Tuesday, March 26, 2013 | Edited by Daniel Moores
||Home Depot, Lowe's Prepare for Wave of Remodeling
Claudia Brown, a kitchen and bathroom designer for Home Depot Inc., is witnessing what she's rarely seen in the past six years: customers knocking down walls again.
"People aren't hesitant; they're getting what they want," Brown, who works in Greensboro, North Carolina, said earlier this month after selling a kitchen project costing more than $13,000 and a bathroom remodel for $3,700.
Spurred by rising home prices, homeowners who spent the worst housing downturn since the Great Depression taking on only must-do repairs like fixing leaky faucets or minor upgrades like painting are again starting wish-list projects. Those revamps, even in the face of still-tight lending conditions, include additions costing hundreds of thousands of dollars and replacing laminate countertops with marble that's twice as expensive.
Spending for U.S. remodeling in the 12 months through Sept. 30 may climb 20 percent from a year earlier to $145.5 billion, according to a forecast by Harvard University's Joint Center for Housing Studies.
"When the sky is no longer falling, when prices are improving, homeowners are willing to invest," said Scott Mosby, co-owner of St. Louis-based Mosby Building Arts, an architectural and remodeling company.
Mosby, 59, is renovating the basement of a St. Louis home for $230,000, including $40,000 to add a wine cellar. He estimates he'll collect an average of $130,000 for major projects this year, up from about $90,000 in 2010.
After years of trimming costs, firing workers and slowing store openings, Home Depot and Lowe's Cos. recently shifted to preparing for the wave of remodeling. Home Depot acquired a company that measures flooring installation in houses in May and another that remodels kitchens and baths in October.
Lowe's is hiring 9,000 permanent part-time workers this year as it sells more appliances and bathroom fixtures. Both retailers have improved online services allowing homeowners to design projects and communicate with employees as work progresses.
Homeowners are giving themselves "the psychological permission to spend it and feel good about it," Lowe's Chief Executive Officer Robert Niblock said on a conference call March 13.
Niblock told analysts consumers are experiencing "tight credit conditions," impeding the pace at which housing and the home improvement sector will grow over the next two years. Home Depot CEO Frank Blake likened the housing recovery to a "gradual thawing process" pressured by credit constraints and less disposable income for the retailer's customers.
A Federal Reserve survey of banks found that 59 percent of institutions had left basically unchanged credit standards for approving home-equity lines of credit at the end of 2012. On the question of their willingness to make consumer installment loans, 54 percent of banks said their willingness was basically unchanged, the Fed said in the survey released Feb. 4.
U.S. home prices slumped for almost six years through March 2012, declining by more than a third. In the fourth quarter of last year, rebounding prices boosted household wealth to the highest in five years, according to the Fed.
Home Depot's Brown, 44, says she doesn't have time for lunch some days as she fields about 50 queries a week from homeowners, real-estate agents helping clients dress up homes to sell, and investors flipping real estate. Three out of five customers who ask Brown for a price quote on a renovation actually have work done, compared with one in three customers three years ago.
Home Depot Chief Financial Officer Carol Tome said in a telephone interview last month that the market still has a way to recover. An estimated 13.8 million mortgages, about 28 percent of those outstanding in the U.S., had negative equity as of Dec. 31, according to Seattle-based Zillow Inc., the operator of the largest real-estate information website.
"When people start to think of their home as an investment and not an expense, that should be the driver of an improving discretionary spending environment," said Tome, who also serves as deputy chairwoman of the Atlanta Fed.
Bill Smead, whose Seattle-based investment firm owns 180,447 Home Depot shares, sees two waves of consumers spending to fix up their houses: younger adults making their first purchases and longtime homeowners like Smead himself.
Smead, 54, and his wife, Becky, are downsizing and selling their 4,400 square-foot home in Shoreline, Washington, after spending more than $110,000 on improvements such as new windows and a $2,600 kitchen range.
"The housing recovery is shifting into gear," said Smead, who oversees $324 million as chief executive officer of Smead Capital Management.
Ross Bolton and Jeannie Hoag just spent $120,000 to remodel the Greensboro home they've owned for 13 years. They added a living as well as a bathroom with a marble countertop and sink, replaced windows and upgraded the exterior with siding, stone and shingles. A year earlier, the married couple remodeled the kitchen themselves.
"I wouldn't have done it if I couldn't have afforded it," said Bolton, 52, who sells telephone systems to small businesses. "My business is steady."
Jim Kreipe, owner of Square Deal Remodeling Co. in Portland, Oregon, said that for the first time in five years, he's doing a renovation where a bank loaned money based on the value of the improvements, not just the home's equity.
"That is a sure sign that from the bank's point of view that housing is stabilizing and isn't going to get any worse," Kreipe, 60, said in an interview.
Kreipe, who started his company two decades ago, is wrapping up a two-story addition to a Portland home for $200,000, about four times the value of his average project. The homeowners first approached him about the expansion about three years ago and proceeded in December.
"There is a growing need, a buildup," Kreipe said. "It's not an all-out assault of work as it was five years ago. But you can only put off work on your home for so long."
(Source: BusinessWeek, 03/19/13)
||Why Beer Marketers Don't Spend Much on Joe Six-Pack Anymore
With the beer market inundated by fruity flavored brews, pricey craft brands and Justin Timberlake ads, what ever happened to Joe Six-Pack?
He's still there, chugging cheap beers after work, but brewers are dedicating fewer dollars to reach him as the "subpremium" segment declines. Instead, beer marketers, on a quest for fatter profit margins, are encouraging drinkers to trade up to pricier line extensions such as Bud Light Platinum or new concoctions like Redd's Apple Ale.
Brewers are advertising economy brands less: Measured-media spending on the five largest low-end brews -- Natural Light, Busch Light, Busch, Miller High Life and Keystone Light -- fell to $6.9 million last year from $22.4 million in 2011, according to Kantar Media. That compares with the $32 million that Anheuser-Busch InBev spent last year launching Bud Light Platinum. Redd's Apple Ale, introduced by MillerCoors this year, is getting a similarly hefty push, while the brewer last week launched the first national TV ads for Leinenkugel's that spotlight its lemonade-flavored Summer Shandy offering, whose sales soared 90% last year, according to the brewer.
Add in the fact that the economic downturn hurt blue-collar drinkers the most and the result is that the sub-premium segment has been on a long-term slide, falling to 13.5% in 2012 from 15.7% of beer sales at supermarkets in 2009, according to SymphonyIRI. During the same period, craft-beer sales grew to 11.9% from 8.3%, while so-called superpremium beers, like Blue Moon and Shock Top, jumped to 10.7% from 9.1%.
How has beer been able to get consumers to trade up in a sluggish economy? "It comes down to emotional engagement," Trevor Stirling, a beverages analyst at Sanford C. Bernstein, said. "Consumers are much more likely to 'brand' themselves by what they drink, be it a quirky, heavily hopped IPA, or a 'sophisticated' Stella; whereas Natty Light and Beast Light have, if anything, negative brand badging."
New drinkers -- think Joe College -- are a lot more experimental than they used to be, sampling craft beers, cocktails and flavored malt beverages, rather than relying on the same old Keystone or Natural Light. Younger drinkers "grew up with so many different flavors that it's not unusual for them to want to try different things," said Dan Wandel, SymphonyIRI's senior VP-beverage alcohol client insights.
Marketers have also spurred the shifts by hiking prices on subpremium brands. A-B InBev for the past few years has been closing price gaps between mainstream beers like Bud Light and its value brands in an effort to rebalance its portfolio -- and the American beer market at large -- toward premium beers. "Our strategic intent is to grow our share of the value segment, but without growing the segment itself," said Edison Yu, VP-value brands at A-B InBev.
Still, big brewers cannot risk alienating economy drinkers for fear of losing them to cheap liquor or smaller beer brands like Pabst Brewing Co.'s Pabst and Old Milwaukee, whose locally targeted, quirky Will Ferrell ads have gotten a ton of free media attention.
There are signs that A-B InBev and MillerCoors this year are paying a bit more attention to their low-end brands, rolling out new packaging, campaigns and promotions. The goal is to protect share in a segment that still accounts for 18.4% of dollar sales, according to SymphonyIRI. Although declining, the segment is still larger than imports (14.4%) and crafts (5.4%).
"When you are a big mega-brewer like [A-B InBev] or MillerCoors, you are looking to be all things to all people," said Benj Steinman, president of Beer Marketer's Insights. "And if subpremiums are 20% of the business, you damn well want to play there." Economy brands are more about "fast nickels" than a "slow dime," said Ashley Selman, marketing director-economy brands at MillerCoors. "We make less per barrel, but we sell a lot of volume."
As they narrow their focus, value brands are zeroing in on core drinkers. Keystone Light is replacing its "Keith Stone" ads that targeted younger drinkers with a partnership with tournament-fishing organization FLW. Its mostly in-store campaign targets Walmart-shopping, middle-age drinkers.
Busch is seeking to hook more anglers with a limited-time promo this spring in which 50,000 special "fishing-lure" cans will be randomly inserted into cases. Fans who upload pictures of the cans to the Busch Facebook page can win prizes, including a fishing trip with star angler Kevin VanDam.
Miller High Life is launching a campaign that plugs the beer's role in "everyday celebrations," teaming with Harley Davidson for in-store promotions that tout the fact that both brands are turning 110 years old this year.
Despite the competition from crafts, economy brands are not giving up on younger drinkers. A-B InBev's Natural Light, which targets college-age consumers, is seeking to stand out with new "stubby" bottles, dubbed "Fatty Natty," rolling out nationally. MillerCoors is targeting hipsters with its Hamm's brand via grassroots marketing.
The brew is part of the marketer's "classic" economy-brand lineup, which is meant to compete with crafts. "These guys are still challenged by the economy," Ms. Selman said. "And they don't have the money to buy crafts all night long."
(Source: Advertising Age, 03/25/13)
||'Indie Women': Most Powerful, Unheard-of Demo
Marketers spend a lot to reach women, but are they ignoring one of the fastest-growing demographics versus both men and women? The population of so-called "Indie Women" -- 27 or older, not married, not living with a partner and without kids in tow -- constitutes a third of all women, and wields a disproportionate purse power, and it's growing fast.
NBCUniversal's Integrated Media group is promulgating statistics, trends and expert opinions about this sub-group in a 10-minute video, "Indie Women," part of a bi-annual series under the group's Curve Films banner (TheCurveFilms.com). The Integrated Media group has been showing the film at conferences, other marketing and media events and at pop-up "Curve Salons" in major markets.
Some of group's findings, detailed in the film: there are some 31 million "Indie Women" constituting about a third of all adult women; they tend to have more disposable income than other women, spending $1 trillion each year -- $22 billion on vehicles (five times more than independent men), $20 billion on entertainment, and $50 billion on food; they over-index for television by 12%, watching 15% to 64% more late night programs (on NBCUniversal, at least) than average women; and they are multi-screen users.
They are also more socially engaged online both as info seekers and as advocates, being 6% more likely to pay attention to online consumer ratings and reviews, and 12% more likely to say their friends ask them for health and nutrition advice. And they are 10% more likely to say they are pretty much first among friends to shop at a new store.
And they are successful, being the first generation of women to reverse the ceiling in school and at work. They are 57% of undergrads, 59% of masters degree holders, and 52% of managerial positions.
Catherine Balsam-Schwaber, SVP, NBCUniversal Integrated Media, told Marketing Daily that the group chose to study this demographic because the population is large, the people representing it are big, discretionary spenders, and the group is underrepresented, generally, in demographic analyses. "We felt that Indie Women are less profiled than other women, yet there are more of them than there are married moms, so it's a bit of an undiscovered marketing opportunity in general," she says. "And it's the fastest-growing demographic." She points out that the population of this U.S. demographic segment will reach 50 million by 2035.
The "Indie Women" film, which premiered at the recent NBCU "Power of the Purse" conference for the marketing and ad community in Los Angeles, includes interviews with representatives of the demographic, and with people like SuChin Pak at DailyCandy, Toby Barlow of JWT, Claudia Cahill at OMD, and NYU sociologist Eric Klinenberg. A couple of major brands get the spotlight, too, for having done a good job of reaching out to the demographic -- Ford Motor and jeweler De Beers.
The film suggests that Indie Women are more likely to dine, entertain, buy apparel and do more decorating at home than other women. And they are more apt to use online programs like AirBnB "in ways that let them fill in gaps to locating services and building community," Balsam-Schwaber says.
(Source: Marketing Daily, 02/28/13)
Daily Sales Tip: Find Your 'Bell Cow'
On the ranch, the herd will follow along behind the one cow with a bell around its neck.
Many salespeople, especially those with less experience, emulate the example of the team's "bell cow." So, it's
important for you, as a sales manager, to study your team and identify who is the bell cow (informal leader)?
Next, what example is your bell cow setting? Does he/she display excellent work habits? Or, does he/she simply sit
back and "milk" the best territory? The example of work ethic and attitude that your bell cow displays
for the team is, perhaps, even more important than the example you set for the team.
Hopefully, you already have a few players capable of stepping up. If so, talk to them. Help them see the
importance of their success example, and ask them to share more of their talents, skills and energy with less experienced salespeople.
Source: Sales trainer/consultant Kevin Davis