AT&T's Lavilla agrees. "We have used reverse auctions for standard store fixtures, but never for displays," he says. "Even then, there is so little 'fat' in our normal procurement process that we did not realize a lot of savings."In a further attempt to hold down costs, some marketers have discussed with their suppliers the idea of procuring raw materials and/or electronics from less expensive sources, such as China. "We aren't so concerned with raw materials or electronics, but our P-O-P suppliers are aware of our ability to source from the Far East," says Greenberg. "It is not uncommon for us to recommend that they consider an alternate source for components or allow us to produce a component directly with another manufacturer."Michael Mazzacco, general manager of Packaging Innovators Corp., a designer and manufacturer of both packaging and P-O-P displays with manufacturing facilities in Livermore, Calif., and Phoenix, Ariz., agrees. "Over 60% of China's GDP (Gross Domestic Product) is exports," he explains. "We have explored the possibility of importing packaging. We are not likely to produce displays in China, however, because they take up so much space that our shipping costs would most likely exceed what we could save on fabrication and assembly."Jeff Weber, national sales manager for Old Wisconsin Food Products, Homewood, Ill., disagrees. "Yes, we have discussed with our suppliers the idea of buying from China, but have decided against it," he says. "It's partly a concern with quality, but in my heart of hearts, I just can't do it. At the end of the day, it's a Red, White and Blue decision."Low Cost Versus High ImpactKnowing that companies are trying to keep costs down, and given typical space limitations on in-store marketing materials, our survey asked whether brand marketers prefer to use less costly displays that are easier for the retailer to set up or more dramatic displays that require more space. Some cited the advantages of each."A spectacular display will create more advertising impressions," says Greenberg, "but displays must be easy to assemble or you risk their never being used at all. Space is always a factor, as is the often unknown length of time a retailer will keep the display up."Old Wisconsin's Weber agrees that, in general, cost and ease of assembly are important, but that there are exceptions. "For example, we do a promotion with Bass Pro Shops involving a Tracker Boat display," he says. "It's expensive but very successful."Microsoft's Janzik also feels that the nature of the product being sold dictates the degree of complexity of the display. "Significant new product rollouts typically warrant the use of more impressive displays," says Janzik. "Highly anticipated video games also warrant more experiential displays."Other displays, by their very nature, cannot be done inexpensively, according to Bob Plante, manager of the Virtual Sales Center kiosk for BMW of North America, located in Woodcliff Lake, N.J. Case in point, the company's new X3 kiosk. "This is a truly interactive, highly engaging display," he explains. "It began with kiosks at BMW dealers in connection with the launch of the new X3 SUV, a smaller version of the BMW X5 directed to a younger, more 'hip' audience. Today, it has expanded to wireless, remotely programmable kiosks in public places like ESPN Stores, resorts and airline terminals. It not only creates a buzz about the launch of our new vehicle, but also allows us to collect prospect names."Many survey respondents are concerned with costs. In fact, the majority cited design capability and low cost as their primary criteria in selecting a P-O-P supplier. Of the two, however, creativity seems to be more important. "While cost is obviously a consideration," says Skechers' Greenberg, for example, "a supplier's design capabilities are of the utmost importance. I may work for years with a supplier's sales person and management, but it's the company's design capabilities that keep bringing me back to the table."AT&T Wireless' Lavilla agrees. "While cost is obviously a consideration," he says, "design capabilities and experience are far more important."Old Wisconsin's Weber finds the concern with cost somewhat surprising. "We are more concerned with quality, effectiveness and timing, all which are functions of design," he says. "We have a comfort level with our suppliers that is far more important than saving a few cents here and there."The Role of Advertising AgenciesTraditional advertising agencies, according to our respondents, have been somewhat slow to pick up on the trend to increased use of P-O-P. "We have evolved from a generic service provider to become a retailer," says AT&T's Lavilla. "Our agencies have witnessed this growth and want to participate, but they really don't have a sense of the environment in which we function. As a result, we tend to rely on suppliers who specialize in P-O-P."This is not to say, however, that marketers ignore their advertising agencies. "Our advertising agencies play no role in developing our P-O-P," says Greenberg. "However, it is our goal to make our P-O-P function most effectively with our advertising efforts. Because our advertising campaigns change frequently, this is usually done through the use of temporary P-O-P displays that mimic the theme and color scheme of our current branding efforts."Some marketers would like to see their advertising agencies become more involved. "Our ad agency has very little involvement in our P-O-P, but not because we don't want them to," says SunCom's Mangum. "In fact, we are trying to get them more involved in order to achieve greater synergy between our advertising and our P-O-P efforts."Other marketers have already achieved this goal. "Our advertising agencies are heavily involved in our P-O-P efforts," says Old Wisconsin's Weber. "We view them as our marketing communications partners. They have been with us for a long time, and they help make sure that both our advertising and our P-O-P work together."Microsoft's Janzik agrees. "Our agencies are heavily involved in our P-O-P efforts," she says.Securing Placement In-StoreWhen asked to name the most important criteria used by retailers in deciding whether to accept or reject a P-O-P display, most survey respondents agreed that the primary consideration was whether or not it involved a new product introduction. Skechers' Greenberg says, "Many retailers have limited space and might already have all the P-O-P they can use, but P-O-P created specifically to support a new product launch is important to everyone. All parties concerned have money tied up in the new product, and everyone wants it to be successful."Customization for specific stores is also an important consideration. "No retailer in a mall wants the same look as half a dozen other stores in the same mall," says Greenberg. "Most retailers have their own motif, their own look and their own environment, and displays need to blend well in order to be successful."This appears to be less a problem for some marketers than for others. "All of our outlets are either company-owned stores or exclusive agents," says SunCom's Mangum. "They may request minor changes such as the color of a panel to tie in with store dÈcor, but they basically accept everything we propose."That proposal often takes the form of a working prototype. Some 65% of our respondents indicated that they often don't know whether a display has been accepted until after a prototype has been built and tested. Old Wisconsin's Weber thinks that this is understandable. "Retailers are up to their eyeballs in displays," he says. "It usually takes more than one person to approve a display, and some are better at visualizing than others. I sometimes have trouble approving detailed renderings myself," he says."As in any organization, there are a number of people who have a say in the decision," agrees Greenberg. "In order to justify their position, they have to put their two cents worth in. Also, it is usually not possible to get all of these people into one meeting at one time, so a prototype may need to be around for some time before everyone has a chance to review it."While customization for individual stores is not an important consideration for Old Wisconsin, which markets heavily through supermarkets and other food stores, seasonality can play an important role. "For example, deer hunting is really big here in the Upper Midwest," says Weber. "During deer season, we put a sticker of a deer on the package. Retailers love it, and we pull the sticker at the end of deer season."For some marketers, placement is not a problem. "It's easy for us to secure placements," says BMW's Plante. "For example, Jet Blue, a highly successful new discount airline operating out of New York's JFK airport, expected huge lines the day before Thanksgiving, the heaviest air travel day of the year. We will have an 'X3 Game' on four different kiosks that will allow participants to take the car for a virtual test drive. Jet Blue agents will be standing by to direct people to the kiosks."A retailer's clean-floor policy can also influence placement. Weber, for example, says, "Our products are sold primarily through supermarkets, which tend to be crowded with shoppers pushing carts through aisles that may be narrow. Brand marketers in general need to be more aware of the special needs of the super-market industry in designing P-O-P displays."Greenberg agrees but feels that there are exceptions. "If a retailer has a strong clean-floor policy during good economic times, it can change during tougher times and vice versa," he says. "And even the strongest clean floor policy can change when a new product launch is involved and store management recognizes the need to showcase it."There is also the matter of slotting fees and other additional costs incurred to obtain special off-the-shelf placement of displays. Although some 25% of our respondents indicated that they routinely incur such costs, those we interviewed strongly oppose such practices. "Our company doesn't believe in paying extra fees for special position, and we don't do it," says Weber."This is a game we do not participate in," Greenberg says. "Our company is willing to cover all costs, such as the actual display cost, shipping, setup and so forth, but we will not pay slotting fees."Auditing for ComplianceThere is also the matter of auditing stores for compliance and monitoring effectiveness. "We measure effectiveness annually on a financial and cost basis," says Weber. "We realize that this may not be frequent enough to allow us to take full advantage of rapidly changing market conditions and are moving toward more frequent evaluations, but it is a slow process."Greenberg agrees. "Unfortunately, there is no exact science or formula for measuring effectiveness. During the course of a year, however, we roll out six to 18 major account-specific projects, and we tabulate sales over a period of six months with the new rollout versus the same selling period during the previous year without the new rollout."Microsoft, on the other hand, audits compliance "at the same time as the displays are being installed," says Janzik. "We do it through the use of a third-party field force."For BMW North America, monitoring is easy. "With our remote wireless capabilities, we can get 'real time' results location by location," says Plante. "We can easily move underperforming units to new locations where we expect they will do better."One monitoring technology that has received considerable attention among both brand marketers and retailers is RFID (Radio Frequency Identification), which would allow retailers to electronically track the movement of individual products from the store and permit constant inventory adjustment. "This technology is still in its infant stage," says Greenberg. "It is, however, definitely moving forward, just like bar coding technology did years ago. Wal-Mart will certainly be a driving force in developing this technology."Weber, however, has his reservations. "This technology is not as 'hot' as everyone predicted, especially in the case of refrigerated products like Buddig meats. Even Wal-Mart, which has been leading the drive for RFID, has recently begun to back off. Now they are pushing its use for tracking pallets from the warehouse to the retail floor rather than from retail shelves to shopping carts."Discounts, Rebates & Tie-InsMore than 90% of the respondents to our survey feel that instant discounts or premium offers are more effective than mail-in rebates. "Absolutely," says SunCom's Mangum. "Customers would much rather leave the store with more cash in their pockets than have to wait weeks for a rebate."According to Janzik, "Yes, today's consumers seem to be demanding offers that include immediate discounts or premiums rather than mail-in rebates.""Anyone who has ever mailed in a rebate knows that a man may land on Mars before the company gets around to mailing them their rebate," says Greenberg. "Not only that, it is often impossible to contact the company processing the rebate. The scam behind rebates as opposed to instant discounts is simple. Because a large proportion of customers forget to take advantage of the offer or lose their receipt, the company wins. Any customer would be happier to shell out $20 instead of $30 at the time of purchase rather than wait months to get their $10 back."Greenberg has an equally strong opinion when it comes to tie-ins using entertainment personalities or sports figures. "Celebrities have an overall larger demographic following, and it is true that sports figures are mostly male-oriented. But if we could get Michelle Pfeiffer to wear our men's shoes, I'm sure we would get substantial advertising impressions from both men and women. The same would be true of any company using a female celebrity to endorse a male product."

2004 P-O-P Trends Report

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