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.

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.

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. 

Copyright 2012 Floor Focus