Lumber Liquidators 2008 Annual Report Download - page 13

Our Marketing and Advertising
Our marketing strategy emphasizes product credibility, value, brand awareness, customer education and
direct selling. We have structured our marketing and advertising strategy to correspond with our understanding of
the hardwood flooring purchase cycle. We increase brand awareness in a variety of ways, including advertising
and demonstration of our value proposition to customers. We have invested significantly to build awareness and
demand for all of our proprietary brands.
We believe that our Lumber Liquidators brand is positioned based on selection, price and service, while our
Bellawood brand is known as a premium flooring brand within the industry. We establish product credibility
primarily through the strength of our product and the attractiveness of our pricing. We believe that we have
achieved a reputation for quality and low prices, and that our proprietary brands are recognized for excellence by
our customers. We try to avoid being perceived as a volume-driven discounter, so while our promotional cycle
focuses on particular buying cycles, we generally try to hold our sales around events where we can create some
excitement among customers. For example, we hold sales when we acquire bulk amounts of inexpensive
inventory where we can pass along the savings, during three-day weekends when a customer has more time to
consider (and possibly even install) a new flooring purchase, and during our annual “odd lot” sidewalk sale in
April.
Our product credibility also benefits from celebrity endorsements and product placement opportunities. We
have long-term relationships with respected, well-known home improvement celebrities Bob Vila and Ty
Pennington. Bob Vila in particular has been associated specifically with our Bellawood proprietary brand for
several years. Ty Pennington has a long-term endorsement arrangement and his own hardwood flooring
collection, the Ty Pennington Collection.
To increase brand awareness, we conduct ad campaigns on both a national and local level using both
traditional and new media. We co-sponsor various television shows such as “Extreme Makeover: Home Edition”
and HGTV’s “Dream Home,” which use our products and enable potential customers to see both what our
flooring will look like after installation and the relative ease with which it can be installed. In addition, we use
targeted television advertising on cable networks such as Discovery Channel, HGTV, TLC, DIY Network and
A&E Network. We engage in sports marketing by participating in opportunities with, among others, Major
League Baseball and the National Basketball Association and sponsoring the Lumber Liquidators Professional
Bowlers Association Tour.
We believe our national advertising campaigns have been successful, and we expect to see greater returns on
our investment in national advertising as more stores open near people who have already been introduced to our
brands. We expect to place a greater focus on local advertising, including home shows, print and radio, to support
targeted store growth while maintaining appropriate levels of national advertising.
We also engage in marketing and advertising using the Internet and our catalogs. On the Internet, our
advertising efforts include the use of banner advertising, sponsoring links on well-known search engines, having
storefronts with large e-tailers and having a large network of online affiliate partners. Our direct mail strategy
focuses on regular contact with our customers and the targeting of prospective purchasers. We distribute our
catalogs, as well as other direct mailings, to key consumer and commercial segments around specific store
locations.
Our Customers
We seek to appeal to customers who desire a high-quality product at an attractive value, and are willing to
travel to less convenient locations to get it. We sell our products principally to existing homeowners, who
represent over 90% of our customer count. Historically, these homeowners are in their mid-30’s or older, are
well-educated and have been living in their homes for at least several years. Over 60% of hardwood surface
flooring purchases are made by households with incomes of $70,000 or more. We have found that homeowners
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