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Understand the Shifting Sands of the Channel Captain



By Suzanne & Bob Grayson, Grayson Associates



Published March 9, 2010
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You have to go back 20 or more years to find the term “Channel Captain” even covered in a marketing textbook. We found this definition in the Dictionary of Marketing, a British publication circa 1995. “The firm acting in leadership of a channel of distribution which has become a single, integrated system. Because of its position or economic power, a channel captain can stipulate marketing policies to other channel members, in effect exercising control over some or all of their decisions and activities.”

Think of it this way: the airlines decide not to pay travel agents commission on flights they book, or drug chains decide that their space is so valuable that they can charge a“slotting allowance,” or, Sephora can garner (in reality), a 60% margin, have the marketer pay for the store fixtures to hold its products, and then pay for the“co-op” advertising to sell it through.Gee, being captain must be fun.

But when the captain squeezes too hard, marketers find a way to relieve the pressure. QVC, HSN and infomercials were major forces in shifting potential and some existing department store brands to electronic/direct sales. Now, new brands, eschew traditional media by building their consumer bases with alternate channels, professionals, spas and of course, the ever-growing internet channel. The result? Department stores, which start with 40% margin, plus commissions+training costs+ fixture charges+extra spiffs+not-so co-op advertising+poor payment+vigorous return-to-vendor policies, are now the last-choice channel sought by new brands whose moderate to very upscale retail pricing would have found a home there in the past.

Ultimately, the departments stores’ continuing loss of traffic and share have forced their existing brands into a larger number of bigger and less profitable GWP promotions because the frightened marketer is locked into that channel of distribution. Add the on-going economic malaise and you have dim, moving-into-bleak horizons for the once ultimate “image” channel of distribution. The real vitality is elsewhere, and department store managers are left without the power, will and/or ability to adapt/capitalize on the new cultural shift. Prestige may be the captain for Lancôme and Lauder, et al., but the day of reckoning for brands and this channel is coming.

Consider that, a few years back, StriVectin came on the scene and brilliantly marketed directly to the consumer. Due to its success and consumer demand, department stores joined the distribution bandwagon, along with salons and stores serving that channel, spas, GNC stores and now, even Costco. The net, virtually all-points-distribution were achieved and maintained for a $135 product,* and extended product line. In our recollection, it represents a never-before-seen command of the channels and a true captain! Before StriVectin, we can’t think of a brand in department stores that didn’t get the heave-ho notice, when it crossed the distribution Rubicon.

So what are existing and new marketers to do to take or get back control?More of what they should be doing!“Firsts”and/or real star product news with significant benefits which can be communicated and appreciated by consumers, along with plenty of“permission-to-believe” and“permission-to-buy. ” You and every marketer know this, but it’s easy to say, and not-so-easy to do.

A Thriving Business?


Failing a significant competitive edge, pack 100 units and ship them off to beauty bloggers with a link to your website. If the product has any merit, half may give it a mention, and the old or new marketer is in business! For the vibrant internet channel, the sub-channel captain is the blogger. But remember, this tactic is just a placeholder.

The bottom line on all of this is that with the exception of fragrance, the beauty business really is thriving, despite the not-so-hot audit reports. It’s just that consumers have discovered beauty in non-measured places. And, let’s not forget Avon and the rest of the “invisible” direct players. Unseen by competition, Avon continues to give the consumer the best bang for the buck in value, both real and imagined. Just take a look at the campaign 4 catalog, which is the best ever in our opinion. It satisfies virtually every up-to-date consumer need, at remarkably low pricing.Think of the developing world at Avon’s fingertips!

Back in the 1970s, after many years at Revlon and the start of our own consulting business, we thought it worthwhile to learn more about Avon and direct selling. In those days, Revlon and the other“big guns” paid little attention to Avon. When the representative arrived, I said that I didn’t know much about the products and she said, “That’s okay. All you do is go through the catalog and just point to each item. We call it “fingertip selling.”

While some may hope and even, expect a return to the good old days, others will recognize and capitalize on the cultural shift and very real distribution crisis as a significant opportunity to break out in new directions.

Conjugating Olay


First came Oil of Olay Beauty Fluid. Now, according to the website, there are a minimum of 115 products under the Olay brand, along with cosmetics via Olay ingredients in CoverGirl, on that same website (see chart 1). Wow! Of course, with so many products promising the similar results, and in varying prices, the toughest competitor for Olay may be Olay itself.But so what? That just leaves less for other brands.

Many of us were brought up with the concept that a brand name should be held closely and only tied to one product–two at the most, if there was a synergistic relationship–like Vicks Vapor Rub and cough medicine. By the late 1970s and early 80s, with volume falling, it was widely accepted that the use of a brand name for a closely related product would help get trade acceptance, be less expensive to market, get more shelf space, and have a familiar ring with the consumer.Apparently, that holds today–sometimes in overload.

Which brings us to Dawn Hand Renewal with Olay Beauty. Sounded like a hand cream to us. But, when we looked at the ad
Dawn Hand Renewal with Olay Beauty is an example of how existing assets can add value to other brands.
very, very closely, at the bottom of the label in two-point type, it said dishwashing liquid. Interesting! P&G has moved Dawn from a utility product, to a brand whose competitive edge is Olay Beauty, with a perceivable benefit. Pampers next?

Strategically, this follows P&G’s long-term strategy of using existing assets to add value to other brands. The only question is, will the very ubiquity, which leads to the success of other products ultimately, destroy the intrinsic value of the name? We’ll see. Since, as noted in chart 1, there are many Olay ingredients, in many products/price ranges, is it Olay ingredients or Olay image that should be the driver for building the House of Olay – and particularly, for cosmetics?

The next phase is already cast for new Dawn with Olay Beauty, rather than Olay ingredients. Look for that move in cosmetics. Image is all encompassing in terms of brand value. “Ingredients” are non-specific and are ever-changing. And just to keep the juices flowing, keep in mind that Olay and Dove go head-to-head for brand leadership.

The Power of the Brand


The brand is all you own, that may be a little simplistic but quite accurate. You don’t own the channel of distribution, the media, you may not even own the factory or the formula, and you certainly don’t
own the consumer. All you have is the brand.

When you examine “branding” there are four components: Image, Innovation, Intrinsic Value and Impact. For this column we’d like you to examine your brand in the Intrinsic Value segment.The other three will be covered in subsequent columns. Intrinsic value should be divided into two distinct sections: Real and Imagined..

Lest you think that value is simply a price-point issue, what is the department store brand built on the high value principle? Estée Lauder for sure. First, its iconic fragrance Youth Dew gave the consumer more than what she bought it for, a great scent with exceptional lasting ability due to its higher level of fragrance oil, and of course, GWP and its sampling aura. Still works, doesn’t it? Real high performance (value) will do it every time.

A note about anticipating pleasure.** Prior to the development of beauty-only retail outlets, cosmetic purchases were made primarily in drug and department stores. The former was not really conducive to the total pleasure-seeking anticipation that one might find as buying a wine in a liquor store, or a new golf club in a sport shop. Buying in cyberspace totally removes that all-encompassing
feeling. Too bad, but obviously, its compensating factors provide value of another sort.

We are suggesting that you develop a mission statement for each and every one of your brand’s marketing components and that they become the bible for your brand. It will function as a total check list for every execution challenge you face, while acting as virtually the keeper of the brand—no matter who or how many are involved in decision-making and brand growth—and, the more participants,
the more it is needed. For a copy,e-mail suzanne@graysonassociates.com.

About the Authors
Suzanne and Bob Grayson are respected, professional marketers, having spent their careers with the leading companies in the beauty industry before starting their successful consulting business in the early 1970s.

Their consulting clients have included Avon, Bristol-Myers, Estée Lauder, Procter & Gamble, Revlon and Cover Girl, among others. They reside in San Juan Capistrano, CA and maintain an office in New York City. For more information, they can be reached at bob@graysonassociates.com or
suzanne@graysonassociates.com


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