Packaging, Interactives Drive Software Initiatives

At this summer's meeting of the Interactive Entertainment Merchants Association (IEMA), members were set to discuss a variety of topics related to how they retail software products. A key element of that program centered on the growing concern among both retailers and manufacturers about the in-store presentation of products. At some point, many agree, such meetings will create a more efficient packaging format -- which in turn may create some new merchandising challenges."We're trying to move software products, which have been very independent products with no set packaging, into a standard format that the channel is used to," explains Tony Costa, manager of category merchandising and product acquisition for Infogrames Inc., New York. "We focus on the mass merchants, and they have told us they want cookie-cutter sizes. Software publishers want to be as creative as they can be in achieving that."One of the problems in reducing and standardizing sizes, he notes, is that those large, nearly-empty boxes offer the only merchandising space most companies have available to them. "The merchandising approach for most software is very simple in stores," Costa explains. "They provide us with traffic in the aisles and shelf space -- which usually is not elaborate or very well signed -- and the product has to sell itself."Software publishers are more concerned than ever about balancing merchandising needs with retailer preferences because their share of real estate is beginning to shrink, Costa says. "When personal-computer software was considered more of a growth category two years ago, our space increased," he explains. "But as more [game] console products came out, mass merchants began grouping all types of software together in the same area." Those retailers keep the category size constant -- and the game side of the business is growing. It is also expected to continue to grow as new systems, such as Sony's anticipated PlayStation II, reach the market.But the news isn't all bad for software makers. This hot competition for space often results from an expansion of product categories into new channels, especially the mass merchants. "We're breaking into many new channels now," reports Marci Knutsen, director of creative services at Humongous Entertainment Inc., Bothell, Wash. "We've been in major CD-ROM retailers for some time, but now we're breaking into mass merchants and some drugstores. The options are growing." But waste of space," acknowledges Costa. "And smaller sizes would allow retailers to stock more products in the same space, which allows us to provide a wider breadth of titles in the mass channel."But while the retailers want more efficiency, they also must face the concerns that smaller packages lead to more theft. That's a problem console-game software makers still wrestle with. "We don't have a solution at this point," says Scott Lambrecht, director of channel marketing for Sega of America Dreamcast, San Francisco. "There isn't any industry standard, so every retailer wants something different." The options Sega provides include:sample boxes with real products locked away,magnetic strips in any of three formats,attached hang tabs that allow the products to be pegged in locked cases."It discourages sales when the customer has to find a clerk to open the case so he can read about the product on the back of the package," Lambrecht says.To overcome the dilemma of various presentation options, Sega produces a variety of P-O-P pieces including posters, counter cards, standees, and monitor frames, depending on the retailer's preferences. But the company is also creating more video-looped presentations that showcase the games' action, along with expensive interactive displays that allow customers to try the games in the store. "We're fighting for shelf space with everyone else, so there's less P-O-P space available," he says. "We're very much focused on live product and providing samples that customers can try."Sega used this strategy right from the kickoff of its Dreamcast product last September, when the company produced 3,500 standalone kiosks for various accounts, including customized versions specifically for Target and Sears. It also funded the construction of kiosks produced by other chains including Best Buy and Toys "R" Us. Each unit cost the company about $1,300, Lambrecht notes. "We made a significant investment, but it was a commitment to the retailers that will last three to five years," he says. Other videogame makers are taking a similar approach, he adds."The most important value for interactive displays is that it presents the game to the consumer," Lambrecht explains. "In TV ads, we have 30 seconds to show it off. With game previews, you have to rely on set graphics and descriptions. In-store interactive units are the only chance we get to really let the customer see the full range of game play." Sega's videotapes have supplemented this. They include details on key upcoming releases, 30 seconds of simulated game play, bullet points of features and game logos.Theory vs. RealityUnfortunately, kiosks and videos often work better in theory than in practice, Lambrecht says. "Buyers understand the value of interactives, but store managers don't always take the same approach." Some managers believe that the elaborate displays are little more than babysitters for roaming kids who don't want to share, so the units are unplugged. Video formats help keep traffic flowing and prevent anyone from monopolizing the games, but they too have drawbacks, he says. Clerks sometimes deactivate the videos as the game sounds and messages wear on them over the day.Retail reluctance to accept many types of displays for both console and PC software is growing, suppliers note. "There is a lot of resistance to corrugated displays," says Infogrames' Costa. "Retailers receive too many and they disrupt the store's flow. Mass merchants in particular want to keep their aisles clear, and some won't accept any displays."Adds Humongous' Knutsen: "Some accounts are pretty restrictive, but if you can get the buyer excited about the promotion, the rules are lessened. Fun stuff will always be accepted."Even then, the macro strategy doesn't always match up with the micro implementation, warns Costa. "You can do a great corrugated shipper display that looks good in the brochure and the buyer okays it. But the store personnel don't want it in their aisles, so they trash the display and pack-out the product on an endcap somewhere else entirely."Customized OptionsThat resistance leads suppliers to work closely with retailers to provide the items the specific account can use. "Two years ago, everyone was producing one thing for everybody," says John Gunn, vice president of channel sales for 3DFX Interactive Inc., a San Jose, Calif.-based maker of 3-D computer video cards often sold with software. "Now we go chain by chain to fit the exact format, exact graphics, exact specifications. What we produce depends on how the account goes to market, and they all go to market in very different ways."In many cases, this results in a menu of options that the retailer can choose from. At Infogrames, the options include standees, counter cards, posters, shelf strips and other targeted pieces, says Mike Markey, vice president of marketing based in the company's San Jose, Calif., office."We explain the marketing approach we're using and the volume we believe we can generate," he says. "Then we work with them to select the merchandising options that give them the best way to merchandise the products in their store. Once they select the pieces they want, we work with them to provide the sizing parameters they need." Regardless of final format, the merchandising pieces feature the same marketing thrust and graphics, which tie directly to the images shown in television and print advertising, he notes. "The pieces are tailored to the retailer, but they reinforce what we're doing in other media to provide a common thread. The P-O-P acts as a reinforcement and identifier once the customer gets to the store."Sega, too, provides options based on retail input generated from initial renderings of graphics pieces, says Lambrecht. "We can only place the materials that have been authorized, so we give them a selection for each title." According to Humongous' Knutsen, "We keep within a tight budget to give retailers what they want. We've had a lot of success with shelf cards and pole posters that reinforce the brand with consistent color and messaging." These work especially well for expanding the messages into other related departments, she adds.Consolidation Focuses InvestmentWorking more closely with retailers has become easier as consolidation has reduced the number of significant retail players, suppliers agree. That makes it more critical to get into those stores, but it also makes it more economically attractive to work closely with them. "Retailers are more restrictive of what they will accept, but that ultimately benefits them and their consumer," says 3DFX's Gunn. "They have more control over their store environment and can communicate in their format. That changes the format we work with, not the opportunity of working with them. The message is just carried in their style."That can be achieved because fewer retailers account for more business, Gunn adds. "Each store is driving more of our business and generating a stronger ROI," he explains. "That means we can invest in more expensive in-store materials and demonstration units, because of the higher volume."The consolidation and competition for real estate is also leading suppliers to concentrate their efforts on selected products. "We're focusing on a few key P-O-P pieces," says Infogrames' Markey. "We're trying to put more dollars behind a few pieces and merchandise for our biggest releases so we can devote more floor space to key products."Sega, too, focuses its attention, Lambrecht says. "We look at the key titles we're promoting and allocate our budget as needed. We'll go full-bore on P-O-P for certain titles and give less promotion to others." In some cases, he notes, that is based on the game's rating, as the company promotes General and Teen-rated games but won't promote its Mature-rated games.Even with customized pieces, retailers still want efficient sizes, Humongous' Knutsen says. "We have a good relationship with our key retailers, as long as our displays stay within their restrictions." That typically means keeping any display to a 24-square-inch footprint. Because of the company's focus on character-focused children's software, it also aims to place key graphics at both the 4- and 5-foot heights to entice kids and parents.Infogrames has found success with several approaches that directly address retailers' on-going concerns, Costa says. "In most cases, our P-O-P consists only of our product, which is faced out on the shelf with the artwork as the sales face," he says. With many publishers offering a consistent brand identity and overall line look, retailers often group a supplier's products together, creating an opportunity to provide some limited category management. But maintaining such organization proves difficult."We're dealing with personnel who don't specialize in software, and they need structure with planograms to give them direction in maintaining the shelves," Costa says. To accomplish that, the company produces 4-foot channel strips that are customized for each retailer based on their individual planogram. "Rather than individual strips that fall out or slide to the wrong place, these won't get lost." They include UPC and pricing information plus a graphic of the product. "The retailer can set it quickly without having to check numbers or a schematic," he explains. "It saves a lot of time for merchandisers, and the response from retailers has been very good." Wal-Mart in particular has had strong success with it, he notes. "It's very simple but effective."Another approach Infogrames has taken features an inexpensive wire rack that ships as a temporary display. Used for Christmas and tax-season products, the unit features side panels touting the product's benefits. When later products ship, new side panels are available if the store decides to use the wire rack for a longer period."We designed the displays to be temporary units, but they can be retrofitted for longer use," says Costa. "Changing the side panels helps it stay up longer, and it offers a quality image that isn't available in a typical temporary shipper."On-Shelf Pieces ThriveWith console-game and PC software departments merging into one larger section, accessories are also being included in the mix, offering more opportunities for combined promotions and cross-merchandising opportunities, notes 3DFX's Gunn. "We use a lot of shelf talkers in the software department to direct people to where we're located if it's separated," he says.The company has worked with software publishers to create value-added promotions, in which customers receive instant discounts on software programs when they buy a 3-D game card and software title. In recent years, video-card companies have also tried bundling their products with software programs, or at least demonstration samples of programs, but that has fallen off. "True co-merchandising opportunities tend to be limited, but we encourage shared endcaps," Gunn says. "It's not always easy to coordinate two separately planned promotions, because most software is promoted heaviest when it is launched. Finding that opportunity can be difficult."Humongous has also looked at cross-merchandising opportunities, but its efforts have focused on expanding the licensing of its characters to other departments rather than taking its existing products to those aisles. The company owns such properties as Putt-Putt and Pajama Sam and licenses Blue's Clues for software. "The first step we're taking is licensing our products for plush toys," Knutsen says. "We want to keep a slow pace to ensure we stay on track, but we intend to ramp up the licensing to include television, video and apparel."A recent promotion shows the potential, she notes. The Pajama Sam 3 software, "You Are What You Eat From Your Head To Your Feet," came packaged with a limited-edition lunchbox, with a sample built into the corrugated display produced for the promotion. The lunchbox's 5,000 unit production run was quickly snatched up -- and marketers have since seen it selling at on-line auctions for $95. "It added value to the promotion, which always makes it more appealing to retailers."The combination of better ROI and a focus on key products will lead to more elaborate, if fewer, merchandising pieces in the future, Knutsen adds. This not only will include value-added options, but more interactive displays. "We're interested in adding layers to the displays, with sound and light and motion-activated attractions," she explains. "Animation adds appeal for our characters, and we're definitely focusing on our character-driven products. Anything that will help keep the display in the store longer will be considered."Promotions must be well-supported, stresses Infogrames' Costa. "Lots of retailers are looking at their inventory and the types of promotions they're offered," he says. "Few promotions are really successful for them. It just becomes an opportunity for suppliers to dump product on them, and that doesn't sell. So they're accepting fewer."That's why his company has such high hopes for the efforts of groups like the EIMA, where new concepts in packaging will settle the category and allow more attention to be focused on merchandising. "Downsizing packaging will allow us to pump more product into stores while staying within the designated sections they'll give us," he says. Adding breadth to each store is vital because turns on any one product haven't been high enough to support major P-O-P materials, he says. "Retailers want more efficiency or smaller space, so publishers have to come up with ideas to change the package and create better merchandising."The need to grow is also leading to an examination of other channels. Humongous, for instance, recently completed a promotion in Loew's movie theater lobbies that featured a motion-activated display with a voice chip for its Spy Fox 2 software. "That was very exciting, because we were hitting customers out of context," Knutsen says. "It's fun to consider what other cross-overs might work."The program, she adds, "was really successful, so we definitely hope to do it again. We also hope to move into grocery stores, drugstores, bookstores and other theaters. If we can keep our messages simple and clean and not cram too much information into one small space, we can help the customer understand the value and attract them to the products."