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

Job Openings Edge Down in September   Full Article
Washington, DC, Nov. 13, 2014 -- There were 4.7 million job openings on the last business day of September, according to the Labor Department.

NWFA Approves Vermeister Finish Products   Full Article
St. Louis, MO, Nov. 13, 2014 -- The National Wood Flooring Association said that Vermeister S.p.A. has been approved for the NWFA Accepted Product Seal and NWFA Accepted Eco Product Seal designations.

Dixie Discontinuing Carousel Custom Line   Full Article
Chattanooga, TN, Nov. 13, 2014 -- The Dixie Group said it will discontinue its Carousel custom manufacturing line.

CRI Outlines 2015 Initiatives at Annual Meeting   Full Article
Dalton, GA, Nov. 13, 2014 -- The Carpet and Rug Institute (CRI) held its annual meeting in Dalton, Ga. yesterday.

Initial Jobless Claims Remain Below 300K   Full Article
Washington, DC, Nov. 13, 2014 -- Initial jobless claims increased by 12,000 to 290,000 in the week ended Nov. 8, according to the Labor Department.

Resilient Institute Adds Seven New Members   Full Article
LaGrange, GA, Nov. 13, 2014 -- The Resilient Floor Covering Institute has expanded membership, adding four manufacturers and three suppliers to its roster.

Distributor Fishman Rolls Out Private Label Flooring   Full Article
Baltimore, MD, Nov. 13, 2014 -- Distributor Fishman Flooring Solutions said it is entering the private label flooring business.

Foreclosure Filings Spike in September   Full Article
Irvine, CA, Nov. 13, 2014 -- Foreclosure filings were reported on 123,109 properties in October, according to tracking firm RealtyTrac.

Wholesale Inventories Rise in September   Full Article
Washington, DC, Nov. 12, 2014 -- U.S. wholesale inventories rose 0.3% in September after a 0.6% gain in August, according to the Commerce Department.

Beazer Homes Returns To Profit for Year   Full Article
Atlanta, GA, Nov. 12, 2014 -- Beazer Homes reported fiscal fourth-quarter net income of $59.8 million or $1.88 per share, compared to $11.9 million a year ago.

Mortgage Applications Fall Last Week   Full Article
Washington, DC, Nov. 12, 2014 -- Applications for U.S. home mortgages fell last week as interest rates rose, according to the Mortgage Bankers Association.

NAFCD Names Award Winners   Full Article
Chicago, IL, Nov. 12, 2014 -- The North American Association of Floor Covering Distributors has named the winners of its Leadership in Action and Lifetime Achievement awards.

First TISE East Draws International Attendees   Full Article
Dallas, TX, Nov. 12, 2014 -- Hanley Wood Exhibitions said that its first-ever International Surface Event East featured 185 exhibiting companies covering over 50,000 square feet of booths and displays.

NAFCD Urges Members To Support Habitat Stores   Full Article
Chicago, IL, Nov. 11, 2014 -- The North American Association of Floor Covering Distributors Association is urging its members to support Habitat for Humanity's ReStores by donating materials and products.

Former Mannington VP Hollinger Dies   Full Article
Kennett Square, PA, Nov. 11, 2014 -- Mark A. Hollinger, age 58, a long-time Mannington Mills employee, died Nov. 5 after a year long battle with glioblastoma multiforme.

Desso Using Water Company Waste in Carpet Tile   Full Article
Waalwijk, The Netherlands, Nov. 11, 2014 -- Carpet company Desso said it is using chalk from local water companies to make its products.

Investment Adviser Reduces Stake in Armstrong   Full Article
Boston, MA, Nov. 11, 2014 -- Wellington Management Company of Boston has reduced its stake in Armstrong World Industries to less than 5% of the firm.

Mr. David's Founders Named Persons of Year   Full Article
Chicago, IL, Nov. 11, 2014 -- David and Leonard Zmijewski, the founders of Mr. David's Flooring International, have been named Persons of the Year by the Chicago Floor Covering Association.

Dover Rug & Home Wins Philanthropy Award   Full Article
Natick, MA, Nov. 10, 2014 -- Dover Rug & Home said it is the recipient of the 2014 Community Excellence Award, given by the Family Business Association of Massachusetts.

More Home Refinancers Taking Cash at Closing   Full Article
Washington, DC, Nov. 10, 2014 -- Borrowers cashed out an estimated $8 billion in home equity through refinancing of conventional mortgages in the third quarter, according to Freddie Mac’s quarterly refinancing report.