Tools of the Trade: Pricing strategy

During the Do it Best May Market in Indianapolis, Home Channel News spoke with Do it Best CEO Bob Taylor on pricing, margin and the prospects for growth. Here are highlights from the interview:

Home Channel News: Pricing and price perception are two important topics at the education day of the May Market. It seemed to me one approach was to make sure you know what the price-sensitive products in your store are and act accordingly. Do you have anything to add to that?

Do it Best CEO Bob Taylor: Well, I think the pricing piece has to be more than just looking at competitive situations. You’ve got to look at your entire pricing matrix. Because if you’re going to have the ability to be competitive on the price-sensitive items that you need to be, you’d better be making some margin some place else to allow yourself the opportunity to do that. So, it really does take a complete approach to pricing. You’ve got to stay on it and stay abreast of what’s happening in the marketplace, and be more informed than your consumers are about what’s happening in a competitor's store -- and that means getting out and getting in their stores and seeing what’s going on. You can’t just read the ads.

HCN: Merchandising plays a big role as well?

Taylor: How you present, how you advertise, how you promote what you’re doing with your endcaps, your dump-ins, aisle displays and the lights to really convey a price image is extremely important. And too often folks just maybe don’t give that the attention that it deserves, because it really does help convey that price initiative to customers when they come in and they see that. As opposed to an endcap when you look at it and it’s a hodgepodge of items and you think, “What was the thought behind that endcap?” You really have to put some time and thought behind your promotion efforts in all aspects of it.

HCN: some of the key thoughts were: You got to get your messaging out there, you got to be good with your advertising. Is that one of the big initiatives that we heard earlier --that the AdPak program is seeing circulation up 31%?

Taylor: Yes, it is. I think it’s creating the right message and then finding the right ways to get that message heard. It’s more challenging today, and I think our members are more and more understanding the importance of really targeting their message. You always have to be out there looking for the opportunity to bring in new customers, but you sure want to be spending the majority of your effort communicating with those customers who already have a proven history of spending dollars with you. You can’t just go out there with a raw shotgun approach anymore. So, looking at programs like our best rewards program, which is that loyalty-type program that goes back to that group more frequently with targeted promotions patterned after their shopping habits.

HCN: Where do you think some of the big opportunities for members are?

Taylor: Well, I think when you look at the last couple of years it’s been one of those times when we have been tested a bit We’ve been rightfully so focused on managing expenses and reducing operating costs and kind of managing to the curve of the business -- and we have to do that. But you also have to be sure you’re working with your other business too, and I think the successful folks coming out of this are the ones looking for those opportunities to grow their market share. That market share may not translate into a heck of a lot today, but as we start to move over this, those are the folks who are going to ramp up more quickly because they’ve taken business, taken share from somebody else -- whether it’s by category or going into a new market that they may not have been in before. The folks who have kept their powder dry and have had the capital dollars to invest are making some really smart investments right now and taking advantage of that.

HCN: As far as initiatives for the co-op, what are the top things that you’re working on?

Taylor: We were talking about some at our kickoff breakfast this morning really from a communications standpoint. We were looking at how we can both communicate with our members more effectively and help them do a better job of doing the same thing with their customer. [We also looked at] the effort that they’re putting in to the electronic catalog today and really developing that as a true fountain of information to help members do a better job of both building their assortments in the store and then also building that special order opportunity. Because if you have the right tools and then have a warehouse system to back it up, then those special orders really aren’t that special -- they’re pretty easy to process, so it’s easy incremental sales on top of that.

HCN: Do you think that recovery has begun?

Taylor: It’s begun. [I’ve heard] a lot of positive comments from members out there, and we have had some very strong results for spring. I was up in the Northeast visiting members for about a week a couple of weeks ago -- a lot of positive comments from members out there. They are excited about the opportunity, looking to take advantage of it. I think from a co-op perspective they are kind of waiting for that activity to take hold across the country.