Marketing Costs: A National Brand--At What Price?
Here's a million-dollar question: How much moola does it take to get a new product onto supermarket shelves nationwide? A million, 2 million?
A cool $3.6 million. And that's on the cheap, according to marketing pro Jeff Phillips. He should know. At his last job, he sold a little-known recycled trash bag called Renew into the top tier of supermarkets.
Phillips hopes to stretch his marketing dollars even further in his new position as vice-president of marketing at Seventh Generation, a $7.5-million marketer of "green" products in Colchester, Vt. This time Phillips plans to pay supermarkets $4 million over the next four years to get his line of 12 Seventh Generation products on their shelves.
Companies low on dough shouldn't lose heart, says Phillips. "If the concept is right for consumers, then you can succeed despite the obstacles." Here are tips for vaulting the two biggest hurdles:
Up-front fees. Slotting fees -- a small company's nemesis -- are the steep introductory payments that supermarkets demand for newcomers. The de facto insurance fees can eat up 10% or more of sales. But, Phillips says, nothing is written in stone. To start, he targeted 70 accounts east of the Mississippi (plus Texas) that are reasonable about up-front costs.
Phillips quells store buyers' fears. He shows grocers like Publix and Star Market independent studies that compare the performance of brand-name cleaning products with Seventh Generation products'. "First and foremost, you have to convince the trade that what you say has integrity."
Advertising bucks. Procter & Gamble can afford a TV blitz and huge direct-mail campaigns complete with samples. Seventh Generation must rely on smart packaging, competitive prices, and good public relations.
"In the absence of a brand name, we needed a packaging concept to help us stand out," says Phillips. The company chose simple icons -- a fish, a leaf -- to appeal to kids, who are often better recyclers than their parents are. "The hardest part is to get someone to try us for the first time. Kids are key."
In-store promotions play a crucial role in negotiations. Seventh Generation has retained a Washington, D.C., PR firm to work up consumer-outreach programs. The company's new packaging, covered with environmental facts, serves as an informational broadsheet. Phillips explains, "You've got to get buyers thinking about what your products could do for the store's image." Once they do, they are more likely to, say, accept a cut of sales the first year in lieu of up-front fees.* * *
National Rollout: A Four-Year Budget
Public relations and advertising 37%
Slotting fees 33%
Distribution and customer service 15%
Marketing staff 10%
Other general and administrative costs 5%
Source: Seventh Generation.