When you were a child, remember Highlights Magazine? To the Hidden Picture article? To find something inside the graphic?
A recent Wall Street Journal article said that “retailers have been stealing ideas from online rivals about how to run websites for years.” That may be true, but online (especially pure play companies) have been doing that for years. “Technologizing” traditional marketing, display and promotional tactics used by retailers for decades.
Think about these examples …
- In the snack food aisle, you see tortilla or potato chips displayed in various racks. What do you see next to them? A wire rack that holds jars of salsa or queso dips. Or a promotional display with dry vegetable dip.
- In the clothing areas of a department store, you probably will see blouses or dresses which may have complimentary jewelry next to them. Or men’s dress shirts with a tie that matches the shirt.
- Or, for the summer or fall camping season, the display containing chocolate bars, marshmallows and graham crackers to make the delicious (although I don’t like them) s’mores.
What are retailers trying to do? Develop companion products that spark the consumer’s interest to purchase more than one item; to increase sales or an additional product with a higher margin.
Hmmm, let’s examine how pure play companies “appropriated” this tactic. Think of a “massive” online retailer …
- Let’s say you search for a cell phone. When you have a specific product displayed, a few inches down in the webpage they will say “Customers Who Bought This Item Also Bought.” OK, is that any different than the companion product
- So you search for a tablet device. The webpage displays a section “Frequently bought together” creating a package with your displayed product along with a case and screen protectors (to protect it from all the abuse we give the tablets!). Did you look at the package cost? There is no discount for the three products.
So, How Does It Connect?
In the first example, it provides an alternative choice of the displayed product. No different from the retail setting by having a substitute product displayed on the same shelf for the consumer to compare. It is suggesting to the customer other options. Same tactic that happens in a fine clothing store. The sales person will suggest another skirt, shirt or suit. Don’t let them leave the “store” or product without buying something. If they don’t like the product displayed, suggest something else.
In the second example, the tablet is probably being sold “near” or at cost. The two complementary products displayed probably have a higher margin than the “base” product. Retailers constantly use “loss leaders” or packaged items to increase profits and the “shopping” cart sales from individual consumers. Selling the cheese dip next to the tortilla chips. The garlic butter next to the freshly baked bread in the bakery. It is all about lowering your cost of sale by building the “shopping cart” with more items to increase gross profit and sales.
In consulting and teaching the strategy of online sales and e-commerce, these are the concepts and examples that are discussed to illustrate a tactical “metaphor” from the traditional retailing to online world.
What’s the Takeaway?
While there are always new concepts, ideas and strategies, it is important to note that very often something (a tactic, operational process) has been done before. It is important that the keys to success for business organizations and the careers of its individuals is to observe everything.
- To observe something that another business organization does and “custom fit” that strategy for your own product, operations or business model. One of the most important things (that is not very academic I would admit) that I discuss with students a lot … observe everything! When you are at another business, read an article or at a conference, be watchful about initiatives or tactics that you can leverage to your business.
- To figure out how something can be leveraged for the use of your business. Think, analyze and visualize how it will be integrated. Visualization is important to be analyzed by the specific business areas that are affected (or affect others) by the prospective initiative.
- Determining the value that will be realized by the tactic. Is it: Profit or contribution margin? Increasing sales? Reducing what a customer may buy from a competitor? Increased average shopping cart value? Reduction in marketing/selling cost?
It’s like finding the squirrel in the Hidden Picture (go ahead, take a break, try it! OK, maybe not at work!). Or maybe not as much fun!