Market Inspiration

Research data for the natural foods market applies to our own as well. 6/28/2010 8:00 AM Eastern

Market Inspiration

Jun 28, 2010 12:00 PM, By Don Kreski

Research data for the natural foods market applies to our own as well.

Research data in natural foods also applies to AV.

The key to making good decisions is starting with good information.

That’s an area where marketing managers in the natural and organic foods industry have a big advantage over those of us working in AV. They can use cash register scanner data to model buyer behavior, rather than relying on surveys, samples, and other means of estimating sales and market share. Because of the great data available, it’s much easier for them to tell which marketing activities do and do not work.

Realizing that, I recently spoke to Mike Addona, director of analytics and consulting at Schaumburg, Ill.-based market research company Spins, whose clients are producers of natural and organic foods.

According to Addona, the industry is in many ways very similar to ours: it’s made up mainly of smaller companies driven by people who take an unusual amount of pride in their products. They are strongly influenced by a larger, related, but mostly separate consumer-driven industry. It is a growth industry, with industry-wide revenue expected to increase by about 9 percent in 2010—roughly the same as current InfoComm estimates for professional AV.

Addona has several observations of interest to the AV industry.

Short- to midterm effects

“We find that a lot of the things marketers do in our industry—or any industry—just don’t work very well,” Addona says. For example, he recently completed a study of a client’s radio and billboard advertising campaign, analyzing the sales of the company’s products before, during, and after the advertising ran.

“The ads were clever, but it really wasn’t clear what they were trying to sell,” he explains. “Consequently, we did not see the sales gains we would normally expect.” Addona says that, judging from sales results, the most successful campaigns are simple, direct, and clear. Those that emphasize clever delivery over product benefits may get noticed but are less likely to generate sales.

According to Addona, good advertising can and does work, but the effect is generally short- to midterm. “The hope is always to create such a memorable message that you get a significantly large sustained effect, but it rarely happens,” he says. The Energizer Bunny, for example, had a long-term impact on buyers’ perceptions of the Energizer brand, but most brand-building efforts must run on an ongoing basis. Addona does suggest that smaller firms advertise in bursts; that is, try to gain a lot of attention in a shorter period, stop, then go back and run short, intensive marketing efforts again and again.

A good result from a very successful campaign, Addona says, would be in the neighborhood of a 10 percent sales gain, over and above the “baseline” growth the product might have achieved with only very basic marketing.

The vehicle that carries the marketing message is crucial. Addona says that natural foods marketers rarely advertise on television, on the radio, or in general-circulation magazines. There is a relatively small but specific clientele that buys these products, and so a shotgun approach is not going to be cost-effective. Instead, companies tend to place their messages in specific health-related magazines and websites, and include in their marketing mix targeted vehicles such as PR, newsletters, and email.

Market Inspiration

Jun 28, 2010 12:00 PM, By Don Kreski

Research data for the natural foods market applies to our own as well.

Where price promotions are effective

As in our industry, the mind-share of distributors and retailers is critically important for the success of natural and organic foods. “They will create new products with features that appeal to the retailers and their customers—perhaps a gluten-free energy bar or hormone-free milk for consumers with specific health concerns,” Addona says. Thus a large part of these companies’ marketing budgets goes to merchandising within the retail store, and promotions are an important part of the marketing mix.

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Yet price promotions, while useful, often have a negative effect on profits. “Many of our clients overdo promotions or time them ineffectively,” Addona says. For example, Spins did a study for a baking supplies company that ran price promotions throughout November and December each year, feeling that they needed to step up their marketing efforts for the holiday baking season. It turned out that while they got a boost at the beginning of November, by early December their actual revenue was running below what analysis showed it would have been without any promotion. Of course their profits, given the discounted pricing, were far below what they would have been. The recommendation: focus the timing of their 2010 promotions on the weeks prior to Thanksgiving to increase both revenues and profits.

Addona also says that for certain products, price promotion is questionable. As an example, he talks about a nutritional supplement costing roughly $50 for a one-month supply. The company periodically ran $10 price reductions, but Spins could find little evidence that the company was accomplishing anything other than rewarding consumers who would buy the product anyway. “I doubt that many consumers are going to trial-purchase an expensive, health-related product like this based on a discount,” he says. And of course cutting the price by 20 percent chopped the profit margin far more.

Nonetheless, a study Spins undertook last year showed that the natural food categories that grew their revenue the most during the recession were ones where producers increased the frequency of their promotions.

Promotional incentives work best, Addona says, when they are able to motivate consumers to try a new brand that they stick with after the promotion is over. As an example, he cites a number of manufacturers that enlist the services of Catalina Marketing to print a cash register coupon for consumers who bought an item that directly competes with theirs. “The idea is: ‘Here’s someone we know is buying our category. If we can get them to switch even once, some portion will hopefully like our product better and stay with us,’” he says.

Perhaps the lesson for an AV integrator here is that, if you do offer a price special—say on a system in a box or any other type of installed system—you need to make sure that the service you offer is fast, accurate, and absolutely first-rate. What you’re selling, of course, is not a packaged good but the experience of working with you. So if you’re going to do a special, you need to focus not on the fact that your margins are low on this project but that you have the opportunity to gain a new customer.

That’s really the point of any marketing campaign, in our industry or in natural foods. You’re either building your brand image to the point that someone will try you, or you’re offering some kind of incentive to get them to switch at least once. It’s hard to get someone new to try you, however. When you finally succeed, it’s time to pull out all the stops and provide a memorable experience.

Don Kreski is the president of Kreski Marketing Consultants, which offers marketing services to the AV industry. You can reach him at

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