Point of Purchase Decisions

Competition from 3M

Where Brains Beat Experience

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."

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Point of Purchase Decisions

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

that disappears."

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."

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Competition from 3M

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

months.

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

smaller print.

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

today.

— by Melinda Sherwood

Floorgraphics Inc., 5 Vaughn Drive, Suite 311,

Princeton 08540. Richard Rebh, CEO. 609-514-0404; fax, 609-514-0204.

Home page: www.floorgraphics.com.

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Where Brains Beat Experience

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.

Winmill Software, 100 Canal Pointe Boulevard, Princeton

08540. Joseph Strazza, CEO. 888-711-MILL. Home page: www.winmill.com.


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