The New Catalog Product Process
Donald R. Libey
Libey Incorporated
Advisors and Intermediaries for the Direct Marketing
Industry
In a drawer somewhere is the manuscript of a yet-to-be-published book I wrote a few years ago on the art and science of product development and management for catalogers. As I remember, it wasn't until chapter nine or ten that I got to the discussion of the actual product features, benefits and attributes. The process of managing product selection for a new catalog is one that demands a great deal of preliminary thought and decisions before the actual products are chosen. Unfortunately, most senior managers skip right to the excitement of the new products themselves and bypass all the stuff that is really important which, in most cases, assures that the catalog launch is fatal.
Where do you start?
I like to start at the end. When conceiving a new catalog or multi-channel on-line or retail venture, I try to envision the successful company twenty years in the future. Perhaps I see several spin-off catalogs or a vastly expanded definition of the market and product space the catalog dominates. As an example, if I were to create a catalog selling ice-cream making supplies to ice cream shops, I would ultimately have a collection of catalogs selling a variety of food preparation supplies to the ice cream, sno-cone, popcorn, nut, pizza, deep-fried Snicker, cotton candy and corn-dog and hot dog markets. In fact, I would see a catalog that dominated the state/county fair, festivals and concession stands fast-food preparation supplies business. If you looked at the history of the Huber restaurant supply catalog, as an example, it probably started as a kitchen knife supplier or something like that. When I see the end, I then have some idea of what kind of questions to ask at the beginning.
Positioning
How is the business to be positioned? The word position has no specificity. To pin-down position we need to talk about specific components of catalog and product positioning.
Product Economic Position. Will the catalog be the high price leader, the low price leader, a discounter, a mid-price follower, a sale price promoter, or any of another five choices, or so? Product economic position generally depends on competition and an assessment of the probable barrier to entry. Where no competition exists, a choice is made between staking out the high price position or the low price position. The high price position is safe if the barrier to entry is high, and it is an opportunistic strategy; the low price position acts as a barrier to entry when the barrier to entry is low, and is a protective strategy.
Product economic position also includes margin. High margin product positioning is often found with value-added printed products, even those that are commodities. Low margin product positioning is often found with non-valued-added, distribution products, such as computer peripherals and office furniture. A further element of economic positioning involves the ratio of internally manufactured products to externally sourced products. Similarly, economic positioning includes the ratio of inventoried products to drop shipped products and the resultant inventory turns versus inventory value ratio. For example, a low margin product costing $450 and selling for $600 may require a quantity of 100 in stock and do only two turns a year. This may not be the best use of capital for the overall product strategy and the product should be drop shipped.
Inherent in product economic positioning is universe. Generally, a low-price, commodity product has a larger universe of buyers than a high-price, specialized product. The top-line revenue expectation must be in synch with the potential universe size for the product and the potential response rate of that universe. If you are selling $2,500 Italian leather desk sets, your universe is fairly small. If, on the other hand, you are selling $8.00 t-shirts that say "Jerry Springer Rocks" the drooling, mindless universe of lobotomized TV zombies is quite sufficient to assure revenue projections, provided you can limit the sales copy to one syllable words.
Product Choice Position. Will the products in the new catalog have a high number of choices or a limited number? Again, a high-price product strategy often offers fewer choices because of inventory cost. The $2,500 Italian leather desk set may only come in black or burgundy, not in a dozen color choices. The t-shirt, however, will likely have eight color choices and twelve sizes. The number of choices, in part, dictates space requirements and, therefore, sales projections. As you can see, the ideal product strategy fits a large universe, high demand, high price, high margin, low choice product line. Kind of like health insurance and prescription drugs.
Product Style Position. If the products have a style "look" to them, what will be the dominant product style you wish to present. For example, if you are selling home office furniture and accessories, will the style be retro, art deco, modern, contemporary, traditional or European? All products have a style quotient, even restaurant supplies. The continuity of product presentation demands some thought be given to the overall stylistic components. A great example of style consideration in product development and design is found in the Levenger catalog where continuity exists from product to product and the product selection is never reduced to a noisy hodge-podge of dissonant styles.
Product Gender Position. What gender appeal will exist with the products? If your catalog has 80 percent female buyers, the products should replicate that gender positioning. Gender, in all likelihood, determines a great deal of the positioning of style. The most difficult catalogs to mix relative to product are those that are evenly split between male and female buyers. In business-to-business products, female buyers will accept products that are utilitarian and more male in style, but males will seldom accept utilitarian, female styled products. This, of course, points up the underlying female capacity for intelligence and getting the job done without the debilitating male concern for ego. Not only are products influenced by gender, but the overall design elements surrounding the product presentation tend to be very different, as well. If you think of the Northern Tool and Equipment catalog, there is a decided male design bent; however, the Anthony's medical uniform catalog is decidedly female in its design elements.
Product Quality Position. Will the products be positioned at the apex of quality or at quality nether regions? If one is selling commodity products versus exclusive, proprietary products, this may be a relevant positioning component of the product strategy. Here, the economic and choice positions have to be in synch with the quality position, otherwise the customer will immediately see through the inconsistencies. Other factors influence quality position, such as gross margins, service, exclusivity, and product life. If you sell a top-of-the-line quality Schlessinger briefcase, you will only sell one in that customer's lifetime, but if you sell the low-end import knock-off, you might sell the customer several provided you can retain that customer with lower quality product. In other words: Price becomes the offset.
Product Attribute Position. In some instances, products have a characteristic attribute, such as "easy to use," "compact," "goes anywhere," or "repels salsa drips." If, in fact, your products are known for their unique attributes, you have an obligation to continue those attributes that your customers have come to expect. One product attribute for Ultimate Office is leading-edge file storage design. To introduce filing products that are of a mundane, commodity design would not be in keeping with the attribute niche Ultimate Office has carved out for their products. When it comes to filing, there is only one catalog to go to: Ultimate Office. While other attributes may be important, the ethos of most product lines will have a primary attribute thread that runs completely through the line(s). It is well to honor that attribute and to keep the thread in hand. From time to time, there are opportunities to further exploit the primary product attribute position. For example, proprietary tools designed and sold by Northern Tool and Equipment feature repair and maintenance part kits so that they can be serviced on the job site without downtime. This extends the "high reliability/low downtime" product attribute that customers of Northern have learned to rely upon when they purchase products. Attribute positioning goes far beyond merchandising. In the mind of the customer-in addition to price, quality, choice, and other elements-attributes are the characteristics they expect the product to possess. Few business to business catalogers ever fully understand the concept of product attributes and fewer still ever optimize it in their overall product merchandising and positioning tactics and strategies.
Product Source Position. Simply put, will the products be imported or manufactured in the U.S.? In some cases, this is a very important positioning element, not only economically but ideologically. For example, the Harley-Davidson product line is somewhat (read: large, hairy, patriotic men (and women) with tattoos and nose rings) identified as being a U.S. product line and you probably would not want to deviate from that position. In a similar mode, product sourcing also has to include a position on the percentage mix of internally manufactured versus outside sourced products if this is a relevant ratio for the catalog company. While this tends to be a gross margin issue, there is also the economic position of inventory burden to be considered.
Product Quantity Position. What are the quantity breaks you will offer for the products? In the world of advertising specialties, coffee cups are generally offered in dozen lots, such as 6 dozen (half a gross or half-carton). If you want to stake out the low quantity, high price position, offer coffee cups in minimum quantities of 24 instead of 72. You will attract many more small quantity buyers. At the opposite end, you may want to stake out a larger share of very large purchasers and choose to offer a lowest price 12 gross (master carton) discount for the 1,728 quantity. Both of these extremes reflect a specific product quantity position. The merging of quantity and price results in a "sweet-spot" position that determines at what quantity break you will offer the best discount or price break. As you work to improve gross margin, you might offer the best quantity/price break at lower quantities to encourage slightly higher gross margin and more frequent orders. Moving the sweet-spot up and down can influence the number of orders, the average order value, the frequency of orders and the rate of customer retention.
Product Personalization Position. Some products can be personalized. Personalization usually involves logos, name and address, initials or other personal elements. Personalization can also include registration numbers, value-added security features, custom designed software loads, tailored warranty programs, and an endless list of creative ways to make the product yours alone. Think of cell phones. Your phone may just "ring," but mine plays flamenco when you call. To some degree, every product you sell can be personalized in some way, particularly if that is your gimmick and a position you wish to capture for your product line. I would be willing to bet you that this topic has never received more than a cursory discussion at your catalog company; at least, not more than the simple, expected components of your products. What I am after, is the wholly unexpected and breakthrough concepts of personalization that you can conceive and add to your product positioning strategy. For Dell, this was something as revolutionary as saying to their prospective buyers, "Hey, call us up and tell us what you are going to use this computer for and we'll configure it with the right software you need to do the job. Just plug it in and go!" Wow! What a concept: Personalized computers!
Product Service Position. Is the primary product position one of on-going service? For example, a Ford Taurus is purchased not for design or price, but for service reliability. The transmissions are known to go 200,000 miles; tune-ups occur at 50,000 and 100,000 miles; with routine oil changes, the engines never die; everything about the Taurus implies reliability and service consistency. Maytag is another good example. Until recently, since the financial performance has declined, the company's products were positioned as virtually "no service calls are needed." The service guy, Old Lonesome, became the icon for the service position. Now, changes are occurring that require a re-examination of the product economic positioning, the product sourcing positioning, the product quality positioning and the product service positioning. Suffice it to say, there are changes ahead for Maytag if they want to stay in business. What is the service position your products command? Is that the position you desire to occupy in the future? If not, what do you have to do now to assure there is a position in the future?
Product Technology Position. Do your products have a high-tech position? Or, are they low-tech or no-tech? Do you wish to move up the tech-ladder or down the tech-ladder? A good example is pocket calendars that are imprinted with your company name and logo; you know, the ones you give away at the beginning of the year. If you were the manufacturer of these products, what would you be thinking in 2004 relative to the future product technology position of that product line for your company? If you are setting out to create a business-to-business product selection, what percentage should be high-tech versus low or no-tech? Of course, opportunities in product exist to travel the contrarian and contra-cyclical route. In a world of the high-tech Blackberry, I tend to want to stake out the leather pocket diary and No. 2 pencil share of the market. There probably isn't anybody else who wants to do that and there is a huge core group of No. 2 pencil folk out there who are looking for somebody to service their simple desires and product needs. So, there are choices to be made about product technology and position: leading-edge or trailing-edge; early adaptor pricing or late adaptor discounting; high-tech, high-service position or low-tech, no-service position; and many others. The point: Technology moves and product position either moves ahead of, with, or behind the technology curve . . . at a cost. What do you want your product line's position to be?
Product Proprietary/Brand Position. Is it your intention to create branded, proprietary products? First, recognize that proprietary and branded products are not always the same. A product can be branded and not be proprietary and the opposite is also true. If you wish to stake out the unique proprietary product position, that is, a product found nowhere else, you have to have some very special product design elements. If you wish to stake out the brand position using your product quality or product service positions, you have to begin with those elements and merchandise them on an integrated basis with your brand position. When branded product is associated with an upscale economic position and highest quality position, what often results is an exclusive, classic, traditional, high-priced, proprietary attributes, gender-specific line with limited choices and timeless design. Think Chanel and Aston-Martin. Often, these products will be featured in a catalog as the "best" of a "good-better-best" product array and will carry a unique brand caché. A proprietary, branded product line also usually develops more corporate value than a non-proprietary, non-branded product line; and only value matters in the end.
While other product positioning components exist and should be explored, these twelve components provide a place to start when conceiving of a product line to be presented in a new catalog, or when re-formulating an existing catalog's aging product lines. I daresay few catalog companies truly exhaust all of the potentials to be found in product development in just these few, simple components of the art and science. After all, it is far more interesting and exciting to jump right in and get some "new product kill." Marketers and product types are always extending their talons and spreading their wings, lustily waiting for the hot, rising thermals so they can launch out over the cliff and swoop down and snatch a dismal piece of new product in their claws and quickly fly to their roost and greedily gnaw away at the pitifully sparse flesh in a feeble attempt to satisfy their constant hunger for fresh meat and the thrill of the kill. But, once and a while, an old, grizzled hawk sits high in a tree and relentlessly ponders all the potential positions and possibilities and then effortlessly flaps down and gets a big, juicy rabbit.
Hey, it's all about positioning.
