March 11, 2004
Build a Premium Brand Via Marketing, Says Oreck
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On March 9, David Oreck, the founder and CEO of Oreck Vacuums, spoke to an audience of over 500 students as part of the V.I.P. Speaker Series. The topic of the day was entrepreneurship, an area in which Oreck has considerable experience, having worked his way up from a small-town Minnesotan with “no money, no name, no business” to the viscount of vacuums.
The key to his success, Oreck said, was his ability to differentiate himself from other vacuum salesmen by manufacturing a unique product. Differentiation is crucial in sales, he said, and emphasized that if you could not differentiate your product, you can still build a premium brand via marketing.
To illustrate, Oreck held up his wrists. On one, he wore a Nike sports watch, which kept excellent time, featured a calendar and backlight, and cost $59.95. On the other, he wore a gold Rolex, which did not have any extra features, did not keep time as accurately as the Nike, and cost $5,000.
"That," he said, "is what I call good marketing."
Oreck first became involved in the cleaning industry as a
traveling salesman for Whirlpool. In the mid-1960s
he bought the RCA Whirlpool company, which
manufactured only vacuums and was struggling to sell
them. Oreck reflected on one of his first principles
of salesmanship: “You have to give the customer a
specific benefit, a distinct reason to buy.”
In his case, Oreck thought that the vacuums of the day
were too heavy. He saw an opportunity to carve out a
niche for himself in the cleaning world by offering
customers a lightweight alternative. The first Oreck
vacuum weighed only eight pounds. “My niche was taking
the hard work out of housework,” he said. “It was so
light, you could lift it on your finger!”
His advisors thought this was a bad idea. Indications
from consumers, they said, were that they equated the
heft of an appliance with its ability to perform
serious work. A lightweight vacuum would seem to be a
lightweight at cleaning.
Oreck followed his own counsel: “Learn how to listen
to, but not necessarily to follow, advice.” Rather
than abandon his plan, he looked for a way to change
the perception that cleanliness required heaviness. He
came up with the hypothesis that since people expect
luxury hotels to be impeccably clean, they would place
some confidence in a hotel’s cleaning supplies.
Therefore, he set his sights on selling vacuums to
high-end hotels. When he succeeded in this, he gained
more credibility in the eyes of consumers. Today,
50,000 hotels use Oreck vacuums.
Oreck gained a foothold in the industry by
differentiating his product from others, and in his
remarks he encouraged would-be entrepreneurs to do the
same. At the same time, he preached the importance of
remembering some time-honored fundamentals of sales:
consumers value pretty products over plain ones, a
sincere sales pitch over a silly one, and, to an
extent, a solid value over price.
Entrepreneurs should be aware that the strategy of
relying on a product to speak for itself has
limitations, said Oreck. Rather, he said, “There is
great value in building premium brands, especially
because the difference between products is shrinking.”
We are entering, he said, the age of the marketer:
“Perception is reality.”
According to Oreck, the ability to build premium brand
awareness is important not only to the proprietors of
the particular brand, but to the national economy as a
whole. “If we want to compete [in the global economy],
if we want to have jobs, we’d better wake up to just
how crucial marketing is,” he said.
Oreck's appearance was scheduled to coincide with the Undergraduate Business Council's Engineering vs. Business Week, which pitted undergraduates in those two disciplines against one another in various battles of physical prowess, wits and attendance. Over 540 students attended Oreck's lecture, a new record for the V.I.P. series; and as more business students than engineers turned out, the business school was considered the winner of that particular contest.
For information on specific programs at the McCombs School, consult our contacts page. For media information, contact the Communications Director by phone at 512-471-3314 or by email at CommunicationsDirector@mccombs.utexas.edu.
