P-O-P Show Keynote: John Costello on Home Depot's Strategy

The Home Depot's chief marketing officer isn't sure what constitutes P-O-P anymore. "When I started my career, there was a very distinct line between what's a product, what's brand advertising, in-store promotion, point of sale, the store environment," said Home Depot's John Costello, in reference to his early days at Procter & Gamble. "[Those elements are] all blurring together, and also reinforcing each other. All of those elements need to fit together. We need to come up with compelling merchandise and products that fit within the retail environment that our customers are shopping." "The role of P-O-P is going through a profound change. It is more important than ever before, but it also has its challenges," said Costello, speaking before a capacity crowd at the P-O-P Show/Chicago in September. "The in-store experience is more important than ever before, but its role is changing. The challenge we face as business professionals is, how do we take advantage of that convergence?"Home Depot found several ways to do so when redesigning its paint department, which previously "preserved the warehouse feel. Great brands, lots of paint, knowledgeable associates," but in an environment that presented the products as necessary, functional products, he said. "But paint has evolved from a functional product to a source of inspiration. "That led to our Color Solutions Center, which are designed to not only support our place as the number one retailer of paint in North America, but to provide inspiration for our customers," he said. To achieve that, lifestyle brands such as Ralph Lauren and Disney were brought in alongside Behr (a Home Depot exclusive) and Glidden, and displays were redesigned to help inspire instead of just hold cans.The initiative "begins with great product, but how do you have a consistent message," Costello asked, before showing a print ad that contained embedded paint chips readers were encouraged to bring with them to stores. "Was that a paint chip, was that point of purchase, or was it a print ad? The answer is, it was really all of those." The color centers also feature "a combination of high-tech and high-touch," he explained. High-tech as in color-matching technology that allows shoppers to bring personal items -- a pillow or piece of apparel, say -- match it "and then build a room around it." High-touch as in providing larger paint chips to "make it easier for the customers to get the right product. "Is that a product sample, is it a paint chip, or is it P-O-P," he asked. "And the answer is, it's all of that." The convergence of product and P-O-P advertising also is evident in the line of "1-2-3" publications Home Depot publishes [in conjunction with Meredith Books]. "You could argue that these are just books that we sell. But they really are a way for us to enable you to bring that know-how home." [And] they're an important part of the P-O-P in our store" by providing know-how to both customers and employees. In developing its marketing and merchandising plans, Home Depot strives to achieve the following objectives:Think big. Home Depot doesn't simply want to sell products, but to "empower customers to build the home of their dreams," Costello said. Efforts to exemplify that pledge in stores are "built on a foundation of great merchandise, supported by very strong associates who have the know-how to help [customers]." The chain also has doubled its investment in store modernization to help "bring that solution to life across our entire store." Another important strategy for empowering customers is the How-To clinic program for women. The clinics have attracted nearly 200,000 participants since spring 2003. Think small. "It's easy to lose sight of the real power of ... connecting with customers one by one. An important part of what we've done is identify who are our most important customers," he said. In addition to "home perfecters," that includes professional builders (which account for 25% of the chain's business) and emerging markets such as 50-plus consumers. "With our heritage as a home improvement warehouse, we had a tendency to over-market to men and under-market to women -- even though women represent 50% of our purchases and, in fact, 46% of the business to our stores are men and women shopping together." This realization led to the How-To clinics, he said. Better meeting the needs of professionals entailed a dedicated Pro Desk complete with its own checkout. The chain found "that we need to go beyond information to provide a different solution. The result, he said, is "a convergence of customer service and P-O-P."Similarly, reaching out to the emerging Hispanic segment included hiring bilingual associates in addition to developing dual-language signage. Think like a customer. Home Depot has become "the No. 3 retailer for appliances" by understanding the consumer need for easy buying decisions, Costello said. Thus, the appliance department evolved into "appliance centers that had the right P-O-P, had the right information, had the right associates recognizing that appliances are a big-ticket item that requires a different kind of environment. In rolling out a new grill set in spring 2004, "we redid all of our P-O-P and our whole layout" to recognize the fact that the category has become much more complex to shop. In-store information is now supplemented with a buyer's guide (produced by the marketing department "working closely with the in-store team") because "you can only absorb so much when you're in the store."Be frugal. "Do more with less." However, "productivity" doesn't just mean reducing costs, but creating programs that benefit the customer as well. Home Depot developed a new production system for kitchen and bathroom vignettes in which modular pieces are assembled before being shipped to stores. That has cut in-store set-up time by 75%. It also has improved the in-store experience because vignettes now can be changed out more frequently."Think about the power of endcaps. How do you make them more compelling," he asked. "If we can develop P-O-P that's not only really compelling, but also generates increased store productivity, there's the opportunity not only to create greater financial return but also pass those savings on to the customer.

P-O-P Show Keynote: John Costello on Home Depot's Strategy

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