No. 2 in market share: Dyson hoovers up vacuum business

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Americans didn't know they needed new vacuum-cleaner technology until Dyson arrived. But in short order the U.K. company pushing $400-plus cleaners has vaulted to the No. 2 position behind longtime leader Maytag's Hoover-and it's not stopping.

"You don't have to do the math," said Clare Mullin, global marketing director for Dyson. "In other markets, it took us two to three years to overtake the No. 1 brand so we expect that to happen in the U.S."

Aided by clever design, an unflinching purchase price, memorable advertising and strong word-of-mouth, Dyson, since reaching critical mass at retail in March 2003, has gone from a market share of zero of the dollars spent on uprights to 14.7% as of September 2004, according to NPD data. Maytag's Hoover moved from the dominant 25% share to 19.6% in the three-month period ending Sept. 30. Calls to Hoover, and its parent company, Maytag, were not returned by press time.

"Dyson has shaken up the marketplace," said Bill McLaughlin, executive editor, HomeWorld Business Magazine, noting the vacuum has turned a price-driven environment into one where products are competing on design, technology, and performance."

In its surge, Dyson sales surpassed long-established brands in the $2.2 billion upright market, including Kenmore, Oreck, Eureka, Kirby and Bissell. Not only that, Dyson-as its tagline goes "the cleaner that doesn't lose suction"-has pulled up a commodity-priced category into one where premium-priced devices now hold more than a third of the market. In the second quarter of this year, 38.3% of vacuums sold cost $235 or more, up from just 12.2% in the second quarter of 2002. Up until the first quarter of this year, more than half of all vacuums sold in the U.S. cost $95 to $125 or less, according to NPD. Dyson cleaners range in price from $399 to as much as $550.

"Suction to consumers is very important, and Dyson as a marketer claimed something that resonated with consumers," said Mr. McLaughlin.

Dyson expects to sell 900,000 units in the U.S., up from 200,000 last year. The privately held company made a profit of $86 million last year, according to Ms. Mullin.

The company over the past two years has used a marketing strategy centered on its technological innovation. "We're an engineering-led company, not a marketing-led company," Ms. Mullin said. But, of course, Dyson has spread the story of its founder's discovery-James Dyson, frustrated with conventional vacuum cleaners that lost suction, invented the new kind of cleaning device that uses, in the company's parlance, "dual cyclone technology" and has used clever design and distribution strategies to penetrate the U.S. market. Its vacuums were not only constructed with colorful shades of yellow and blue, but also had design features centered on ease of use, such as being bagless, making them easy to empty. Dyson's flashy design also helped catch consumers' eyes, important since 80% of vacuum cleaners are sold in self-service environments, he said.

"To this point, there is nothing to challenge him on his own terms," Mr. McLaughlin said of Mr. Dyson.

`new and exciting'

At first, Dyson seeded its vacuums through tony specialty stores. It later rolled them out to Target, and now has a strong presence in stores from Best Buy and Sears, Roebuck & Co. to Home Depot. And it's done so while still commanding a high price. Last month, Norman Axelrod, chairman-CEO of Linens N Things, cited the Dyson vacuum in an analysts meeting as an example of a product which is turning customers' eye away from price. The $500 vacuum, he said, "becomes our best seller simply because there is something new and something exciting about it, so there is not a resistance to price points."

Mr. McLaughlin said even Wal-Mart Stores, which had pressured other manufacturers to lower the price of vacuums to under $100, is testing sales of an ice-blue Dyson model priced at $350. "If Wal-Mart spreads that unit out, it is likely to have a significant effect on the marketplace. It could lead to more price competition," he believes. "There is no question Dyson is having an impact long term." A Wal-Mart representative did not return calls.

Initial ads, from agency Publicis Groupe's Fallon, Minneapolis, simply showed Mr. Dyson explaining his invention against a black background. A more recent spate of spots included Mr. Dyson but also showed footage of people frustrated with their vacuums. "James does a very good job of being himself on camera," said Mike Gibbs, group creative director, Fallon.

Dyson spent $755,200 in measured media in 2002, but upped the ante to $14.4 million in 2003, according to TNS/Media Intelligence CMR. From January through July of this year, Dyson spent $16.1 million. Media included print and TV.

Some of Dyson's most effective efforts have involved not TV ads, but careful seeding of the product by public relations and promotional ties. The DC11 canister, for example, was displayed in Barney's New York windows. Its premium vacuum designed for pet owners was given away as part of the goody bag for winners of the Westminster Dog Show. A Dyson vacuum also appeared on NBC's "Friends."

washing machines next

Ms. Mullin said, however, that most of Dyson's marketing is centered on word-of-mouth. Consumers of all economic groups "are buying it literally because of the performance of the vacuum cleaner," she said.

This year, a canister model was added in two markets, New York and San Francisco. Planned new models are expected to be smaller and more compact as well as more powerful for urban markets. Eventually, Dyson plans to bring new technology to another household standby, the washing machine, with a device using two drums that is said to better mimic the action of hand washing.

So far, most competitors have been slow to react to the Dyson challenge, some trying to copy its design features such as its lively colors, and others adjusting their marketing claims. But changes are emerging in the marketplace and Dyson may not have a clean sweep forever. Electrolux, for example, is interested in acquiring Maytag, according to recent press reports.

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