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The Coming Era of Product Differentiation

Here are a few criteria for making the decision as to which product differentiation strategy is best for your retail operation.


1) Will the exclusive mean anything to your customers?

2) Is the product intrinsically special? Does it taste or perform demonstrably better?

3) If you develop a market for the exclusive product, will your supplier honor that agreement when your competitors begin clamoring for it?

Line Extensions:

1) Will the new product fill a void that you could address by better promoting an existing product? For example, if your customers begin asking for a drink or a coffee that your competitor is selling down the street, rather than begin offering that product or a knockoff thereof, is there a product you already have that tastes similar to, and perhaps better than, your competitor's offering?

2) In adding the new product are you making the best possible use of your existing equipment and the skill sets of your employees? You probably know what things your store is best equipped to do, and what functions at which your employees excel. Try to add products that take advantage of these respective facilities and skills. Just as Benjamin Franklin (it WAS him, wasn't it?) was suspicious of all endeavors that required a new suit, you should be leery of any new products that require new equipment or entirely different job functions on the part of your employees.

3) Two examples of no-fuss, no-muss line extensions are embodied in R. Torre & Company's new additions to the Torani line of products. The first is Frusia, a shelf stable smoothie base consisting of sweetened, pureed fruit and other ingredients. This product, available in Kiwi Fruit, Raspberry, Mixed Fruit, Strawberry and Mango, can extend a smoothie line enormously as each of its five flavors can be blended with others as well as being blended with fresh fruits. Another Torani branded product, Caffe Fiori, originally conceived for offices, makes it possible to serve flavored coffees without making whole urn-fuls of flavored coffee, or even grinding flavored coffee in separate grinder. Coffee is flavored in the cup with a teaspoon of one of the five flavors in the Caffé Fiori line. Because of its brown rice syrup base, Caffé Fiori syrups add very little detectable sweetness. This product offers more variety while decreasing waste and reducing, not increasing, the equipment needed.

4) Will the new product enhance the image and ambiance of your business? Does it fit in with the impression you have tried to impart when a new customer first walks in the door? Look for products that define better what your business offers, what it stands for and what standards you hold. You may want to offer a wacky new smoothie your daughter just invented but if you've always run a coffeehouse for purists with as few extraneous non-coffee drinks as possible, you may find that a new smoothie may do more to distract, confuse or even alienate your existing customers.

Outside Branding and Estate Coffees

1) Does the flavor and/or quality of the products associated with the brand you are considering match or exceed the quality of the products you are selling now? Does the brand identity (Logo, merchandising, the public's perception of the brand) communicate a message harmonious with the one that your store communicates? For instance, if you have always sold good, solid, fresh roasted coffee at rockbottom prices, will your customers become confused if you abruptly start offering rare & exclusive coffees at sky-high prices?

2) Is the brand something that your customers will recognize and something to which they will respond favorably?

3) If the brand does not have a high profile now, is it actively being marketed to consumers so that its name recognition will increase in the future?

4) If it is an estate coffee, is it one with a proven track record? There are many estate coffees that have now been offered to roasters for several years such as La Minita from Costa Rica, Fazenda Vista Alegre's coffees from Brazil, La Torcaza Estate from Panama and Finca Dos Marias from Guatemala. If it is a newer offering you can check with importers, or even exporters from the country of origin to determine if the farm will prove to be an ongoing enterprise upon which you'll be able to depend. The same criteria of reliability should apply to all the branded products with which you work.

Private Labeled Products

1) Do you sell enough of a given product to justify the expense of private labeling it?

2) Is the brand identity of your store or business sufficient to create a halo of value over your private labeled product. For example, Peet's Coffee & Tea offers small chocolate bars with their own name on them. The product sells because their customers have come to trust that whatever Peet's offers it will be of excellent quality. Can your business make the same claim or should you stick to your knitting for a few more years?

3) Will you sell enough of the privately labeled product so that your packaging and or product will still be fresh and new by the time you run out of product? Many people order such humungous quantities of privately labeled items in order to get the most desirable volume discount. Sometimes this stock of packing material can fade or look dated by the time you've run out. This can do more harm than good to your brand identity.

The most important message in all of this is to create something which is comprehensive and integrated, product differentiation (refinement really) should add to what you are already saying as a retailer, not dilute it. This is presuming, of course, that what you are doing is working and that the positioning of your store, the price/value equilibrium you are seeking to establish and become know for have all struck a chord with the customer segment you are targeting. Product differentiation then, is more about improving than it is about fixing-and if that is the problem, in today's competitive environment, it may already be too late.

Timothy J. Castle is the president of Castle Communications, a company specializing in marketing and public relations for the coffee and tea industries. He is also the co-author (with Joan Nielsen) of The Great Coffee Book, recently published by Ten Speed Press, and the author of The Perfect Cup (Perseus Books). He may be reached at: (310) 479-7370 or via E-mail at: qahwah@aol.com

Tea & Coffee - June/July 2000

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