From Home Furnishing Business
The State of Advertising
Developing furniture and bedding advertising was a relatively simple process for decades. For retailers, it meant getting material for the upcoming weekend’s newspaper advertisement submitted on time, and possibly taping another radio or television spot to go with it. Yes, there were direct-mail pieces and the occasional billboard to deal with, but for the most part, the biggest concern was what other newspaper ad or news story would get placed adjacent to the space purchased by the furniture or mattress retailer.
For manufacturers, it meant checking insertion deadlines for their favorite shelter magazine, and touching base with key retail customers to do a deal on getting them co-op advertising dollars (that means the manufacturer foots some or all of the bill).
But a few years ago – way back in the early 2000’s – consumers started yelping about late furniture deliveries, tweeting about their comfy new mattress, and pinning pictures of that cool living room makeover they saw on HGTV. So much for those meetings with the ad salesman for the local newspaper.
“What has happened is that the amount spent on print – except for circulars – has dropped significantly.” Said Steve Rotman, president and CEO of Rotmans Furniture in Worchester, MA. “Radio and TV has dropped from what it used to be. And the amount spent on (direct-mail) circulars has dropped, although we still do them.”
No, Rotman and other furniture and bedding retailers like him haven’t cut back on advertising. But their dollars are being re-directed in a big way to the digital realm, which includes everything from social media sites such as Facebook and Pinterest to paid search programs such as Google AdWords to YouTube videos.
What use to be simple in terms of communication has exploded into a multiplicity of ways to communicate with perspective furniture consumers. Let’s start the discussion with how retailers are allocating their advertising budget.
Print is definitely trending down with some larger retailers in larger markets moving entirely away from the medium even with substantial discounts and value added. The fact is the consumer has moved away from the newspaper as a source for news reducing the impact of advertising.
Television which exploded on the scene more than a decade ago as the workhorse to attract potential customers to furniture retailers, is slowing. The fact is that consumers are viewing less television and when they are viewing, they are doing so on devices that exclude advertising.
Even in instances where television is the centerpiece of a marketing and branding strategy, digital media plays a key supplemental role. This is especially true with brand-building strategies by well-known manufacturers who advertise nationally such as La-Z-Boy, Ethan Allen and Tempur-Pedic.
Internet is either the first or second step when the consumer decides to make a furniture purchase.
As can been seen from Graphic B, 46.3% of consumers first visit the internet shopping various sites before selecting those 2-3 stores they will visit. This is a devastating blow to the less dominant retailers in the market. More retailers today have a web presence of some degree. However, the challenge is the site management, populating the site with new products and current advertising are the basics.
The other 38.8% visit the store first to scout out the retailers shopping environment. This is a critical visit influenced by the retailers branding effort as well as the reputation in the market. An important note is how the sales associate treats the scouting consumer. A lack of interest by the sales associate because of a perceived “tire kicker” can result in no return visit.
Of late, however, Rotman said his store’s most effective ads have been videos used as so-called “pre-rolls”, or short ads that run before a user can watch a selected video. He acknowledged that the click-through rate on such is small, but those who do click on the ad and visit Rotman’s website are much more likely to visit the store.
“It has a positive effect on store traffic and sales because it drives people to the website”, he said of the pre-rolls. “And, we’re finding that when website traffic goes up, store traffic goes up. And there’s a direct relationship between store traffic and store sales.”
He said that makes it critical to keep the website fresh and engaging so it accurately reflects what the in-store shopping experience is like.
“We want to create value for each web visitor,” said Rotman. “It has been very effective for us in terms of (an improved) closing rate and in terms of store sales.”
Social Media still has the buzz to be the solution to the furniture retailers advertising problems. Anecdotal research is the most often cited as reasons for pursuing this medium.
As can be seen from Graphic C from the consumer research, social media is not the most effective method to inform the consumer.
Rotman and Julia Rosien, brand manager to bedding producer Restonic, agreed that the measure of social media and digital programs is very important, but they noted that the traditional advertising measure of gross ratings points is only a small part of the measurement puzzle.
“At Restonic, we measure a wide variety of things – impressions, reach, engagement, and especially sentiment, which is very difficult to measure in traditional advertising,” Rosien said. “There’s a misconception that a social media strategy is easy to develop and implement. You can spend hours on social sites gathering and creating content, commenting on others content and sharing it all, and measuring the wrong thing. Valuable resources could be wasted on a vehicle that is not driving toward your goals.”
Rotman likes to call it “web-oriented advertising.” And he said, it now takes up about 40% of his annual advertising budget, and by next year, it probably will be 50% of the total. Five years ago, it was barely 10%. “I don’t see that trend reversing itself,” Rotman said.
Neither does Rosien who is an early proponent of a digital-heavy advertising and marketing strategy. “The goal of any well-conceived digital campaign should be to improve the connection between the brand and its consumers – turning fans into ambassadors,” she explained. “In this way, the sale becomes the by-product, but the community that drives engagement and love for the brand, that’s the sweet spot.”
She said Restonic’s digital media strategy has become important for both a business-to-business and business-to-consumer standpoint. Restonic dealers, for example, have access to a library of blog content they can incorporate on their own social media pages, while the company’s Facebook page now has more than 30,000 “likes” from consumers.
“Brand awareness and growth have been phenomenal in the past few years,” Rosien said. “Our blogger outreach campaigns have allowed us entry into groups and communities on social media that we wouldn’t have reached otherwise.”
She said the B2B side is important because retailers, especially smaller independent operations, often lack the time or staff expertise to execute the strategy. “We know retailers struggle to produce content and our digital publishing program takes the burden from them,” she said. “Social media is no longer a nice-to-have. It’s a must have.”
Rotman agreed, but said social media can be the classic double-edged sword if a retailer’s customer service or product quality consistently falls short of expectations. That can result in numerous negative comments and harsh reviews on sites such as Yelp, which a retailer generally has no ability to remove.
“If you have a lot of customer service issues, then it’s not a positive thing,” Rotman said. “But, if you have good customer services, there’s no reason to be afraid of it.”
Direct Mail, with the advent of computer graphics and digital printing, has evolved to the next level. This process allows small-run quantities with the ability to change product shots to match the targeted consumer. From the consumer’s perspective using more information/product shots makes the message more effective. Graphic D illustrates.
Over the past two years the concept of magalogs has been introduced to the traditional retailer. A combination of editorial content and product presentation devoid of a “sales pitch” has produced substantial results with 9%+ of existing customers and 4%+ of targeted potential customers visiting the store to make a purchase. Lifestyle stores, such as Pottery Barn and Restoration Hardware have used this approach instead of television advertising.
The introduction of targeting the consumer “most likely to purchase” has more than doubled the response rate of direct mail. The same targeting concept is now being applied to email transmissions. This involves moving away from the weekly total emails to numerous emails to specific consumer targets with products that most likely would appeal to them in terms of style and purchase cycle.
The focus going forward will be to direct a specific message to a potential customer incorporating a feedback loop for performance.
WHO DOES THE TALKING?
Advertising is the communication from suppliers and retailers to persuade a consumer to purchase their product. It is a simple statement but a difficult objective to accomplish, especially to quantify success.
The starting point must be what influences the consumer purchase. According to the latest buying process study conducted by Impact Consulting Services, parent company of Home Furnishings Business, price was obviously number one well down the list. The graphic to the right illustrates all of the purchase motivators.
Manufacturing Role to
Attract the Consumer
In the past decade, the industry has lost many of its major brands or, of those that remain have muffled their voices. The traditional role of the manufacturer was to create, in the minds of the consumer, an aspirational desire for the product. The chief purveyor of this message was the “shelter” magazine. Starting at the upper end with Architectural Digest and Elle Décor and moving down stream to Southern Living and Good Housekeeping. If they still exist, there is little furniture advertising. Interestingly, there are rugs and accessories advertising which could explain the increase in the consumer price index for these product categories (index at 93.8 compared to furniture/bedding at 71.9).
There are brands that are the exception. In our discussions with Eli Winkler, Vice-President of Digital Customer Experience and e-commerce, he shared the La-Z-Boy approach to advertising to the consumer.
“La-Z-Boy’s hugely successful “Live Life Comfortably” effort, featuring actress Brooke Shields, wouldn’t be as effective without the benefit of digital media, despite the presence of her high-profile television and print ads,” said Winkler.
“La-Z-Boy has an integrated media plan across numerous channels: print, TV, digital video, display, social and search engines,” Winkler said. “It has been incredibly successful for us, garnered attention, and shifted people’s perceptions and knowledge of the brand based on our research findings. And, we have seen unprecedented sales growth.”
He said a key goal of the branding strategy is to change the perception that La-Z-Boy only makes recliners – a view that persisted among consumers despite the company’s nearly 90-year history of making a variety of upholstery products.
“We addressed the outdated associations head-on”, Winkler said. “We used Brooke to capture consumer’s attention, and her welcoming personality and authentic charm helped communicate that La-Z-Boy offers a wide range of great looking furniture options that fit almost any lifestyle and home. And, with Brooke in the furniture, customers took notice of our variety of stylish offerings.”
In 2017, he said Shields’ (and La-Z-Boy’s) visibility will increase as her ads will be used more extensively online, and will move into prime time broadcast TV slots. That’s in addition to the usual mix of non-prime broadcast and cable TV.
“Our target is the woman who wants to create a great looking, comfortable home where she can relax and enjoy life; where both family and friend feel at home the second they walk in,” Winkler explained. “She looks for quality and style that will stand the test of time and provide the functionality of her family needs, and is never interested in just following the newest trend. Her home is a place she really lives, not just a showpiece meant to impress others.”
Another successful brand-building effort built around TV and digital is found at Palliser, a Canadian upholstery producer who is wrapping up a national campaign in Canada and is planning to extend into the U.S. later this year.
“The secret to our success is the Palliser brand reputation in the Canadian market,” said CEO Cary Benson. “Palliser believes everyone deserves to have their home furnished exactly how they want it and when they want it. Their home furnishings reflect their personal style, color, comfort and function that matches their taste and lifestyle.”
He said the most recent TV commercials aired during early morning and evening news shows, as well as several national entertainment and sports broadcasts.
“We included a large hockey buy because, in Canada, female buyers are avid watchers of hockey broadcasts with an almost 50-50 split with men,” Benson said. “In addition, we have been sponsoring nationally televised Winnipeg Jets games with signage on the rink boards” (Palliser is based in Winnipeg).
He said the company currently is evaluating the best way to spend its media dollars in the U.S. market, but said the campaign will probably focus on digital and social media because national TV buys in the U.S. are not as cost effective as Canada.
“Our goals with our advertising investments are to help educate consumers about our brand and attempt to develop brand preference for our products so a consumer will visit our website, learn about our products and visit one of our local retailer partners,” said Benson.
Manufacturers acknowledge that some retailers are reluctant to promote a particular furniture brand – preferring instead to promote the store as a brand. Rotman, however, said he’s fine with including both the store brand and the manufacturer’s brand in his advertising, since the combination can convey the message that the store carries quality products from reputable manufacturers.
“The store brand is effective when it’s placed with the manufacturer’s brand,” he said, pointing out that some of Rotmans ads promote a particular category of furniture, such as solid wood and don’t mention any specific brands. “In that case, it’s the store brand used with a phrase that signals quality to the consumer.”
Retailers Role to Attract Consumer
The retailer’s role is to communicate price/value, selection and service. However, this message has evolved to “you can afford it” a financing message. The costs of this message, in addition to the medium used, is a hefty sum. The following graphic compares traditional retailers to the lifestyle stores (retail verticals).
These expenditures are quite a bit out of the average gross margin 48.6% that can be achieved. We should carefully understand the comparison to other distribution models such as lifestyle (retail verticals) brands Crate and Barrel, Pottery Barn and others, as can be seen from the graphic. An expenditure of half that amount by these retailers can be used to reduce margin targets or increase advertising.
As traditional furniture retailing moves into the future, the role of the suppliers to this distribution channel must be better defined. Suppliers are now comfortably selling other distribution channels, such as Etailers and Lifestyle stores as private labels.
Likewise, many retailers are directly importing using their brand. However, the focus from the consumers perspective is not aspirational, but one of price.
Without branding to the consumer of a product’s attributes, quality, design, etc… the product category will become a commodity.
WHO ARE YOU SELLING?
There is an old adage that says, “I know 50% of my advertising is not effective. I just don’t know which 50%!” This is the challenge that must be addressed in order to reduce the cost and to improve the effectiveness of advertising. The foundation must be to know who you are selling at the most basic level of age and income. This is accomplished by appending — on an ongoing basis — the consumer demographics down to a product category level. Impact Consulting Services/FurnitureCore, the parent company of Home Furnishings Business, provides a Consumer Segmentation application that delivers this ongoing service. It is shown in the graphic above.
Comparing these findings to the consumers in your individual markets allows you to better understand your primary consumer. This information, when compared to the consumer you should be selling based upon your merchandise mix, gives direction to the buyers.
TARGETING YOUR CUSTOMERS
One of your most valuable assets is your customer list complete with mailing addresses, email addresses, and telephone numbers. When this list is appended with basic demographic data and purchase history it allows you to use a “rifle approach” to targeting your consumers. Impact Consulting Services/FurnitureCore, the parent company of Home Furnishings Business, maintains a subscription-based application that maintains your databases. The targeting screen is shown in the the graphic above.
The application has a feedback loop to measure the results of direct mail campaigns as well as email campaigns. This provides the opportunity for you to communicate directly with your millennial customers (25-35 years old) about the targeted merchandise just purchased at Market or a special offer to your customers with available credit line or even the customer who has recently bought a bed, but not a new mattress, etc. All of this allows a more targeted approach to advertising. But most important, did it work?