Advertising & Branding - July 2013

Advertising & Branding From July 2013

By Santo Torcivia

 

Upon examining the most recent figures from Kantar Media on consumer advertising, I am struck by how quickly the investment in brand equity among producer flooring brands has fallen. Each year over the last five years, the total amount spent in support of flooring brands by producers has declined to the point where spending in 2012 was 20% of what it was in 2008. This does not bode well for manufacturers and their efforts to gain a stronger position in the product channels, considering that the same trend is not true for consumer advertising spending by major retailers. 



It cannot be said strongly enough that, in the product channels, brand equity—that is, the communication of a brand’s image, perception and benefits to the trade and consumers—is as important as product development, product quality and price. In fact, brand equity is why an automobile company like Toyota or Honda can get a higher price (and higher sales volumes) for its products, which are perceived to have higher quality and better values than its competitors. But producers sometimes think it a simple matter to cheat their brand equity and “save” these funds to freshen-up the bottom line. They do not realize that cheating brand equity today undermines margins down the road. This sort of shortsightedness breeds long-term margin struggles and sales declines. There are plenty of examples. Just consider Stainmaster fiber by DuPont, which held a vaunted position in the late 1980s. Stainmaster cheated on its brand equity before making some other crucial marketing errors, was sold by DuPont, and is now is trying to resurrect itself. It is difficult to regain esteem once a brand has slipped from the consumer’s mind. 



Fortunately, flooring retailers across the U.S. do not suffer the shortsightedness of flooring producers. Empire Today has reportedly spent half a billion dollars over the last five years on consumer advertising, increasing its expenditure each year. Lumber Liquidators spent over $100 million in consumer advertising over the same period, also increasing its expenditure each year. Additionally, Lumber Liquidators has spent over $7 million in consumer advertising since 2008 in support of its Bellawood wood flooring brand. Overall, retailers have expended $849 million in consumer advertising over the last five years versus $297 million by flooring and carpet fiber producers. These figures include an estimated spending by the top three home centers (Home Depot, Lowe’s and Menards) of $140 million combined over the last five years, just for flooring.



Let me leave you with this thought. All the major retailers have store brands. Some, like Bellawood, Trafficmaster and SwiftLock, have varying degrees of equity. Flooring producers are reducing their advertising (communications with consumers) at a time when retailers are not following suit, diminishing flooring producers’ brand equity and pushing themselves evermore closely to commodity status. What will happen to product margins for producers? What other expenditures will producers be forced to cut when margins fall—product development, research and development, or something else? What will this then lead to?

It is not too late for flooring producers to assess their market positions and redeem their brand positions and, therefore, their margins. The question is whether flooring producers can see behind the next quarter’s income statement and invest in the future. Where would you put your long-term bet?

Copyright 2013 Floor Focus 



Other Archived Articles

NAFCD Releases Executive Trends Index   Full Article
Chicago, IL, July 17, 2014 -- The North American Association of Floor Covering Distributors said it has released its Q2 Quarterly Executive Trends Index.

Initial Jobless Claims Fall Again   Full Article
Washington, DC, July 17, 2014 -- Initial claims for unemployment benefits hit the lowest level in nine weeks, according to the Labor Department.

Metroflor Forms Sales Team for Aspecta Brand   Full Article
Norwalk, CT, July 17, 2014 -- Metroflor Corp. said it has established a network of specification representatives for its contract LVT brand, Aspecta Plank & Tile, which debuted at NeoCon last month.

Housing Starts, Permits, Fall in June   Full Article
Washington, DC, July 17, 2014 -- Housing starts fell unexpectedly in June to a nine-month low, according to the Commerce Department.

Summit International Names Sales Director   Full Article
Florham Park, NJ, July 17, 2014 -- Summit International Flooring said that Marc Becker has been promoted to national sales director.

Foreclosure Activity Hits Eight-Year Low   Full Article
Irvine, CA, July 17, 2014 -- Foreclosure activity hits its lowest level in eight years in June, according to tracking firm RealtyTrac.

Contract Furnishings Mart Opens 11th Location   Full Article
Beaverton, OR, July 17, 2014 -- Contract Furnishings Mart has opened its 11th Northwest location in Beaverton.

Producer Prices in June Rise More Than Expected   Full Article
Washington, DC, July 16, 2014 -- U.S. producer prices rose more than expected in June, according to the Labor Department.

Builder Confidence Grows in July   Full Article
Washington, DC, July 16, 2014 -- Builder confidence in the market for newly-built single-family homes rose four points in July to a reading of 53 on the National Association of Home Builders/Wells Fargo Housing Market Index.

Industrial Production Rises in June   Full Article
Washington, DC, July 16, 2014 -- U.S. industrial production edged higher in June, according to the Federal Reserve on Wednesday.

Mortgage Applications Fall Last Week   Full Article
Washington, DC, July 16, 2014 -- Mortgage application volume fell 3.6% the week of July 11 from the previous week, according to the Mortgage Bankers Association.

J+J Flooring Group Offers Customized Rugs   Full Article
Dalton, GA, July 16, 2014 -- J+J Flooring Group has rolled out a new commercial customized area rug program called Invision Rugs that complements the broadloom and modular products offered by J+J brand Invision.

Shaw Releases Sixth Sustainability Report   Full Article
Dalton, GA, July 16, 2014 – Shaw Industries said it has released its sixth annual sustainability report.

New York Area Manufacturing Surges in July   Full Article
New York, NY, July 15, 2014 -- A New York-area manufacturing index rose to its highest level in more than four years this month.

Retail Sales Rise in June   Full Article
Washington, DC, July 15, 2014 -- Retail sales rose in June despite slower auto sales, according to the Commerce Department.

FIANA, CFI Planning Joint Event in September   Full Article
Vancouver, WA, July 15, 2014 -- The Floor Installation Association of North America and the Certified Floorcovering Installers are planning a joint convention in New Orleans Sept. 4-6.

Beaulieu International Group To Build Plant in Georgia   Full Article
Cartersville, GA, July 15, 2014 -- Beaulieu International Group said it will invest $200 million to build a campus-style manufacturing facility in Cartersville.

Volkswagen Chooses Chattanooga for New SUV   Full Article
Chattanooga, TN, July 14, 2014 -- Volkswagen said it will invest $600 million to build a new seven-passenger SUV at its factory in Chattanooga.

Median Age, Credit Scores For High-End Borrowers Fall   Full Article
New York, NY, July 14, 2014 -- The median age of borrowers seeking high balance mortgages has declined steadily over the last three years, according to private lender LoanDepot.

Meritage Homes To Acquire Atlanta Builder Legendary   Full Article
Scottsdale, AZ, July 14, 2014 -- Meritage Homes said it will acquire the Atlanta-based homebuilder Legendary Communities for approximately $130 million.