Signs: The Bottom Line

A classic article from the International Sign Association on signs as advertising and the importance of changing signs to increase notability as well as increase foot traffic into your business.
~Amy Donahue
Signage Consultant


Signs as Advertising
A few years ago, a sign manufacturer performed a study of its clients to find out whether their signs were bringing in customers. The businesses surveyed were a year or less old and the surveys were conducted within 30 to 45 days after the installation of a new sign. Thousands of shoppers were asked, "How did you learn about us?"

The results, shown in Table 1, clearly demonstrate that the signs attracted half of the start-up businesses’ new customers – more than any other form of advertising the businesses used and even more than their word-of-mouth referrals.

Table 1: How did you learn about us?
Number of Customer Responses
On-Premise Sign	Word of Mouth	Newspaper	Yellow Pages	TV	Radio
1,234	820	212	139	32	38
Percentage by Category
50%	33%	9%	6%	1%	1%

Naturally, as your business becomes more established, more of your sales will come from repeat customers and fewer will be directly due to your sign. But that does not mean the sign has become unimportant. On the contrary, you must constantly remind your regular

customers that you are there. Even more importantly, studies show that on any given day, as many as 35% of the people passing your business have never seen it before and could become first-time customers because of your sign.

Increasing Profits

The University of San Diego conducted a study to determine the economic value of on-premise signage. Table 2 shows the average increase in sales revenue that resulted from signage improvements. [1]

TABLE 2 - Average Increase in Sales Revenue
Signage Change	Fast Food	Pier One Imports
Add one monument sign	9.3%
Add large pole sign (144 sq. ft.)	15.6%	8.6%
Add chain identity to plaza identity sign		7.7%
Addition of two new directional signs		8.9%
Replaced storefront wall sign with larger sign		7.7%

Let's assume you own a typical family clothing store and add a new, better-designed sign to the business. Here's how it could impact your bottom line:

Your annual sales	$1,757,486
Cost of goods sold	61.8%
Gross Profit Margin	38.2%
Operating expenses (includes other expenses of 1.5%)	36%
Income taxes (estimated at 35%)	0.8%
Income after taxes	1.4%
After tax profit ($1,757,486 x 1.4% or)	$24,604

A 7% increase in sales created by the addition of a needed sign, without increasing operating expenses, would cause the following change in profit:

New sales at 7% ($1,757,486 x .07)	$123,024
Gross Profit from new sales ($123,024 x 38.2% Margin Contribution)	$46,995
Net Profit (Assumes 35% taxes)	$30,547
Total Profit (Original Profit $24,604 plus New Profit $30,547)	$55,151

With a small, 7% bump in sales your profit could jump from $24,604 to $55,151. That's an increase of over 124%! Increasing profits is one way that signs improve your bottom line. Another way is by decreasing expenses.

Cutting Costs

A number of surveys have been conducted before and after installing signage to determine effectiveness. One of these, from late 1996, involved a Los Angeles auto dealership. Three previous auto dealers had failed at the location. The new owner, Aztec Motors, spent much time, energy and money improving the building and lot.

Once renovations were complete, the new owner invested $7,400 in replacement signage that entailed one wall and one double-faced pole sign.

A survey found the new signage, not the renovations or other advertising, was responsible for a minimum of ten new walk-in customers per week, resulting in at least six additional sales per week.

It took less than a month for the new signs to pay for themselves, and the owner was able to reduce his advertising budget from $16,000 to $4,000 per month an annual savings of $144,000.

As part of your advertising you're probably considering one or more of the following: TV, radio, newspapers, Internet, direct mail, etc. The most basic way to evaluate the cost effectiveness of these or any marketing method is the cost per 1,000 exposures. Here's how business signs measure up to other media.

The price and life expectancy of signage varies widely depending upon the type, but let's assume you invested in signage costing $16,500 that should last seven years. If your business is located on a street with 60,000 people passing each day, the cost per 1,000 exposures would be only 11 cents.

The same $16,500 spent on outdoor advertising (i.e., any sign that is not appurtenant to the use of the property, a product sold, or the sale or lease of the property on which it is displayed) for 1,000 exposures would cost $0.83. A similar expenditure in newspaper advertising would cost you $1.57, while television advertising for 1,000 exposures would cost $6.60.

If you'll remember from Table 1, only 1% of first-time customers come in because of your television ad. But 50% come in because of your sign. If you're spending only 11 cents per 1,000 exposures to get that 50%, that's a good use of your money.

[1] Figures from The Economic Value of On-Premise Signage, a study conducted by the University of San Diego School of Business Administration.

Industry Resources. www.signs.org.

Proving the Value of Signs... since 1913

Great article on the value of signs and what they can do for your business.
~Amy Donahue
Signage Consultant

Proving the Value of Signs
By Wade Swormstedt

I recently came across an article in which a sign salesperson responded to a customer’s very pointed question: “How do you know that an electric sign will bring people into my store?” The salesperson’s extended answer bears repeating, so I’ll paraphrase and quote from it. If I quote verbatim, I’ll put it in italics.

First, the salesman, Mr. Smith, asked the owner of the clothing store, Mr. Jones, how many people came into his store each day. Jones figured 100. Next, Smith asked Jones how many people he thought walked past his store (located on a busy downtown street) each day, between 6 a.m. and midnight. Jones figured maybe 1,000.

Smith doubted the figure was that low, but he accepted it, and then calculated that might mean 6,000 per week. Smith even conceded that many of these people probably walked past more than once, so he reduced the number to 3,000.

Next, Smith took some statistics from the latest government census and said the average household income in that community was $50,000. Smith then asked Jones for an estimate as to what percentage of that money would be spent on the type of clothes his store offered. He figured 5%, which would mean $2,500 a year, or roughly $50 a week.

So, 3,000 people a week times $50 per week would mean $150,000 a week would be spent annually by townspeople for the style of clothes Jones sells.

How much of this business are you getting? Smith asked.

Smith reiterated the figures Jones had provided: 100 people a day equals 600 per week, times $50 would mean Jones’ weekly gross would average $30,000. That subsequently means Jones’ $30,000 is approximately 20% of the $150,000 people are spending on his type of clothing.

Why are you not getting more of it? Won’t your store accommodate more customers? Can’t your clerks wait on at least twice as many more? Smith queried. The trouble seems to be that your store doesn’t offer the strongest possible invitation to the crowds to come in and do business with you. People pass by before they have made up their minds whether they want to buy from you or not. You need to tell them who you are, where you are, and what you have to offer.

You need to make the invitation so pressing, to make the suggestion so strong, that they will be impelled to come. What better way is there of carrying your message to these prospective customers than by an electric sign? Projecting over the sidewalk, its suggestive force is working when your customer is still a block away – before he reaches your entrance he has decided that he wants to buy; he comes in and the sale is made. Day and night, the sign is telling its story and extending your invitation to hundreds of buyers.

To be conservative in his estimate, Smith said perhaps the $150,000 figure was high. He was willing to cut it in half to $75,000.

This is surely much less than the actual amount of business you might get each week. But even at that, as your sales today average $30,000, there is left just $45,000 worth going after. Again, taking a safe course in our estimate, we’ll say by the use of progressive advertising, quality goods and splendid store service, you can pull in one-third of this $45,000. $15,000 worth of new business created every week!

What does it cost to get it? Practically nothing. Your rent is the same; taxes and insurance have not increased, and your clerk can sell 50% more goods without over-working. Except for one item, there is clean-cut profit on all the additional sales.

Smith calculated a 25% profit on the added sales, which would bring in $3,750 more per week and $195,000 for the year.

And to get this business and this additional income, you need only an electric sign, which we agree to furnish installed, complete, ready to turn the switch, for $7,000. Doesn’t a net profit of $188,000 justify that?

“How soon can you have it up?” asked Mr. Jones.

Truth is, this article appeared in the December 15, 1913 issue of ST (for a brief time, the magazine was published twice a month). So I multiplied the numbers by 10. And yes, today’s selling environment is much different. In 1913, there was no radio, TV or Internet. Window displays and on-premise signs dominated. And, traffic was decidedly more pedestrian, and the few automobiles moved much more slowly.

However, perhaps the value of the on-premise sign is even more important now because of the recession. Online shopping aside, all the advertising in the world is worthless if people can’t find the retail store. And yes, much more documentation exists today to prove the value of the on-premise sign, but none of it contradicts Smith’s rhetoric. The value of the on-premise sign remains timeless.

Posted on http://signweb.com/content/proving-value-signs Mon Aug 24, 2009 4:28pm EDT By Wade Swormstedt

U.S. Sign Industry Recovering Confidence

Great news today from the U.S. Sign Industry business confidence index. 2010 is going to be a great year for everyone!
~Amy Donahue
Signage Consultant

U.S. Sign Industry Recovering Confidence

The U.S. sign industry is coming back from its economic doldrums, according to the latest business confidence index report from the Sign Analytics research program co-sponsored by Sign & Digital Graphics, and The Visual Information Group LLC, of Cincinnati, Ohio.

The research collaboration, now beginning its third year, measures business confidence among U.S. sign companies twice-yearly. The business confidence index shown in the two accompanying charts (see Business Confidence Index, and Business Confidence Index by Segment) is based on surveys completed by more than 600 sign companies in January.

“We are right back where we started in June 2008 with our first survey,” says Mary Tohill, publisher of Sign & Digital Graphics. “With all that has happened with the economy, it’s exciting to see our sign companies regaining confidence in their outlook. Everyone profits from these improved index numbers.”

The January survey asked sign companies to look ahead to the first six months of 2010, comparing their expectations of sales then with 2009 year-end. Available replies were: Much Better, Better, About the Same, Worse, and Much Worse. More than 45 percent of respondents said they expected business conditions to be either Better or Much Better. Only 17.5 percent of respondents expected business conditions in six months to be Worse, or Much Worse.

By contrastⁱ, the Sign Analytics survey results from a year earlier (January 2009)—when the full brunt of the economic downturn was in evidence—show marked differences. At that time only 29.5% of respondents expected Better, or Much Better, business conditions while 38.7 percent expected conditions to be either Worse or Much Worse.

“These results represent great news not just for sign companies but for the manufacturers and distributors that support them, says David Williamson, principal of The Visual Information Group LLC. “While the 2009 market sizingⁱ data that we will be releasing is troubling due to the economy, 2010 appears to be starting with increased confidence among all of our sign industry segments.”

Because the exact same questions have been asked in each of the four Sign Analytics surveys, research results canⁱ be expressed as an index number. The numerical averages of replies from the June 2008 are expressed as a base of 100. An index number below 100 would indicate a worsening of business confidence, while any number above 100 would indicate improved confidence relative to the June 2008 timeframe.

Sign & Digital Graphics. Wed, 03/03/2010 - 8:07am | by KenM

Signs would connect the spots

An idea for revitalizing downtown Rockford? Signs like the prototype shown here would be part of a system to help direct visitors to downtown attractions in Omaha, Nebraska.
~Amy Donahue
Signage Consultant




Signs would connect the spots

If you’re feeling lost in downtown Omaha, city planners and tourism officials want to help you find your way.

Instead of relying on an office worker’s directions to get you from the state wrestling tournament to an Old Market restaurant, the City Planning Department is working on a new system of street signs to point out major downtown attractions.

The idea is for color-coded signs to work almost like a trail of bread crumbs, using arrows to give people directions one or two blocks at a time.

If the plan moves forward, signs to route foot traffic would go in about 50 locations around downtown, while signs for vehicle traffic would go at about 20 key intersections.

The concept is still being refined, and the City Council will vote Tuesday on whether to spend $61,300 in tourism funding on the project. The city’s Urban Design Review Board signed off on the design concepts Thursday.

“It’s high time to think about how we’re helping people maneuver,” Dana Markel, executive director of the Omaha Convention and Visitors Bureau, said in an interview.

The system being developed, she said, would make downtown more visitor-friendly.

Markel pointed to First National Bank’s pioneer sculptures as an example of something visitors may need to have pointed out to them. She said people may come upon one of the sculptures, but to fully appreciate a “tremendous story,” people need signs to connect all the pieces.

Officials have had a cohesive “wayfinding” plan in mind since 2005, when the city signed a deal with Philadelphia-based Joel Katz Design Associates to design the signs. But the design firm’s early work has sat on a shelf.

The council’s approval would keep the design work moving forward on a project that ultimately could cost $500,000.

If the council approves funds for continued design, the Convention and Visitors Bureau then would seek private funds to support the project.

Councilman Franklin Thompson said he sees the city’s funding as a further investment in downtown, the Old Market and the riverfront. Businesses as well as downtown visitors would benefit, he said.

It’s a case, Thompson said, where the city should “spend a little bit of money to make a whole lot more.”

Cathy Madison, who was in town from Kearney, Neb., on Thursday for the state wrestling tournament, said the directional signs would be useful. Madison and her companions said they took the Embassy Suites shuttle to get where they need to go while downtown.

But sometimes when you get dropped off, she said, “It’s like, where am I at? Which way do I go?”

The Eggleston family of Gothenburg, Neb., made it downtown without any problems thanks to a GPS system. And the trip from the Doubletree Hotel to the Qwest Center Omaha was an easy walk down Capitol Avenue.

The family planned to have dinner in the Old Market. Cody Eggleston said his plan was to “just start walking.”

“Based upon the map in our room, we need to go south and east,” he said. “That’s all I know.”

Jed Moulton, who is coordinating the sign project for the City Planning Department, said signs are meant to be easily recognizable and get people to downtown’s major destinations.

“You can have this kind of cacophony of competing signs,” he said. “You can create mayhem out there.”

By Jeffrey Robb WORLD-HERALD STAFF WRITER

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