The Dollar and Cents Value of the On-Premise Sign

The following article originally appeared in the February 1977 issue of Signs of the Times magazine.

By R. T. Anderson, Director of Research, National 3M, Bedford Park, Ill.

This is the first of three comprehensive installments being presented as a service to the sign industry in general and to individual sign salesmen in particular. Based on extensive research conducted by 3M National, the series will explore in depth the concept of the on-premise sign, why and how it is a critical economic factor in business growth, the importance of the on-premise sign in any advertising program and how the on-premise sign fits into the total promotional program of any size of company. This particular installment is based on 3M National’s educational cassette program, “The Economic Value of the On-premise Sign.”

Throughout history, the on-premise sign has been used as a means of identifying the local business at his place of business. Because the earliest barbers drew blood and used a great many bandages, the familiar red and white barber’s pole evolved as an easy-to-remember identifying sign.

The term “to hang your shingle” came about because of the on-premise signs put on a business or trade center.

Examples go back, in fact, to the ancient Romans, who used on-premise signs as identifying symbols. Symbols continued to bear the brunt of conveying the message through the “Dark Ages.”

That’s why the on-premise sign today, as in ancient times, is recognized by the business as the most vital communications link with its market.

The modern, business-identification sign continues to perform the same identification function as signs have done throughout history. But there’s been an important modern touch added to the on-premise sign as we know it today.

The modern, on-premise sign is no longer used strictly for identification. Research conducted by 3M National has proven the on-premise sign can and does perform the same advertising functions as print and broadcast media at a much lower cost.

And because of the unique location of the on-premise sign in front of a business location and its ability to reach a great number of people in a market, the on-premise sign plays a vital role in the buyer/seller relationship. In this way, it renders a true public service to people in the marketplace, to the local business that supplies goods and services, and to the community at large, which directly benefits from this strong commercial climate.

What does an on-premise sign communicate?
Using words, symbols and graphics, an on-premise sign communicates advertising information in the same way as other media.

With these elements, the on-premise sign communicates a business name and trademark to create an image. Image creation is very important in advertising businesses of all sizes, from national brands to local, independent retailers.

The on-premise sign also can communicate special, promotional advertising information in the same way other media do. A limited-time sale, special price information, extra services and products can all be effectively and inexpensively advertised using an on-premise sign that incorporates a changeable-copy board.

With an on-premise sign, businesses can communicate a selected key feature of their business that is of special interest to potential customers. Whether it is “service after the sale,” low cost, high quality, selection or whatever special feature a business is trying to communicate, an on-premise sign can effectively communicate the message.

And an on-premise sign can offer a communications vehicle to build public relations. This is especially true for service industries, which do not offer a consumer product. For example, banks use on-premise signs to communicate the time and temperature, a public-relations activity that helps build goodwill for the bank in the community.

The on-premise sign, therefore, can be used for literally any communications function found in other advertising media. However, in doing so, the on-premise sign must be equipped to perform the same advertising function as other media: identify and sell the features of a product or service.

And, like other media, the on-premise sign can be measured against the four standard criteria for any advertising communication: coverage, repetition, readership and cost per thousand.

How you can measure an ad medium’s effectiveness
In the next installment, these four criteria will be explored in greater detail. For now, however, a brief look at these criteria will help show you the economic value of the on-premise sign.

Coverage and repetition, the first two measurements, deal with exposure of the advertising message to the advertiser’s market.

Coverage is the percentage of households exposed in the marketplace. This is very important to the sign owner because he can relate the exposure of his advertising message to the total number of households in the marketplace. This will, in turn, give him the market penetration of his advertising message.

Repetition refers to the number of times the advertising message is repeated during a defined time period. Repetition is important to the retailer in that it is the only way he can build the public’s memory of his advertising message.

Readership, the third criteria for any advertising communication, goes beyond coverage and repetition. It measures whether or not a person exposed to an advertising message actually sees it and reads it. And once he sees and reads the message, does this readership lead to a change in buying behavior — buying what the advertiser has to offer?

And the fourth criteria, cost per thousand, is a measurement of the comparative advertising cost. Gaining the most mileage out of an advertising dollar is best measured by the cost-per-thousand exposures for an advertiser to reach his market.

Top-of-the-mind awareness: The reason for it all
Advertising programs strive to make the sponsor’s product or service the most prominent among its competition. This prominent position leads to top-of-the-mind awareness by consumers of the advertised product or service. Building this top-of-the-mind awareness has very real benefits for the advertiser, the most important being that of customer loyalty. Familiar examples of this top-of-the-mind awareness is the prominence that Coke, Kleenex and Band-Aid enjoy in their markets.

The on-premise sign makes it possible to turn this top-of-the-mind awareness into sales on the retail level.

Now, we will examine how the on-premise sign is of economic value to four distinct groups of people: the franchisee, the independent business, the consumer and the community.

On-premise signs and the franchisee
The retailer who is a dealer or franchise agent of a national brand conducts business in an economy that is very brand conscious. People have learned to expect a certain level of quality from national brands. This brand consciousness (top-of-the-mind awareness) leads to loyalty to that brand because consumers know they can get the same quality any time they purchase that brand.

The on-premise sign plays a vital role in our brand system by informing consumers of the availability of the brand item at the retail level. Without the on-premise sign, the brand system, as it applies to the auto trade, the service station, the fast-food restaurant, the motel chain or to countless other local retailers, would not work. There would be no tie-in between the national advertising done by that brand and the local retail outlet in the marketplace.

On-premise signs and the independent bBusiness
The second type of retailer is the independent business. The owner has a two-fold need for top-of-the-mind awareness — to convey his name and the goods or services offered.

This category of retailer represents the 50 major business trades, including anybody selling to the public in a business district. For each of these 50 major retail trades, the on-premise sign provides a vital communications vehicle.

The importance of these independent retailers in the marketplace is highlighted in results of six research studies conducted by 3M National.

When an analysis was made of the two types of local retailers in a business district, 80% were found to be independent and only 20% franchised. Therefore, it makes a big difference whether a retailer is backed by national-brand advertising or whether a retailer owns his own business without the benefit of national-advertising support. Obviously, there is great difference in the problems of both types of retailers, most of all, in the advertising area.

3M National has conducted research on the incidence of these independent retailers using newspaper advertising. Newspaper ads comprise between 50% and 60% of the local advertising in the U. S.

An analysis in South Bend, IN examined those using newspaper ads and in what quantity of space. South Bend is a typical middle-sized market with a trading-area population of 180,400. According to Dun and Bradstreet, there are 1,847 different retail businesses large enough to earn a financial rating. Forty-eight per cent of these businesses use the newspaper as an advertising medium; 52% do not. Here is a quintile analysis, in terms of monthly expenditures, of those businesses who do advertise, in groups of 20%

The mean or average expenditure for the top quintile on the right is $5,710. The mean or averages for the other four quintiles range from $605 down to $58. Thus, the top quintile actually accounts for 85% of the dollars spent. So, in South Bend, for all the retailers involved, most of the newspaper advertising is bought by only 20% of the retailers in the marketplace.

Here is another way to look at it: This quintile bar chart shows that the first quintile, which includes the large department stores and grocery stores, accounts for most of the dollars spent.

Here is what all this means to the sign company and its salespeople:

In this typical example, at least half the retailers in this market rely on the on-premise sign to communicate what they sell. Many of these retailers have the very simplest type of on-premise sign, which only identifies their business by name. This is how they survive as a business. To seriously restrict their on-premise sign program simply means the restriction of their sole communications device with the public. Likewise, by upgrading these on-premise signs, local businesses can more effectively communicate their advertising message in the only advertising medium they are using.

On-premise signs and the consumer
Now we shall examine the third group — consumers — who are affected by the economic value of the on-premise sign. In any marketplace, 40% of buying decisions occur as the consumer travels to or in the business area or in the store itself.

This 40% is a composite of three kinds of decisions:

  1. The decision to buy itself. Quite a bit of buying occurs simply on an impulse basis. “We didn’t need it, but all of a sudden, we’ve got it.”
  2. The second decision has to do with where to buy it — in which store.
  3. The third decision has to do with what brand of item will be purchased.

The composite of these three decisions adds up to 40% of out-of-the-home buying decisions. And this fact alone illustrates the obvious economic importance of the on-premise sign to communicate the retailer’s name and other advertising information to people in the marketplace.

The most direct way to determine the value of the on-premise sign to consumers is to ask them. And because no such study had ever been done, 3M National conducted a survey in Corpus Christi, TX, in the Spring of 1975.

Prior to this main study, we had conducted several pilot studies, in which we found that you can’t talk about signs in general. You must talk about specific signs, such as supermarket signs, restaurant signs or gas-station signs. Furthermore, when we talked to people, we had to get them to visualize a particular sign with which they were familiar. So we had to develop a whole new research technique in order to extract this information. We used this technique in our Corpus Christi study. Here are some highlights from that study.

We rediscovered something which is well known in merchandising anyway; most people are comparison shoppers. In Corpus Christi, seven out of 10 people like to shop at more than one store, even for groceries. Thus, on-premise signs play a key role in the marketplace in helping consumers do their comparison shopping.

We inquired about several different types of trades. In inquiring about furniture stores, we asked: “When you are shopping for furniture, are signs important to you?” Seventy-seven percent said, “yes”.

We then asked: “What information do you want to see on furniture-store signs?” This was an open ended question.

The four kinds of communication which people want to see are:  the name of the store, the hours of operation, the brand carried, and the sales specials. The majority of people are brand conscious when buying gasoline, but a large group of people still shop around for gas too. So what do they want to know? The people in Corpus Christi wanted to know the price, the brand, the availability of mechanic service, cigarettes and automotive products.

In studying fast-food restaurants, we asked the question: “When you are looking for a fast-food restaurant, are signs important to you?” Eighty-three percent say the sign is important. “What information should a restaurant sign show?” The response was: the brand, the daily special and the price.

Going through all nine categories would be an entire article in itself. So a summary is presented of the results of two questions covered in the nine different trades studied.

When asked whether signs were useful or not when shopping, 96% said that signs are useful. Regarding what information signs should carry, the four highest responses were the name of the business, the brand sold, sales information and other announcements. Thus, this study showed that consumers felt signs are useful, and they perform a valuable information function.

On-premise signs and the community
The last group of people who benefit from the on-premise sign is the community itself. Most people don’t realize their community has a trading center that competes with other trading centers for the consumer dollar. It doesn’t matter that it’s in a rural area.

For example, Des Moines, IA, draws from almost the entire state for major purchase items, such as furniture and automobiles. Thus, Des Moines competes with 26 other communities that have trading centers where the same goods are available for sale. All of these small trading areas compete with their neighbors. So these trading areas, in rural areas, are in competition for the consumer’s dollar.

Here also is the Chicago trading area illustrated.

This includes Chicago proper and the suburban area. Here, the competition is much sharper because trading centers are closer together. One could literally shop in 25 different trading centers. Communities then, whether in rural or urban areas, are in tremendous competition for business. But what does business mean to a community? Business means tax receipts, real-estate taxes, employment, property values and the growth of the community itself.

Adequate on-premise signing makes shopping easier, and, therefore, it’s a factor when one trading area competes with another. Tasteful and functional on-premise signs give a community a competitive advantage over other communities with inadequate signage.

What this all means

To summarize, the on-premise sign is not merely a means of indexing or identifying a business, it plays a vital role in the buyer/seller relationship in the marketplace.

On-premise signs are key marketing tools used by retailers. These on-premise signs do not merely identify, but are an integral part of image building and promotional advertising. For half of the independent local business, this is all they have.

The public, as consumers in the marketplace, depends upon the on-premise sign for critical buying information. This is shown because 40% of all buying decisions are impulse decisions in the marketplace. And the community depends upon the on-premise sign to effectively compete with other business districts and obtain its share of the consumer’s dollar.

In conclusion, we hope this article provides you with a better understanding of the business function and the economic value of on-premise signs for businessmen, consumers and communities as a whole.

As shown, the on-premise sign has been taken for granted as a necessary communication medium in business for so many years that no one has recently attempted to quantify that value in specific terms. We hope this article has done that for you.


Wade Swormstedt

Wade Swormstedt

Wade is Executive Director of the Foundation for the Advancement of the Sign Industry. Formerly he was Editor and Publisher of Signs of the Times magazine.

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