PM: Who's driving the plumbing market these days?
Wills: The consumer. It doesn't matter whether you're talking about plumbing or you're talking about cars. Showrooms, home centers and, most recently, the Internet have made the consumer better informed. The fact that so much information is so easily attainable will force changes in distribution patterns since consumers can say, "I don't want to do it that way, I want to do it this way."
PM: How does the consumer's growing influence change your branding strategies? It sounds as if the plumber is not only not in the driver's seat, but in the trunk of the car.
Wills: I don't think they're in the back seat - or the trunk. They're in the front seat with the manufacturer as a partner trying to figure out how to sell the product through the supply chain. What was successful for creating the Delta brand in the past will continue to be what is needed to be successful in this new environment. And that all comes down to quality. If the product doesn't deliver at the end of the day, the plumber wasn't going to install it before all these market changes occurred and the consumer won't buy it today. Continuing to make innovations in terms of styles and finish options is important so that plumbers can install products that consumers want.
PM: The support options must be considerably different to market to both the trade and the consumer.
Wills: The support elements are different. For example, we must have more consumer-oriented product on the retail shelf along with more point-of-purchase literature to explain more to a consumer who only buys a faucet once every seven years vs. a plumber who buys them on a regular basis. There's a lot more education that you need to do with the consumer.
PM: Still, there's a fine line between catering to the consumer and alienating the plumber. "Easy-to-install," for example, might be a benefit to the consumer, but condescending to the plumber.
Wills: But if we can develop faucets that save time to install, the plumber can install more faucets per hour or otherwise accomplish more jobs per day. How many plumbers get hurt twisting their backs under a sink and can't work? An easier-to-install faucet benefits both the plumber and the consumer.
PM: When Delta first started selling to home centers, it created the Peerless brand; now it sells both Peerless and Delta. Tell us about how selling two brands at retail came to be.
Wills: When we created Peerless, the original intent was to keep Delta out of the retail channel. However, all of our other competition quickly decided to sell their name brands directly to the home centers. The exposure that competitors were getting from the home centers was giving them an unfair advantage over Delta in generating consumer awareness. Consider how many consumers were walking down the aisles of these home centers. Meanwhile, in the consumer's mind, the home centers had a lot of validity since they provided a place to see such a wide range of selection. By Delta not being on the shelves, the impression consumers got was that Delta must not be as important as a brand.
PM: So when a plumber came to a homeowner with a Delta faucet, the consumer might not recognize the brand?
Wills: That's exactly right. We weren't the first faucet company into the retail channel. The bottom line was we couldn't afford to be in a one-down position with all the awareness that was being created by the sheer volume of people shopping at these stores. And the only way to sell home centers was to sell them directly. They were adamant that they weren't going to buy through two-step distribution. So it was either sell them directly or we wouldn't have a presence in the stores. We fought it for a long time, and we fought it due to the strength of the brand name we already had. But to not do it at some point would have eventually meant the erosion of the brand name.
PM: What are your plans for the Peerless brand?
Wills: We are still wrestling with that today. I think clearly there is a place for Peerless. There is a need to keep the brand based on the millions of Peerless faucets that are installed right now. Plus, there's a lot of other faucets that are ranked below Peerless in sales survey and brand ratings information we see. The trick is to differentiate Peerless from Delta for two reasons: 1) We don't want to duplicate resources between two products that are the same in terms of engineering and product development, and 2) the retailer who's buying Peerless doesn't have rubber walls. There isn't space for everything so they want to differentiate their products, too. Peerless is a property that we don't want to give up on, but we have to make sure it's differentiated. Otherwise, by necessity, people will make it go away.
PM: Of course, the interesting question to our readers is what effect two brands at retail has done for the overall business?
Wills: And the answer is that two-thirds of our business still goes through wholesale to be installed by the plumber. Our total business has grown as a result of putting our faucets at retail, and I think what that's done has created more Delta awareness in the minds of those who want a faucet installed for them.
PM: So home centers could end up being everyone's salvation after all?
Wills: Salvation might be a little strong. But we'll never reach a point where every faucet gets installed DIY. History does repeat itself. While we have seen a lot of growth in the DIY market lately, if you look at the demographics of what's going on in the marketplace today I think there are going to be many more "have it done for me" consumers. As we work through this new do-it-for-me generation, the fact that Delta has a strong name should give the plumbers more opportunity to install more faucets.
I also think there might be something the manufacturer can do to increase the purchase frequency of faucets. If we made consumers consider the faucet more as an accessory than just a utilitarian product, we could shorten the life cycle. Maybe that can grow the whole category for everyone. Style can do a lot of things.
PM: Is there anything left that a contractor can call his own?
Wills: We haven't talked about our growing commercial market - all of that business goes through the traditional channel. But in terms of remodeling or repair and replacement, we do have some things that are unique to the trade. We have the Delta PHCC Professional Product Line, for example. That's definitely for the trade only.
But from that point on, you have to be careful how you define "unique." Our Delta Select brand is a showroom product, but what's a showroom? It's generally sold by wholesalers to showroom operations, which could be the wholesaler's own showroom or it could be an independent showroom run by a kitchen and bath dealer. Theoretically, a homeowner could walk into the showroom - maybe even a plumbing wholesaler's showroom - and walk out with the Delta Select brand. So exactly who's preventing that product from being "contractor exclusive?"
The world is changing. Look at the APEX deal. Now everything that APEX had is available to Home Depot. We can't cut APEX off. So as the distinction between the channels blurs, nothing is available to one channel vs. another. Even the traditional channel has changed so much that I think you're being myopic if you're trying to apply the rules of the past to what's happening today. Who's causing this change? It goes back to the first question you asked me: Everyone is trying to meet what the consumer demands.
PM: How do these changes affect how you target your advertising dollars?
Wills: We are spending much more money now than we did 10 years ago. But you allocate your ad dollars based on your ad sales. Two-thirds of our business is still at wholesale. Obviously, taking Delta to retail has created more sales for us on that side of the equation. We're spending more money to support where the sales are going.
Who's deciding where those sales are going? Back to question one - consumers vote with their pocket books on where they want to buy product. Here's another area where the old rules just don't apply anymore: Builders, for example, may be the end-decider of product, but their choices are being driven by the consumer. Consequently, builders want co-op money from us to say that they have Delta faucets in their new homes. That's a new phenomenon - having the builders have as much sway in deciding where to spend some advertising dollars. So there's money going to support what builders are doing. If I can help the builder sell more houses and I've got eight or nine Delta faucets in that house, the more houses he sells, the more faucets I sell.
But all that product is flowing through wholesale. And all that product is being installed by a plumber. So how do you quantify that advertising expenditure? Is it wholesale dollars? Is it builder dollars? Is it contractor dollars? That's where it's just not straightforward anymore.
What you have to consider is how you can best spend money to influence the consumer to buy what you're selling. It's not so simple to say this is the money I'm spending at retail and this is the money I'm spending at wholesale.
PM: What role do you see the Internet playing?
Wills: We were selling faucets directly to an Internet retailer called Value America. It really didn't amount to much business at all, and, in fact, the company recently dropped its entire home improvement category.
Yet, there are other types of products that sold well through Value America. The Internet in total is a very good tool for information. And it's a great tool for someone who's already familiar with the product they're buying. But if I buy a faucet once every seven years as consumers do, I may go on the Internet to look for a whole pile of information, but our products are better off sold by a person where you can go eye to eye, ask questions and get a comfort zone with what's going on.
I think school is still out as far as selling our type of products on the Internet. I think there's plenty of research that indicates people use the Internet for information. But as far as how many people have actually bought a home improvement product over the Internet, it's very small. And the telling question is whether people really intend to buy a home improvement product over the Internet, and that's pretty low, too.
You can sell books and CDs - products you don't have to worry about how to put together. The installation causes consumers to step back and say maybe I should talk to a live person and, while I'm at it, I can see what that shine really looks like.
PM: What are Delta's plans for the Internet?
Wills: In the future, selling the plumber faucets over the Internet might make a little more sense, but right now we don't have any plans to sell anything over the Internet. There is still a need for a "bundler" to sell our type of product over the Internet - to package everything else you need to install a faucet. If a wholesaler doesn't put its product online, someone is going to step up and be that sort of bundler. Think about what's made home centers successful - they're bundlers. But right now there's just not enough people out there, consumers or plumbers, buying faucets online for it to make sense. We all have to stay tuned on this one.
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