Differentiate and brand-build

This is the fourth post in this series, written to help you differentiate your products and brand-build in an effort to not have to overly-rely on discounting and promotions to compete. Like the previous posts, following are examples of how to do this, including results.

The first post addressed market analysis, the second post product positioning and the third post sales channel strategies. This post focuses on leveraging driver items.

What’s a driver item?

I use the term to describe the products / assortments that A.) most define your brand(s), B.) generate a significant amount of your profitable customer acquisition and / or C.) generate a significant amount of your profit.

For example, working in the wellness industry, the company’s meal replacement brand was the lowest calorie on the market. And, at the same company, though fourth in terms of the volume of new customers generated, one product assortment generated significantly more profit than all other assortments, because of the lifetime value of the customers.

At another company, with an e-Commerce store with thousands of products, two of our brands, and fewer than one dozen SKUs, drove about 80% of our customer acquisition, sales and profits. (Note: It is important to have driver items, however having so much volume produced by so few SKUs is risky.)

Because this blog is about e-Commerce, following will focus on direct-to-consumer business models. However, driver items are also found in CPG and retail store businesses.

Why bother?

There are two primary reasons you should identify and leverage driver items, financial benefit and differentiation, shorter-term and longer-term benefits. Leveraging and investing in driver items will help you build your brand(s), reducing the need to have to compete on price or with promotional offers, and increase your competitiveness, increasing your ROI on marketing.

Here’s a real-world example. Working at ancestry.com, I started the beginning of Q4, inheriting an YTD P&L behind sales budget 10%. As a result, I needed to beat the Q4 sales budget by 20%+. I was able to do this, in large part, by redirecting resources to the brands referred to above that were driving volumes.

Also at ancestry.com, in my second year we were going to introduce new products, and re-launch, one of our driver brands. As a result, we were willing to price test. Given the volume of sales the brand generated, rolling out price testing results produced monthly sales 20%+ ahead of sales budget.

Another example of the benefits, using direct response radio to increase awareness of the lowest-calorie meal replacement mentioned earlier, we generated double-digit increases in e-Commerce sales, sales conversion and customer acquisition efficiency by increasing search volumes and branded search volumes.

How do I go about it?

To execute driver items strategies, there are a few action steps. In general, short-term steps are to identify your existing driver items, requiring competitive analysis and analysis of historical financial and customer acquisition results. Long-term is your product roadmap for product development.

As was discussed in the first post in this series, competitive analysis should be one of the first steps for your competitive strategies. Among other aspects of your competitors, the analysis should include product portfolio depth / breadth, pricing strategies, unique selling propositions and competitive advantages. This analysis will identify the points of difference of your products, allowing you to identify the products that will best brand-build.

However, as mentioned earlier, a successful driver items strategy requires more than products that have a point of difference, you need to also have products that have historically driven customer acquisition, sales and profits volumes.

So, another step is to analyze your customer acquisition results. In general, what you want to do is pull sales and customer records, and group the number of customers acquired, and their lifetime value, based on SKUs, assortments and brands they were acquired with. Grouping, totaling and sorting in descending order will allow you to identify where you acquired the most customers, and where you acquired the most profit.

Lifetime value is key to long-term profitability, and to maximizing new customer volumes and ROI, however it is a longer-term view. So, the other step to take in identifying driver items based on past, recent results is to also report on sales and margin trendlines for the past couple years based on the same criteria, SKUs, assortments and brands.

With the above analysis, you will have identified your products that best differentiate you, help you brand-build, drive the most customer acquisition and financial success. Now, you will be able optimize resource allocations, marketing channels, site merchandising and more with existing products.

While you’re leveraging existing products, with the information above, your market and competitive analysis, growth strategies, sales channel strategies, etc., you can start to incorporate lessons learned into your new product development plans.

Product development make take the form of line-filling, where you have gaps relative to competitors or where you want to shore up products that differentiates you.

Though the details are confidential, not long ago, using this process, we identified a few product lines that were most important to us financially and strategically, and started developing four driver item product assortments for each of the key product lines.

A key to success is how you integrate driver items into your marketing channel strategies, which is what the next installment will be about, how to differentiate and brand-build while generating impressions and clicks.

Same time, same channel

Next week’s post, the last in this series, will focus on multi-channel marketing channel strategies for driving growth, efficiencies and brand-building.

In the meantime, if you have any questions about market analysis, product positioning, sales or marketing channel strategies, driver items, branding, e-Commerce, growth or marketing strategies, you can reach Paul at pbecker123@gmail.com

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