While many companies have extended their brand's franchises into retail, far fewer retailers have extended beyond "the store." One remarkable exception is PETsMART.
 The magic to having a solid, differentiated brand franchise is the ability to expand it beyond the brand's original reason for being. If your brand stands for something in the consumer's eyes -- and if you know your consumer well -- it is often possible to leverage this knowledge to extend your franchise into areas probably not dreamed of when your brand (or business model) was originally created.
Examples are plentiful: Sony has expanded from the equipment that plays entertainment to the entertainment itself. Disney has expanded from entertainment into merchandise, from merchandise into retail stores. Mattel has taken Barbie from the doll your child dresses to dresses for your child.
The most successful at doing this have been the companies with the strongest brand franchises -- so is it any surprise that Harley-Davidson has moved from motorcycles into clothing and cafes? Perhaps the ultimate example is our personal favorite -- one super-franchise building on another super-franchise -- "Harley Barbie" dressed in biker's leathers.
Among retailers, Costco certainly has been the standard bearer with the services it offers to its members -- e.g., credit card processing, equipment leasing and health care insurance for its business members; auto buying, discounted Internet access and vacation planning for its regular members. To a lesser extent, Staples has achieved this with Copy Centers and payroll management services.
For the most part, however, retailers have not been able to expand their franchises beyond being outlets for other people's products. This is because, in most cases, the primary focus has been fixed upon the relationship these retailers have with their suppliers versus the relationships they ought to be building with their consumers (read: "making money on the buy, rather than the sell").
Then there's PETsMART, which opened its first two stores in Phoenix in 1987. Today, it operates approximately 560 stores and does $2.7B in sales. From the start, PETsMART has focused on knowing its consumers -- and differentiated itself in its consumers' eyes -- by encouraging people to bring their pets with them to shop. Their message to consumers -- both in words and action -- is that PETsMART is for animals.
Your pet can now enjoy an atrium room or suite, a "poochie cot" with hypoallergenic lambskin blanket and cable TV tuned to Animal Planet.
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Consequently, PETsMART has been able to develop additional revenue streams by expanding into services for animals that pet owners desire and will pay for -- and, importantly, trust PETsMART to provide. To this end, PETsMART not only sells the broadest selection of products of any of its competitors, but now routinely offers its customers such services as pet styling salons, training classes, PETsMART adoption centers and veterinary services.
In a spectacular example of over-the-top thinking, PETsMART just broadened its services portfolio by announcing the opening of its "PETsHOTEL" boarding facilities for both daycare and overnight stays. With services that exceed the pampering most humans get at top luxury hotels, your pet can enjoy an atrium room or suite, a "poochie cot" with hypoallergenic lambskin blanket, cable TV tuned to Animal Planet and supervised play time.
All of PETsMART's packages come with 24-hour supervision, on-site veterinary services, Fort Knox level security systems and air filtration systems that completely re-circulate the air three times per hour -- no doubt an amenity that should resonate with business air travelers who know that the only re-circulation in airplanes is other people's germs. In addition, we have "Yappy Hour" and the "Bone Booth."
And what is "Yappy Hour," one might ask? "Yappy Hour" is when pets are offered PETsMART's lactose-free, frozen yogurt treat complete with dog biscuits and Snack Bone -- a "mashed potato and cheese-filled Kong toy that will keep your dog busy for hours." In a similar vein, the "Bone Booth" is for people who cannot stand being without their four-legged friend for extended time periods and offers these folks the opportunity to call their pets during lobby hours and give them reassuring love words and determine whether they (the pets) are happy.
Now for those who think that all of this might be a little excessive, consider the following known facts about pet owner behavior:
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- 79 percent of allergy sufferers will not give up the pets to which they are allergic.
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- 62 percent of pet owners buy gifts for their pets.
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- 27 percent regularly "phone home" and leave their pets reassuring voice mails while on vacation
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- 23 percent carry pet pictures in their wallets or purses.
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- The American Animal Hospital Association reports that "70 percent of American pet owners (about 56 percent of households) now think of their pets as children and are willing to spend on their pets as if they were children."
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Clearly, while some aspects of the PETsHOTEL concept may strike one as over-the-top, PETsMART has connected with its consumer.
And what have the results of PETsMART been in extending its basic brand franchise into more and more service areas? PETsMART's third quarter FY2002 service sales were up 31 percent vs. 2001 while third quarter gross margins increased 230 basis points to 29.2 percent (vs. 26.9 percent same period previous year). Net income year-to-date (39 weeks) was 3.3 percent vs. the previous year's 0.56 percent -- not all the result of service business contribution but bolstered strongly by same, nevertheless.
These days, we have a never-ending stream of talk from other channels about "branding the store" and "differentiation." All one ever has to do, however, is pick up a Thursday ad to know that for most retailers the business is still primarily deal and/or price driven vs. consumer-driven.
There are many opportunities for some of these retailers to get off this train and think for a moment about how to excavate and exploit their basic assets and differentiate in ways that will make their competitors react to them instead of vice-versa. If anyone is inclined to do this, the Sony, Disney, Barbie, Harley, Costco and PETsMART examples provide obvious and proven starting point benchmarks -- namely:
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- One cannot extend a brand that does not exist in the first place (remember the 1995 Coopers & Lybrand survey that reported that over 83 percent of consumers think all supermarkets are alike?)
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- To extend one's franchise, one must develop a system or a process for understanding and keeping track of the current lifestyles and shopping proclivities of one's consumers (such as PETsMART has obviously done).
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- With the exception of Wal-Mart, price is not a strategy: Find other ways to fulfill and expand on what consumers expect of your stores and you will solidify your reason for being in the process.
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If you haven't got the internal resources to walk this path, ask your top preferred supplier partners to help you. This is the essence of co-marketing.
Christopher W. Hoyt is President of Hoyt & Company LLC, a packaged goods training and consulting organization based in Scottsdale, AZ. He may be reached via his web site at www.hoytnet.com
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