As the U.S. Food & Drug Administration’s (FDA) growing regulation of the premium tobacco industry becomes a reality, manufacturers and tobacconists face uncertainties over how they might be able to grow their businesses. With traditional sales and marketing practices, such as distributing free samples to consumers, being banned outright or severely restricted, tobacco businesspeople are looking for new, fresh and legal alternatives.

Addressing these concerns, Michael Herklots, vice president of retail and brand management at Nat Sherman, presented the TPE 2019 keynote speech, “How to Market, Merchandise and Promote in a New FDA Landscape.” Beginning the presentation, Herklots suggested that the title should be changed to “How to Market, Merchandise and Promote in a Constantly Changing Landscape,” subtly reminding the audience that the premium tobacco industry has always faced challenges and found ways to overcome them.

Herklots stressed the importance of every business defining its own brand experience. Drawing on differences between a Mercedes-Benz dealership and a used car lot, Herklots talked about the expectations potential customers had for both business models. While both businesses were extremely successful, they brought in vastly different customers. The key similarity between them was that they knew their customers’ expectations and catered to them.

“Don’t try to be everything to everyone,” Herklots told the audience. “Be the leader of the experience that you provide. Hosting events that cater to your customers’ interests is the easiest way to develop your brand experience.”

Developing your brand experience begins by finding out what is meaningful to the business owner and then crafting experiential events that are inspired by those passions. Events that pull in outside vendors add power to their success and offer a chance to expose new customers to your business.

Crafting consistency in everything concerning your business is also an important aspect to building the brand experience. While allowing room for discretion and accommodation, retailers should explain to their employees their customer service expectations and stress that customers are looking forward to quality experiences, which include not only interpersonal communication between store staff and customers but also a commitment to only the best standards of cleanliness and order inside the store.

“Merchandising allows you to tell a story, and the way you merchandise your products is a billboard for what you think about your business,” Herklots said. Herklots also suggested keeping some stock in reserve, which forces customers to ask about it. “That creates conversations with customers, which lead to education moments. Having staff that can teach your customers builds on the experience your brand offers your customers.”

Using a quote from business consultant, educator and writer Peter Drucker, “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic,” Herklots concluded his presentation by urging retailers to identify their key vendors and grow their businesses with them. He also told the audience to trust their gut feelings and their data, and he urged them not to fall into the trap of stocking items they want to sell over items that customers want to buy. He shared with them the importance of setting goals and then reducing them to manageable levels, thus making it easier to achieve them. Finally, he told the audience that change will be the consistent part of the premium tobacco business for the foreseeable future, and he urged them to craft business plans that are more resistant to change.

For a full video of Michael Herklots’ keynote address, click here.

This story first appeared in the March/April 2019 issue of Tobacco Business magazine. Members of the tobacco industry are eligible for a complimentary subscription to our magazine. Click here for details.