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December 12, 2016

Brand power of Idaho potatoes helps retailers maximize profit

Marketing

Brand power of Idaho potatoes helps retailers maximize profit
by Ron Pelger | December 09, 2016


On an assignment years ago, our marketing director and I drove the division president to the airport for a business trip. Prior to departing, he turned back and said, “While I’m gone, don’t give the house away.” He was referring to our merchandising and pricing strategy.

With Idaho potatoes commanding a premium at retail, supermarket operators can use the popular spuds to help boost their bottom line.The retail supermarket world is reshaping itself. As operating expenses rapidly climb, there is no room for doing business as usual, especially when grocery stores are under so much pressure to achieve profit results.Customer-Purchasing-Idaho-Potatoes
With Idaho potatoes commanding a premium at retail, supermarket operators can use the popular spuds to help boost their bottom line.

The fresh departments are attracting a greater number of shoppers than ever before and produce is leading the pack. With the budgeted bottom line as the paramount goal of any supermarket retailer today, produce executives and produce managers need to be looking at every possible way to increase their gross profit. Unfortunately, this task is not getting any easier.

Every item in the produce department must increase its growth to keep pace with the constant change of consumer shopping habits. In order to stay on the same page with consumers, merchandising practices must also adapt to those changes.

It is very difficult for me to understand why some retailers today feel the need to advertise 10-pound bags of potatoes at $1.29, or even lower. Those retails date back over 40 years. Such intense discounting can also depreciate the image of the product.

Why feature potatoes at such incredibly low prices? Undoubtedly it’s because that’s the way it has always been done in the past. Well, times have changed and the pressure on produce gross profit has become more demanding.

Potatoes are a consistent meal ingredient that are purchased by every customer. Since the demand is so great, why give them away? Why not take advantage and capture more of the profit they can generate?

This is especially the case for potatoes from Idaho, which I personally feel are truly a brand themselves. They are of superior quality and so well known that shoppers request them by name.

Many retailers sell a lot of featured produce items at rock-bottom prices yet never make any profit on them. This is a good way to move additional amounts of produce, but those items don’t have a positive effect on the bottom line.

Consumers do not react to retails the same way, with some looking for low prices without considering the quality, size or condition. Deep discounts may move some volume, but we’re not only in the volume business, we’re in the profit business.

On the other hand, there are shoppers who are willing to pay a premium price for a superior product associated with equity and value, such as Idaho potatoes. It’s a better practice to get a premium price on a premium item like Idaho potatoes and still move larger quantities by applying better selling strategies.

Merchandising is an art and a science. It’s also about experimenting. I often tested retail psychology by experimenting and trying something different with selected produce items, including Idaho potatoes.

During one test, we relocated bags of Idaho potatoes from the normal section in the produce department to a massive end display priced at the regular retail, and the results were amazing. We sold three times the volume and tripled gross profit, compared to when they were displayed in the normal potato section. Simply giving them spotlight exposure and using point-of-sale material from the Idaho Potato Commission proved that branding and quality will sell at a premium price. The demand was motivated by the expansion and exposure of the display, not lowering the retail.

We also tested 80-count Idaho potatoes as an advertised sub feature — again in the regular potato section and on an off-shelf display. Surprisingly, we sold almost four times the amount over a normal week. We used descriptive words such as “premium Idaho potatoes” and “genuine Idaho potatoes” to affirm the high-quality standards.

Many consumers recognize Idaho potatoes as being a brand since they are marketed so well. The current TV commercial featuring the Idaho potato truck and humorous farmer has become quite popular with consumers, giving Idaho potatoes key exposure similar to our massive table end display test.

Try some creative experimentation when merchandising Idaho potatoes. The manner and strategy in the way you display them will make a big difference in generating incremental profit. Our testing proved that point.

Idaho potatoes already have brand awareness. The best-quality produce will make you the most profit. Idaho potato quality raises its value and lessens consumer sensitivity to price.

Attaining a profit in 2017 will be crucial to reaching budget goals. Stand firm on your pricing and focus on the versatility Idaho potatoes can generate in gross profit for your company. Simply apply a better merchandising strategy.

Republished from The Produce News