Sure your washer gets those grass stains out, but how does it make you feel?
It’s a silly sounding question, but one worth billions of dollars for Whirlpool Corp. Four years ago, with its future in doubt, the company reinvented itself with the customer’s feelings as the core of its business.
The result has been striking. In an industry known for producing boring, white boxes, Whirlpool has unleashed dozens of artfully designed toasters, roasters and washing machines, setting itself apart from competitors and winning customers’ dollars.
Whirlpool systems engineer Aaron Dykstra demonstrates one of the firm’s innovative products, the Polara appliance that can be programmed to go from a refrigerator to a cooking range.
Since 1999, sales have increased yearly amid a general recession in the United States, stunning analysts who had bet against the stock after the company began its restructuring. Since 2000, the stock has enjoyed a march from $35 per share to its current $73.
A lot is riding on Whirlpool reinvention on both Wall Street and Main Street. Located in the heart of Benton Harbor, a city torn by racial and economic strife, Whirlpool’s newfound success couldn’t have been better timed and city leaders hope its success will spill over into the community.
“We’ve got a lot of programs under way now to help get this economy going here,” said Jeffrey Noel, president of Cornerstone Alliance, a community economic development firm. “This company has made a commitment to make sure we succeed.”
Far from the stereotypical concrete and cubicle mazes, Whirlpool’s corporate offices lie on several acres of gently rolling land just north of the central city and within view of Lake Michigan’s shore.
The complex has more a feeling of a college campus than a Fortune 500 business’ headquarters, complete with separate buildings for various subjects. And the coolest place to be on campus “” like many schools “” is the art department.
While number crunchers and engineers make up the majority of Whirlpool’s 2,600 Benton Harbor employees, the creative impetus behind the company’s recent renaissance comes largely to a small corps of designers.
The team of 80 created the hip and esthetically pleasing Duet washers and dryers as well as countless designs for future products, like circular microwaves, chrome mini-fridges and a host of other popular, artfully designed gadgets.
“Design used to be very much an afterthought, where the engineers would finish their work and just toss it over the wall for decoration,” said Charles Jones, vice president for the company’s renowned design shop. “We’ve doubled our staff in the past four years and our budget has risen 30 percent each year. It’s become an obvious priority for the company because they’ve seen what great design can do for a brand.”
And the results are immediately obvious inside the lobby of Whirlpool’s Global Design Center where visitors are hit with a display of microwave designs that were shown at the Louvre art museum in Paris. Nearby is the White House award for achievement in American design.
The building is a brightly lit space, reminiscent of a big city loft; the walls covered with old appliance pictures, art magazines and tasteful decorations.
From here, designers try to capture the look of the company’s brands. For Kitchen-Aid, the company’s higher-end brand, it wants appliances and gadgets to offer “heft” and “durability” inspired by the original Kitchen-Aid stand mixer made famous in the post-World War II era. Pizza-cutters thus have giant handles and large blades while refrigerators have large handles and gentle sloping curves and smooth edges. Such looks appeal to cooking enthusiasts, the company says.
For Whirlpool, the company’s mid-range brand, designers are asked to make appliances look convenient, reliable and hi-tech. Edges are more angular for the futuristic look and digital buttons and gauges adorn the display panels.
“If Kitchen-Aid is analog, then Whirlpool is digital,” Jones said. “You’ve got two different types of products for two different groups of consumers.”
And the theory appears to be working. The company’s Whirlpool Duet washer and dryer, retailing for $2,000 as a pair, are selling faster than they can be made. And for Kitchen-Aid, only one year after entering the market for kitchen gadgets “” like spatulas and mixing spoons “” it’s already become the top selling brand in the United States.
“We want people to be able to immediately recognize our brand’s products as being our brand,” said Jamie Moldofsky, vice president of the Kitchen-Aid division. “And that has really made us stand out with our customers.”
Washers and pork bellies
While the theory of making brands stand for something is an old one, it’s relatively new for the appliance industry.
Through the 1980s and “˜90s, companies worldwide had rushed to make appliances cheaper and cheaper. As such, consumers had come to treat washers and driers as commodities, like oil, cattle or pork bellies traded as equals on open markets regardless of where it comes from.
Customers had little or no loyalty to any brand and couldn’t see any differences between models beyond cost.
“We called it the “˜sea of white,’ which is what a customer would see at an appliance store, a bunch of white boxes,” said Whirlpool’s chairman and CEO David Whitwam. “Nobody knew one from the other, so they just made their decision on price.”
The danger in simply competing on cost for Whirlpool was that it was eventually going to find a cheaper place to do business than Benton Harbor. Eventually, those who moved their operations to low-cost countries like China or Eastern Europe would be able to beat an American company on cost.
Not to mention, there’s little room for sales growth when nobody cares from whom they buy their appliances.
“We had to change from trying to sell to dealers, to trying to sell to customers,” Whitwam said. “It’s a totally different mind-set.”
The company also went about some painful cuts, eliminating 10 percent of its work force as part of it turnaround plan, totaling some 6,000 workers, to cut $260 million in annual costs.
At the heart of the plan was to establish Whirlpool and Kitchen-Aid as viable, distinguishable brands. Furthermore, the company wanted to become known as an innovation leader in the field.
Through product design and marketing, the brands soon became a success. Profit-margins swelled on many products as customers bought Whirlpool products for their visual appeal, as well as performance. Meanwhile, the company still managed to compete on lower-end appliances with products made at factories in China, India, Brazil and Latvia.
Sales have steadily risen from $10.3 billion in 2000 to $12.2 billion in 2003, and executives credit the marketing plan for the results.
“The company has certainly achieved rapid change in the way we go about our operation in a short period of time, but in our minds it’s not fast enough,” said president and chief operating officer Jeff Fettig. “There needs to be constant change to stay ahead.”
With that in mind, the company also has attempted to capture the creativity of its employees to create new products. Workers are encouraged to submit ideas and are routinely given money to develop business plans for their ideas.
As a result, Whirlpool is developing hundreds of innovative appliances, trying to get their products into nearly every corner of your home.
Whirlpool has already found success with Gladiator, a series of corrugated metal-themed cabinets and appliances for the garage. In the future, the company is aiming to make miniature washing machines that fit beneath bathroom cabinets, stoves that can refrigerate food until you’re ready to cook it and Internet-controlled appliances that you can adjust from work or vacation.
“We’ve got a product in development now that came from a lineworker at one of our plants in Ohio,” said David Swift, head of North American operations. “It’s a laundry product and it could be a big one, but that’s all I’ll say for now.”
Hope for a troubled town
For Benton Harbor, the success of Whirlpool couldn’t come at a more crucial time. Known for a history of racial tension “” Benton Harbor remains more than 90 percent African-American, while neighboring St. Joseph remains more than 90 percent white “” the city erupted last June in a fiery riot after a police chase ended with the death of a motorcyclist.
But the town’s trouble goes beyond race to economics. Despite its location on the scenic southern shore of Lake Michigan, this town of 11,000 looks more rust-belt than vacation spot.
Abandoned and boarded-up houses dot the main streets. Old hotels sit empty and neglected. And compared with the charming shops and restaurants of St. Joseph, the business scene of Benton Harbor remains dilapidated and sparse.
Furthermore, the city is relatively secluded economically, sitting 100 miles from Chicago and 200 miles from Detroit. Recruiting, retainment and travel costs all added to the weight on pre-1999 Whirlpool.
“I even told the city then that if things didn’t change, we wouldn’t be able to continue successfully doing business here,” said Whirlpool’s Whitwam.
As Whirlpool’s fortunes turned, the town took a turn for the better, attracting an art district, theater and new loft housing. Cornerstone Alliance, the local development firm, has started several successful programs to get local businesses involved in attracting and retaining new developments and work with the community.
“We have a program where sixth-graders go on a weeklong internship with a local business and Whirlpool is a major part of that,” Cornerstone’s Noel said. “From the kids’ point of view, they learn a lot and for the business they get a different perspective on the people who live in this city.”
But last June’s riots stand as a stark reminder to Whitwam that there is much more work to be done. But with the company’s finances more secure now, Whirlpool is more able to afford to fund community projects and help improve the city. In just a few weeks, Whirlpool will open an office for 100 customer service representatives along a battered portion of Main Street in Benton Harbor, with the new brick building standing in stark contrast to other empty storefronts.
“Where will this town be in five years? In a much more wonderful place than it is now,” Whitwam said. “Will it have a long way to go, sure. But the effort is under way and our success has a lot to do with the success of this town in the long run.”
