Date: Thu, 18 Dec 1997 00:15:29 GMT
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"Own the Home"
Lloyd D. Ward
Executive Vice President, Maytag Corporation
President, Maytag Appliances
New York City, October 30, 1996
Maytag Corporation boasts a great stable of brands and terrific consumer preference for
its brands. I'm excited to be on the team and to have the chance to build on the strong
platform that's been put in place for Maytag Appliances. This has been a strong year for
Maytag Corporation, and a strong year for the domestic industry...but not as strong for
Maytag Appliances. We know the year could have been better... and going forward...
we know we will do better.
This year, the competitive dynamics in the marketplace have been aggressive and
across all product categories. Candidly, we were not effective in responding to some of
those competitive dynamics earlier on. The good news is we did respond. And our
response is working.
This year we also reorganized our major home appliance business and that also has
held operating performance somewhat in check. The business I run today is essentially
eight months old. It's over $2 billion in sales... with 12,000 employees. And it is a
business in which we are still digesting the changes and discovering the opportunities
set in motion through the reorganization. We literally are assembling a new business in
real time.... with a new leadership team... and a new and exciting vision for the future.
The reorganization has gone smoothly in the eyes of the customer -- our dealers -- and
the consumer. That's critical for our business. It's on time and on budget. And that's
critical for our shareholders. In operations there have been bumps. But that's also the
point of reorganization. We had two separate appliance businesses. We now have
one. Making the organization function like one business is the hard work of the
reorganization. We are getting that done. We are aligned as a single business to
deliver better results... better service to customers... better brand and product
management.... better manufacturing and cost efficiencies.
Maytag Appliances provides a strong, profitable foundation for Maytag Corporation. It
always has. What's different now is that we are reorganized and refocused to deliver
more consistent growth and more profitable results. What will make us different in the
future is this: We will lead growth for the corporation... we will grow this business... and
we will set a new pace for profitable growth in the industry.
Maytag's Platform for Growth
A lot of businesses talk about growth. There's nothing new in that message. But not
every business has the platform for growth. We do.
We are backed by a corporation that is capable of supporting growth in ways it has not been able to do previously.
This business historically has enjoyed strong operating margins and positive cash flow. That's not going to change. It's a strength we will leverage to grow.
We command a premium price for Maytag and Jenn-Air brand products. That's also a competitive advantage.
Our brands command outstanding consumer preference. Believe me, I know first
hand the value of brand preference. Other companies spend millions trying to
gain a fraction of the recognition -- let alone the preference -- of the Maytag and
Jenn-Air brands. We will leverage brand preference for growth.
That's the platform we will build on. Our potential for growth is tremendous. My team's
challenge is to realize that potential. Here's how.
First, grow market share.
Second, grow unit volume.
Third, grow profits.
We will grow market share.
To grow market share, we first will protect our position, and then we will grow it smartly.
"Smart" means sustainable and profitable share growth... not share at any cost... and
not any share.
You see, I believe growing market share without profits is like breathing air without
oxygen... all the functions appear to work for the moment, but it's not very nourishing to
the body.
That's important, because I am encouraging a new spirit of business aggressiveness at
Maytag Appliances. I can assure you I do not like -- nor will I tolerate -- share loss.
That's not part of my vocabulary. It will not be part of my team's vocabulary.
Going forward, we will grow share smartly with three strategies:
- By building long term, win-win partnerships with customers.
- By competing for purchase decisions at key price points and putting a Maytag
within economic reach of every household.
- And by expanding our distribution in order to put Maytag within physical reach of
every household.
Win-Win Partnerships
This is a new attitude at Maytag. Since April, I have held top-to-tops with our largest
retail customers. I sit with my counterparts and share Maytag's vision, commitment,
and strategies to grow, and our desire to forge a win-win partnership to help them grow.
In every case, our customers want more from us, and we want more from them. Once
we understand that, it's easy to agree on mutual objectives and move ahead together.
And we are. We are putting in place specific steps to grow our market share with
customers in every channel in which we operate.
Make no mistake about it, I want Maytag and Jenn-Air to be the "go to" or "push" brands
on every retail floor in America. Not because of prices... we won't be the lowest price...
but because of preference... most consumers prefer a Maytag or Jenn-Air -- and are
willing to pay a premium for that preference. This actually produces a win-win-win -- for
our customer, the consumer, and for Maytag -- and it works.
Compete for every purchase decision
To grow share we will compete for every purchase decision, which is also new thinking
for us, but it opens up the playing field dramatically. Here's an example: We have just
introduced a new brand to the Maytag family. In a market test, we launched a limited
edition Performa by Maytag laundry line, which includes two washer models and one
dryer.
Performa by Maytag is a whole new way to think about leveraging the Maytag brand.
We are testing it in laundry, but we also are looking at all of our product lines. One
target retail price is $399 for the washers; $349 for the dryer.
Why those price targets? Because more washers and dryers are sold at $399 and $349
respectively than at any other price points. Yet, until a week ago, the Maytag brand
didn't compete there. Now, the Performa by Maytag line will give us a very strong entry
at these key price targets, backed by strong margins, for us and for our dealers, and
backed by the Maytag brand and reputation. Let me do some simple math to highlight
the magnitude of this action:
Roughly 12 million washers and dryers are sold in the U.S. and Canada.
40 percent of washer and dryer sales occur around the $399 and $349 price
points.
This represents 4.8 million washers and dryers.
With Performa by Maytag, we will now compete in a new way for 4.8 million more
purchase decisions in 1997 than we did in 1996.
If we only get our current share, it will represent well over 700,000 more
consumers who are satisfied Maytag owners... 700,000 more Maytags sold by
our customers... and 700,000 units off our competitors' books and on ours.
Just as impressive, at the other end of the price and value continuum is our higher-
priced, high efficiency Maytag clothes washer that will be introduced at retail in the
middle of 1997. It will use horizontal axis technology. It will offer consumers superior
energy benefits... superior washing benefits... superior clothes care, and a new level of
user-friendly operation. It will offer traditional Maytag dependability... a new kind of
innovation and value... and set a new standard for Maytag's premium brand leadership.
With Performa and our revolutionary H-axis Maytag, when consumers think of the very
best in laundry, they will think of Maytag at both ends of the price - value continuum -- a
continuum we have expanded to touch more consumers than ever before. These two
Maytag brand products will be like strategic bookends... protecting share and expanding
it smartly, and competing for more purchase decisions of more consumers. And
importantly, this strategy will not erode the average retail price of a Maytag. This
strategy will maintain or improve operating margins. That's what smart share growth is
all about.
Expand Distribution
A third driver to growing share is our distribution strategy. We want a Maytag in every
home in America. In fact, our vision is to "Own the Home." Expanding distribution is a
key step toward that vision and in converting brand preference into market share.
Today, not every consumer knows where to go to act on that preference. When I ask a
dozen people to tell me off the top of their heads where they would go to buy a Maytag
washer, their first answer is usually wrong... and their second answer is usually, "I don't
know" -- which is also wrong. The fact is we have a strong presence with every power
retailer. And we need to ensure that consumers realize it.
- to Power Retailers
- But we also will make it easier for anyone who wants a Maytag to buy a Maytag, and to
know where to go to get it. Here's an example. Best Buy is committed to being more
aggressive in growing their appliance business. We are committed to being more
aggressive in helping them grow with the Maytag brand. The result: today you'll find all
of our different models across the entire Maytag product line in every Best Buy store.
We began to expand with Best Buy about a year ago... today, our volume is up
threefold. And, going forward, we see continued, accelerated growth in this channel.
Best Buy delivers a terrific customer demographic for us; we deliver consumer-preferred
products for them. They win and grow. We win and grow.
- to Maytag Home Appliance Centers
- We have other initiatives. Based on the strength of the Maytag brand name, we have
created a special and proprietary distribution channel across North America -- Maytag
Home Appliance Centers. Today, there are hundreds of these independently owned,
dedicated retail outlets for Maytag brand appliances. Collectively, these stores make up
a distribution channel equal in size to a power retailer. This is a true competitive
advantage. We will continue to grow these stores: We have added the Admiral brand
to the product line-up. And we are testing Jenn-Air brand in selected markets. And we
are shipping Performa as we speak.
Just as importantly, we are backing up all of our initiatives with an entirely new logistics
function... a new regional distribution system... and a new willingness to see our
business through the eyes of our customers.
So, the approach we are taking to growing share is different -- it does not rely on price
discounting. It depends on building win-win partnerships with our customers... it will
require that we compete at more key price points... and it leverages the opportunity we
have to expand distribution. With this strategy, we will grow our share smartly.
We will grow unit volume
We will grow volume with product innovation and by providing compelling value to
consumers. Or, as I like to say, we will "wow" the consumer with features they want...
and features they are willing to pay for.
This is something we know how to do -- we just
have to do it faster and more often. It will mean routinely developing innovative
products based on key consumer insights.
If you think about breakthrough innovations in home appliances, they have been few
and far between. The recent history of the white goods industry has been to meet
expectations. But just meeting expectations doesn't produce a "wow." To get the
"wow" response we want, we have to exceed consumer expectations by providing
benefits that consumers don't expect... or even know they want. "Wow" means
providing benefits that compel consumers to buy Maytag and Jenn-Air products.
An example of what I'm talking about is the new Dependable Care laundry line we
introduced in the third quarter. This product offers consumers a new wash system with
an agitator that works only when it's needed and works only as much as it's needed.
For a large load of towels, the agitator provides added turnover power and cleaning. On
smaller loads of blouses or shirts, the agitator handles clothes more gently.
But why does the consumer care? For starters, consumers are surprised when we tell
them that 77 million loads of laundry are washed every day in the U.S., with a retail
value of over $23 billion. This takes on personal significance when consumers realize
the average retail value of a wash load is not the $75 to $100 they estimate.... but $300
to $400 -- and can easily hit $700 to $800.
So what's the consumer insight? It's that the value of the average laundry load will
often exceed the cost of the appliance they wash it in. And that the new Dependable
Care washer from Maytag... with the number one rated clothes care system... will clean
their clothes like a Maytag... and it will protect their investment in clothes like no other
clothes care system in the world. This is a benefit consumers are willing to pay for. It's
a benefit they didn't ask for, and it's a benefit that has emotional and economic appeal.
What you see in our new laundry line is just the tip of the iceberg. To consistently lead
the way with innovation and with consumer insights, we are doing things differently.
- We are doing consumer research differently.
- We are taking a different approach to focus groups.
- We are starting to advertise, market, and merchandise differently.
Maytag is known for quality and dependability. We will add to that equation product
innovation based on compelling consumer insights. And this is a powerful combination.
We will grow profits.
The third objective is to grow profits. Here, we are not going to rely on traditional
thinking. In the past, we have used straight logic that says if volume grows, so will
profits. This is the conventional logic in this industry that relies on marginal costs and
economies of scale as the only way to gain a competitive advantage and the only way
to grow. This conventional thinking is not producing the kind of results for our
competitors that they want, or the kind of results that would be acceptable to us.
That's because pricing in the industry is extremely competitive... and on a downward
spiral. Manufacturers and retailers are fighting aggressively for market share. And,
other than the equity of the Maytag and Jenn-Air brand names, and the quality we build
into our products, there is very little differentiation of products and features in the
industry. As a result, to win in the game, our strategy is to offer best value to our
customers and to consumers, and to offer it in every product line.
Therefore, we must -- and will -- dramatically reduce our costs and become a lower cost
producer. We will not compromise quality to do that... our quality is our heritage. But
we will seek out -- point out -- and drive out all non-value-added costs with a
vengeance. Non-value-added cost is our worst enemy... and we are "sleeping with the
enemy" every hour of every day.
This is a new agenda for us set in motion with the reorganization, which has opened up
opportunities in a much more significant way. Before the reorganization, purchases
were made by separate business units in separate and autonomous companies. Now,
we can fully leverage the "Power of One" business to drive out all non-value added
costs. We have the opportunity to take cost reduction to the next level... to cost
transformation... to transform our total cost structure. Here are a few examples:
Reduce Costs
We have been working closely with several of our suppliers to develop specific plans to
significantly reduce direct and indirect material costs. With our key suppliers, we have
identified tens of millions of dollars in cost reduction opportunities. To realize these
savings, we will rationalize and reduce the number of suppliers... we will commission
joint continuous improvement teams... and we will go to a global sourcing strategy.
These savings are real. We have already begun to capture them. We will realize
significant reduction in 1997 and for several years to come.
Transform Costs
We have an even bigger opportunity in cost transformation in the initiative we have put
in motion to design quality in and costs out -- from the beginning. Here's an illustration.
In refrigeration, we have created a new, lower cost platform for our entire product line,
while adding value and features for consumers. This new product (top-mount models)
will be introduced in the first quarter of 1997. Refrigeration is the biggest revenue item
in our product line; it also accounts for the lowest market share of any product in the
Maytag line. This new product -- literally -- is designed to change that. It will set new
standards for performance, convenience, flexibility, and, of course, dependability.
It was designed to use common parts across brand and model mix, reduce service call
expense by 50 percent, run on a new, state-of-the-art manufacturing line, and realize a
double-digit platform cost reduction, even as we added more features and value for
consumers. We are investing $180 million to achieve this; the project is on schedule
and below costs. And we have initiatives aimed at producing similar results in laundry,
cooking, and dishwashing.
We will become a lower cost producer because that is the price of admission into the
game. But we are not in the game just to play; we are in the game to win. And to win,
we are thinking differently about growing profits... about growing volume.... about
growing share. To win, we must grow... we can grow... share... volume... profit. All are
within our reach.
This is the strategy to win with... and it is a strategy we can execute. It will not happen
overnight. But it will happen sooner than most think. We are much stronger and much
better and a much more determined competitor today. We will be even stronger and
better in 1997: A tougher competitor. Better innovator. Lower-cost producer.
We will become a growth company. We will become a major force in this industry. And
when we do, we will achieve our vision and "Own the Home."
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