HP goes CPG

Hewlett-Packard is employing tactics from the world of consumer packaged goods, demonstrating once again something I (and others) have been noting for a while – the growing convergence of the two wings of trade promotion in consumer products, CPG and consumer durables.

BusinessWeek reported recently that HP is making payments to retailers to get them to stop selling private label cartridges for HP printers:

Those executives say the company has approached chain stores that sell store-brand cartridges compatible with its printers and offered them incentives if they end the practice.

Staples is offered as an example. The article goes on to raise questions about the legality of the practice, which is of interest, of course. But I was more struck by how HP, an iconic company in the high-tech arena, is using a marketing tactic more identified with the selling of canned peas.

The fact is that the convergence I spoke of is one-sided – trade promotion practices among consumer durables companies are emulating CPG. And the reason is the one that drives almost all practices – the nature of the channel. As more durables products are driven through big-box retailers (and even B2B products, in many cases), trade promotion programs must be modified to meet the needs and demands of the retailers, and, in this case, to allow the manufacturer to charge a premium price for their branded product. If it works for Del Monte at Kroger in charging an extra fifteen cents for canned peas, it should work for HP at Staples in pricing the ink cartridges a couple bucks higher.

The case also demonstrates how a product can morph in terms of its category. Are ink cartridges a B2B product, or a consumer durable, or CPG? The answer, I suspect, is yes and yes and yes, demonstrating the difficulty of developing channel programs today, and demonstrating the need to constantly re-evaluate the nature of your product.