How does your strategy differentiate you from the rest of the pack? In his book, Break from the Pack, Oren Harari skillfully explores the importance of identifying your differentiating value (DV).
When we initially developed the business strategy for Paper Warehouse, we did not sit down to determine what was going to make us different from the “big box” retailers. While it did not become immediately obvious, the answer evolved over time. I knew from my days at Catalog Showroom that we had to develop a merchandising assortment which gave us dominance in the market place. Catalog Showroom had been stronger in gold, diamonds, and small appliances, which separated us from all other retailers.
My father had located our first successful Dolgin’s store in North Kansas City, MO because Clay County did not charge tax on cigarettes. We were the cheapest re-seller/retailer of cigarettes in a five county area of Missouri/Kansas. The carton cigarettes priced at $1.79 created a “halo effect” on the overall store with its 9,000 SKU’s (stock keeping units). This may have been our niche – our DV.
Today, I understand this marketing strategy much more clearly than I did back then. Yet, it has taken many years of business experience to learn how to identify and/or predict the products or characteristics that have the potential to create that “halo effect” in particular businesses. I do not believe it’s an art, but I do believe you have to understand your market, your strategic positioning, your franchise and your organization in order to extract this trait and to be able to exploit it into a full blown DV.
I learned a valuable lesson from a critical mistake made at Paper Warehouse. When the party goods industry was in decline, we brought in a well-known agency to help us turn the tide. This outside firm recommended that we raise our prices on greeting cards. We had been selling greeting cards at 50% off for years; in fact, we were one of the first retailers to sell a name brand greeting card at half price. Customers would flock to our stores to buy these bargain priced greeting cards. What we failed to understand was that the greeting card pricing at 50% set the halo effect of the overall merchandising strategy of the store. Yes, we were less expensive and had a greater assortment of name brand party goods than Target and other specialty retailers. But it was the cards that set the perception that everything was a bargain.
Only one person within our organization understood just how important those half-priced greeting cards were to the whole store’s profitability. Shame on me – I did not listen. Instead, I followed the recommendation of our board, our staff, and our consulting firm. Consequently, as soon as we began charging full retail on greeting cards, we inadvertently removed the DV from our merchandising and marketing strategy.
I should have listened more carefully to that one person who clearly understood the significance of those discount cards! This person was a board member who has always displayed great wisdom and insight. Oh, by the way, she is also my wife!! She continuously reminds me, even to this day, of what happens when I don’t listen to her!
To summarize:
- Every organization has to have a reason for existing. Find your niche. Understand your differentiating value.
- Continuously keep your differentiating value in front of your customer or client. (Quiz: At what store can you “Expect More, Pay Less”?)
- Understand “Halo Effect” marketing and make sure to use it correctly.
- Finally – perhaps the most important advice of all – listen to your spouse!!
If you are interested in gaining a better understanding of your DV and halo effect marketing, contact Élanstrategic for more information.