Andy Campbell discusses the principles for building a good product range
Product range architecture is a critical retail discipline. In the unusual circumstances of the past year, the rules on constructing ranges may have temporarily been abandoned. However, it is good to remind ourselves of the fundamental principles as we plan for the future. For the retailer, it is important that a range is built to generate sales and maximise
profit. For the consumer, it is important that a range makes sense when browsing and
shopping. Novice gardeners can find the process of finding what they are looking for, in a garden retail space, both challenging and frustrating. Therefore, anything that can be done to demystify and simplify the experience is surely a good thing.
Consider the Drivers
In the garden centre sector, product range decisions need to have a reasonable degree of longevity, typically at least one year. Before deciding what product ranges you stock, you should undertake an information gathering exercise and an assessment of the opportunity. The assessment should include information on the market, the consumer in general, your customers in particular, past performance, the supply base and the competitive landscape.
The five key factors which drive category sales are price, quality, service, promotion and of course range choice. The sales performance of most categories tends to be driven predominantly by one of these factors. It is crucial, therefore, that you understand how important range choice is as a driver of the overall category performance. For example, packet seed is largely driven by range choice; whereas quality is the key driver for most house and garden plants; before and after sales service is critical to the success of petcare and aquatic categories; growing media and garden power tools are price driven categories; whilst high value groups such as garden buildings tend to be promotionally driven.
Range Width and Depth
A product range is a group of products within the product mix that are closely related in form or function, similarly priced or marketed. Accordingly, when building a product range it is important to consider the range width and the range depth. The range width refers to the number of related products in the range offering, whereas the range depth generally refers to additional sizings and formulations of the products. For example a garden pest
control range may include both physical deterrent products with chemical and natural pesticide products. The depth of the range will depend on the number of options for each product type. When deciding on range width and depth you should consider if you want to be authoritative in the category or simply want to concentrate on the best-selling lines.
A good starting point when deciding the correct number of price and quality levels to have in your product range is to use the model of three levels, often referred to as Good/Better/Best or Basic/Standard/Premium. Keep in mind the space available to you and remember to make it easy for your customer to differentiate between options; offering too much choice can be confusing. Your decisions should be driven by your understanding of your customer base with respect to socio-demographic profile (age, gender, disposable income) but also the interest level of your customer which may range from ‘disinterested amateur’ to ‘enthusiastic professional’.
Most manufacturers seek to differentiate themselves from their competitors through their brand. Therefore, brand positioning is important in range development. The questions you need to consider include: What are the dominant brands within the sector? How important are they? What is the level of brand awareness? When you can answer these questions you should be able to decide if the brand should feature in your product range and the profile the brand should have within the range.
Range Pricing and Value
The design of a product range is inextricably linked with price. The majority of consumers evaluate a retailer’s offer based on a combination of the quality of the product and the price they have to pay for that product. The other key factors of range, service and promotion all contribute to the overall perception of value that a consumer gains, but inevitably quality and price dominate. Setting the right price for a product is both a science and an art but having a defined pricing policy certainly helps. Setting the right retail price by considering market conditions, competitor activity, price sensitivity and margin expectations is more likely to deliver profit than by simply applying a standard mark-up, eg. double the cost price plus VAT. This is the scientific approach; there is also an art in using one’s judgment to find the price point that maximises sales and profit.
When you have identified your competitors and determined where you wish to position yourself in the market, you can start to develop a pricing policy. One of the first steps is to decide what pricing strategy to apply, i.e. a constant pricing level or a high/low promotional approach. This decision will be largely dependent on the type of products in your range and
what prompts your customer to buy. Some products respond better to price-based
promotion than others.
The relationship between how customer demand responds to a change in price is called price elasticity. There are some products that have high price elasticity, a small change in price has a large impact on demand or volumes sold (elastic) and conversely products where the impact on total volume tends to be low (inelastic). Setting the right price for products is hard, and may sometimes mean lowering prices for high elasticity products and increasing prices on less sensitive lines – the overall objective is to maximise profit achieved. The price awareness of the consumer for a particular product should be kept in mind at all times. If price awareness is high it is in advisable to apply a price point significantly different from your competitors.
It is important to achieve the right relativities between products within a range. All products in a range should represent good value and at the same time trading up to the next quality level should make sense to the consumer, thereby increasing potential revenue and profit. If we take digging spades as an example, a well built price range of €17.99, €23.99 and €29.99 should appeal to a wide customer base, with a competitive entry price point while encouraging trading up, if clear benefits for additional spend are apparent to the consumer.
A Good Range is Good Business
Most garden centres seek to maximise the customer service they provide, however
most would also admit that on a busy bank holiday weekend, it is simply not possible to serve every customer personally. It is also true that some people prefer independent browsing and buying. As a result, elements of self-service are necessary within most garden centre outlets. Ultimately, well structured product ranges can support your business and the consumer by enabling your customers to make purchase decisions easily and with
clarity on what they are buying. That, for certain, is good customer service and good business. ✽
|ANDY CAMPBELL is an independent business development consultant
specialising in the garden centre industry with 40 years’ retail experience. Contact details: 0044(0)7788 567011 / firstname.lastname@example.org /