Thursday, April 28, 2005

The Maytag Repairman Gets Even Lonelier

A good buddy of mine who should have been laid out by now has been terminally ill for a long time. He was always complaining that he was the "the loneliest man in the world." A depressing fellow, really, who reached the top of his trade by theoretically having built appliances with such care and quality that nobody ever called him for repairs.

You may have known him: the Maytag Repairman.

In case you missed it, Reuters news service recently noted that, "struggling appliance maker Maytag Corp.... reported an 80 percent plunge in quarterly profit on lower sales and higher steel and energy costs, and slashed its full-year outlook. Maytag, the maker of Hoover vacuums and Jenn-Air and Amana appliances, said its full-year profit would about half what it had previously forecast, and its shares fell 8 percent in pre-market trade."

Wow. Here was a brand that staked its entire reputation – built its entire history -- on being "the dependability people" suddenly gasping for air. This was a company that for years placed a succession of sour-faced Maytag Repairmen in front of the American public, complaining of their loneliness because nobody ever called them to repair a Maytag machine.

How times have changed.

"There's a serious credibility issue developing around the management of this company," said David MacGregor, an analyst with Longbow Research. "As a result, it might be time for the board to shift to Plan B," or more crisis management. "The core of the problem has little to do with cost," MacGregor said. "It has more to do with not being competitive and not having a competitive product offering."

The Reuters article goes on to state that, "the disappointing results and lowered outlook were the latest in a series of setbacks for Maytag, which has been struggling to reverse a prolonged slump at its Hoover vacuum unit and reduce its overall costs, which analysts have said are higher than other appliance makers." And then Mr. MacGregor drives a stake right into the heart of the matter:

"There are strong brands, good retail distribution for the time being but those things have a half life," said Longbow's MacGregor. “If the board doesn't get involved and do something relatively soon, the intrinsic value of those intangible assets will continue to diminish.”

Gee, ya think those "intangible assets" might have something to with management that has no idea of what a brand is?

Maytag’s stock price is half of what it was 12 months ago. If ever there were a brand in an iron lung, this one has to be it. And the reason, no matter what Maytag’s board of directors are telling the press, is not that steel prices are going up. It’s what I call Caretaker Management Syndrome, which has now reached pandemic proportions throughout corporate America.

If you haven’t heard of CMS, it’s probably because I just made up the term, coined after realizing that the syndrome itself has undermined many of America’s most trusted brands. The way it works is similar to the theory of Three Generations of Wealth, in which the first generation creates the fortune, the second generation spends it and the third generation loses it. Many American brands are victims of third generation "caretaker" managers, who themselves never had to build the very brands they’ve been charged to manage. Living off the fat of the land, they’re complacent managers who fear innovation and risk, the type that figure their brand will always be there, because it was always there for their fathers and grandfathers.

The trouble is it doesn’t work that way. The grandfathers who built the brands knew the power of a brand. They knew how to constantly build and reinforce their value. Caretaker managers, however, spend more time on the golf course than they do building brand value. In fact, most CXO’s don’t truly understand what a brand is, let alone how to build its value. And so while the caretaker managers might hold hands, close their eyes and wish real hard, their brands continue to wither from neglect, with market shares shrinking into a mere slivers of what they once were.

I guess this wouldn’t bother me so much if I knew that better, stronger brands were eating Maytag’s lunch. But I have a sneaking suspicion that it’s the boys in the corporate ivory tower that are really to blame. Guiding their decisions by balance sheets instead of real brand and marketing strategy, they completely undermine and undervalue the most powerful asset their companies possess: their brand. They discount the trust and values their fathers spent decades cultivating and nurturing, because they know nothing of trust and value.

You want proof? How about this: Over the last decade, the actual number of appliances that Maytag actually builds and markets is down to one machine. That’s it. Everything else is built by some other brand and slapped with a Maytag label. Sticking a high-end lable on to a substandard product may look good on the income statement for a quarter or two, but there are two things wrong with it:

First, it undermines your brand. Second, people start launching class-action lawsuits. Both have now hit Maytag broadside, as the number of lawsuits Maytag is fighting – and losing – have come home to cost the brand more than "the cost of steel" ever could.

This is the story that American business media continues to miss. The widespread ignorance of branding is a scourge on the economy that’s going to get a lot worse before it gets better. Today, if you really want to find the loneliest person in the world, don’t look for the Maytag repairman.

Look for a happy Maytag customer.


Anonymous Anonymous said...

Surely if the cost of steel were the 'real' root cause of Maytag's problems - then the Auto Industry, Ship Building Industry and every other Industry that uses Steel as a main component of their products manufacturing process i.e., Aluminum foil (insert any number of finished prodcuts here) would be facing the same sets of issues.

Personally, I think Maytag's problems are linked to the lack of product innovation. Let's face it, doing laundry isn't rocket science these days, nor is producing a decent Vacuume cleaner.

If there are no compelling functional reasons (advantages) to purchasing a Maytag product, other than the inherient 'value' of the Maytag name and the perception that the product is better in the minds of the buying public ... then the product is no longer better.

Marketing is afterall a battle for mindshare. Consumers vote with their wallets.

Maytag should look at the competitive landscape and develop a product that out performs the competitive offerings and can be positioned along the likes of its predessors (i.e., a premium product).

Just my view from here.

Simon Rolfe, Senior Partner
Creative Genius Communications Inc.

4:33 PM  
Blogger Rob Frankel said...

Simon, I agree that the steel cost thing is so blatantly ridiculous that no sane person could offer it up for blame -- yet that's exactly what Maytag is doing.

Still, there was a time when Maytag really was synonymous with high quality.

Where I disagree with you is in two spaces: First, battle for mindshare isn't the whole ball game. That's simply awareness, and as I point out often, cancer has a high awareness, but who wants it?

Second, even though consumers vote with their wallets, the whole point of branding is to get them to see the value above and beyond that which they may mistake as commodity. That's why people pay FEDEX twice the rate for overnight delivery that they could be paying the U.S. Postal Service. FEDEX has the brand that conveys trust.

Also, having just launched a laundry service as a client, I can tell you that while it isn't sexy, it's a critical issue for all self-supporting folks. (In our client's case, the innovation is in the service end).

Finally, this issue really isn't about innovation. It's about letting a very strong brand decay and die through neglect. If Maytag had their act together, they could have continued to stand for quality forever.

Thanks for your thoughts, Simon. They're always wortht the read.

8:37 PM  
Anonymous Anonymous said...

Rob, back in 1999 under the leadership of Lloyd Ward, the sales force which had been succesful for years was downsized by over 130 of their sales and marketing employees. We were told it was not our age, gender or that we weren't making quota, just a good business call. I myself was downsized with over 24 yrs of "dependable" service to Maytag. Dealers, no what their size, knew we would be there at least once a month to train them and their staff on appliances and that's what we did. I personally logged in hours of windshield time covering small dealers in SD, WY, and NE. We did our jobs and well, so we thought. Maybe they should rethink what happened after they got rid of their experienced sales force and marketing people. AM

2:58 PM  
Anonymous Anonymous said...

The only problem with Maytag appliances IMO is the product itself.Lower quality,bad styling and low quality fuctionality all with higher prices.
Once the product line and value proposition is adressed you can market the prouct line.I walked right past it last time in favor of other brands.Amana their aquired brand too is damaged by lower quality products and poor customer support.Sad very sad

10:37 AM  
Anonymous Anonymous said...

Hey have a great day, I'll be back to see yours again too. :)

9:16 AM  

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