Guide to Product Merchandising: Types and How to Use Them
By Indeed Editorial Team
Published June 1, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Before retailers make a product available to consumers, merchandising teams use product merchandising techniques to make the item seem the most appealing to them. Their goal is to present the product in a way that commands customers' attention, leading to increased sales. If you're involved in merchandising, retail, or marketing, learning more about product merchandising may be beneficial. In this article, we define product merchandising, explain why retailers use it, discuss types of merchandise, and share how to use merchandising strategies effectively.
What is product merchandising?
Product merchandising is the set of strategies that merchandisers use to sell products. It involves a detailed plan for promoting and displaying the products within stores and highlighting how products can benefit consumers. Retailers typically consider the four Ps of merchandising, including:
Product: The product is the good or service that a company offers.
Placement: Placement refers to where to sell a product or service.
Pricing: The price is the amount customers pay for the good or service.
Promotion: Promotion is the strategy for marketing the product or service
Some merchandising strategies incorporate interactive elements where customers can engage with products. For example, supermarkets sometimes distribute food samples, and some cell phone stores let you try the phones. Other aspects of merchandising include promotions, product bundling, email marketing, social media, and various other digital marketing strategies.
Why do retailers use product merchandising?
Retailers use product merchandising for several reasons, including:
Develop brand recognition
Product merchandisers can help companies increase customer brand recognition by affecting the ways consumers recognize it. They can achieve this by being consistent with various aspects of the presentation. For example, consider your favourite store and what you notice, whether it's a scent, lighting, design, or colour. Your image of the store is likely the result of merchandisers' planning. Consumers' associations with a product or store contribute to the overall brand.
Product merchandising aims to highlight a product's strengths and how purchasing it can improve the consumer's life, leading to more sales. One way for merchandisers to achieve this is to provide samples to customers. Samples introduce customers to new products, which increases the likelihood of purchasing the product the next time they require the specific item. For example, body care stores may give customers free samples of new products, such as small body lotion packets or mini shampoo bottles. This way, customers may recall enjoying using the sample and return to the store to purchase it.
Provide a quality customer service experience
Successful merchandising can also affect the quality of customer service. For example, whether the customer could find the product they were looking for affects their experience. Merchandisers aim to make stores easy for customers to navigate. Providing a quality customer service experience increases the likelihood of customers returning and recommending the store and its products to their friends.
Merchandisers can decrease the backstock of products by considering factors such as the season, customers' needs, product demand, and current trends when managing inventory. While some products sell well throughout the year, products like clothing can depend on the season. For example, a clothing store in a northern city may not sell swimsuits in the fall. Decreasing backstock reduces inventory expenses, increases the amount of storage space, and lowers the chances of stocking items that don't sell.
Types of product merchandise
There are four types of product merchandise:
Convenience goods are items that consumers can access quickly and widely with little effort. For example, if a shopper wants to purchase some toothpaste, they can buy it from various shops like supermarkets, convenience stores, and drugstores. Convenience goods are widely available, low and stable in price, and in steady demand throughout the year. Typically, customers purchase these goods spontaneously without considering the brand. Some examples of convenience goods are:
Most food items, such as milk or bread
Impulse goods are items that consumers don't plan on purchasing but end up buying without much thought when they see them at the store or online. These items are easy buys because they offer customers instant gratification and are low priced, yet retailers can earn a significant profit by selling them. Retailers often place impulse goods in areas where customers can easily see them, such as at checkout lines. Some examples of impulse goods are:
Shopping products are items that customers consider before buying and select based on their characteristics compared to other similar items. As shopping products are typically more expensive than convenience and impulse goods, most consumers compare similar items' quality, style, and price before deciding which one to purchase. For example, many people like to research and compare computers before purchasing. They may compare processor specifications, memory, product reviews, and prices before buying. Unlike convenience goods, shopping products usually have limited distribution. Some examples of shopping goods are:
Specialty goods are unique products that consumers exert effort to acquire. This effort can consist of research, travel, time, and money. Consumers desire specialty goods for one or more of the following qualities: style, quality, scarcity, or brand. Specialty goods have minimal distribution. For example, a consumer who wants a specific high-end car that isn't available near them may pay a lot of money for the dealer to deliver it. Some examples of specialty goods are:
Product merchandising strategies for different merchandise types
Here are some product merchandising strategies to increase sales for the four types of product merchandise:
Strategies for merchandising convenience goods
The primary strategy merchandisers use when selling convenience goods is keeping the price low. Customers put little thought into purchasing convenience goods, so they may decide against purchasing if they think the item costs too much. When setting the price, merchandisers focus on the demand for a product.
Retailers aim to sell the same amount of goods at all times, even if this means reducing the item's price. For example, if a convenience store was unable to sell enough toothpaste for the past three months, they may lower the price slightly, hoping to sell their stock. Because of the low cost of convenience goods, retailers try to sell many units in a short amount of time to make a profit.
Strategies for merchandising impulse goods
When merchandising impulse goods, retailers focus on the placement within a store. They ensure customers can easily see and access the products. Retailers typically place these items at eye level. Consider your local supermarket—there are usually breath mints, chewing gum, and magazines at the checkout counter. These items are inexpensive and easy for customers to buy while checking out their groceries.
Strategies for merchandising shopping products
When merchandising shopping products, it's crucial for merchandisers to consider competing products. To outsell competing products, merchandisers may use marketing mix modelling. With this approach, professionals use statistics to determine the impact of different marketing techniques on sales. Marketing mix modelling helps increase sales by maximizing advertising and promotional strategies. It also gives merchandisers insight into which methods are working effectively and which ones they may avoid using in the future. When choosing between competing products with apparent differences, customers typically care more about their features than their prices.
Strategies for merchandising specialty goods
When merchandising specialty goods, merchandisers use targeted promotions and exclusive distribution. They aim to make their product seem unique and the only option for consumers who want what it offers. Merchandisers may use targeted advertisements when selling their products as specialty goods have a single, unique use. For example, high-end vehicle rims can upgrade a car. Merchandisers may contact high-end dealerships and their customers to convince them that their vehicle can become even more exclusive if they purchase their rims.
Exclusive distribution is when only certain retailers can sell a company's products, which can make them seem more desirable as they're more challenging to acquire. For example, if only one retailer in the entire country sells a high-end car, consumers may make an appointment and travel to the retailer before purchasing it. Few consumers are willing to go through this process or have the required funds, so the product seems more exclusive. Merchandising specialty goods requires a high level of customer loyalty. Consumers of specialty goods usually already have a brand in mind and aren't likely to consider other options.
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