In our recent blogs we have been focusing on key aspects of design in creating effective POP display programs. In this 2-part series, we will discuss 2 important economic aspects of effective display programs.
Ultimately, the success of POP display programs boils down to economics. Today we are going to discuss the importance of establishing a budget for your display program.
Setting a budget for your display is a critical step before beginning the design process. Without a realistic budget or budget range, the design process will be inefficient and unfocused. A significant percentage of design inquiries we receive come from customers who don’t have a budget for the display they would like us to design. Many others think that if they share a budget with us, they won’t get as good of a price. Still others remind us that they have to give the displays away so they want the price to be “as low as possible.”
The truth is that communicating a realistic budget will help you get the best value for your money. In establishing a budget for your display, consider the price of your product, your profit margin, your anticipated sales volume, and the length of time you expect your display to be in place. Many retailers like to see inventory turn a minimum of 2-3 times per year, but this can vary by type of product, type of retailer, and other factors. In some cases, you may not be able to completely cover the cost of the display with your opening order, but in setting your budget it usually makes sense to amortize the cost of the display over the expected life of the display investment. As general rule, the higher the sales price of your product, the more you should be willing to invest in a display. Alternatively, if you have a low-priced product with a low profit margin, be careful not to overinvest in the display or it will be difficult to get your money out of your investment.
Keep in mind that sometimes a cheap or low-budget display can end up being the most expensive type of display in the long run. A cheap display might be easier on your pocket book in the short term, but it might be very expensive in the long run after considering the damage it could do to your brand or company reputation, the ill will and potential lost future opportunity with retailers, and the possible costs related to repair and servicing issues. If, for example, you spent twice as much on a display that enabled you to sell 3 times as much product, you may find that the display that required twice the initial outlay is actually relatively cheaper since you can amortize the cost of the display over 3 times the sales volume. A good question to ask before making a decision on a display is how many more units would you have to sell to justify the incremental investment in a particular POP display or add-on display feature?
The bottom line is that for a POP display program to be successful, the numbers need to make sense. Spending the time to develop a workable budget is as important as creating a set of detailed design specifications for your display.
Jim Hollen is the owner and President of RICH LTD. (www.richltd.com), a 35+ year-old California-based point-of-purchase display, retail store fixture, and merchandising solutions firm which has been named among the Top 50 U.S. POP display companies for 9 consecutive years. A former management consultant with McKinsey & Co. and graduate of Stanford Business School, Jim Hollen has served more than 3000 brands and retailers over more than 20 years and has authored nearly 500 blogs and e-Books on a wide range of topics related to POP displays, store fixtures, and retail merchandising.
Jim has been to China more than 50 times and has worked directly with more than 30 factories in Asia across a broad range of material categories, including metal, wood, acrylic, injection molded and vacuum formed plastic, corrugated, glass, LED lighting, digital media player, and more. Jim Hollen also oversees RICH LTD.’s domestic manufacturing operation and has experience manufacturing, sourcing, and importing from numerous Asian countries as well as Vietnam and Mexico.
His experience working with brands and retailers spans more than 25 industries such as food and beverage, apparel, consumer electronics, cosmetics/beauty, sporting goods, automotive, pet, gifts and souvenirs, toys, wine and spirits, home improvement, jewelry, eyewear, footwear, consumer products, mass market retail, specialty retail, convenience stores, and numerous other product/retailer categories.