I read recently that JC Penney is having problems converting the retail success of its new CEO, Ron Johnson, formerly the head of Apple’s retail monolith. In fact, Forbes reported losses of $203 Million in just the 3rd quarter and a drop in same-store sales (a barometer for retail health) of over 26%.
Analysts blame poor retail sales on Johnson’s change in management philosophy drawn from his days at Apple, where SALE signs NEVER appeared. He tried the same thing at JCP, supported by a media blitz highlighting the problems inherent with coupons, sales, and other sales promotions.
So, why has the marketing strategy that was successful for Apple failed JCP? The answer lies in fact that the two sell in different product categories and product category suggests a lot about how consumers think about, shop for, and respond to marketing efforts.
In general, we divide consumer products into 4 product categories:
- Convenience goods
- Shopping goods
- Specialty goods
- Unsought goods
Categorizing a product into a specific category isn’t absolute, as one consumer might categorize a product as a shopping good, for instance, while another categorizes the same good as a specialty good.
5 Steps in using product categories to optimize your marketing strategy
The first step in category marketing in your marketing strategy is to understand how YOUR TARGET MARKET categorizes a specific product.
The second step in using category marketing is using this categorization to determine the appropriate (most likely successful) marketing strategy for each of your brands.
The third step in using category marketing is implementing your strategy.
The fourth step in using category marketing is testing the impact of your product strategy on achieving goals — such as increased sales.
The final step in using category marketing in your marketing strategy is tweaking your strategy to improve your results.
Category marketing: strategy fit
Convenience products –
Convenience products are purchases frequently by consumers with little thought about the relative performance of individual brands. In fact, a lot of consumption of convenience goods is a function of brand loyalty or sales. These are commonly low involvement products such as toothpaste, bread, magazines, and laundry detergent.
The appropriate strategy with these products is:
- low price – as consumers see all brands as pretty much the same
- intensive distribution – as consumers won’t go shopping around for your brand, you need to make sure it’s wherever they are.
- heavy advertising/ sales promotion – consumers aren’t “looking” for your brand, so you have to make sure they “see” it and have incentives to buy it.
- little emphasis on brand extensions as consumers likely share similar needs for the brand and will find a large variety of offerings confusing.
That’s why I think Charmin and Tide missed the mark. They created multiple offers — Charmin Soft and Charmin Strong — which just confuse consumers and, in the case of Tide Sensations, attempted a premium price for something few consumers really cared about.
Shopping goods –
Shopping goods are purchased less frequently and more effort is put into comparing brands and shopping around for a particular product or better price. Shopping goods are likely higher involvement goods like clothing, furniture and consumer electronics.
The appropriate strategy with these products is:
- Higher price as consumer preference is based on quality, brand image, and store image more than price (within a broad range of prices).
- More selective distribution since consumers are willing to shop around for just the right brand.
- Advertising, including personal selling, is still important, but the retailer may take over much of this function.
- Brand extensions are likely valuable since consumers shopping for these goods reflect different needs, usages, and price ranges.
This is where JCP operates. And, they have a lot of competition in this category from other retailers like Kohls and discounters, like Marshalls. Their non-clothing lines similarly compete with other retailers, including Target (another former employer of JCP new CEO). Maybe, Johnson THINKS this is where Apple operates, but he’s wrong — Apple is a specialty good.
Specialty goods –
Specialty goods commonly command high customer loyalty, with consumers willing to pay a premium price for their preferred brand — sounds like Apple, huh? So, while PC brands may operate as shopping goods, it’s likely Apple operates as a specialty good for most of its target market. Products that fit in this category are luxury products like Rolex watches, automobiles, and homes.
The appropriate category marketing strategy with these products is:
- High price as consumers are willing to pay a premium for owning this brand
- Exclusive distribution — like the Apple retail stores — because over-exposure of the brand lessens its appeal
- More targeted promotions and fewer sales promotions
- Lots of brand extensions as consumers love the brand and will buy other products with the same brand name. Consumers also have different needs and want products customized to fit those needs.
Again, this is where Apple lives. As you see, Apple shoppers pay a premium to own this brand, which builds their self-esteem and tells the world how “cool” they are, in addition to the core service of computing. It’s just not the same to own an HP or other computer brand.
Johnson’s strategy worked at Apple, where you NEVER find discounted products at ANY retail outlet. The same can’t be said of JCP’s brands, which lack uniqueness and can be purchased at numerous other locations who do provide deep discounts.
Hausman and Associates
Hausman and Associates publishes Hausman Marketing Letter and the monthly email newsletter of the same name. We also provide cost-effective marketing and social media through our virtual agency concept. We welcome new clients and would happily provide a proposal to show you how we can make your marketing SIZZLE.