Advertising/Flooring-Fair Weather Friends-May 2012

 

By Santo Torcivia

 

In 2011, consumer advertising by flooring manufacturers was 22% of the level achieved in 2007, just a few years ago. Manufacturers spent only $23 million on ads to consumers last year, compared to $104 million in 2007, according to Kantar Media, a company that tracks media spending by all types of businesses in the U.S. Kantar data indicates that retailers seem to have held up their consumer flooring advertising expenditures better than the mills, especially the big-box retailers.

Lumber Liquidators alone spent $20 million on consumer advertising last year, almost as much as all the flooring manufacturers in the U.S. combined. Except for Empire Today, the retailers shown below all have various private label flooring brands that they promote to consumers. If manufacturers aren’t careful, they will become a pack of private label hounds all barking for the low-margin business that is commodity, private label production.

BIG BOX ADVERTISING SPENDING

 

 

Empire Today
Lumber Liquidators
The Home Depot1*
Lowe's2*

Adv. Spending
($, MM)

$105
20
15
10

% Change
(2010-11)

+19%
+8%
+2%
-15%

1 Flooring est.=5.3% of total sales
2 Flooring=5.7% of total sales
*Note: Home Depot & Lowe's figures estimated at 4% of total advertising expenditures


Today, advertising is significantly broader and more complex in scope than it was even ten years ago. Yes, it still encompasses television, radio, print, direct mail, and outdoor advertising (billboards), but it also now includes the Internet, social media, email blasts, in-store signage and electronic devices, and other channels. My Webster’s Dictionary defines advertise as, “to describe or announce (a product or service) in order to promote sales.” Webster’s definition is a simple and concise one that captures the essence of all advertising. For me, advertising has always been communication that attempts to engender an action in favor of the advertiser. Good advertising is interesting and memorable; it grabs the recipient’s attention and causes them to remember the message. Good advertising produces a favorable response in the recipient; it carries a call-to-action that moves the recipient to positively react. And finally, good advertising is focused on a target audience; it is aimed at the largest group that is most disposed to receive the message and act appropriately. As it is targeted, it minimizes waste and the cost of communicating with audiences not positively disposed to the advertised message.

Ultimately, the goal of all adverting—for that matter, all corporate action by a business—is to enhance that business’ brand. Wise companies develop and nurture their brand, building brand equity in the process and a positive image of their products or services. They realize that their brand has value, as much as (or sometimes more than) their tangible assets. A superior brand promotes sales because customers know and trust it; the brand enhances margins because the value and image that it projects has worth to customers, who will pay more for a product that they value and trust. And lastly, the higher margin provides funds that the firm can re-invest in research that enhances product or service differentiation as well as more advertising to communicate the superiority of the brand.

The problem is, in soft economic times, as we are experiencing currently, advertising budgets are the first thing many mills and retailers eliminate. They feel they can coast along on their existing brand equity. Cutting brand investment is the same as cutting maintenance expenses. Cut your maintenance on machinery or vehicles, and you are going to have more breakdowns. The same holds true for brand building. When you cease advertising, you cease communicating with your customers, and when you are out of the consumer’s sight, you are out of the consumer’s mind.

CONSUMER ADVERTISING SPENDING 
AS PERCENTAGE OF TOTAL RESIDENTIAL SALES

Product Category

2007

2008

2009

2010

2011

Resilient Flooring
Laminate Flooring
Wood Flooring
Ceramic Tile
Carpet

0.1%
2.1%
2.5%
0.8%
0.4%

0.1%
2.5%
1.8%
1.1%
0.4%

0.0%
2.2%
0.9%
0.8%
0.3%

0.0%
1.8%
1.1%
0.4%
0.1%

0.5%
0.0%
0.4%
0.0%
0.2%

Flooring Manufacturers

0.9%

0.9%

0.7%

0.5%

0.2%

Carpet Fiber

0.2%

0.2%

0.1%

0.3%

0.1%

Total Flooring & Fibers

1.0%

1.0%

0.7%

0.6%

0.3%

Source: Kantar Media and U.S. FlooReport


So, where has all the good advertising gone? Advertising campaigns like DuPont’s Stainmaster from the late 1980s: that campaign transformed the carpet industry and actually reversed the decline in carpet sales for a while. That was, until the mills backward integrated into fiber and took the margin out of the product.

How about Pergo’s initial advertising for laminate flooring in the mid 1990s? That campaign was beautifully executed, along with an exclusive (six month long) introduction of the product at Color Tile that proved the new product’s performance to a skeptical marketplace. This campaign built a product category, and Pergo is still a generic term for laminate flooring in many circles, just like Kleenex is for facial tissues. 

These campaigns reached out to consumers and demonstrated in memorable and dramatic ways why consumers should purchase the products so advertised. Of course, you have to invest money to make money, and then you have to develop an effective and targeted execution. I am still waiting for a similar campaign launched using the Internet.

Consumer advertising expenditures as a percent of total residential sales have been falling each year since 2008, with total advertising expenditures for flooring and carpet fibers dropping from 1.0% of sales in 2008 to 0.3% in 2011.

Who were the leaders in consumer advertising spending in 2011? As I said earlier, the list is short, with many firms cutting back significantly on advertising spending in these dire economic times. In the list (on right) of the top spending mills, the amounts shown are spending on media placement and do not include advertising production or other costs.

There is a common thread that runs through these brands. They all are positioned well and are respected in the marketplace, and they have a definite image and recognition. This brand positioning did not just happen; it was cultivated and grown through annual investments and executing a strategy that communicated a specific image to the market.

Many retailers and mills have looked at the Internet as a means to cost-effectively communicate with consumers, and they desire to substitute this channel for traditional media. Thus far, Market Insight/Torcivia’s research indicates that the Internet, at least for flooring, is at best a mediocre substitute for traditional advertising and a marginal sales-building medium. It’s a necessary adjunct, not an alternative, to advertising in traditional media. 

The Internet can communicate information well—it can even assist in brand building—but it remains a weak medium for producing sales. Research indicates that less than one percent of all retail flooring sales last year was derived via Internet promotion. The Internet is a great source of information and advice for consumers in the shopping process, but it shouldn’t fully replace traditional advertising. Don’t get me wrong: I believe every mill and every retailer needs a website to be credible, to set their brand image, and to provide the shopper (and customers) with product and service information, store hours and locations, products and services offered, and much more. As a sales growth vehicle, however, the Internet is not yet a substitute for traditional advertising. 


TOP FLOORING BRANDS 
2011 TOTAL SPENDING ON CONSUMER ADVERTISING

Brands

Adv.
Spending
($,000)

Share

Est. %
of Sales*

Armstrong
Mohawk (incls. Karastan)**
Bellawood (Lumber Liquidators)
Stanton Carpet
Shaw
Mirage (Boa Franc)
All Others

6,073
4,569
3,356
947
767
760
2,146

26%
20%
15%
4%
3%
3%
9%

2.10%
0.20%
0.70%
N/A
0.04%
N/A
N/A

 

16,472

81%

0.20%

Smartstrand (Mohawk)
Stainmaster (Koch Inds.)

2,758
1,707

12%
7%

0.10%
0.04%

 

4,465

19%

0.10%

Total Consumer Adv. Spending

23,083

100%

0.20%

*% of sales based on residential sales of the product category(s) advertising

**Mohawk figures do not include Smarstrand, which is shown separately

Sources: Kantar Media, U.S. FlooReport, Floor Focus


Copyright 2012 Floor Focus

 



Other Archived Articles

Wholesale Prices Slid in February   Full Article
Washington, DC, March 13, 2015—Wholesale prices fell 0.5% in February, says the U.S. Bureau of Labor Statistics. The unexpected drop represents the fourth consecutive down month, as measured by the Labor Department’s producer price index.

Interface's Claims New Microsfera Has Lowest Carbon Footprint Ever   Full Article
LaGrange, GA, March 13, 2015—Interface has unveiled its latest product, Microsfera, which the firm says has the smallest carbon footprint of any carpet tile in history.

Ecore Revamps Business Structure   Full Article
Lancaster, PA, March 13, 2015—Ecore is making changes to its business structure in conjunction with IHRSA 2015 by launching a new category of sports and fitness flooring called Ecore Athletic.

J+J Flooring Video Wins Gold in AVA Digital Awards   Full Article
Dalton, GA, March 13, 2015—J+J Flooring Group video was named gold winner in the corporate image category of the AVA Digital Awards.

Average Mortgage Rates Rising, Buoyed by Strong Jobs Report   Full Article
McLean, VA, March 13, 2015—Average fixed rate mortgage rates are moving higher amid a strong jobs report and bringing mortgage rates back to where they were at the start of 2015, according to the results of Freddie Mac’s Primary Mortgage Market Survey.

Trade Sales & Manufacturer Shipments Edge Down in January   Full Article
Washington, DC, March 12, 2015—The combined value of distributive trade sales and manufacturers’ shipments for January was estimated at $1,302.5 billion, down 2.0% from December 2014 and down 0.3% from January 2014, says the Commerce Department.

Retail Trade Sales Down from Previous Month But Up YOY   Full Article
Washington, DC, March 12, 2015—Retail trade sales were down 0.6% (±0.5%) from January 2015 but up 1.0% (±0.9%) over 2014, says the Commerce Department.

LL's Free Air Quality Testing Won't Meet CARB Standards   Full Article
New York, NY, March 12, 2015—Lumber Liquidators will offer free indoor air quality testing for its consumers--conducted to workplace standards,-- but OSHA's thresholds for formaldehyde in the workplace are not as stringent as CARB's for the home.

Parterre's Vertu Resilient Plank Wins ADEX Recognition   Full Article
Wilmington, MA, March 12, 2015—Parterre’s Vertu Resilient Plank won two ADEX awards.

Consumer Survey Reveals Optimism about Housing Market   Full Article
Washington, DC, March 12, 2015—Consumer optimism toward the economy is growing and appears to be contributing to further improvement in overall housing sentiment, according to results from Fannie Mae's February 2015 National Housing Survey.

Millennials Account for Largest Share of Home Buyers, Says NAR   Full Article
Washington, DC, March 12, 2015—The millennial generation represented the largest share of recent buyers, according to the 2015 National Association of Realtors Home Buyer and Seller Generational Trends study.

Three Tarkett Rubber Textures Win ADEX Platinum   Full Article
Chagrin Falls, OH, March 12, 2015—Tarkett received the Platinum Award for Design Excellence (ADEX) for its new range of rubber textures: Brushed, Concrete and Leather.

Fuse Alliance Focuses on Digital Marketing to Raise Awareness   Full Article
Laguna Niguel, CA, March 12, 2015—Fuse Alliance, a member-owned organization of professional, commercial flooring contractors, unveiled a next generation public facing website that clarifies the group's target audience and services offered.

U.S. Container Imports Down Over 5% in 2015   Full Article
Minneapolis, MN, March 12, 2015—Total U.S. container imports are down over 5% this year, compared to January and February of 2014, reports Zepol. Nearly the entire decline in imports is attributed to the West Coast ports of Los Angeles and Long Beach.

Armstrong Top Execs Offered Retention Award to Stay Through Spinoff   Full Article
Lancaster, PA, March 11, 2015—Armstrong World Industries is giving three of its top executives an incentive to stay at the company through the spinoff of its flooring business into a new, independent company next year, reports Lancaster Online.

Small Business Optimism Edges Upward   Full Article
New York, NY, March 11, 2015—U.S. small business optimism edged up in February amid signs of tightening labor market conditions, bolstering the view that a recent slowdown in economic activity will be temporary, reports Reuters.

LL Class Action Lawsuits Extend Beyond Formaldehyde Issue   Full Article
Toana, VA, March 11, 2015—Lumber Liquidators is currently facing at least 12 class action lawsuits.

Foreclosure Inventory Fell 33.2% Year Over Year   Full Article
Irvine, CA, March 11, 2015—CoreLogic's January 2015 National Foreclosure Report reveals U.S. foreclosure inventory declined 33.2% from January 2014, and completed foreclosures declined 22.5%, reports World Property Journal.

The Floor Store Earns Sixth Armstrong Elite Retailer Recognition   Full Article
Lancaster, PA, March 10, 2015—The Floor Store’s new San Francisco, California showroom has been named an Elite Retailer by Armstrong, the chain’s sixth location to earn the distinction.

Wholesale Inventories Up Slightly   Full Article
Washington, DC, March 10, 2015—Wholesale inventories were up 0.3% to $548.7 at the end of January, says the U.S. Census Bureau.