Marketing Matters

By Bonnie Morrow | October 1, 2009

Because most coatings manufacturers have a broad, complex business model that embraces multiple customer targets, the selling and marketing of coatings requires a vigilant and precise understanding of customers and their needs.

Research has often shown paint to be perceived as a commodity product, particularly among homeowners (DIYers) who, through no fault of their own, are not always able to differentiate between brands. This is because there is normally an 18-month purchase cycle associated with interior paint projects. A lot can happen in 18-months making it difficult and expensive for marketers to reinforce brand and retail awareness and to build loyalty. Other factors that can thwart customer loyalty include the ability of most retailers to match colors from one brand to another enabling customers to take a color sample from one retail outlet and duplicating it elsewhere.

Professional painting contractors are more able to detect brand and color differences because of their almost daily interaction with products. The variables that can affect their brand loyalty include client preference, retailer convenience and relationships, and other alliances forged by manufacturers.

Since the downturn in the housing market and its attendant impact on the home improvement industry, less paint is being sold and less advertising dollars are being spent promoting it. This economic environment has suppressed sales as much as 25-30% and has forced marketers to become savvier at reaching customers and convincing them to paint.

California Products' Elements Zero VOC 100% acrylic interior paint family.
No stranger to marketing challenges is Dan Cohen, vice president of marketing at California Products Corporation, an 80-year old company headquartered in Andover, MA. California Products manufactures Elements Zero VOC 100% acrylic interior paint, which is LEED compliant. The company is one of very few whose premium paint lines are based on 100% acrylic technology. California products are sold through a carefully selected independent retail network. Other well-known products include premium lines of primers, clears, stains and enamels for residential and commercial use.

I talked with Dan in August-prime time in the residential painting season-to discuss how his company is endearing itself to its retail and customer bases.

Given the state of the economy and its effect on the home improvement industry, how has the strategic direction for key players in the architectural coatings business changed?

Dan Cohen, VP of Marketing
California Products Corp.
DAN COHEN: Based upon prior economic downturns, I do not believe that anyone in the home improvement industry believed that this cycle would be so long or so deep. As the period lengthens, you are seeing dramatic company shifts to aggressive market strategies attempting to minimize the impact or increase market position. Pricing strategies and key manufacturer leverage are being used to weaken competitors and force the smaller companies out. Many of the old rules of marketplace and channel protection have been eliminated. This is especially true of the national independent brands. The big box stores have taken a very aggressive position on pricing, with one company actually lowering retail prices.

CW: In what ways has it forced corporate leadership to adopt new ways of thinking about a very mature industry?

COHEN: California Products management has had to become much more strategic and defined with market penetration strategies. Cost control and select funding of initiatives have forced us to be better at what we do. The funding of market research has been lowered, so much of our research has gone to grass roots efforts. Market opportunities are carefully scrutinized and weighed prior to making decisions. In an attempt to hold and increase our dealer loyalty, we have resisted following our national counterparts with market over-saturation. Instead we have sought out expansion opportunities such as our recent asset acquisitions of Progress Paint Brands of Louisville, KY, our new distribution center in Chicago and our expansion to Canada.

CW: What has been the impact on employees?

COHEN: California Products has been very conscious and fortunate in not having wide range corporate layoffs or salary reductions. The morale has been held, as most employees understand the current economic situation. The greater effect has been on the field staff whose income is directly related to sales and to the competitive aggression. The field staff has had to become more resourceful in seeking opportunities and more creative in closing prospects.

CW: Brand or product differentiation within the coatings industry has always been a challenge; what are you doing now to ensure your brands have their own identity.

COHEN: The coatings industry has been historically viewed as a commodity business. Any good idea in product or marketing is quickly replicated by the competitors. Finding a value added position (VAP) used to be as critical for a company as it was for a product. Diff�erentiation is the greatest challenge. California Products' mantra of best quality-best service-best people is now the expected. Having a somewhat sterling reputation, we have shifted most of our efforts to technology and innovation and finding unique selling points (USP) as a means of having the products distinguished at the consumer and professional levels. The use of ceramic microspheres, Microban brand as an antimicrobial, and applying names like Penebond to an alkyd modification are examples of California trying to find a VAP for its products. Paralleling this is the use and availability of color in your tools and sampling systems. Color is a true separator when it comes to consumer choice. We are exploring synergistic color relationships outside of our industry and are advancing specific ones, one of our current market strengths. We were on the forefront of the color sampling tinting machines and it has been a successful tool for a select group of dealers.

California Products Corporation's corporate headquarters in Andover, MA.
CW: Companies such as yours enjoy a two-tier sales model: B2B and B2C with both sharing the retail outlet. How have you made your retail channel not only hospitable but serviceable to both?

COHEN: When you do not control the retail channel you must work within the confines and limitations of the group. Many operations have continued to evolve into full service color, decorating and professional service centers. Unfortunately many still treat the business as a commodity center and are experiencing a declining result. We try to supplant the retail operations with tools in providing them an opportunity to expand sales and customer retention. The main tools are education, merchandising and in-store tools, and sales support from our field staff. We continue to expand and customize our training to meet the market changes. We have added higher impact in-store merchandising and tools. We also are aggressively marketing our on-line color presence for at home color tools and our website for product and technical support.

CW: Even in a perfect world, homeowners put the painting experience somewhere between a dental visit and a colonoscopy. As a result, the purchase cycle for paint is very broad. This phenomenon wreaks havoc not only on brand loyalty but retailer loyalty as well. What are you doing to compress the purchase cycle?

COHEN: I love the analogy! The fact is that very few enjoy the painting process, yet almost all enjoy the result. Painting is a very low cost way to dramatically alter your environment. The problem is today's lifestyle does not allow many the skills, experience or time to do so. Branding has become increasingly important as many have extended the cycle. What used to be a room at a time has now gone to a project based activity. Loyalties to brands have subsided as the average consumer knows less and paints less frequently. It is more about putting yourself in front of the consumer for top-of-mind awareness. We have maintained a strong devotion to quality and product performance. We acknowledge that in order to gain loyalty, you must already posses a happy customer. We stress to our customers through our training, that the average consumer is not shopping the independent channel for paint as a commodity. They shop it for a higher level of product, expertise and service. It is important that our dealers treat their customers with the same quality approach as we do for our product.

CW: Despite the maturity of the industry, there is still a lack of uniformity in certain areas of the coatings industry, for example, sheen. What other areas of the industry are in need of more decisive collaboration? Would you include VOC legislation as an example or is that another issue altogether?

COHEN: There certainly is a loose classification of terminology and equalization of industry terms and phrases. The coatings industry has no adherence to defining ranges of sheens or definition of quality. The average consumer who shops for a can of paint or primer has no idea what the resin or ingredient benefits are in the product or the limitations inherent with the product. One company a few years back promoted titanium dioxide as the key component and consumers were coming into stores looking for black paint with TI02. Many consumers do not know if there is a differential in sheen from a satin to a semi gloss. It is extremely difficult for the average consumer to know what they are buying or equating values between products. More often than not, they are buying brand or outlet.

The VOC, as they go to national limits, will certainly equalize some of the disparity of products. The question is will they be patrolled or enforced. For the consumer's protection, I believe that national associations should set standards, not guidelines for coatings. The fact that some companies are being allowed to use the terms non-toxic as a prominent selling feature of their product is one that I truly question.

CW: As we continue to see the coatings industry players decrease through acquisition and otherwise, is there a future for coexistence between coatings manufacturers and makers of non-paintable surfaces such as TREX and HardiePlank?

COHEN: I think that they have already made certain strategic alliances with the approved use on their products. The prefinished colors have them already involved with the industry at another level. People will always want a choice. The success of the industry as a whole to promote the long-term "non peeling" characteristics on dimensionally stable products like vinyl siding and synthetic exterior surfaces will go a long way to driving exterior coating sales. Most customers do not change color because they believe it will perform as if they were going over wood or masonry.

CW: You mentioned that we've evolved from a "product-trinsic" to a "color-trinsic" way of responding to customer needs and trends. That evolution has had a dramatic effect on busting any silos that might have existed before within corporate walls. It has forced a major course correction requiring a profound, second-look at how we in the architectural coatings industry do business. We've had to convince ourselves to look at our products the way our customers do. It has also demanded we reexamine what our brand focus is and should be. It also mandates we adopt universality in our communication so that our retailers are strategically aligned. Can you comment on how this has reshaped California Products as a corporation and how it is organized and staffed?

COHEN: The ideas of selling paint benefits have given way to selling lifestyle. The shift has gone from technical to color and corporate marketing direction has changed from promoting from the male to the female. All of this has had managements in our business refocus on the consumer and attempt to find out what is driving the sale. Consumer research, designer input and trend analysis has never been more critical. We realized that for the first time color outpaced chemistry as a determining factor. Our standard way of developing a new color system through a color co-op changed. We ventured with Dunn Edwards on a well researched color palette-The Perfect Palette-which was rated in focus groups as the finest color system available today. This investment was more than three times our anticipated budget, but we knew it would be a driving force for years to come. We have improved our color tools and have invested in a new color lab. We have also increased emphasis on color professional liaisons.

CW: H.R. 3382, The Home Im�provement Revitalization for the Economy Act (HIRE) proposes to offer incentives for those undertaking home improvement projects; paint purchases are included. Do you feel this will result in a significant stimulus to bridge the industry until its projected turnaround in Q2 2010?

COHEN: I do not believe that this act will have a dramatic effect on our business. Although it will stimulate some activity the true turn will come when consumers feel they are secure in their jobs and when they feel that home buying is not a risk. Nobody wants to surrender equity. The average consumer will spend when they are getting or increasing value as was shown with the "Cash for Clunkers" program in the auto industry. At present the consumers are still in the "rainy day" fund mode. They are saving and awaiting that confidence.

CW: Professional painting contractors have different needs from homeowners. However, they must be responsive to the needs of homeowners who are often influenced by trends and certainly by the media. What is the DIFM side of the business doing to keep itself busy and how is it reinventing itself? How is California Products continuing to endear itself to the professional panting community?

COHEN: It is becoming increasing difficult to reach out to an audience who is so unwilling to be involved as a group or association. We try at store level to hold information breakfasts and alike. We are planning to increase the use of training at our facility to better educate the professionals to problems in the field and usage of our products. We will continue to utilize multiple forms of electronic and print media to drive new products and solutions. We find that most contractors will only switch or suggest consumer choice when it is of benefit to them. We have a tremendous amount of contractor loyalty to our California Paints exterior house paints, Troubleshooter Primers and Storm Stain Exterior Stains due to the long-term reputation of performance. Having the number one rating in Consumer Reports for so many years for our house paint has provided the contractor the leverage to convince the homeowner.

CW: The homeowner has been told that the least expensive way to affect a new look for homes is to paint. We know through research that "paint begets more than paint." For example, a freshly painted wall accentuates the need for a new sofa, etc. It also, we hope, encourages homeowners to paint adjacent surfaces and rooms. With money tight, how do we convince the homeowner they can still bring about a desired look with a minimal investment? Does that require us to ease off on the restoration hardware "syndrome?"

COHEN: The increased use of color has certainly shifted the look and feel of a newly painted room from a fresh look to a new interior ambiance. Our thoughts are that with the right color advice any consumer can handle this change from an altered to a totally new look based upon their desire and budget. On a budget, a depth and sheen change in an existing color and a couple of throw pillows can easily get the desired change in appearance. Since the introduction of The Perfect Palette color system, the amount of calls and e-mails we get for color assistance is growing rapidly. Retailers who feature color expertise and services are realizing the benefits. Our dealer training features color education and our website is a great decorating tool for the color novice or professional. The complete, one-stop, off the shelf decorating store will always be of service to a select market. Just like the mannequin in the department store. Interior and exterior color stylists, once for the wealthy, are becoming more and more commonplace to the consumer.

CW: What would you like to add that I've not covered? Examples might include the future of the industry, the impact of global retailer strategy on the US, innovation in raw materials such as pigments and resins, etc.

COHEN: The industry is certainly going to continue to contract and consolidate its suppliers. Our biggest concern is that out of need or greed the independent channel members, those who built their success on products and in markets that are exclusive, are throwing away their futures. They are acquiescing to the pressures of the large manufacturers and are allowing the markets and brands they built to be eroded. Rather than fighting for their futures, they are surrendering control. The big boxes will continue to gain in market share and the level of quality and expertise must be improved in the independent dealer base.

Innovations for enhanced product performance will continue especially in the water-based coatings. Pigments technology in-store colorization could provide the greatest impact on product performance in the years ahead.

About the author: Bonnie Morrow is a partner at The Coatings Consultancy, which can be found on the web at www.thecoatings�consultancy.com. She is a marketing and marketing research executive whose specialty is helping companies build and sustain brand loyalty by differentiating products from competition. She was selected by Benjamin Moore Paint Company to establish their marketing research and competitive intelligence group in support of both corporate and retail strategic initiatives. Her successes included identifying appropriate sales and communications strategies for Benjamin Moore's waterborne brand platform. She now consults for the coatings and other industries.