U.S.

Small Business Administration MT-12

SIGNS: Showcasing Your Business on the Street

The Importance of Signage for your Business

By. R. James Claus, PhD

And Susan L. Claus

Marketing Series

SIGNS: Showcasing Your Business on the Street

The Importance of Signage for your Business

By R. James Claus, PhD

and Susan L. Claus

Businesses exist in a highly competitive environment. To succeed, a business must be

able to communicate with customers quickly and effectively regarding the products or
services it offers. For most businesses, the most cost-effective and efficient form of
advertising to potential customers is on-premise signage.

Signage is a business's basic link to customers. This is true whether the sign's purpose is
to promote impulse "stop and shop," to create awareness for the product or service for
future reference, to reinforce other forms of media advertising, to influence purchasing
decisions once the customer has stopped, or to physically mark the building site and
___location to aid motorist safety.

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Caption 1: Modern signs have evolved to meet every place-based commercial
communication need. The most advanced form of signage is represented by the
expansion of the old "false front" of early businesses to national franchise and chain
identification signage systems, backed by major media advertising. Learning to use your
sign skillfully will maximize your return on advertising dollars.

Functions of On-Premise Signage

On-premise signs serve six primary functions:

1. To develop brand equity by emphasizing words, graphics or symbols that are

associated with the products or services offered by a business. Developing brand equity
for a site includes the presentation of signage and architecture to create a unique
awareness of the products or services offered at that site. Brand equity for a particular
business is similar to the goodwill of an enterprise.

2. To aid in recall and reinforcement of other media advertising efforts. In addition to

the business's name, if the business has a trademark or logo, the symbol should also
appear on the sign and as part of any other choice of advertising. Often, when a site is
successfully "branded" in the local trade area, the need for other media advertising is
significantly reduced.

3. To prompt a purchase, especially "impulse" purchases. As consumers drive by, they

often see a sign, stop at that business, and buy on impulse. On-premise signs increase
your business. They offer a method for point-of-sale advertising.

4. To change a purchasing decision or choice once the customer is on the premises or in

the building. Temporary signage, whether exterior or interior, is very useful in this
context, particularly to call attention to "specials."

5. To promote traffic safety by notifying motorists where they are in relation to where
they want to go, and assisting their entry to the premises, should they decide to stop.
However, a sign cannot successfully perform this function unless it can be detected and
read by a motorist in sufficient time to appropriately react in traffic.

6. To complement community "aesthetic" standards. Today's sign design and production

technology makes it possible for on-premise signage to reflect the character or
architecture of its surroundings, without sacrificing any of its other primary
communication functions. Well-designed signs certainly can be employed as land use
and business panning tools to create a sense of place in central business districts,
neighborhood commercial blocks or corners, urban commercial corridors, entertainment
centers, and tourist destinations.

Caption 2: Your sign performs many functions, from letting people know who you are
and what you offer, to assisting safe driving decisions and wayfinding.

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Caption 3: The right sign can brand your site, even if you are not part of a national
franchise or chain. Your sign should display a logo or trademark that identifies your
business and develops memory of your ___location in the minds of potential customers.

Caption 4: Most major media advertising is expensive. Your sign is an economical way
to display and reinforce your message. Always use your logo or trademark in all
television and print advertising efforts, including business cards and letterheads.

Americans live in a sophisticated, highly mobile, consumer-based society where billions

of dollars are exchanged annually for goods, products, and services. The U.S. economy
is no longer dominated by industrial or manufacturing commerce, but instead by retailing
and service business activities. This change has elevated the role of commercial signage
to one of paramount importance to both the individual business and the community at
large. One example of increased awareness of this importance is reflected in the courts,
both state and federal, where commercial signage has gained recognition as a form of
protected speech under the First Amendment. (For the seminal case, see Virginia State
Bd. Of Pharmacy v. Virginia Citizens Consumer Council, Inc. 425 U.S. 748 (1976))

Contributing to the growing recognition that on-premise signage is a valuable economic

partner are two important trends: (1) the increasing reliance of consumers on their
automobiles, and (2) the increasing number of people who are moving to unfamiliar
geographic areas for new job opportunities, resulting in large shifts in population. These
influences have fostered substantial changes in customer behavior, generating
identification needs that businesses must recognize and address if they are to remain
competitive. Nothing can meet these requirements as quickly, safely, and effectively as
an on-premise sign that is appropriately designed and placed. In fact, the on-premise sign
may well be the critical factor in a business's success or failure.

Types of On-Premise Signs

Signage design and construction is site specific and an essential component of any
successful business strategy. Knowledge of the various types of signs available and the
numerous functions they perform can provide dramatic bottom-line results to a business
if properly integrated.

Signs are classified as either ground mounted or building mounted. Both types are valid
and necessary forms of signage which, when applied to a business's unique needs and
___location, result in proper advertising of the business.

Ground-mounted, freestanding signs vary in size and height, as well as construction

method. Freestanding signs are often the most effective in communicating your message
to the public. They're typically placed close to the roadway with the sign face
perpendicular to the road. When they're built to a proper height and size, they are the
most readable of all signs.

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Caption 5: A sign may be observed for later recall or it may prompt an immediate
reaction and unplanned stop. The "impulse" trade is often the difference between
profitability and business failure.

Caption 6: In a busy society with mobile consumers, the sign is more than a welcoming
"handshake" - it is a safe wayfinding signal. The right on-premise sign can turn even a
marginally visible site into a safe beacon for approaching motorists.

Building-mounted signs are further classified based upon where they are installed on the
building, such as wall or fascia, canopy, marquee, parapet or roof. The appropriate size
and height of building-mounted signs varies greatly based on the distance from the
building to the street, viewing angle, viewing obstructions, and building site.

Additionally, it is possible to design a building to support and enhance the signage. This
signcentric design principle results in a reinforcing synergy between the building
architecture and the business's signage and is frequently used by regional and national
retailers. A number of national retailers have taken this concept further, crating a
standard signature building where the building's appearance further reinforces the
advertising message and brand identity. Special site lighting and landscaping are often
added to further the unique appearance of the business.

The market-wise retailer uses all of these methods to create a unique brand identity for
the business. In today's ever-evolving business environment, whenever possible or
feasible, the modern businessperson cannot simply consider traditional forms of on-
premise signs, but must take into account all forms of signage and the way a site's overall
visibility functions to inform, direct, identify and advertise the business.

Caption 7: Your sign can both customize your site and reflect the visual character or
environment of its surroundings. Today's sign technology makes it possible for signs to
meet nearly every aesthetic standard and effectively perform their vital communication
function simultaneously

Caption 8: Signs represent the most basic form of speech. Commercial signs are a
necessary component of informed consumer decisions. Your right to inform the public
cannot be compromised, absent a substantial state interest that cannot be advanced
except through censorship of your message.

Caption 9: Today's signs should serve the needs of society in a way that meets consumer
information needs effectively, conveniently and safely.

The Role of Signage in a Dynamic Retail Environment

In the U.S. retail economy, on-premise business signage symbolizes the most universal of
all advertising options, surpassing television, radio, print, and direct mail. Today's
signage is expansive and innovative. It can effectively and attractively perform a vital
communication function alone or in partnership with other advertising media.

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Each business must develop a comprehensive business strategy, including an effective
signage program. The signage needs of a local retailer are very different from those of a
national franchise. The local retailer usually cannot rely on or afford expensive
traditional media advertising to present and reinforce their message. Their signage is the
primary method available for advertising and gaining customers, and may be the essential
key to success.

The cost of media advertising is calculated in terms of "cost per thousand exposures."
The on-premise sign is a permanent asset which, unlike other media, is exclusive to the
business it advertises. Also unlike other advertising media, it is on the job 24 hours a
day, 365 days a year.

Because a sign's exposure time to the passing public is continuous, evaluating its "cost-
per-thousand exposures" is more complicated than for other media, such as television or
radio, where exposure of the message is of limited duration.

Caption 10: Whether a sign is visible to the average motorist depends upon the visual
acuity of the motorist. The sign must also be properly placed within the driver's cone of
vision, and be legible and conspicuous. Whenever possible, it should be illuminated to
enhance visibility at night or during inclement weather.

Caption 11: The right sign is worth a thousand words.

For the on-premise sign, the cost-of-the-message calculation is based on the original cost
of the sign (design, production and construction, and placement costs) plus maintenance
expenses and depreciation, as well as factors relating to trade area demographics and
traffic counts (or readership). Take a look at how inexpensive an on-premise sign is
compared to other forms of advertising.

Figure 1 shows the formula for calculating the cost-per-thousand exposures for an on-
premise sign, using an example that applies $33,000 as the cost of the sign. As you can
see, the monthly cost-per-thousand exposures of the on-premise sign in this example is
$0.22.

Now look at how that amount - literally a fraction of a dollar - compares to the cost of
other forms of advertising. The graphs in Figure 2 compare the cost-per-thousand
exposures of on-premise signage with other advertising media over a four-week period,
with an equal amount (again, approximately $33,000) spent on each medium.

From the above media cost evaluations, one can quickly note that the on-premise sign
provides exposure of its message to a large pool of potential customers at a fraction of the
cost of other media. Hence, the lower your cost to gain top-of-mind customer awareness,
the higher your return on your advertising dollars.

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FIGURE 1 Cost/1000 Exposures Formula for an On-Premise Sign
This example applies $33,000 as the cost of the sign:

Assumptions:

Initial Cost of Design, $33,000

Production and Installation: (for two faces)

Amortization Period: 7 years

Cost of Sign/Month: $393.00

Estimated traffic count (cars/day): 60,000

Formula:
Cost/1000 Vehicle Exposures Monthly Cost
Monthly Exposures

Calculation: 393.00
1.8 million

Cost/1000 Exposures = 0.22

FIGURE 2 Given the costs of other media - all of which are "off-premise" - it's easy
to see how effective and inexpensive an on-premise sign is.

Gross Impressions (in Millions):

On-Premise: 2
Outdoor: 20
Radio: 6
TV: 3
Newspaper: 10

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Cost Per Thousand Impressions:
On-Premise: $ 0.22
Outdoor: $ 1.90
Radio: $ 5.90
TV: $10.00
Newspaper: $ 3.60

Asset Management of the On-Premise Sign: Its Value in the Marketplace.

On-premise business signs are an elemental component of successful business strategies
and asset management. They are as important to a commercial zone's success as
sidewalks, streetlights, curbs, parking and streets. Signage should receive the same
careful attention to function as these other components. It also requires attention to
cleaning and maintenance.

Signage must communicate an attractive image for the business to attract a clientele. In
other words, it is just as important for today's businessperson to convey the proper image
to the passing public as it is for the community to present an attractive retail environment.

The goal is to attract the attention of potential customers and convince a potential
customer to stop. Signage is often the only visible clue that a business exists. In this
situation, site planning and development must be "signcentric" (based around the
signage) to optimize the site's economic value.

Street frontage offers a unique opportunity to interact with each passerby. If well-design
signs, visible to the street, do not maximize this advantage, then potential patronage will
be lost. These lost sales may ultimately represent the difference between the success and
failure of a business.

For freeway-oriented businesses, as many as 50% of their customers are non-locals,

neither living nor working nearby. There may be only one opportunity to capture their
attention. Without a properly sized sign installed at the necessary height to be visible
from the freeway, these businesses will be essentially invisible and will struggle to
survive.

The on-premise sign, when standing alone, should be considered and treated as a full-
function communication and design system. In any commercial setting, the sign should
be easily detectable because it (1) is of sufficient size and height not to be masked or
obstructed by intervening traffic or other objects in the visual field, (2) displays "content"
(copy and/or graphics) that is legible, and (3) stands out from its background. In other
words, it should be optimally visible, legible, and conspicuous.

On-premise signs are one of the most important ingredients of any advertising program.
Whenever possible, they should be integrated into all media advertising campaigns. In
addition, building design and colors, product displays and dispensers, landscaping,

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lighting, and layout may all be part of the "signature" mix of an advertising program.
When used correctly, on-premise signage provides immediate marketing advantages.

Caption 12: Your on-premise signage provides both an invitation to the potential
customer to stop now and assists consumer memory and recall for future use. It gives
you the competitive edge you may need to succeed.

The Mobile Consumer: A Case in Point

Without a properly designed and placed on-premise business sign, a commercial site
cannot function at its full economic potential. Generally, appraisal of commercial real
estate addresses three ___location factors - visibility, accessibility and parking. When
assessing a sign's contributory value to its site, appraisers concentrate on the so-called
visibility factor. This factor has two components: (1) the site's overall visibility, and (2)
the visibility of the sign in terms of how easily it can be seen, understood and safely
reacted to from the road.

The importance of signage to mobile consumers is underlined by the fact that many are in
a hurry. The example below sets out a survey conducted by Burger King Corp. over
several weeks. The survey results were part of evidence submitted in a legal action
brought by Burger King, among others, against Agoura Hills, California, to prevent the
removal of its freeway-oriented, high-rise on-premise sign, as required under a new sign
code. The subject Burger King sign was visible to the Ventura freeway; the building was
not.

Surveys were conducted at quick-service food (QSF), family, and atmosphere restaurants.
The participants were asked how they first became aware of the restaurant. The results
are tabulated below in Table 1:

TABLE 1 QSF % Family % Atmosphere %

SAW THE SIGN 35 26 13
ALWAYS KNEW 29 27 19
WORD-OF-MOUTH 14 30 54
ADVERTISING 10 6 4
ALL OTHER 6 7 7
DON'T KNOW 6 4 3
TOTAL 100 100 100

The spontaneous nature of the QSF visit (in the above example, 35%) has critical
implications for all business strategies, particularly advertising in the form of on-premise
signage that is optimally visible to passing motorists. In the Agoura Hills case, without
the sign, business revenue losses would have amounted to $3.2 million over the 15 years
remaining on the lease. Most of the loss would have occurred in the first two to three
years, and the store could not have stayed in business for the full term of its lease. Burger

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King and its co-plaintiffs won the lawsuit, and the city was permanently enjoined from
enforcing its high-rise pole sign ban against them. (See, Denny's Inc. et al v. City of
Agoura Hills, 56 Cal. App. 4th 1312, 66 Cal. Rptr 2d 382 (1997))

The Impulse Trade

As described previously, another primary function of on-premise signs is to prompt

consumers to stop and shop. This type of consumer behavior is measured by the Institute
of Transportation Engineers (ITE) based on trip-generation rates.

While typical trip-generation rates are derived from counts taken at the driveways of
various land uses, such as a business, not al trips generated at the driveway represent new
trips made for the express purpose of entering that particular site; instead some are made
by motorists who did not set out for the site, but who enter it as an intermediate stop on
the way to or from another destination. This type of stop is referred to by the ITE as a
"pass-by trip;" for our purposes, it is defined as an "impulse stop."

The percentage of pass-by trips, or impulse stops, varies by land use. Table 2 sets out
ITE estimates regarding the percentage of stops attributable to motorists for whom the
site is not the primary destination. It is clear from the Table that impulse trade is very
important to many businesses. And because the stops are not planed, it is unlikely such
stops would be made without optimum communication to the street by the sample
businesses.

TABLE 1 Impulse-Stop Percentages

Business Land Use Impulse-Stop %

Shopping Center
-Larger than 400,000 sq. ft. 30%
-100,000-400,000 sq. ft. 25%
-Smaller than 100,000 sq. ft. 35%
Convenience market 40%
Discount Club/Warehouse Store 20%
Fast Food Restaurant 40%
Sit Down Restaurant 25%
Service Station 45%
Supermarket 20%

The Bottom Line

On-premise signage can be a business's single most important advertising vehicle.
Whether used to create brand equity, to promote impulse buying, or to safely guide
customers to your door, on-premise signs can mean the difference between business
success or failure. In the modern market-place, the right place-based advertising will

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effectively and economically permit the local shopkeeper to successfully compete, even
with the mass merchandiser or large retailer.

Safe Passage (or Wayfinding)

Signs are critical to safe movement by the traveling public and are the primary
wayfinding device employed on U.S. streets, roads and highways. Traffic risks and
accidents occur in part because people are not provided easy access to information
necessary to their purpose. Drivers look for, and expect to find, signs telling them where
to go and what is available once they get there. A sign that is too small, inadequately
placed, poorly illuminated, inconspicuous, or in disrepair will be frustrating to mobile
consumers. Frustrated consumers often make unsafe traffic maneuvers to get where they
want to go. Furthermore, as the present driving population ages, the visual acuity of the
average driver decreases, and the need for the signage to be more conspicuous and legible
will correspondingly increase.

Caption 12: Sign design and placement must concentrate on the goal of providing
optimally visible and legible information to the passing motorist or pedestrian. Both
design and placement should assure that at the first read, and within 2-3 seconds, the
viewer is aware of what you consider your most important message. If the targeted
viewer is a motorist, the advance viewing times should be long enough to permit a safe
response.

Interior Signage

The Americans with Disabilities Act (ADA) became effective on January 1, 1992. This
sweeping civil rights act forever changed the way buildings and landscapes were
conceived and designed. As part of the process, signage was impacted in a similar
fashion.

Interior signage has two major purposes. First, it serves as a guidance or wayfinding
system to move people through a building safely. You must always consider how the
legal requirements from the Disabilities Act impact your signage, both exterior and
interior, to make sure you are in compliance.

Its other purpose is to provide point-of-purchase advertising. National retail executives

will tell you that effective point-of-purchase ads can influence 85% of purchases in a
store. Also, major brand producers will pay substantial amounts to a storeowner to
acquire this space.

A more complete discussion of interior signage, as well as store layout - another

important ingredient in a successful advertising and marketing mix - is beyond the scope
of this advisory.

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Outdoor Advertising in a Nutshell

The difference between on-premise business signage and outdoor advertising (or off-
premise signage) is that the former communicates information concerning goods,
products, or services available in very close proximity to the sign while the latter
references goods, products, or services, and sometimes activities, available somewhere
else.

Although the focus of this publication is on-premise business signage, a brief discussion
of outdoor advertising is useful at this point. Outdoor advertising is a big player in the
major media advertising mix of U.S. corporations, and advertising measurements
applicable to on-premise signage are derived from those routinely used by outdoor
advertisers. This is especially true for "cost-per-thousand exposures" calculations.

Outdoor advertising is commonly referred to as "billboard" advertising, although this is

an inaccurate definition as many varieties exist. For example, advertising that appears on
public buses, bus stop shelters, or benches is outdoor advertising. The term "billboard"
itself derives from the colonial American custom of attaching a "bill" (or paper poster)
containing a written or pictorial message on a "board" and then displaying the device
about town or out on the road. Today's outdoor structure is typically defined by size.
The structures seen on major interstates and highways generally are produced and owned
by large companies, and are standardized by size. The structures seen on secondary roads
generally are owned by smaller companies or individual landowners and are not
standardized by size.

Outdoor advertising structures dramatically expand street communication for the retailer.
They develop specific memory about a business by offering convenient and useful
information along travel paths. Industry studies show that informational/directional
outdoor signage that directs motorist attention to locations and activities nearby will
increase business an average of 15%. These studies also disclose that signs that include
time-and-temperature information increase consumer attention and enhance retention or
recall of the commercial message. [Research data available at Outdoor Advertising
Association of America Inc. (OAAA), 1859 M Street, N.W., Suite 1040, Washington,
D.C. 20036.]

The viewer of a message displayed on an outdoor structure may act immediately upon an
informational/directional message, like the weary driver observing the advertisement for
a motel located two exits away. At times, the message may function as a reinforcement
device for a regional or national major media campaign, which also includes television,
radio, and newspaper advertising. Other times a message may provide public-service
information, such as road conditions, the ___location of a rest stop, time and temperature
data, or gasoline availability and pricing information.

The multiple street frontage provided by outdoor advertising is very valuable. For
example, it is not uncommon for a "bulletin" structure, measuring approximately 10-14
feet x 36-48 feet to lease for $2,500-$3,500 per face, per month. Anyone questioning the

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value of street frontage as provided by an on-premise sign, should check the advertising
rates for outdoor structures in their area.

Members of the business community are not alone in recognizing the value of outdoor
advertising. Increasingly, cities are leasing public space to advertisers. This space is
found, for example, on buses, bus shelters, transit stations, and sidewalk kiosks.
Although public advertising space is generally much smaller than that offered by
traditional outdoor structures, in recognition of the intrinsic value of such exposure, lease
rates of $500 per month per poster face are not uncommon.

Caption 13: Outdoor advertising displays are varied, multi-dimensional, and expensive
in comparison to on-premise signage. As a barometer for the value of commercial
signage in general, however, they cannot be bested. A call to your local outdoor
advertising agency for local "rate cards" will dramatically demonstrate how valuable
your on-premise street exposures are.

SIGNS: Showcasing Your Business on the Street

The Importance of Signage for Your Business

Prepared for the US Small Business Administration

By R. James Claus, PhD and Susan L. Claus

The support given by the U.S. Small Business Administration to this activity does not
constitute an express or implied endorsement of any cosponsor's or participant's opinions,
products, or services. All SBA programs or cosponsored programs are extended to the
public on a nondiscriminatory basis. SBA Auth. No. 00-763D-43.

MT-12, July 2001

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