Selling Retrofits

In my recent travels, I’ve noticed that quite a few lamp message displays are still standing throughout the country. Monochrome LED displays have been in widespread use for 15 or more years. Color LED systems for sign applications became popular roughly 10 years ago. How can lamp message technology still survive in the marketplace?
Nearly 10 years ago, I first wrote, in this column, about the cost savings associated with modern LED signs. I prescribed a formula that helped justify the upgrade cost. Since that time, the price of LED digital signage has plummeted while electrical-utility costs have inched higher. The resulting differential makes the cost of an upgrade to full-color LED a no-brainer.
In 1986, in my home town, I sold a double-faced, 32 x 96 lamp, wedge-base message center that still stands. The lamps have 1.5-in., center-to-center spacing and use 7.2-watt xenon lamps. The display is in a separate cabinet affixed to the bottom of a beautiful, shopping-center sign, mounted squarely between two poles.
The center is fully occupied with upscale shops and stores that befit the area’s demographics. Two, very high-profile enclosed malls closely bracket the center. One of the malls utilizes a large, full-color, LED sign with extensive, paid, tenant advertising. From my vantage point, the old, wedge-base lamp display is not only useless, but embarrassing and an insult to its tenants.
Because I don’t work for the sign company that maintains the display, and because I do manage a salesforce of people who represent a display manufacturer, I haven’t contacted the retail center owner. Frankly, it’s not my place to compete with the sign trade to whom my company sells products. However, given that I sold that particular sign in my youth, I feel entitled to use it as an example for an LED upgrade. Here’s how I would prepare for the sales call.

Cost justification
Before approaching the sign owner, the salesperson must invest a great deal of preparation. Anticipate the reasonable objection that no money is available at this time for an upgrade. Retail centers have been particularly hard hit by this recession. Therefore, cost justification is a critical component of this equation.
Wedge-base lamp displays were once the hot ticket in the display industry. Where’s the logical place to seek cost recovery? Their downsides — high energy usage and maintenance costs. Obviously, the owner knows the monthly energy expense, but a salesperson should make an estimate before your meeting so you won’t be delayed asking for the figure when you present your justification.
Using the example display above, let’s do an energy-usage calculation.

 

32 x 96 x 2 = 6,144 (total lamps in the display) x 10 watts/lamp = 61,440 (total wattage of the display)

 

61,440 x 24 hours x 30 days = 44,236,800 (total watts of the display for one month of usage, assuming all the lamps were on simultaneously)

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44,236,800 x 0.40 (adjustment for average percentage of lamps actually on at a given time) x 0.65 (factor to accommodate for night dimming) divided by 1,000 (conversion to kilowatts) x 0.085 (cost/kW hour of service) = $977.63 (estimated monthly utility cost for 24-hour, per-day usage)

 

Next, calculate the monthly maintenance for the existing lamp display. Using the old formula of five cents per lamp, per month, at 6,144 lamps, the monthly-service expense would be $307.
Combining the electrical usage and maintenance costs provides the actual, out-of-pocket expense the customer pays for continued use of the existing display, or $1,284.63 per month.
Now, let’s calculate the comparative numbers for a replacement display. Let’s assume the display size can’t be enlarged. Let’s also assume the replacement display can be permitted, over the counter, given that it replaces a like-sized, existing, digital display. Therefore, we’ll use the dimensions of the existing sign cabinet, 5 ft. x 15 ft. 2 in.
We’ll increase the screen resolution to present higher-quality images. For this location, I would provide a 16mm-pitch, full-color display with a pixel matrix of 80 x 240 in each face. The display cost, delivered and installed, should equal roughly $75,000.
Because display manufacturers routinely provide a five-year parts warranty, the monthly maintenance will be approximately $125. The monthly-utility cost can be derived by using the formula above, substituting the total number of pixels for the total number of lamps. For the kilowatt usage, substitute 11 cents per pixel instead of 10 cents per lamp. This calculation brings us to a total electrical usage of $67 per month.
To complete our cost justification, convert the display’s sale price to a monthly-lease number. Many good leasing companies provide sign and display funding. I prefer Larry Kovacs of All Media Capital, because he can do “No Application Financing” for this type of transaction at 7% interest. For this particular transaction, the monthly payment would be $1,380 per month.
We now have all of the numbers necessary for the first stage of our cost justification.

 

Monthly payment for new display lease $1,380.00
Add new monthly maintenance $125.00
Add new electrical usage $ 67.00
Total (New Monthly Expense) $1,572.00
Subtract Existing Display Monthly Expense $1,284.63
Total Net Additional Monthly Expense $ 287.37

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Now, you’re not working to justify a $70,000 expenditure, you’re fighting for less than $300 per month.

Creating the presentation
In our aforementioned financial calculation, I noted the savings as the first stage of the cost justification. Ten years ago, when I first wrote about energy and maintenance savings, this was all that we had to tell. A salesperson only touted the obvious impact of a new sign.
We’re now a decade into the emergence of the digital display as a legitimate, new, advertising medium. Two national, pharmacy chains have embraced the LED display as a primary advertising form for every store. One of those chains is changing monochrome displays to full-color, LED media. At least two, national, restaurant chains have chosen color message technology as the critical medium for each restaurant in their operation. National mall chains are placing color digital media on their pylon signs to accelerate foot traffic and create revenue. The nation’s largest brand, Coca Cola, has placed its own digital billboards in 50 U.S. markets as the anchor to a new, digital-sign, media campaign.
Now that the digital-sign medium is the new thing in the ad community, the sign upgrade can be proposed as the replacement of an eyesore with a new, revenue-generating profit center.
To sell this visual medium, take a good-quality photograph or, optimally, a video of the sign in its current condition. Ask your designer to Photoshop a replacement, LED image, in the correct pixel matrix. If you record a video, create a vibrant ad on the new display for one of the tenants.
Use the same tools as the media professionals. I always use PowerPoint in all my presentations. I bring a video projector and several copies of the finished presentation with the slides bound, professionally, with a clear cover. The first slide always shows a picture of the proposed display with the words, "A Visual Media Solution for ________”
In the PowerPoint presentation, for this particular application, first explain how the old message-center concept has evolved into the new "It" medium, with ad-industry focus here and internationally. I would talk about national chains that have adopted the medium. Mention Coca Cola and other national brand successes. Talk about the outdoor-advertising industry’s conversion of existing billboards to digital media and the customer demand for more such digital billboards. Intersperse appropriate photos of each (which you can find on the websites of all the major display manufacturers).
The next slides should explain the low-energy/low-maintenance, green aspect of the LED signs. One slide should show the existing display with lamp outage, followed by a slide with a crisp LED image.
The following slides should show the cost-justification information, as shown above, clearly illustrating that the net additional expense for the new medium amounts to only $287 per month.
Then, I would show a slide that talks about dynamic message creation and offers to provide a programming service, which would professionally create images for the optimal benefit of the tenant advertisers. This could become an additional revenue source for your sign company or could be provided by the display manufacturer. This type of programming usually costs $300 a month.

The sales call
Contact the development company, and ask for an appointment to discuss a proposal to convert the existing message center into a new, digital-media profit center. If the developer argues that he doesn’t have the time or money, insist that the time will be well spent and that your presentation will focus on a revenue generating opportunity, not cash outlay. Ask for 30 minutes. Also, ask if there’s a place you can show an electronic, Power Point presentation. If there’s no space, bring several printed copies.
At the presentation, set the tone by showing the initial slide that shows the existing sign and the conversion. Quickly step into the discussion of how the old, lamp technology, didn’t serve most media applications, given the lower resolution, the high cost of electricity and maintenance, and the consistent and unpredictable failure of the lamps. Explain that the new LED media has advanced to being the fastest-growing medium, for both off- and on-premise advertising, as you show the example slides.
Move to the cost-justification section, and demonstrate the minimal cost necessary to make the conversion.
Then, delve into dynamic-message creation, and ask if the prospect feels if tenants in the center want to capitalize on the traffic that moves between the two neighboring malls. Talk about the dynamic nature of the programming and the fact that messages can specifically target a particular demographic certain times of the day. Offer to attend a tenant-association meeting to promote the value of the new technology.

The disconnect … or the opportunity
By this point, you’ve probably captured your prospect’s interest. The disconnect might be this question: Who will do the ad solicitation from the tenants, the billing collection and payment disbursement? For some developers, this will be the deal killer. For the sophisticated display vendor, this could be another source of revenue.
In my next column, look for a discussion on how to create a new digital-display media agency to eliminate the disconnect and bring new, non-manufacturing revenue to your bottom line.
Good Selling!