"THE MARKETING of COLOR"

If your company markets components, melamines, laminates, kitchens, store fixtures or even consumer products, I think you will find this article "THE MARKETING of COLOR" to be of interest. Since we are all in the business of figuring out what consumers want, exploring the history of color, how trends are created and how distribution affects color develop is highly relevant. Its hard to be a predictor of future trends however after you read more of how I analyze past trends, I think you'll see that some predictions can, in fact, be made towards future color trends.

HISTORY OF COLOR
As a fellow human, certainly you can attest to how important color is to our daily lives but think about how important color was to early man. The decision to eat one food over another and the color of poisonous snakes for example could literally determined if you survived to produce offspring. Interpreting color and making predictions could be a life or death situation. As a result, humans have certain innate reactions to color that seem to, in general, be universal across cultures. Lets examine more about the history of colors and how they evoke emotions today.

RED: If you look at the color red it typically has two very different feelings; pleasure and danger. If you look at food, strawberries can be sweet and safe to eat yet Hawthorn's red berries can make you sick. This creates a dual emotion that Red can be a volatile color that could create pleasure or pain. Another example of red, are red lips. Red lips in most cultures signify that a woman is fertile and is therefore loosely translated to passion. Today red lipstick is used not only as a cultural decoration but its origins can be traced far back in various civilizations. Another place red was seen in the history of humans is on the battlefield. Red blood signifies the calamities of war which could be disaster if you were on the loosing side but you might feel elation after winning a war and getting to live another day.

Red is a very common color used by certain consumer products to invoke passion however many companies such as financial companies avoid red entirely as it signifies danger or loss. When companies are loosing money they are known to be "in the red" for example.

GREEN: Green typically signifies "wealth". Imagine all of our years growing crops and living off the green of the land. Land use to be viewed as the single source for survival and hence the color green signifies money and wealth. Starbucks is a successful company that uses Green and a symbol that looks like a coin. Have you ever thought that Starbucks sells the aspiration to wealth rather than only selling coffee. Books have been written on the success of Starbucks and how vital green was to their overall success.

YELLOW: Just like Red, yellow evokes dual emotion. One is of hope, happiness and sunshine and the other is in betray or deceit. We all can understand that the sun represents hope and brightness but why is yellow often seen as the color of deceit or betrayal? For thousands of years the color yellow has signified betrayal in most cultures (but not all ) however some trace the yellow color to certain deseases and illnesses that have plagued humans from the beginning. I won't elaborate too deeply in this short article however I may expand examples in future articles.

BLACK: Black typically signifies power, authority, fear and death. When you take any color to its darkest value it becomes black. If you can imagine ancient mankind and how a decomposed body turned black or how a crop or home might be destroyed by fire would be black. But the most moving evidence that early man might be afraid of black would be from when the sky turns black. Today black also signifies authority such as in a suit or when a judge wears a black robe rather than a yellow one for example.

BLUE: Blue can be most closely related to Water and the sky. Do you ever feel more peaceful simply by looking at water or the sky? I know I do... Ancient humans always felt safe when they lived close to water because we can live for weeks without food but only a few days without drinkable water. Insurance companies, banks and even 3D Laminate companies often use the color blue to make people feel safe in using their product. Do you use a particular company due to their color unknowingly?

HOW WE PERCEIVE COLOR:
In a previous article I wrote called "Understanding the Language of Color", I went into depth about various things that affect how we perceive colors. I won't go too deep in this article however I will say that how we perceive color is not always accurate... For example, think of the "area effect". To understand the area effect, imagine making a match to a large 2' X 2' board and then looking at a small 3" X 3" match to that board. At first glance you may think the larger board is more light however what if you found out that you were in fact looking at the exact same color!? Simply by looking at a larger piece is creates an accumulation of color in your eye (so to speak) that gives you the perception that it is lighter than the other. In summation, there are various situations such as metamerism, the area affect and others that can make human perceive color differently from situation to situation.

ANTITHESIS TRENDS
The Mirriam Webster dictionary defines a trend as "A general direction in which something is developing or changing". But what is an "Antitheisis Trend"? First I should say this is a Markism or in other words a definition made up by myself... (you're free to laugh at or with me here) Due to my passion for marketing and exploration of marketing trends I often come up with situations in which there does not exist a marketing industry term. Previously I had come up with the term "Gain Leader"; opposite of "Loss Leader" and I've received a lot of positive feedback on this new marketing term and perspective. Getting back to the Antithesis... My definition of an "Antithesis Trend" is "A new trend created by the desire for change away from the current trend". If you ask a music executive or clothing designer if they have ever experienced an "Antithesis Trend" they would first ask you what it meant and then after you gave them the definition they would immediately point at you and say "Yes ! Thats my reality. "

In the Music Industry, lets examine some examples of Antithesis Trends. Before you think I've gone on a tangent, trust that I will tie this in to how color trends can also be affected by this. Next I will take you on a journey from the 1950s music through 2010 and show how a desire for change drove new trends and then give specific examples of musical artists and how they benefited from the trend change.

Early 1950s; This era was made up primarily with Crooners. This romantic singers appealed to love, relationships and courtship. Artist such as Buddy Holley were big in the 1950s and to say that the decade was full of G rated love songs would be an understatement. Whats the opposite of a G rated love ballad by a Crooner? Elvis...

1956/1960s; When Elvis first appeared on the Ed Sullivan show on September 9th, 1956 with his sexual innuendos and gyrating hips he put a nail in the coffin of the days of the Crooner. Elvis was extremely talented but he was also at the right place at the right time. Elvis mixed the Blues with Crooners and became the Antithesis of the Crooner trend. That is until.

1970s; Disco and the Bee Gees.. Disco brought in an era of excess, drug use, disco balls and dance. Although Elvis had smooth moves of his own, Disco brought in an error of the individual dancing. It is a bit difficult to draw an exact correlation of how Disco was the opposite of Elvis however one can certainly argue that Disco dominated the 70s and that it was very different to say the least.

1980s; Hair Bands. Motley Crew. When the 80s music scene came it as if someone turned out the lights and took the disco ball home. "No more disco for you" they probably grumbled as they exited out the back door of Studio 54. Bands such as Motley Crew and Warrant wore make up, teased their hair and did not come close to breaking out into dance as in the days of disco. It is easy to see how the Hair Bands were the Antithesis of Disco until...

1990s Grunge Rock. Nirvana. From the moment I saw the video "Smells like Team Spirit" and cought wind of the growing Seattle Grunge movement I knew that Hair Bands were simply uncool. Think of how Grunge is actually the opposite of hair bands and make up. Many in the Grunge music scene avoided showers and there were no sequins or makeup to be found. Is it possible that Grunge became popular BECAUSE it was the opposite of Hair bands?

2000s Rap/Bling. Tupac. What is the opposite of a white guy from Seattle who believes in minamalism? Hmmm. Well certainly the opposite of Grunge Rock is Rap featuring videos with gold chains, cars and excess. Rappers are the new rock stars....they say...

ANTITHESIS TRENDS can be witnessed in the music industry over the past 60 years and one could argue that no new fad would have quite the impact if people weren't so darn tired of the past trend. It could be argued that if you want to know whats going to be big, just figure out whats the opposite of whats hot now.

Color Trends Antithesis: Many laminate colorists often discuss how when an economic market declines that darker colors become more popular. Our best seller for the past four years has been Wenge which is a dark woodgrain and certainly one can argue that its in line with what colorists have been saying. On the flip side, colorists also say that lighter colors tend to become more popular during economic growth. This has been applied to laminates however it becomes more complicated when we look at cars or fashion. But in a bigger sense, its important to understand how trends can be created based upon using a feeling for the bigger world around you.

MASS THOUGHT'S EFFECT on COLOR TRENDS

Mass Thought or Mass Consciousness essentially means that there are common thoughts shared by your community that are influenced by religion, culture and socio-economics. As a human you share many common thoughts and each person influences mass opinion through his or her vote or opinion towards a given subject. We have all heard of the "butterfly affect" however mass thought is much more easy to describe and understand. Above I mentioned how trends can be created by the general public desire for change (Antithesis) away from a current trend and I've also given a history of color and how our emotions are influenced by our preconceptions about what colors mean to us. What if I gave a test and where I had a picture of a red ball and a blue ball and then asked the general public "Which ball do you desire more". Wouldn't logic tell you that it would be 50/50? What if you found that the 70% desired the red ball? How would explain it? What if you had a society who was sick and tired of taking chances and dealing with products that did not work and then gave them the test whereby 70% then chose the blue ball? This is a theoretical question and no such study has been done however if you understand color more deeply and if you have spent much time studying consumer trends then you can start to see that such a result may be possible.

The DISTRIBUTOR EFFECT.... on COlOR TRENDS

The next area that can affect a color's success is the Distribution of that product. Imagine that you are a colorist for a melamine board producer and your job is to select colors that will be a hit in the market. Of course you will consider the following:

1. What you are seeing at trade shows. Example: textures

2. What has been selling more in the recent past. Ex: dark colors, warm tones

3. What has not been selling in the recent past. Ex: Items with knots

4. What the market is asking for. Ex: Less movement in the wood speciesand more linear

5. What you believe your distributors will buy into

What would you add?

So you start to ask yourself questions such as "Will the market like it?" "Whats in my line now?", "What trends are coming?", "What trends are going?" and then finally "What items can I get my distributing customers to buy into?" Now imagine that the distributors make a comment such as "I don't have anything in a warm honey shade ..." Bingo. Now if you find a wood species that is linear, warm in tone, looks good with that new ticking texturing you just launched, doesnt have knots and one of your key distributors thinks it will fill his line. Now you've got something.

Now of course I've just simplified the process for the sake of this article but think about the importance of a Distributor for any product line. Do you think that Ford considers their dealerships when creating new cars? Of course its a consideration since they will be preordering the inventory.

In addition, imagine that you are going to buy a sedan and you really want a black Camry and then you go to a few Toyota dealers in your town but they are all out of black Camrys but they do have black Avalons which cost more. It could be that the Distributor might have known that there is a demand for black sedans and so he intentionally stocked more black Avalons since they were a higher margin car. Now imagine deciding to go ahead and buy an Avalon because you really really wanted a black Toyota sedan. Now imagine that simply by Toyota allowing the Avalon to be a higher margin car and then knowing that black luxury sedans sell better than gold ones and then mysteriously black Avalons outsell black Camry's 2 to 1 yet Camrys outsell Avalons. I call this the Distributor Effect...A truly powerful persuasion on the outcome of color sales.

CONCLUSION:

As we examine the MARKETING of COLOR we can clearly see that how humans interact with color can be based upon our preconceived feelings that are on a primal level, based upon trends , Antithesis trends, Mass Thought and even based upon the Distributor Effect. The Marketing of Color sounds like a crap shoot but the more you examine humans, the market and human behavior you will find that its not only possible to predict color trends but to actually create color trends.

Global Consumption of 3D Laminate Thermofoils

In the past two weeks I have been asked twice either about the size of the US or about the size of the global market of 3D Laminates. In one specific instance a consulting firm inquired. At least once or twice a year I get a call from a consulting firm and typically the way it works is that they cannot divulge who they are paid from but that if they want information they also must provide me with information. So as a result it increases my understanding of the business while I provide them with a general guideline about the market. Some may think that this is helping the competition but I view it differently. Often factories will make foolish decisions or invest too heavily based upon thinking a market is much bigger than it actually is. My theory is that its best just to give honest information on the market as it is and then let people make their own decisions in accordance.

As a result of these two recent inquiries, I decided to write a more detailed synopsis of this market as it relates to the macro market as a whole both locally and globally. Although you may feel that its not important to know the world consumption I think that by taking 10 minutes to read this that it will give you a mountain top view. This can help you in ways that may not be obvious or apparent.

Please keep in mind that the cost numbers I give are averages as a whole and may not be your average.

US & CANADA MARKET SIZE

Firstly lets start with the overall size of 3DL sales volume for the US & Canada market. Based upon my relationships with other manufacturers and based upon my general knowledge of this market I think its a fair consensus to say that the current market volume in dollars is approximately $50 to $60 million in rigid 3DL Sales. This does not include flat lamination or profile wrapping grade material. In this market lets use the average price of $0.50 per square foot. Of course solids are less and high glosses are more however if we use the average of $0.50 per square foot its pretty accurate. If you can accept the market as conservatively being $50 million square feet at an average of $0.50 per square feet then it means that over 100 million square feet of 3D forming laminates are solid in the US & Canada with the current market.

Next lets try to calculate the amount of components sold. Since I don't have this information on hand I will take basic market knowledge and try to calculate. I know that there are doors that are sold for all types of price ranges however for the calculation I think that $5.00 per square foot would be a good average. Again, whites are sold for less and high gloss, custom components or desk tops are sold for more. When 3DL is used many people calculate in different ways as to the scrap rate. If you take the width of 57" this means there are 4.75 feet wide and if the bed length on average is 9 feet this gives an average of 43 feet of material. With waste on the sides for clamping the material down, between doors and on the length it is conservative to say that about 30% of the material goes to waste. Most companies bale and recycle the material however for this study lets say that only 70 million square feet of material makes it onto a component out of the 100 million square feet consumed. This means that the components sold could be approximately $350 million in sales. Many reading this article will be able to poke holes because they sell on average at $8 a square or their press is 10' long however if you really average everything out it it doesn't have a big impact on the final numbers either way. Again this is just to give a snapshot of the market.

US & CANADA FINISH PRODUCT:

Next I'd like to calculate the finished Kitchens, Office or Store Fixture prices sold based upon the components. The purpose to calculate this is to final the components impact on the final cost of the product and also to find the overall market influence of the product's final destination. This is an extremely difficult calculation but lets take a crack at it. Firstly it would be very hard to pinpoint what the final product mix is between Kitchens, Office Desktops, Store Fixtures or doors sold for refacing. Certainly there are Kitchens sold at $2K, $5K, $10K and some at $20K utilizing 3DL. There are refacing jobs sold at $2K, $5K and $8K and there are office desks sold at $400, $2K and $4K. If we can assume that most of the volume is sold at the more affordable level then we could calculate that the average cost finished cabinetry sold would be at an average of $2K. This is a very arguable number however with all factors considered I think that $2K is a safe number to use. Keep in mind that if you are buying retail that the average may be closer to $8K but the price to buy one Kitchen is much more than when buying 300 for obvious reasons. To calculate the total cabinetry or finish products sold based upon the total component sales we can say that on average there are 20 doors in a North American Kitchen with an average of 2.5 square feet for each door. It is generally agreed that this is the national average. This means that there is an overall average of 50 square feet in each Kitchen. If we use the average cost of $5 per square foot then the average would be $250 in components. For those of you reading this cringing thinking the price is too low; please keep in mind that this includes the overall total as sold in volume not the average for custom produced components. We are all familiar with Pareto's principle of 80/20 which states that 80% of events are derived from 20% of the causes. Simply put, there are 20% of larger producers doing over 80% of the volume and therefore skewing the numbers.

If we take the average of $250 in components on $2K in finished product then we can calculate that the finished product is about 8 times more than the cost of the components on average. In a small wholesale environment the numbers are closer to 10 and in a retail environment the number is closer to 15 but in a market calculation scenario the calculation would be closer to 8 due to the larger projects. So if we can say that there are $350 million in component sales then we can say that the final cabinetry or goods sold in the US & Canada are approximately 2.8 billion. I would say that in my estimation that the Kitchens alone are probably more like $1 to $1.5 billion based upon independent research that calculates that 3DL is approximately 8% of cabinetry sold however when you add in cabinet refacing, office and store fixture in final sales figures I would say that 3DL's overall finished market impact is more close to 2.8 billion in final product sales is pretty accurate. Keep in mind that this number is important to know when calculation the total market force a product has. This is a pretty interesting number to digest; especially if you are a component producer or cabinetry manufacturer.

IMPORTANCE OF 3DL Cost:

Whenever you analyze a product its also important to figure out your products cost as it relates to the entire cycle of the product. Since there is an average waste of 30% this increases the average price of 3DL from $0.50 to $0.65 in terms of real cost to the producer. If the average square feet is 50 then the total cost for 3DL is $32.50 in material in a finished product selling price of $2K and components sold at $250. This means that that the 3DLs cost is approximately 13% of the final components cost on an across the board average and is a 1.6% of the final product's selling point as a market average. I have seen this number be as little as 8% and for some companies it averages 10% but whether its 8% or 13% its still a small portion of the final component price and at 1.6% of the final cabinetry price its an insignificant factor for the final cabinetry or end product cost. With some products such as solid surface the product cost can be as much as 30% to 50% of the final product cost. So in the solid surfacing market if you can save a customer 20% on material cost its a big deal in relations to the final product cost however in 3DL the cost of the laminate simply doesn't have as big of an impact. This is the primary reason that companies prefer a quality 3D Laminate as a norm rather than simply the lowest cost 3DL.

GLOBAL 3DL MARKET:

From my colleagues in this business that sell laminate internationally, I have heard that the global consumption of 3DL Thermofoils is approximately $400 million is US dollars Although I don't personally have the knowledge to validate this number I feel that its probably pretty accurate. Although markets vary greatly from Asia, to the US & to Europe we can attempt to calculate a global average of component cost and also a global average of final product cost.

GLOBAL COMPONENT COST:
Based upon my research I estimate the global component cost average is more close to $4 per square foot rather than the US average of $5 per square foot. If you take the entire world, the cost of thermofoil is also a bit lower globally as well. Partly because the manufacturers typically are larger in Asia and also in Europe on average. North America tends to have many more small shops as a whole. The primary reason is that the cabinetry produced for North America tends to have larger custom and semi custom markets whereas globally they use standard 32mm increments. This creates a scenario where larger producers thrive whereas the custom and semi custom cabinetry insulates the smaller producer in North America to some degree. This is important for the custom component producer. So in regions such as Asia or Europe they typically buy 3000 yard runs rather than by the single roll although this has been changing with the global market conditions.

Based upon $400 million of 3DL being sold this would mean that the global consumption of 3D Laminate thermofoils is 8 times larger than that in the US & Canada. This means that there is over 800 million square feet of 3DL thermofoils consumed yearly and by my estimates this equals $3.2 billion in component sold which could equal more than $40 billion in finish goods sold utilizing 3DL as its product.

It should be noted however, that although the US is 25% of the world GDP that it consumes on 13% of the worlds 3DL. It would safe to say that 3DL is less popular in the US as a whole when comparing it to some other markets.

CONCLUSION:

In conclusion, I hope that having this information gives you more awareness of the size of the local market and also the size of the global market for our product segment. I also hope that it gives you insight on how the cost of the 3DL does or does not impact the component or final cabinetry cost.

As you have read this article, I hope that you keep in mind that these numbers won't necessarily affect your business. They are only used to calculate the market size and the market impact as affected by 3DL. If you are not in the business of selling the lowest cost door you can and you are more focused on custom then your numbers will much different than the national or global average.

I also find that information gives us perspective and gives us more confidence in our decisions. I have found that in life sometimes information that appears to have no correlation to your daily life, it in fact gives us more supportive evidence for our decisions as a whole.

For future story ideas or things you'd like me to research please feel free to email or call me anytime.

New Wemhoner Forum

Recently I have been speaking with Ken McFadden with Stiles Machinery and they have introduced a new Wemhoner users forum. Although all of the readers of this blog do not have a Wemhoner you may find their forum to be a good source of information about pressing.

The most recent postings in their site discussed sourcing membranes and comparing rubber membranes to silicone membranes. If you press 3D Laminates most certainly you'll want to stay up with material sourcing and pressing discussion topics.

http://www.stilesmachinery.com/solutions/2010/09/wemhoener-user-forum/

LEED Points for 3D Laminates

The question is often asked "Does your product qualify for LEED Points?"

LEED doesn't certify actual products however the use of certain products may qualify the project to earn these LEED points.

Of course 3D Laminates is a great product for large projects. Read more at: http://www.dackor.com/3DLaminatesaregreen.html

3D Laminates:

- Reduce the use of exotic hardwoods

- Utilize MDF which is uses recycled or low priority wood chips

- helps facilitate LEED points

The easiest LEED points that can be generated using 3D Laminates are the following:

MDF Core & Particleboard made of Recycled Content (20%): 2 points
No Added Urea-formaldehyde Resins in MDF & Particleboard: 1 point
Final product (i.e. finished kitchen) manufactured within 500 miles of the jobsite: 1 point
Low Emitting Materials Adhesives and Sealants: 1 point

If you produce thermofoil components, be prepared for a customer shift in 2010.

If you manufacturer or use 3D Laminate, thermofoil doors and drawers you should prepare yourself for a customer shift in 2010, 2011. In this article I will give market conditions and observations that I believe will convince you of a coming shift in thermofoil component buyers. As the market slowly rebounds, its my belief that you will find many customers WILL NOT come back because they will start buying imported KD cabinets. Many larger Kitchen company lines who service KB Dealers, however, will increasingly use 3D Laminate thermofoils due to the quality control and ability to be made in North America by automated machinery.

If your company has been producing thermofoil components since the late 90s or early 00s, your entire company is structured around the market as it was. The router profiles you stock, colors in your warehouse, pricing and customers you send samples to are all a result of what you believe to be connected to your target market. Certainly most of your feedback probably comes from your customers, but you should ask if they are still your ideal target customers? Is your target market shifting? Its my belief that the market "as we knew it" will not return to thermofoil in the same manner. Not only is the market smaller, but the people seeking out these components are often new people and new companies. Do you think its possible that these new people may be of a different demographic in terms of their market view, their wishes and wants when it comes to colors and profiles? Lets examine...

In Europe, most of us are aware that thermofoil has been utilized in over 50% of the Kitchens in prior years whereas we've never topped 8% of the Kitchens here. The primary reason is due to the shortage of low cost wood, however the second reason is that the larger Kitchen producers adopted thermofoil as a viable way to market kitchens via KB Dealers. Consumers trust larger manufacturers due to their warranties, elaborate brochures and higher quality of dealers.

In North America, however, thermofoil has traditionally been used primarily for lower end cabinets. As a result, the major cabinet companies have primarily only used white thermofoil due to its superior consistency to a white painted door. The vast majority of users of the woodgrain thermofoils have been buying a raised panel door that is been marketed as a counterfeit wood door.

In addition to the US building market shrinking there has been a rise in imported "Knock down" cabinets coming from Asia. Although the US Cabinet market has decreased by a reported $3 billion in sales, the imports from Asia have increased by over $250 million in wooden cabinets in the last 2 years. Does this signal anything for you? Do some research on the American Furniture industry that evaporated in the 90s.

Many of the past sellers of value based cabinets have concluded that when the building market does rebound that they can buy from a cabinet importer and resell cheaper than they can construct a cabinet box and buy thermofoil doors. In addition, they can give the illusion of more quality since their new cabinet will be solid wood. In reality, most of these imported cabinets have been failing due to the expansion and contraction of the wood doors revealing the unstained center panel edges. In addition, most importers or distributors of these cabinets lack the capital to stock enough SKUs to complete many of the projects they undertake. As a result of these two reasons, the market perception of a value based wooden cabinet will decrease and the market perception of an American made thermofoil Kitchen will increase.

Another interesting thing is that KB Dealers are faced by a decline in cabinet sales as a whole. KB Dealers are also facing increased competition from the importers of value based Kitchens. Imagine being a small KB Dealer selling an American made particle board cabinet with maple door for $20K installed whereas a flooring shop is selling a solid wood box with Cherry door for less than half. This is not every case, for every area or every dealer but it is a scenario that is playing out as we speak across North America.

Daily, I see more and more KB Dealers as well as American Kitchen manufacturers promoting a Euro style cabinet with high end thermofoil. These higher end cabinet shops and KB Dealers are finding that the sophisticated consumer willing to purchase a $20K plus Kitchen does value Euro styling in many cases, but in most cases aren't too keen on buying a $8K Kitchen from a tile shop for example.

In conclusion, I do recognize that there will continue to be need for custom solid white and custom raised panel woodgrain thermofoil doors from the value based door buyers, but please do shoot for the the higher end cabinet factories that sell cabinets via KB Dealers. You may be surprised....

Do you see the subtle shift that I do? If so, drop me a quick email mark@dackor.com

Best wishes in 2010..... Mark

When should I bring in a new 3D Laminate color?

As a producer of 3D Laminate components, when should you bring in a new color?

First let me say that I'm clearly bias because most of my time is spent trying to convince customers to add more colors. But let me see if I can be unbiased as I write this article. I'd like to address the following issues in this article:

1. COST CALCULATIONS OF MATERIAL: Here I'll calculate the average costs of material.
2. CUSTOMERS WHO ARE WILLING TO PAY MORE: Here I'll examine who is wiling to pay more and why.
3. SMALL ROLLS: Bringing in colors in 50LY quantity that are being promoted widely. Analyzing the cost and break-even point.
4. CUSTOM RUNS: Bringing in custom colors in 600LY quantity (from Dackor) that no other companies have yet. Analyzing the cost and break-even point and lag time before the color is wide spread.

COST CALCULATIONS OF MATERIAL: Lets say that the average cost of a woodgrain is $0.55 per square foot. Lets calculate a 50% scrap rate of material around each component to increase the cost to $1.10 for 3D Laminate material per square foot. For the sake of this article lets say that with board, glue and some other costs the total cost is $2.50 per square of material. This amount needs to be doubled to $5.00 per square to cover labor, rent and other costs of doing business.

According to the 80/20 rule, 80% of your business will come from 20% of your customers. Assuming that you have large customers or project that require an aggressive price that would mean that a big portion of your business is at a lower price point (for many of you). If we use the base cost of $5 per square foot as an average then you can account part of this at $4 for white and $6 for woods to come up with an "average price sold in volume" to these large accounts.

Many manufacturers like to find large accounts (even lower profit ones) to fill up production to cover the over-head. I'm not saying that this is the right way or wrong way but only that its a common way.

Now what do you call sales above the $5 per square foot or even above the $6 per square foot? Obviously this is where the gravy or profit is being made. To make this profit its important to have good customers who are willing to pay more.


CUSTOMERS WHO ARE WILLING TO PAY MORE: With the above in mind, who are the customers that are willing to pay more? There are two types of scenarios in which there exists a premium market. Lets assume that there are multiple companies who give great service and have great quality for the sake of this article. What else can separate you from the rest? Colors.

If you think about it, there are only three ways to make an obvious change to a 3D Laminate component.

A. Having matching backs
B. Having unique profiles
C. The color of the door. Having colors nobody else has.

Stocking matching backs is absolutely necessary if you are targeting closet producers so this is something required by most of that industry. Having unique profiles is a very difficult way to separate your doors. Surely a new profile can excite your customers but is it enough to attract new ones? I think most would agree that the color of the 3D Laminate is the most obvious way to offer something new.

Below I will discuss the dollars and cents of bringing in new colors....

SMALL ROLLS: In the market, most 3D Laminate manufacturers offer "cut to size" or 50LY rolls. After cutting fees lets assume that the average cost of this material is $500. In a 50LY roll there is approximately 700 square feet of material. For this calculation we'll use a 50% scrap rate so that would mean that there are 350 square feet of usable material. This can bump up the cost per square foot by a little however it really does not change the base cost of the door in such small volume. The biggest thing to consider is the amount of money being tied up.

Since the overhead is fixed at $2.50 by my calculations that would be that $2.50 for variable material costs should be used for this calculation. Lets assume that an average order for a Kitchen is 50 square feet of doors. If the order was sold at $7.50 per square foot then this leaves $5 per square feet or $250 for doors. That would mean that you would have to sell two small jobs to break even on the foil however this would only use approximate 20 of the 50LY on hand. A 50LY roll should yield an average of 5 jobs with each job grossing $250 per job or $1250. So we have the break-even at two jobs or 40% of the roll usage.

I should mention, however, that the barrier of entry to the 50LY order is low. Should you present your client with a new color that everyone knew about then you are not really providing a solution to a long term problem. The way to create a solution to a long term color problem would require bringing in a custom run color.

CUSTOM RUNS: Next I'd like to calculate the break-even on a 600LY custom order from Dackor. Yes you read that correctly.... 600LY for a custom order. How do we do it and make a profit? Quite simply we produce 3,000 LY but only require you to take 600LY of it. Essentially we're working with you to build our color offering.

Lets use the base cost of $5,000 for this 600LY order. According to our above calculations you'd need to sell 1,000 square feet of this new color to pay for the material cost. This would equate to 20 Kitchens. So does that mean that you'd have to sell 20 Kitchens to break even? Not necessarily and I'd like to explain... What if this color was your lost leader?

Imagine that there is a key customer that you are trying to land and they've been buying their doors from your competitor (be it a direct or indirect competitor). If you did a survey of this customer and found that they needed a color that matched their TFM supplier but that no other door supplier offered then this could be your loss leader. Essentially you'd negotiate with that client and say that you'd be willing to bring in that color but that you'd expect all of their business. A typical scenario would be that you would start producing their orders that they have now and then wait the 8 to 12 weeks it would take to develop and bring in their new color.

The above scenario would add value by solving a critical issue that the client had BUT, how can you afford to bring in that new color? Quite simply you would need to divide the entire business gained by the $5K. Remember that the $2.50 is already covering your material cost on the floor of the white and standard colors on a per job basis. So if that closet customer is only ordering 50 square feet a week then it would only take 5 months to break even on your investment with one single account. That's not taking into account the other accounts you may be able to sell this new color to.

I know that there other variables such as stocking new MDF back colors potentially however there are also variables such as cost averaging over multiple clients.

If you are an employee of a component producer I hope that this article has given you some ideas of how to present the idea of a new color of 600LY to your company. If you are an owner or partner in your component business I hope that you will see the possibilities of using new colors as leverage to obtain new clients.