VISUAL MARKETING PROGRAM

1. VISUAL MARKETING PROGRAM February 6, 2008

2. Background • where we came from and where we are…. • Frost Electric Supply, a multi-generational electric supply company, has identified a need for change in its current environment and method of capture for its in-store/showroom transactions . • The goal of such program is to attempt to maximize the revenue potential at the branch level. Applying proven retail methodologies will increase branch traffic, support the companies brand position and generate incremental sales. This new approach will not only set a new benchmark for Frost but also position Frost as an industry leader.

3. II. Corporate Objectives • where we want to be…. • Frost has retained Sovereign Management Group to review the current method of visual marketing and the transaction process in its branches. After such review SMG is to provide a specific set of recommendations designed to achieve: • increased showroom sales • an additional platform to market Frost and its products and services • improved product merchandising and better inventory control

4. III. Current Paradigm the contrast…. The current industry is a picture painted by a legacy of failure to properly maximize showrooms. Our goal is to alter the current paradigm and create a more retail friendly environment therefore driving more sales at the showroom level. Most distributors in virtually all supply chain industries, from suppliers such as Frost Electric to plumbing and HVAC distributors primarily use the showroom/retail sales floor as a static formal display area or as adjunct storage to the warehouse. While this may fill a need and fill the “box” it is far less than what the optimum selling environment could be. The reasons for this “channel bacteria” are obvious. It is simple, its ease of implementation, ABDTW (always been done that way), management’s failure to look outside the box, laziness, lack of adequate skill level, poor ordering/stocking levels and a myriad of other reasons that limit many companies to a level of acceptable mediocrity.

5. Current Paradigm (Cont.) • If for one moment we accept the fact that the showroom area is the single largest “window” for most customers to see “us” through and define “us” as operators it would stand to reason that a business should emphasize its showroom and maximize it to its fullest sales potential. • Accepting the fact that most showrooms are simply used as “extensions of the warehouse” is the first step to the paradigm shift required to alter the current operating status quo.

6. Current Paradigm • In order to break the status quo, a company must view the showroom/retail floor as a space to conduct a retail or consumer sales transaction or educate and plant the seeds for future sales opportunities. • A simple appreciation of those facts moves one to consider the plethora of benefits from proper showroom usage. They include better merchandised products, message conveyance platforms for services provided and an extension of thecorporate identity through effective marketing messagecommunications incorporated throughout the showroom. • All of which if executed properly and committed to for the long term provide an opportunity for enhanced revenue generation

7. Keys to Visual Merchandising • K. I. S. S. • The best approach to good visual merchandising is simplicity • ● The 3-dimensional part of branding • ● A hands-on experience • ● Compare to competition and simply be better • ● Engage in the experience and consider the process • ● Use as a method to create and control the customer experience • ● Make it a priority, be passionate about it or it will never serve • you well • ● The goal of good visual merchandising should be to affect retail trade and generate revenue

8. Market Overview • what the picture looks like…. • The Frost family of locations toured included Maryland Heights, O’Fallon, Downtown, and Collinsville. Competitor and vendor locations visited included French, Grainger, Rexel and Holt. • Branch Specifics • A. Maryland Heights Headquarters • ● Fairly Clean • ● Attempt has been made to locate items in an orderly fashion • ● Area signage has been used in combination with vendor provided banners and signs • ● Several displays often used outside the corresponding area • ● Location is well lit and access to merchandise is good in most instances • ● Counter location offers a multitude of opportunities (as does the general space in this location) • ● Will call location “prohibits” customers from entering showroom

9. Market Overview (Cont.) • B. O’Fallon • ● Smallest and least effective retail presence of all branches • ● A number of physical restraints hinder this location • ● No real merchandising presentation – primarily due to lack of showroom • ● Counter located in warehouse • ● Poorly illuminated • ● No signage other than outside • ● Little or no effort has been placed upon selling products to walk- in public • C. Downtown • ● Clearly the most visually organized and best merchandised branch (both corporately and competitively) • ● Effective brand signage but very little product signage used • ● Store well lit

10. Market Overview (Cont.) • D. Collinsville • ● This location failed at several fundamental levels including cleanliness • ● Promotional displays were in disrepair and not structurally sound (safety issue) • ● No real effort made to develop retail presence at this location • ● Little attention to detail in store, from floors to product presentation

11. VI. Branch Issues the good, the bad and…. After a review of the individual locations was completed an assessment of comparative strengths and weaknesses was outlined. Strengths ● Corporate commitment to change ● Excellent “story” available to communicate ● Current brand selection is well-known and highly marketable ● Locations are conveniently located throughout the Frost trading area ● Available showroom square footage obtainable ● Keen awareness of movement to “green”

12. VI. Branch Issues Weaknesses ● Theme ● Retail store presence ● Lack of a “story” being told ● Diffused focus & direction ● No replicable effort, branch to branch ● Drama or excitement is missing ● Little effort to drive customer traffic; in the door and through the branch ● Highest volume products or areas not promoted/highlighted ● No “feature displays”

13. VI. Branch Issues Weaknesses ● Failure to emphasize “green” ● Lack of “real” sales attitude ● No continuity ● Current signage not used to its fullest potential ● Fixtures provided don’t work ● Display fixtures not well-maintained ● Frost history not noted ● Inconsistent and/or missing stock levels ● Will call location not optimum ● Safety concerns

14. VII. Assessment • what it all means…. • The current operating environment at Frost has created a dynamic which affects more than the showroom, the significance and the opportunity for improvement make a worthwhile case for implementation of a new methodology for marketing and merchandising the showrooms. • The current situation causes Frost to miss opportunities for revenue capture and add-on sales in each location. • A lack of continuity creates a haphazard presentation and fails on multiple levels to create either a story or any impulse to purchase items while in the locations. • In general, there was no consistent “visual statement” throughout the branches. Each location had its own layout and product assignment and acted as a stand-alone business vs. utilizing the potential of the available story of the Frost name or its unified offerings.

15. VII. Assessment (Cont.) Frost as a company has invested a tremendous amount of money in inventory all of which is currently providing little or no return in the showrooms. The net result is a substantial penalty regarding any opportunity to add showroom sales to the top line. The up side is there is adequate space in each location to develop a real “sales” presence in the Frost showrooms which if worked properly will garner sales revenue, create additional foot traffic and develop “Frost Loyalty”.

16. VIII. Strategy • the plan…. • A recommended plan to achieve the stated objectives has been developed, this strategy should be a living document and be modified if necessary to achieve the stated goal. • The first step is to determine the role the Visual Marketing or Merchandising Program will play in the total Frost marketing program. • Assess definitions of Corporate measures and outline expectations. • Develop a new visual marketing program that includes the primary marketing points, consider existing assets and return on time and investment.

17. IX. Tactics • how we achieve…. • Items required to execute the strategy have been considered and noted. These “methods to achieve” are noted as tactics. • Focal to any execution should be: • Staff team to create the desired change • Define the key critical issues • Prioritize items necessary to achieve goals • Retain architectural firm, store design teams or planner • Decide the critical components for Frost • Set up timetables • Plan model and follow-up with revisits

18. Tactics (Cont.) • ● Determine the product categories needed in each branch. • ● Replicate those categories in each location; if certain locations serve specific needs (something unique to its location) highlight in that branch. • ● Create “have to have products” and display accordingly. • ● Lay out retail to provide customers with a sense of familiarity in all locations. • ● Make representation seem “cookie cutter” from branch to branch. • ● As much as possible, treat each location as the same but with larger or smaller quantities of the same products. • ● Identify the cornerstones of your marketing plan and highlight in the showrooms. • ● Make all purchasers “walk” the showroom including Will Call customers.

19. IX. Tactics (Cont.) ● Capitalize on the physical counter as a merchandising sales area. ● Develop and use plan-a-grams. ● Create model showroom including signage, fixture package and theme, replicate throughout chain. ● Include merchandising in all marketing programs; include appropriate signage and product ties. ● Coordinate all merchandising efforts with corporate calendar “promo calendar” ● Create vendor resources pool for space reservation during promo periods. ● Enlist vendor financial assistance for fixtures and signage. ● Don’t just think “green”, make it “green”

20. X. Visual Marketing Keys • things we need to consider…. • Significant weight should be given to a list of factors that relate to the execution of the strategy while all may not be selected it is important to understand clearly the rationale for elimination Leverage all possible assets Frost history Training On hand inventory Key strategic points Create new environments Retail Training Try-it sections On-line ordering/reference Store design Create theme Colors Sensory conveyance Historical perspective

21. X. Visual Marketing Keys (Cont.) Ceilings Use as lighting sales tools Consider light boxes Walls Create “focus walls” Use flexible frames for signage and themes Tell story and highlight marketing theme Remind of “Frost” history Merchandise effectively Floors Determine product categories for risers Use end-caps effectively Create new product displays Promotional areas Educational areas “Try-it” areas

22. Timeline • are we there yet.… • A timeline should be developed and signed off on by all parties Timelines have been considered but without further confirmation as to the elements and direction chosen it is ill-advised to speculate or to attempt to develop time lines for completion. Having stated the above the following can be considered for benchmarking given the commitment and adequate resources being allocated including personnel, capital and inventory. Development 2 – 3 months Design 1 – 2 months Implementation of “Frost Standard” unit one 1 – 2 months