In a shrewd move by the executives at The Hoover Co., the company has branched off into the service industry, offering full-service residential and commercial carpet cleaning services. For Hoover, the transition is a natural progression, says Joe Folk, head of operations for carpet cleaning.
The objective is to diversify Hoover's strategy and stance in the market, says Folk, whose duties include setting policy for the program as well as overseeing day-to-day operations.
These moves come in the midst of changes at Hoover, whose parent company, Maytag Corp., recently announced plans to move Hoover's corporate operations from its long-time home in Canton to Maytag's Newton, Iowa, headquarters. The shift, which will reduce Hoover's corporate work force by approximately 20 percent, isn't expected to affect the company's R&D or manufacturing operations.
David Baker, vice president of diversified products, says the diversification of services is a natural extension of Hoover's business.
"Professional carpet cleaning provides an excellent opportunity for Hoover to capitalize on nearly a century of cleaning knowledge and the superior products that go with it," says Baker. "We believe consumers will embrace this service, not only because they are time-poor, but also because they have long associated the Hoover name with vacuum cleaners and clean carpets. In fact, many will assume we've been in this business all along because, in many respects, we have."
With the power of name association, Hoover's executives believe it's smart to mobilize and, in a sense, sell its product door-to-door. After a superb cleaning by a Hoover team, a customer might feel even more inclined to purchase one of its vacuums after Hoover's equipment has gotten out that pesky stain.
The program has received a strong response in its pilot cities of Atlanta and Pittsburgh, where it was launched in November 2003, says Folk. Both markets were chosen after demographic research conducted by Hoover, and because of the strong service center managers in those cities.
"We (initially) decided against Ohio because we did not feel Stark and Summit counties would be a true representation of the popularity of the Hoover brand," said Folk.
Hoover began offering the service in Stark and Summit counties in April, after its success in the launch cities.
"The reception from customers has been awesome," says Folk. "We haven't had a single negative comment yet, and we are getting callbacks for the six-month cleaning, which is something I was concerned about."
The feedback and callbacks for service are what Hoover has been waiting for. Expanding your reach in the service industry, especially when you're new to the game, can be daunting, and customer retention will be job No. 1 for Hoover's cleaning services.
Its cleaning program operates with a six-man unit in each city. The head of the two-man teams, the technician, is trained by a Hoover partner. They eventually hope to do all training in-house, says Folk.
Hoover considers its decision to move from being strictly a manufacturing company to incorporating a service sector a wise management tactic. The use of vans with the Hoover name provides mobile advertising, and by using Hoover products and equipment in its cleaning service, it is marketing a product through actual application.
The diversification strategies of a company should fit comfortably within the niche it occupies in the market. For Hoover, says Baker, providing the manpower to accompany its cleaning machines was an easy decision, and a smart one. How to reach: The Hoover Co., (330) 499-9499
The fundamental purpose of diversifying is for corporate managers to create value for stockholders in a way they cannot do for themselves. Another purpose is to integrate a new business into an existing one, creating a competitive advantage.
There are two main principles in diversifying your business strategy, improving core process execution and/or enhancing a business unit's structural position.
There are three forms of diversification.
* Vertical integration. Integrating business along your value chain, both upstream and downstream, so that one efficiently feeds the other.
* Horizontal diversification. Moving into more than one industry. The new business somehow relates to the existing one, although some companies pursue unrelated diversification.
* Geographical diversification. Moving into new geographical areas to overcome limited growth opportunities in the local market and/or gain global leadership positioning.
Diversifying alone can be done through internal R&D projects; in-company start-ups such as new product/service development inside the corporation; and spinouts -- managing innovative product/service development separately.
Diversifying with others can be done by implementing projects through new company formation; forming strategic alliances through joint R&D and implementation; making acquisitions; or joint ventures. Source: www.1000ventures.com