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Challenges, problems, and triumphs -- from a manufacturer's perspective.

Provo Responds to Cricut Critics

Unexpected demand caused problems.

by Mike Hartnett (December 18, 2006)

(Note: CLN has received numerous emails from irate independent retailers regarding the way Provo Craft has marketed the Cricut. To hear Provo's side of the story, CLN emailed questions to Cathy Davis, Provo's Director of Corporate Communication and Training. Her answers are below. CLN sent this column to independents who had contacted CLN previously. Their responses to Provo's answers can be found by clicking on "Benny Da Buyer" in the left-hand column or click HERE.)

CLN: Is it true you cannot legally prevent a retailer � chain or independent � from discounting the Cricut or Cuttlebug? If so, what's the point in having retailers sign a contract promising not to advertise the discounted price? Have you stopped selling to any retailers who violated the signed contract?

DAVIS: Provo Craft has unilaterally established a minimum advertised price policy on specific skus within the Cricut product line to protect the integrity and image of the brand. To meet our ongoing intention of protecting the brand, Provo Craft has put consequences in place for retailers who violate this policy and enforces those processes unilaterally.

The paperwork that a retailer signs is not a contract nor an agreement. As our Minimum Advertised Pricing policy is a unilateral policy and does not allow for an agreement of any kind. However, the signed paperwork does serve as an acknowledgment that the new Cricut retailer has read and understood that.

Provo Craft has established this unilateral MAP policy and will enforce it.

CLN: Some independents claim they have had to wait for their orders while QVC was selling them. Do you fill orders on a first-come, first-serve basis or fill the largest orders first? If there's a delay in filling an order, is the retailer notified?

DAVIS: The demands for the Cricut product line far exceeded Provo Craft�s initial launching expectations. In many businesses, when this happens there has to be a determination of how to best disperse the allotment coming in so that the business is able to ensure both the stability of the new product line and the "future" demand for it, while balancing the needs of our customers as much as possible.

This is a tough balance; but one that Provo Craft takes to heart and has done so weighing all the considerations of the business needs during the time demand was exceeding the product availability.

CLN: Are Michaels' stores still allowing consumers to use the 40%-off coupon to buy the Cricut?

DAVIS: Provo Craft does not get involved with the price any of our retailers choose to sell their products for. Any retailer can sell the Cricut Personal Electronic Cutter for any price they deem in their individual business.

Provo Craft does not wish to participate in discussions around pricing Or have any impact on what a retailer chooses to sell a product for.

The MAP policy is a policy around advertising minimums, not selling/buying.

CLN: I noticed on the Creative Xpress website that the mail order company is prominently displaying the Cricut for $249.99, plus 2,000 bonus points. Is that a violation of the contract?

DAVIS: Provo Craft does not issue nor do they sign "contracts" regarding their Minimum Advertised Price Policy. The MAP is a policy that has been unilaterally implemented and enforced. The paperwork that is signed is only an acknowledgment that the retailer has read our unilateral policy and understands it.

CLN: When Provo agreed to sell to Wal-Mart, did the company warn independents and explain why?

DAVIS: Provo Craft, like many craft manufacturers, made a decision to sell product in the mass market. For each mass merchant the timing of implementation varies. We would want our independent customers to know that the timing of this was much quicker than we anticipated. Provo Craft would never wish to cause concern or issue to any of our customers and appreciates the partnerships we have with each.

CLN: An independent told CLN that at the 2005 Summer Show, he was told Provo was showing something new � possibly the Cricut? � in a private area of the booth, but when he walked in, he was told to leave because the A.C. Moore buyer was coming. Then he returned three additional times and was told the appointment schedule was filled. Was that true? Why not show it to everyone?

DAVIS: It would be hard to address any conversation that may/may not have happened between two unidentified people from 1 1/2 years ago.

CLN: Like all vendors, Provo sells to the chains for less than they do for independents because of the chains' buying volume. What do you suggest independents do to compete?

DAVIS: In many industries, the LSM (Local Store Marketing) strategy is used and is very effective. It is particularly successful in the independently owned businesses within those industries as they are far more equipped to execute the process within their business format.

We feel strongly about the potential of this process and will be rolling it out at the CHA Winter show and invite any independent retailer who would like to learn about it to come by our booth, #3061.

CLN: One independent told CLN that she called Provo and was told that Provo referred consumers who called about education and tech support to local shops. She wanted to know why she should help customers with a product with which she's at a serious price disadvantage. What do you suggest she do?

DAVIS: Provo Craft appreciates and values each and every one of our customers. We strive to deliver high quality products at affordable prices to all. Retail is a competitive environment. With that being said, if a customer walks through the door of a retailer with any question, that is a great opportunity to win them over as a future and ongoing customer. A suggestion we would offer, that many businesses use in other industries, is the process of L.S.M. (Local Store Marketing) or grass-roots marketing. This is a process of meeting and exceeding the potential customers� needs so that they gain a loyalty to your business and by so doing, turn the curious into an ongoing customer of your business.

CLN: If Provo could go back in time, would you change anything about the way the Cricut was marketed, sold to independents, and sold to chain accounts?

DAVIS: We have learned much from the launch of Cricut and have already taken many of these learnings into other product line launch plans of the future.

Provo Craft will continue to look for ways to improve our processes and enhance our ability to be the vendor "partner" of choice for each of our retailers.

CLN: Back in May, the Cricut price was raised $15, yet the suggested retail remained the same. What prompted this decision mid-release?

DAVIS: As with any product that has the technical nuances and complexities that the wonderful Cricut product has, it takes much development and troubleshooting. Many companies find when developing such products that the cost burdens end up being more than anticipated while the perceived value of the item, by the consumer, remains the same. In such cases, it is not uncommon to see a price adjustment at the wholesale level and not see that same increase to the MSRP.

CLN: Do you have any specific plans to improve relations with independents?

DAVIS: Provo Craft values each of our independents and understands the barriers and obstacles they face when looking for ways to grow both their top and bottom lines. With this being said, we would like to be partners with each of our customers in assisting them with tools and ideas

to drive both. Provo Craft is currently working on a LSM program that will be introduced at the CHA winter show. We feel strongly about this program as it has been used in other industries for years and is a great tool for driving year over year sales growth in independently owned businesses.

We are excited to share this with our independent customers and know that this will be a wonderful aid to them.

CLN: As a major player in scrapbooking, how does Provo see the category performing and changing in 2007? What can/should retailers, vendors, and the industry as a whole do to increase sales?

DAVIS: The first BIG thing we all must do is to look for ways to bring in "new" curious customers to the industry. (These can be children, students, working parents � helping a student with their school project, someone who has never scrapbooked or paper-crafted before, but is curious.)

Once we have them in our doors (for whatever brought them there), we must look for each and every opportunity to provide them with an exciting and memorable experience. We have to learn what they are looking for and look for ways to exceed their expectations. As we do this we will turn them from curious to crafter, from crafter to core crafter, and build the category even further as they begin paper crafting and then scrapbooking.

(Note: To read retailers' responses to the Davis' comments, click on "Benny Da Buyer" in the left-hand column, or click HERE. To read previous Business-Wise columns, click on the titles in the right-hand column. To comment on this or any other industry issue, email CLN at mike@clnonline.com.)

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