Corrections or additions?
A Business with Nowhere to Go But Up
These articles by Melinda Sherwood were published in U.S. 1
Newspaper on April 28, 1999. All rights reserved.
The next time you wheel a cart through the K-Mart
or Acme, you may find yourself standing on top of a six-foot Pepsi
bottle or inside the creamy middle of an Oreo cookie. If the image
gets your attention, then it may prove that there is still room for
innovation in low-tech (really low) marketing and advertising.
FLOORgraphics Inc., which recently moved from Cherry Hill to 5 Vaughn
Drive near the Princeton Junction train station, creates and installs
trademarked FLOORads — laminated vinyl decals that cover about
six square feet of tile — on the floors of retail stores. The
company leases aisle space from roughly 16,000 retail stores, including
large chains like Acme, Super Fresh and Bradlees, and sells the space
to corporations like Coke or Pepsi.
On the surface it sounds pretty simple. "Size matters," says
Richard Rebh, CEO of FLOORGraphics. "Against the uncluttered backdrop
of white tile floors, the ads stop people in their tracks."
With the constant flow of television and radio commercials, billboards,
product spreads, and banner advertising, why isn’t a horizontal billboard,
frankly, redundant? As it turns out, 70 percent of brand decisions
are made in the store, says Rebh, citing the finding of a 1995 consumer
buying habits study conducted by Point of Purchase Advertising Institute.
In other words, once inside a store, consumers often make a purchase
decision based on a whole range of stimuli, like shelf advertising,
and, of course, prices. "There’s a kind of marketing schizophrenia
out there," says Rebh. "Manufacturers spend enormous amounts
of money building up a product in ad campaigns on television, radio
and so on," he says, "but when you go into a store, all of
The carefully cultivated branding campaign that was once left at the
door is now reinforced on the floor. It is different, says Rebh, from
typical point-of-purchase advertising, which includes everything from
grocery cart ads to coupon dispensers. "Everyone else is presenting
promotion," he says, "we’re presenting a vehicle to continue
advertising campaigns in store."
Although some shoppers won’t be conned by bright ads at their feet
when prices are at eye level, a FLOORgraphics-commissioned research
project showed that brand recognition is still a compelling force
behind purchases. A study showed K-Mart sales of Rogaine going up
55 percent after the FLOORads were installed. A "milk mustache"
in Acme’s dairy section increased milk sales by 12 percent. FLOORads,
it seems, are restoring a considerable degree of brand loyalty. "If
you’re going to spend the money on advertising," Rebh concludes,
"you have to spend it in the store."
As they say in real-estate, location is everything. It is no surprise,
then, that the person who came up with idea to buy and sell floors
is a former real estate salesperson. Fred Potok, founder, spent a
good portion of the 1980s selling resort condominium property in Atlantic
City. When the golden age of real-estate ended, Potok found his way
to VP at Mar-kal, a Montclair-based company that installed decals
on vans, buses and trucks. From his position in the marketing end,
Potok witnessed a technological innovation within the industry. "Our
company had just come across a laminate to put over decals to prevent
it from chipping," Potok explains. "As it turns out, it was
virtually bulletproof." A few days later, Potok lost an important
client to an unexpected competitor, an ad agency that had come up
with a new marketing gimmick: placing ads on the side of buses.
Potok put the two ideas together and, within a few weeks, was back
in the real estate business. This time, however, he was buying acres
of white tiles instead of white sand.
During the 1980s, Potok had paired up with a graphic artist turned
real-estate salesman named George Rebh. Now he found a compelling
reason to get back in touch, and Rebh agreed to join the new company.
"As an artist," says Potok, "he understood the concept
and could help us be up there with the finest of any kind of media."
To truly become a "media" company, however, Rebh and Potok
first had to declare the floor a "medium." That idea took
some time to gel. While pitching floor ads to retail centers, Rebh
and Potok appeased many anxieties about how retail stores would pay
for their product. "If we had in any way cannibalized their co-op
dollars," said Potok, "we’d be taking money out of their right
pocket and putting it back into their left." So they decided to
positioned themselves as media. "That was the key to the business,"
says Potok, "because the money came out of those budgets."
FLOORgraphics had solved one problem, but ran head first into another.
The company had only leased floors in 3,000 retail spaces — roughly
4,000 less than what manufacturers felt necessary to ensure advertising
penetration on a national basis. The company was unable to capture
the threshold number of retail stores because they were splitting
the market with 3M, which decided to go into competition with them
in 1996. "With both of us in the business, neither of us could
be successful," says Potok. "With them having 3,000 locations,
and us the same, we were constantly bucking heads." The irony
was that 3M, the manufacturers of a strong vinyl film that could be
attached to floors, was also the company’s supplier. Still, by 1997,
FLOORgraphics had yet to lay a single ad.
Unable to secure contracts with potential advertisers,
Rebh decided to call in his younger brother, Richard, who was working
in Silicon Valley. A graduate of Princeton University’s Woodrow Wilson
school of Public Affairs, Class of 1976, with a business and law degree
from Stanford University, Rebh brought 15 years of experience with
start-up technology companies to the business. By January of 1998,
he helped secure $5 million in venture capital from Interlaken Capital,
Inc. in Greenwich, Connecticut. Still, FLOORgraphics had no advertisers.
FLOORgraphics finally made a dent in the retail world in March of
last year, when K-Mart signed on with the company. "The K-Mart
contract really put the company on bandstand," says Rebh, "it
gave us something to sell." With the addition of 2,200 K-Mart
stores, FLOORgraphics was able to secure 23 advertisers in the following
Meanwhile, 3M sold its billboard division, which handled floor advertising,
but it was later coughed up in the deal and floundered. This allowed
FLOORGraphics to approach their competitor in August of 1998 with
an offer. In a multi-million dollar deal, FLOORgraphics bought out
the division and consolidated the business. "3M did not understand
that this was an advertising/sales business," Richard Rebh remarks.
"You can’t take a print ad and stick it on the floor."
The creative team at FLOORgraphics, Rebh maintains, approaches the
floor like an artist approaches a canvas. Here, however, minimalism
appears to be the key. "The impact of each floor ad depreciates
as the number of ads increases," says Rebh, so the company limits
the number of ads to two per aisle. No competing products — Coke
and Pepsi for example — are featured simultaneously, but it is
common to see competitors in alternating cycles.
Ads, like the groceries they are hawking, also have an expiration
date. FLOORgraphics will run an ad for any number of cycles, but after
about 12 weeks, most ads are stale. The creative team will then enter
another round of consultation with ad agencies and manufacturers to
come up with fresh ideas. "One of the best ways to reach the audience
is to link into existing ad campaigns," says Rebh, reiterating
that the money spent on ad campaigns to garner brand loyalty have
to reinforced at the moment of purchase. "We also like to appeal
to kids, since most shoppers bring their kids along with them,"
says Rebh. He points out that the sheer size of the ads can also be
a significant draw on senior citizens, who may have a problem reading
FLOORgraphics recently received another $5 million in venture capital,
this time from Catterton-Simon Partners in Greenwich. Although the
company has no other competitors at present, a representative in the
Philadelphia office of News America Marketing, a company which produces
a full range of point-of-purchase advertising tactics, indicated that
it may enter the floor advertising business soon. The corporate headquarters
in New York would not confirm this, however.
Since saturation of the market, while applying a minimalist touch,
is crucial to the floor advertising business, potential competitors
should not wait too long to get into the game. Some retail stores
may even want to start their own floor advertising division. Wal-Mart
reportedly may do exactly that. In the meantime, FLOORads may be the
loudest — and lowest — "call to action" in stores
— by Melinda Sherwood
Princeton 08540. Richard Rebh, CEO. 609-514-0404; fax, 609-514-0204.
Home page: www.floorgraphics.com.
Winmill Software, a New-York based software and Internet/intranet
developer, has opened an office at 100 Canal Pointe Boulevard. Founded
five years ago by 1985 Penn State graduate Joseph Strazza, the company’s
clients include such companies as Goldman Sachs, Ernst and Young,
and Merck. Strazza expects to find new clients among the pharmaceutical
companies in the area.
Although the Princeton office has five people now, Strazza plans to
hire as many as 25 by the end of the year, bringing the total number
of Winmill employees up to 200. Other offices are located in New York
City, Boston, Melville (New York) and State College (Pennsylvania).
Revenues in 1998 were $13.8 million, but by the year 2000, Strazza
anticipates being at the helm of a $20 million business.
Despite a BA in marketing, Strazza says he uses an unconventional
approach. "I was basically disenchanted with the way most companies
do business," he says, "so I wanted to create a place where
people were committed to life-long learning." In the rapidly changing
marketplace, Strazza sees flexibility as essential to business, and
good workers essential to the company’s flexibility. Says Strazza:
"We hire very smart people."
Roughly 65 percent of his employees are Ivy league graduates. Strazza
says he puts a great value on loyalty, motivation, and intelligence
in employees and job candidates; job experience, he claims, is the
last thing considered. Regardless of work history, new hires are enrolled
in a 13-week training program that Strazza calls "Winmill University,"
a combination of classroom courses and web-based learning programs
that demand 70 hours out of a six day week.
Strazza shows his commitment to smart people through support of various
universities and research institutions. Winmill donates five percent
of its profits to school programs and graduate students at Fordham,
Columbia, and Penn State.
08540. Joseph Strazza, CEO. 888-711-MILL. Home page: www.winmill.com.
Corrections or additions?
This page is published by PrincetonInfo.com
— the web site for U.S. 1 Newspaper in Princeton, New Jersey.