Computer Products Attract Home Users with Traditional Packaged Goods Approach

"In the software computer business, retail merchandising and promotion are easily the hottest topics in the marketing services category today," says Max Wurz. "Growth in marketing is outstripping even the growth of the industry itself."Wurz, a partner in Seattle-based Levy & Wurz Channel Marketing, a retail promotions agency serving the computer industry, knows growth when he sees it. When he left retailer Egghead Inc. in 1986 to start his own business, "not only was in-store marketing not popular, it didn't exist. As fast as the computer/software business has grown, channel promotion activities and in-store marketing have grown at a faster rate."With prices falling and ease-of-use rising, computers, peripherals and software products are just now being marketed to the home user. Historically, business and government buyers ran the show. "The lion's share of development and sales potential has shifted to the consumer market," says Wurz."Growth in the business marketplace has really fallen out," agrees Eric Levin, manager of strategic sales and marketing for Cambridge, Mass.-based SoftKey International Inc. "The spreadsheet business is only growing at 9 percent a year, whereas the home market is growing at closer to 30 percent annually."J'Amy Owens, president of The Retail Group, Seattle, says that point-of-purchase became an issue in computer retailing only within the last 20 months. "Before that, you had isolated incidents of a few people doing it well and most everyone else doing it poorly."With the consumerization of these high-tech products, distribution channels are growing exponentially. They now include computer superstores, consumer electronic chains, mass merchants -- even drug and grocery chains. "The household penetration rate of computers is estimated to reach 45 million households by 1996," notes Levin."It's just absurd to me," says Owens, "that you can put something costing $3,000 on a $50 metal rolling rack with all the cords hanging out and no price tag on it, and expect anyone to buy it."When studies indicate that "75 percent of brand decisions are made in stores," Wurz says, "all of a sudden, retail promotion becomes a much higher priority." Point-of-purchase "is a concept that wasn't even in marketing plans for most companies four or five years ago." Now, those same businesses employ "entire departments of people ... dedicated to channel marketing and sales promotion and merchandising. Software companies were much quicker to grasp the potential of merchandising and promotion than the hardware companies."Soft vs. HardJason Kap, director of research and business development at Technology Advancement Corp., agrees. The software category, he says, "makes the best use of P-O-P, peripheral manufacturers are not using it as well, and CPUs are in the middle." His company, based in Ogden, Utah, provides field marketing services to the high-tech industry.Software makers have more marketing dollars to spend, Kap says, due to software's higher margins."Much more of the margin for hardware had gone to street price vs. any kind of promotional activity or merchandising expenditures," Wurz adds. About a year ago, his firm sensed that was about to change. "Before we had a chance to solicit that kind of business, we had some opportunities presented to us."Until very recently, he adds, "sales promotion and merchandising has been kind of an inside joke. The PC industry hadn't really attracted the attention of the broader market of service suppliers."A rapid and ongoing consolidation of PC and software makers has created "a number of significant players who can better afford the cost of implementing channel promotions," he explains. "Historically the market consisted of small players."SoftKey is one of the industry's new powerhouses, having merged with WordStar International and Spinnaker Software Corp. in February. At the new company, display spending is up 250 percent on a per-store basis, reports Levin. The company's "sole focus is the end-user consumer," he notes. Likewise, industry leaders Microsoft and WordPerfect both have spun off home divisions this year.Different But the SameTheoretically, creating displays for computers and accessories shouldn't be all that different from marketing other packaged goods. Yet these highly technical products present a whole slew of special merchandising challenges. "There are some very different dynamics in our business," asserts Wurz. "The customer and the retailers' mindset just aren't the same as in the grocery or automotive parts business."Few consumers fear buying Pop-Tarts or toasters. With PC appliances, however, "there is a great deal of fear -- to the point of near paralysis," says Paul Papageorge of Apple Computer, Cupertino, Calif. The home audience "is for the most part uncomfortable with technology."Papageorge is manager of marketing programs for the Performa brand of home computers. P-O-P in his department is designed to alleviate consumer anxiety. "We have to present a very approachable product and communicate the benefits in such a way as to break down that fear," he explains. "It's not about specs with this market, although you need to provide specs too. The hierarchy of information is really important."At the same time, providing those specs means the P-O-P can become dated. "Product turns every year, for sure, if not every six months," says Papageorge. Apple is currently struggling with the challenge of keeping up with increasingly frequent turns. "Is there a way to design a display that's product specific but isn't obsolete after every product turn?" he says. "That wasn't an issue before."Marketers at Epson America Inc., Torrance, Calif., work closely with various technical departments to determine what specs will be highlighted on P-O-P. In October, the regular monthly meetings with product development became weekly. The manufacturer has a toll-free, pre-sale support line, so that "we can build customers' questions right into our merchandising materials," explains Laura Seitz, director of merchandising. "We're closing the loop -- taking the information from prospects and buyers and making sure we're addressing all their questions."It's a tough business," Seitz adds. "Computers and peripherals are different even from durable goods like televisions and stereos because the product is technical and you're talking to buyers of many different levels of sophistication." The solution, she says, is to "provide layers of information on P-O-P.""There isn't widespread acceptance of P-O-P by the retail community in this industry," says Wurz. "There is good acceptance of channel marketing programs, which may include P-O-P. Retailers need to see the business plan before they'll buy into some freestanding display for their stores."At Santa Clara, Calif.-based Intel Corp., the P-O-P inventory includes "everything you can imagine," claims Worldwide Advertising Manager Ann Lewnes. Shelf talkers, danglers and stickers "are nice, but they don't really work unless you have seat on the street."Not only do marketers have to convince retailers to use point-of-purchase materials, but they frequently have to pay for the favor. With the exception of demo PCs, manufacturers generally don't charge for a display, but they have to ante up for the space it consumes.Owens sees a growing trend in which retailers sell "strike zones" for display. "CompuSmart is doing it with Lotus to a great degree of success, and Ballard Computer is doing it with Microsoft," she says. Her company recently arranged a similar deal with CompUSA for Logitech, the mouse maker."We re-merchandised the vertical square footage on high-bay perimeters and low-bay gondolas that Logitech had previously been allocated," she explains. "We've taken what was just a lined-up-box presentation and added point-of-sale materials in the way of color banding, features/advantages/benefits banding, a price-point message, and a promotional or positional sign. It's been highly cost effective."Sometimes, getting space at all "is tough with retailers who have clean floor policies," observes Levin. The most important thing, he says, "is to show retailers displays that they're comfortable with -- that are high-quality, sturdy and attractive enough -- to go into their stores. We look at spending a lot more per store than we used to. We know that if we don't have the display in, we don't have any business there."Materials with "some type of promotional offer -- rebates, free product -- have a better chance of being used," says John Patrick, vice president of marketing at software maker Davidson & Associates, Torranee, Calif. "Retailers generally won't put up generic P-O-P."Davidson tailors its P-O-P to quarterly promotions. Budgets range from $50,000 to $100,000, including development, design, printing and shipping.The company's holiday promotion includes shelf talkers, large endcap signs, posters, wobblers and countercards with coupon pads. Patrick promises a $50 savings bond to any store manager who sends him a photo of the set-up display. The company also employs a team of field merchandisers in 14 cities to ensure compliance. Outside merchandisers are hired for two weeks in December to hit all other accounts. Each field merchandiser carries extra P-O-P kits to replenish stores as needed.While Davidson's team checks on stores' efforts, Intel charges its retail merchandising specialists with actual execution. "Four years ago we got into displays in a very experimental way," says Lewnes. Now the company means business. Last year, "we decided to hire merchandising specialists and retail marketing managers" to guarantee placement.The Retail TheaterThe conditions of the retail theater should be foremost in P-O-P designers' minds, cautions Merridee Matson, vice president of the Dallas-based Channel Marketing Corp. "Manufacturers have blinders on when they develop similar programs for Computer City, Office Depot and CompUSA. They think they can use the same point-of-purchase materials when the customers are different." As a result, she says, "retailers often feel like the manufacturers are shoving something down their throats, and it goes in the trash.""There's some skepticism on both ends about how well P-O-P is going to work," concurs Kap. "And there's very little feedback from the store level to the manufacturer, so they have a hard time determining what kind of incremental increases they get from each different promotion, shelf talker or endcap. We call it the black hole. It just reflects the youth of our industry."Display designs must be very flexible in order to fit various store environments. "Elek-Tek, Staples, Media Play, London Drug, Multi-Micro -- all have very different needs," stresses Levin. SoftKey planned to introduce a yellow-and-teal display using LISA plastic that was "originally designed to be very high-tech, high-impact," he says. But to OfficeMax and Staples, "it looked too expensive for their warehouse environment." SoftKey eliminated the color and it was accepted.On the other hand, Levin says, "Elek-Tek has so much going on in their stores that you need to have a lot going on in your display in order to fit in and get attention. The (store) really sets the tone for display."Where the display comes from can also carry weight. SoftKey works with a "very well-established company that does a lot of the fixtures for Sears and Kmart." That recognizable element reassures stores, Levin claims. "We're able to go to retail buyers and say, 'You like the way it looks and you're going to have no problems selling it to your store operations people because they're familiar with the vendor.'"In the future, Epson's Seitz expects to see "a proliferation of P-O-P," particularly the permanent variety. For Epson's new Action Note line of notebooks, the company developed five different kinds of point-of-purchase materials, including stickers, a cardboard easel-back with a take-one pad, and a Lucite security display. The latter is the only piece that carries a cost to retailers.Because Epson products are distributed in so many different channels, Seitz notes, "we have to work with lots of different store formats when developing P-O-P." As the industry matures, "we're seeing retailers with very specific guidelines about what kind of P-O-P they'll use." Epson typically produces "10 or 15 different kinds of support materials for each product -- so that we have something that works in every single store.""We're asking a lot of our P-O-P," says Seitz. "It must build awareness of the Epson brand, provide sufficient information that we've included in the end user's consideration set, and then close the sale."Packaging, monitor crowns and on-screen demonstrations are the key elements of Apple's program. The company, Papageorge reports, has "gone to great lengths" to make sure those demos are running. Apple retailers are required to buy demo units, on which Apple installs a '"somewhat interactive' demo loop that automatically boots up everytime you turn on the computer." The goal, he says "is to attract shoppers and give them a quick, exciting demo. In the absence of a salesperson, it really engages the consumer."Microsoft has also introduced a demonstration kiosk that previews all Microsoft products in one interactive display. WordPerfect "may consider" the interactive kiosk strategy, according to Clark Taylor, marketing development director/consumer products division at WordPerfect, Orem, Utah. And Intel is now releasing an interactive, multimedia demo that will "give far more information than anything we've done before," promises Lewnes.At Apple, "the role of in-store P-O-P is to maintain our brand identity and then provide the most relevant, compelling information to the shopper," he says. The finished product should be "clean, and not too big," he adds. The Performa's monitor crown is vacuum-formed in CR vinyl. "We only take up one side of the monitor, whereas some of our competitors go all the way around. Stores just don't have the room. They want something that's compact and sturdy, and they like it graphical."Kap says monitor crowns are disallowed in many computer superstores. "Many kinds of point-of-sale materials are not being allowed, or being allowed for the first-time, because there is a misunderstanding on the part of the retailer about how to leverage the materials for their benefit. All they see is added clutter and clean up costs."Endcaps, however, are very popular, he says. "And in our industry, those have to be purchased." He estimates that a one-month endcap in CompUSA stores nationwide cost his clients $29,000.This holiday season, SoftKey is rolling out a new CD-ROM marketing strategy, Levin says. In exploring retailer-friendly P-O-P, SoftKey discovered the popularity of audio CD jewelcase displays. "Retailers lick their chops at that. The sales per square inch on jewelcases are incredible, compared to sales per square foot."

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