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 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.

Berkshire Hathaway Reports Lower Sales and Earnings for Shaw   Full Article
Omaha, NE, Nov. 10, 2014 -- Berkshire Hathaway reported third quarter net earnings of $4.6 billion, or $2,811 a Class A share, compared with $5 billion, or $3,074 a share, a year earlier.

Existing Home Sales Expected To Pick Up Next Year   Full Article
Washington, DC, Nov. 10, 2014 -- Sales of previously-owned homes next year may hit the fastest pace since 2006, according to the National Association of Realtors.

Former Starnet Chairman Wins Mayoral Election   Full Article
Point Pleasant, NJ, Nov. 7, 2014 -- Former Starnet chairman Bob Sabosik won his bid for mayor in Tuesday's elections in Point Pleasant.

Mohawk CEO Lorberbaum Discusses Firm's Growth   Full Article
Chattanooga, TN, Nov. 7, 2014 -- Mohawk Industries CEO Jeff Lorberbaum told the Chattanooga Rotary Club that his firm is investing $500 million in its existing businesses in a bet on an improving economy.

Economy Adds 214K Jobs, Unemployment Falls   Full Article
Washington, DC, Nov. 7, 2014 -- Employers added 214,000 jobs in October and the unemployment rate fell again, the Labor Department said.

Attendance at Cersaie Rises This Year   Full Article
Bologna, Italy, Nov. 7, 2014 -- Attendance at Cersaie 2014, the international exhibition of ceramic tile and bathroom furnishings held in Bologna in September, once again topped 100,000 visits, according to organizers.

Builders More Confident in Senior Housing Market   Full Article
Washington, DC, Nov. 7, 2014 -- Builder confidence in the 55+ housing market was up again in the third quarter, according to the latest release of NAHB’s 55+ Housing Market Index.

Housing Markets Improving at a Gradual Pace   Full Article
Washington, DC, Nov. 6, 2014 -- Markets in 59 of the approximately 350 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity in the third quarter.

Planned Job Cuts Surge in October   Full Article
Chicago, IL, Nov. 6, 2014 -- Planned job cuts jumped 68% in October to the second-highest total this year, according to outplacement consultancy Challenger, Gray & Christmas.

Initial Jobless Claims Fall Again   Full Article
Washington, DC, Nov. 6, 2014 -- Initial claims for unemployment benefits fell by 10,000 to 278,000 in the week ended Nov. 1, the Labor Department said

Grosser Named Tile Person of Year   Full Article
San Antonio, TX, Nov. 6, 2014 -- Tile Council of North America presented its Tile Person of the Year award to Donato Grosser at the Total Solutions Plus event.

NWFA Renews Agreement With Wildlife Fund   Full Article
St. Louis, MO, Nov. 6, 2014 -- The National Wood Flooring Association said it has renewed its Memorandum of Understanding with the World Wildlife Fund.

Tarkett Hosts Second Sustainability Summit   Full Article
Chagrin Falls, OH, Nov. 6, 2014 -- Tarkett recently hosted its second annual Sustainability Summit in Cleveland, Ohio.