Category Archives: Channel Management

Get Ready for Google Air Force. Strategy Makes Sense Even if Planes Don’t Fly.

Self-driving cars. Computer glasses. And now, solar-powered, jet-sized drones.

Photo: Titan Aerospace.

Photo: Titan Aerospace.

Last week, Google acquired two-year-old start-up Titan Aerospace, apparently outbidding Facebook for the company.  What the heck is Google doing?

For starters, Google’s management team hasn’t lost its marbles or fallen down the Alice in Wonderland rabbit hole.  The Titan purchase is part of a smart, sophisticated business and marketing strategy that has technology as a key enabler. Continue reading

Razor Battle is On! 800Razors.com Challenges Dollar Shave Club and Gillette.

Photo:  800Razors Facebook.

Photo: 800Razors.com Facebook.

At first glance, it would be easy to conclude that 800Razors.com is just a Dollar Shave Club copycat in the nearly $2 billion razor cartridge category.

But that would be wrong.

Let’s quickly set the stage for this discussion.

Category leader Gillette built a strong business via a decades-long, continuing series of product innovations that support a premium-price strategy.  They kept some of the older models as part of a tiered product/pricing assortment for consumers.

An opening existed for a competitor to deliver a high-quality blade at much lower cost, and it came via a new business model.  Dollar Shave Club (DSC) emerged as a disruptive player in 2011/2012, getting wide notice with a wacky video featuring its founder.  Its online, recurring monthly sales model (“club”) took dead aim at the category giants selling through traditional retail channels.

Photo:  Dollar Shave Club website.

Photo: Dollar Shave Club website.

Then, in 2013, 800Razors.com joined the fray, building off the DSC approach while incorporating significant go-to-market differences:

Photo:  800Razors.com Facebook.

Photo: 800Razors.com Facebook.

  1. Buy Only When You Want.  800Razors allows single purchase. Dollar Shave Club does not.  It’s an important difference because it removes a potential obstacle to trial.  For example, I’ve thought about trying DSC but didn’t want to sign-up for regular monthly deliveries. Continue reading

Creative Product Distribution Brings Hope of Clean Water: Inventor Dean Kamen Connects with Coca-Cola

First I tried the international medical companies and even the U.N., but they weren’t the right fit for the product. Then it occurred to me that there’s only one organization that can get a product to any village in the world: Coca-Cola.  Dean Kamen in Fortune interview.

Dean Kamen & Slingshot water purification machine. Photo: www.coca-colacompany.com

Dean Kamen & Slingshot water purification machine. Photo: http://www.coca-colacompany.com

Where do good ideas come from?

Inventor Dean Kamen wanted to bring his water purification system to the people who need it the most in the developing world.

He found that a traditional analysis of product distribution partners did not generate the solution he desired.  Only when he turned the challenge on its head and looked at it differently, did the right outcome emerge.

Kamen needed an entity that already operated in the remote geographies he wanted to reach, and he wasn’t deterred that such a company didn’t neatly fit the definition of a small machine distributor.

By broadening the process by which he assessed his options – to think about capabilities instead of company description – Kamen and his team came up with an unlikely answer: soft drinks giant Coca-Cola!

“In a partnership with Coca-Cola, Kamen’s firm DEKA Research and Development will bring Slingshot to communities in need of clean water in rural parts of Latin America and Africa.”

Headline

There are no easy answers to difficult business problems.  But sometimes, if you start with the end-game in mind, you might discover a clever, if not crazy, solution.

Harvey Chimoff is a hands-on marketing leader and business-wide collaborator who builds marketing capabilities in B2B/B2C organizations that drive customer success. Contact him at hchimoff at gmail dot com.

The Brand Management-Retail Management Battle at Sears

Photo: Craftsman.

Did you ever think you’d buy Craftsman tools at Costco?

Sears has been the exclusive home for Craftsman since 1927, with the highly regarded brand and Sears distribution channel forming a self-contained sales and marketing system.  No more. Continue reading

New Strategies Bring Change at Cisco and Best Buy

Cisco and Best Buy made important strategic announcements last week that caught my attention.

Each decision provides a good opportunity for a mini-case study discussion.  After you read my take, post a comment and tell me what you think.

Photo: Cisco.

In an April 12th press release, Cisco announced that it would be shutting down its consumer Flip video recorder business. Continue reading

OfficeMax Takes Expertise to New Channels

Pete Townshend wasn’t thinking about business strategy when he wrote the famous lyrics for “Who Are You,” the rousing track in the 1978 album of the same name from rock legends The Who.

In a fun and ironic way, though, “Who Are You” is one of the all-time great strategic opening lines.

These three questions – What business are you in?  Who’s your competition?  What are your core competencies? – are certainly in the strategy definition workshop hall of fame.  Although there may be a tendency to sometimes pooh-pooh this type of corporate soul-searching, that doesn’t diminish the power that can be unleashed by illuminating answers and skillfully executed actions.

Consider school and office supply retailer OfficeMax.

You may be surprised to learn how OfficeMax has creatively modified its go-to-market strategy.  Office Max unlocked growth potential because it avoided defining itself as purely an office supply store retailer (i.e., Staples and Office Depot).

Basically, the company decided to leverage its school and office supply category expertise across retail channels, primarily in existing geographies, with a focus on being an “insightful customer advocate.”  OfficeMax describes its new channel strategy as a “transformational platform.”  It’s an intriguing example of thinking differently to compete by leveraging core capabilities and strengths in a unique way.

OfficeMax Presentation – 6/29/2010

A key customer insight underpins the new approach.  According to OfficeMax, approximately 90% of office supplies sold in the U.S. are sold outside the office supply channel; and it’s convenience that drives these purchases in other retail channels per information the company provided to Store Brands Decisions.

The company now bundles its product development, branding and retail merchandising expertise as a proprietary package and sells turn-key solutions to retailers in other channels.  This expanded service offering includes access to OfficeMax’s stable of private brands, extensive office supply category management expertise, and full-service management of the back-to-school marketing season.

New customers include food retailers Food Lion and Safeway; and the University of Arkansas book store.  “A partnership with a specialty retailer like OfficeMax provides a grocer with the category expertise and merchandise-promotional support necessary to make a statement,” explained William Zeuch, Office Max SVP New Business, in a Supermarket News interview.

OfficeMax touts that it is now able to “distribute products and services where customers prefer to buy them.”  CEO Sam Duncan told investors that this new capability has been achieved cost effectively because OfficeMax has been able to “open new doors and reach additional customers without investing in brick and mortar.”

OfficeMax also benefits from a double leveraging of its store brand innovation program in its own stores and at indirect competitive retailers.  Providing category management services to other retailers is innovative in its own right, yet Store Brands Decisions notes that “store brand product innovation is what is catching the attention of retailers looking to build more excitement in their office and school supply departments.”  The retailer has also become the supplier.

Headline For Marketers:  Don’t dismiss your old business school case study questions about how you define your business, competitive advantages and competition.  Be willing to dig beneath the surface.  No doubt significant work and skepticism abounded in Office Max’s deliberations.  Identify what you do great and figure out how to do it profitably in as many channels as possible.

Harvey Chimoff is a hands-on marketing leader and business-wide collaborator who builds marketing capabilities in B2B/B2C organizations that drive customer success. Contact him at hchimoff at gmail dot com.

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Inside The Red Blue $1 DVD Battle

There’s a new red versus blue battle in the United States, and it’s not what you think.

In the red corner, we have Coinstar Inc. and its Redbox $1 DVD rental kiosk.  In the blue corner, we have NCR, with licensed brand Blockbluster Express, and its own $1 DVD  kiosk.  And in the courtroom, we have the movie studio lawyers, fighting against the $1 price points.

Blockbuster Express DVD Kiosk

Redbox DVD Kiosk

The DVD rental kiosk history is surprising.  The Redbox concept first began in 2002 with McDonald’s Ventures, LLC, which was exploring “new ways to drive traffic to McDonald’s and provide added convenience and relevance to customers.”  Their first test was 2004 in Denver area McDonald’s restaurants.  Coinstar took a minority investment in late 2005, which made Redbox a separate company from McDonald’s, and then bought the rest of the company in early 2009.  Redbox says it now has more than 17,500 locations with each kiosk holding approximately 500 movies, including up to 200 new releases.  The selection is updated every Tuesday.

Blockbuster and NCR announced a strategic partnership in August 2008 that has resulted in Blockbuster Express kiosks being located in supermarkets and high-traffic retail locations.  The newest placement is 200 Duane Reed stores in New York City.  The NCR kiosk holds more than 900 DVDs, per the company.  NCR, which is playing catch-up to Redbox, will end the year with about 2,500 kiosks, according to The Wall Street Journal.

NCR is playing all the angles in this evolving battle.  In the summer of 2008 NCR became a minority investor in and kiosk supplier to TNR Entertainment Corporation, who was at the time the “second-largest operator of movie rental kiosks in North America, under The New Release and MovieCube brands.”  Then in April 2009, NCR bought the remaining TNR equity as part of its plan to extend the Blockbuster Express brand.

Update December 10, 2009.  NCR is at it again.  The company just acquired DVD kiosk operator DVDPlay Inc. and it’s 1,300 kiosks, which will be converted to the Blockbuster Express brand.  NCR also gains access to the California market, where Redbox is weak.

It’s too soon to know the lessons learned, but there are a number of strategic and tactical aspects to consider:

  • Commodity Product Battle.  Each operator sells the identical product, which comes in two basic versions (standard- definition and high-definition or Blu-Ray DVD), although importantly the $1 kiosk rentals are in standard definition;
  • Multiple Distribution Channels.  The user experience for shopping/viewing differs depending on the channel:  theatre, retail rental store, cable on demand/satellite on demand, stand-alone kiosk, mail, and emerging Internet availability for computers and DVD player downloads;
  • Restricted Product Availability.  The studios and movie distributors control timing and availability, which is a key go-to-market variable;
  • Pricing is a 2-way Differentiator.  First, by quality of the product ($1 standard definition in the kiosk, higher price point in the retail store, $3.99 standard definition/$5.99 high definition on Comcast On-Demand); and second by convenience (ultimate convenience is choosing a movie from your couch, cascading down to multi-tasking convenience – get your movie while doing your grocery shopping, all the way to separate destination shopping at the rental store.

There’s an ongoing battle for content in the entertainment industry.  It’s unclear what the ultimate service model will be to deliver content to users in and away from home.  It may be a combination of models.  The critical importance of content access and content delivery, and their potential linkage, is at the heart of the Comcast decision to buy NBC Universal in a vertical integration move.  The end-game questions are whether the content providers or deliverers will be king, and whether providers and deliverers will work together to create and sustain a profitable business model.  What we do know is that consumers want lots of content, delivered in their preferred form and on their own timetable.  Those who can best figure out this challenging opportunity will be the winners.

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TBD.  This battle hasn’t played out.  But, in the meantime, there are plenty of  marketing and business implications to ponder.  Think, learn and apply to your situation.

Harvey Chimoff is a hands-on marketing leader and business-wide collaborator who builds marketing capabilities in B2B/B2C organizations that drive customer success. Contact him at hchimoff at gmail dot com.

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