Hoover Hard Floor Cleaners Product Portfolio Plan Alfred Lui Portfolio Planning Fall 2007 IIT Institute of Design
1 Company Overview Company History & Current Position The history of Hoover defi nes vacuum cleaning in domestic households. Founded by Ohio born janitor Murry Spangler in 1907, and named after its fi rst president William Henry Hoover, it was the company that took vacuum cleaners into the U.S. market. At the end of the Second World War, Hoover commanded about 50% of the U.S. market, which it continue to focus today. Despite competitions from domestic and foreign brands, Hoover continued to lead the U.S. market until early 2000, when Australian company Dyson entered the U.S. market in 2002. Dyson introduced a vacuum cleaner that claimed to address a common problem found in vacuum cleaners, where suction weakens as the fi lter in the outward air path gets clogged by dust particles over time. Dyson s fi rst product performed as it claimed and received positive market response. In 2004, sales of Dyson s vacuum cleaners surpassed Hoover s and Dyson gained the largest market share of the market in the same year. Despite troubles in the traditional vacuum cleaner market, Hoover has managed to dominate the newer hard-fl oor cleaner market. Its patented SpinScrub technology, combined with innovative designs such as folding handle and easy switch between surface and grout brushes, received raved reviews in the market. Maytag, which owned Hoover, merged with Whirlpool in 2005. In early 2007, Whirlpool sold Hoover along with all its equity to Hong Kong based Techtronic Industries Group. Opportunities Despite lackluster performance in recent years, Hoover continuous to carry tremendous brand equity in U.S. households. Its Floor Mate hard-fl oor cleaner product line, particularly the FloorMate H3000 model, enjoys remarkable success in the U.S. market. Dyson has yet to move into the hardfl oor cleaner market and other competitors offerings are relatively weak and stagnant. With this window of opportunity and a new management, the Floor Mate product line can help Hoover regain market share and become the driver for the next stage of growth.
Market Analysis During the past several years, size of the hardfl oor cleaner market has been on an upward climb. While over 90% of U.S. households own a vacuum cleaner, most of them do not own a hardfl oor (dry-wet) cleaner. The housing boom across United State during the past 5 years has created an expansion for fl oor care products across all consumer segments and price tiers. The effect is particularly large among fi rst time home buyers. Consumers in that group have strong preference on high-wood fl oor over any other kind of fl oor treatment in both their newly constructed and refurnished dwellings. The increase of living space in general continues, fuels the abandonment of brooms and mops for automated hardfl oor cleaners. 2 Sales Introduction Growth Maturity Decline Time
Competitive Landscape Form Category Generic Budget Direct Competitions Indirect Competitions Form Wet-Dry Hard Floor Cleaners Several other manufacturers offer hard-fl oor cleaners that directly compete with Hoover. All competitions in this group allows the consumer to vacuum, wash and dry their hard fl oors using one machine. Differentiating features found among these competitions are mostly around use-of-ease, fl oor washing methods and portability. Examples: Bissell Steam Mop Hard-Floor Cleaner Bissell Flip-Ease All-in-One Vacuum and Mop Bissell Flip-!t Select Hard Floor Cleaner with Heat Dirt Devil CE5500 Floor Keeper Bissell Flip-!t Hard Floor Cleaner irobot Scooba 3 Category Automated Floor Cleaners Competitions in this group are mostly traditional vacuum cleaners. They automates fl oors clean but does not wash the fl oor surface. Nonetheless, items in this group are often sold in the same isle as wet-dry hard fl oor cleaners & often viewed by consumers as alternatives to automated hard fl oor cleaners. Many manufactures in this category also having competing models in the Form group. Examples: irobot Roomba Eureka 71A Hand-Held Vacuum Dyson DC07 Black & Decker Cyclonic DustBuster Dyson DC14 Proctor & Gamble Swiffer Wet Jet All-In-One Power Mop Generic Alternate Floor Cleaning Tools Competitions in this groups are hand tools commonly used to clean hard-fl oors. Many consumers clean their hardfl oors using these tools with their vacuum cleaners. They are substantially cheaper and widely sold in many sales channels. Examples: Blooms & mops Floor Rags Sponge Mops Scrub Brushes Floor Squeegees Budget Other House-hold Spendings Rather than spending their household budget on fl oor care products, consumers spend their money on these items to meet their fl oor care needs. Many of these items eliminate the need of a hard-fl oor cleaner all together. Examples: Maid service Carpeting Professional fl oor care service
Two Competitors in Details 4 Dyson The U.S. vacuum cleaner industry went through a major shake-up when Australian company Dyson entered the market with its Dual Cyclone technology, which claims to never lose suction like common vacuum cleaners. Dyson s fi rst model, DC07, costs twice as much as competing models but it proved Dyson s claim. DC07 gained popularity in the market and eventually created a high-tier segment that did not exist. In 2004, Dyson gained the largest market share of vacuum cleaners in United States. In addition to advanced technology, Dyson also defended its territory through intensive marketing campaigns and patent lawsuits. Since 2004, Dyson went on to create extension products along the same platform of DC07. In 2006, Dyson introduced a rechargeable handheld vacuum cleaner and also began to expand into other household appliance markets. Dyson posts an immediate threat to the hard fl oor cleaners of Hoover because of its dominance in high-tier market as well as its brand as an innovative household product manufacturer. With the rising demand for wet-dry hard-fl oor cleaners, it is reasonably certain that Dyson will invade the hard-fl oor cleaner market in the near future. irobot The second new comer in the fl oor care market is Massachusetts-based irobot. irobot has its roots in military robotics. In 2002, it applied its experience to domestic use and introduced Roomba, an automatic vacuum cleaner that can operate with minimal human operations. Despite its novelty, Roomba has been not able to capture any signifi cant market share (less than 1% the vacuum cleaner at the end of 2006). In 2005, the company introduced Scooba, a hard-fl oor washing robot and again, despite its advanced technologies, it has yet to make impact in the market. Automatic fl oor cleaner to hold promises but current products in the market are still far from ideal. Mostly consumers resist the idea of big machines roaming around their living spaces, but small machines mean frequent emptying of the dust bin and replacing cleaning solution. Further, none of the products can climb stairs, which means owners who live in multi-level homes need to either buy multiple units or haul their robots from fl oor to fl oor. Despite these short-comings, several competitors are reportedly making investments in creating automatic fl oor cleaning machines. Dyson DC07 irobot Scooba
Consumer Segments & Trends Preeners First-Timers Rather-Not s 5 Age 30-55 27-40 22-28 Gender 32% male, 68% female 25% male, 75% female 45% male, 55% female Market Representation 52% 40% 8% Psychographics Less price sensitive Wants effi ciency and durability Less responsive to technology Moderately price sensitive Wants features, modern look & good performance Very price sensitive Wants no-frill units that just works Behaviors Make signifi cant efforts to keep their fl oors clean Most responsive to reviews from authoritative sources & product demo Often consult others before making a purchase Average price paid for a fl oor cleaning equipment: $185 Cleans their fl oors regularly Most responsive to TV, online and print ads Often makes joint purchase decisions with living partner Average price paid for a fl oor cleaning equipment: $120 Infrequent users, the cleaner is mostly use for occasional spills Most responsive to TV ads, along with give-away items Primary decision-maker of purchase Average price paid for a fl oor cleaning equipment: $75 Environmental Consciousness Rises The much publicized effects of global warming and rising energy costs have created an emerging demand for environment-friendly products. This rise in environmental consciousness is particularly strong in the First-Timers and Rather-Not s segments. Those consumers are willing to pay a premium for energy effi cient and environmentally friendly products. Similar effects of that trend have also been found in multiple industries, from automotive to consumable household products. Aging of the Preeners The average age in the Preeners segment is growing along with the baby boomers that dominate the segment. Many of them choose to live at their own home and continue to be self-suffi cient. Ergonomics, ease-of-operations and service warranty are becoming determining factors in their purchase decisions.
Current Portfolio $200-250 Preeners First-Timers Rather-Not s irobot Scooba $250 $150-200 Floormate SpinScrub 800 (H3060) $230 Floormate SpinScrub 500 (H3030) $170 6 $100-150 Floormate SpinScrub Widepath (H3044) $150 $50-100 Floormate Lite/300 (H2850) $100 Bissell Flip-!t Select $97 Dirt Devil Floor Keeper $94 Floormate SpinScrub (H3000) $90 Bissell Steam Mop $80 Impulse Cordless Power Mop (H2510) $95 Floormate (H2800) $80 Bissell Flip-!t $80 Bissell Flip-Ease $40
7 Portfolio Review Current Offerings Currently, Hoover offers 7 hard-fl oor cleaners for the 3 identifi ed consumer segments. Two heavy-duty products (H3060 & H3044) are targeted at the Preeners. They both have the patented SpinScrub technology and a 15-inches clean path. Three products with SpinScrub technology but the regular 13-inches clean path (H3030, H2850 and H3000) target the First- Timers segment. H3000 is an older model that is based on an earlier product platform. Similarly, the H2800 targeted at the Rather-Not s segment is also based on an earlier platform. The only new product targeted at the Rather-Not s segment is the cordless H2510. It has an internal rechargeable battery that allows up to 30 minutes of operation. Domination Above the $100 Price Point With exception of the irobot Scooba, all of the competing products are priced under the $100 price point. However, it is because the hard-fl oor cleaners market is so wide open and lucrative, the price tiers above $100 are attracting competitions. Hoover must continue to differentiate itself from competitions if it were to maintain control above the $100 price point. Opportunity in the Cordless Products Hoover only has one product in the low-tier cordless market (H2510). The cordless market has been attracting consumers in the Rather-Not s segment. With a more powerful motor, mobility of cordless models can also appeal the Preeners and First Timers. The gap in the mid-tier Cordless Segment can be an opportunity to extend the cordless product line. Older Models Face Competitions Three older products occupy the lower price ends of the First Timers and Preeners segments. While, the H3044 in the Preeners segment occupies the $150 200 price range by itself, H2800 and H3000 in the $50 100 range of the First Timers segment are facing lots of competitions.
Portfolio Goal & Next Step Strategic Position Hoover is a Market Leader in the hard-fl oor cleaner market. Its patented SpinScrub, space-saving and easy-to-operate products are allowing the company to dominate the largest share of the hard-fl oor cleaner market. To maintain leadership, improve revenue while maintain the balance of the overall risk, Hoover should concentration on establishing dominance in the two mid-tier markets ($100-150 and $150-200). Those mid-tier market drive high volume, since it includes the two largest groups of consumers, but without the much higher amount of investment that the high-tier market demands. With Dyson reportedly eyeing on the hard-fl oor cleaner market and the high likelihood that it will fi rst aim at the high-tier market, we advise Hoover to establish a strong defensive position and dominate the two mid-tier markets at this time. Portfolio Goal To dominate the two mid-tier markets, Hoover should fi rst leverage their product leadership position and also improve customer loyalty. Hoover should put their resources on aligning their products, in both intermediate and long terms, to the two customer trends that we have mentioned. Hoover should also invest resources to continue their effort in discovering, understanding & anticipating their consumers needs. Next Step With the goals to capture market share in the mid-tier market and create a strong defensive position in mind, we re-categorized and re-prioritized the initiatives that Hoover has planned and has been undertaking. We recommend Hoover to concentrate on the top fi ve initiatives that will help them sustain in the current market, extend to new customers and disrupt the market with new offerings. 8 New Customers Extend Create mid-tier rechargeable model, with larger power motor and larger dust bin. A Create ergonomic products, targeting at the needs of aging Preeners. B Renew color schemes and product housing to reach male consumers. Push Beyond Portable, micro, wet-dry spot cleaners for clothes. Removes stain without washing the whole piece of garment. Multi-washable fi lters with replacement indicator. Current Customers Sustain C Improve product performance, solve clogging problem reported by consumers. Remove low-tier 2 corded models to reduce maintenance cost. D Replace older mid-tier corded heavy duty model (H3044) with two cost reduction models in two different mid price tiers. Disrupt E Create new platform of ultra-high energy effi cient products that are low-noise and low energy consumption. Codevelop environmentally friend products with cleaning solution manufacturers. Create intelligent cleaners that can detect the amount of dirt under the cleaner and adjust motor power accordingly. Current Market New Market
Executing the Plan We took the list of prioritized initiatives and created two courses of action, from which Hoover can choose, depending on the focus that they want to place. Note: Size of each bubble indicates the resource, in today s money, required by the initiative. Course One: Risk Minimization To minimize short-term risk, Hoover should fi rst allocate resource to replace an older model, fi x reported clogging problem, and create new products for male consumers. Put second priority on creating a high effi ciency platform and products for Preeners. Course Two: Market Share First To maximize the potential of capturing market share in the mid-tier markets, Hoover should put fi rst priority on creating a new high effi ciency platform and products for Preeners. Put secondly priority on replacing an older model, fi xing unclogging issues and creating products for male consumers. Reward D First Priority Second Priority E Reward Second Priority D First Priority E C A C A 9 B B Risk Market Potential ID Initiative Strategy A Create ergonomic products, targeting at the needs of aging Preeners. Extend B Renew color schemes and product housing to reach male consumers. Extend C Improve product performance, solve clogging problem reported by Sustain consumers. D Replace older mid-tier corded heavy duty model (H3044) with two cost Sustain reduction models in two different mid price tiers. E Create new platform of ultra-high energy effi cient products that are low-noise and low energy consumption. Disrupt
Appendix Dynamic Rank Order List of Strategic Initiatives Strategic Alignment Market Potential Technical Feasibility Financial Rewards Probability of Commercial Success SCORE 10 Ergonomic product designs for aging Preeners. 1 1 1 1 1 5 Renew color schemes and product housing to reach male consumers. 1 1 1 1 1 5 Improve product performance, solve clogging problem reported by consumers. 1 1 2 1 2 7 Replace older mid-tier corded heavy duty model (H3044) with two cost reduction models in two different mid price tiers. 1 2 1 2 1 7 Create new platform of ultra-high energy effi cient products. Low noise and low energy consumption. 2 1 3 1 1 8 Codevelop environmentally friend products with environmentally friend cleaning solution manufacturers. Biodegradable fi lters, non-toxic cleaning agents. 2 1 1 2 2 8 Create mid-tier rechargeable model, with larger power motor and larger dust bin. 1 2 2 2 2 9 Remove low-tier 2 corded models to reduce maintenance cost. 1 3 1 2 3 10 Portable, micro, wet-dry spot cleaners for clothes. Removes stain without washing the whole piece of garment. 3 1 3 2 2 11 Multi-washable fi lters with replacement indicator. 2 3 2 3 1 11 Create intelligent cleaners that can detect the amount of dirt under the cleaner and adjust motor power accordingly. 3 2 3 2 1 11 Note: Lower score in each category means higher relevance