Profits by design Featured

7:25am EDT October 29, 2004
If you ask Reinhard Metzger, president of the Delta Faucet Co., to describe the biggest change in his company over the past few decades, he'll give you a simple answer - the art of design is now a science.

It sounds basic, but it's huge at Delta Faucet, where the research and design process is critical to its success.

"Research is the key," Metzger says, who was named president last October. "And it is one of our greatest strengths."

Drug companies such as Pfizer Inc. devote nearly $8 billion a year to research and development, because they have no choice but to make R&D a key component of their overall strategic plan. And while those R&D dollars are not as vital at a manufacturing company such as Delta Faucet, the company invests in research to increase its probability of success.

Delta Faucet, a wholly owned subsidiary of Taylor, Mich.-based Masco Corp., is one of the world's leading manufacturers of faucets, cabinets, architectural coatings and locks. This year marked its 50th anniversary, and Metzger says that over the course of those 50 years, the company has learned how crucial innovation is and how to create products that are accepted -- and demanded -- by the consumers.

"We are arguably the No. 1 brand in the marketplace," Metzger says. "Our biggest competitor comes close, but we are No. 1."

Attaining and sustaining that top designation didn't happen by accident, Metzger says. He points to Delta Faucet's focus on innovation and the company's carefully crafted research and design process as the reasons the company has attained its position.

"We introduced the first single-handle kitchen faucet," says Metzger. "(We) were the first to advertise to consumers, and developed finishes which were the first of their kind."

Being first begins with a commitment to constant analysis of the marketplace, consumers and, just as important, existing product lines and the capability to develop new ones.

"We look outside our industry at furniture and new styling trends," Metzger says. "We also look at the functionality of our products."

To stay in touch with consumer preferences, Metzger and his staff spend a lot of time conducting customer surveys through the company's Web site, focus groups and broad-based consumer groups.

"We go into homes to see how our products interact in the home and make sure they are OK when it comes to their functional aspects," he says.

Then, the company matches that consumer information with information gathered about style trends to determine the look and finishes to be used on future products.

It is, simply put, giving consumers what they want.

But the company doesn't end its research there. Delta's product designers also make sure products are easy to install, whether by professionals or do-it-yourselfers. That means they are tested thoroughly before they ever hit the market.

Says Metzger, "Even though we've been making these products for 50 year, we are continually working to make them better and trouble-free."

All of this bodes well for the 2,700-employee company.

 

Cost-conscious innovation

Every savvy business leader keeps an eye on the bottom line. Metzger is no different.

Accordingly, even as he strives to innovate, part of the design process includes keeping costs down. Metzger says the company achieves this goal in a few different ways.

"We have a significant internal investment in our in-house design team," he says. "We have a broad-based design and engineering team and cutting-edge test labs, which provide cost-effective tools."

Metzger has also built partnerships with outside designers, such as Michael Graves, to spread the R&D costs across multiple levels.

"The Michael Graves Collection is an extensive line of faucets and accessories for the bathroom," he says. "Having an outside designer helps us control costs."

Cost control is even built into the engineering process.

"We basically include costs into everything," Metzger says. "We calculate revenue projections and measure results on a monthly and quarterly basis."

Staying on top of the results allows Metzger to maintain flexibility for Delta with regard to its new product marketing strategies.

"The process allows us the ability to adjust how we merchandise and advertise the products," he says.

And, as with every other aspect of the business, Delta's merchandising and marketing processes have become as scientific as its design process.

Metzger and his team have developed three price point categories, assuring product offerings for every consumer budget group.

"Our Peerless products are at the beginning price point," he says. "Delta is our core product offering in the middle, and Brizo is our premium luxury line."

But Metzger is quick to point out that he understands you can't shoot for either just the high or low end in his business, and that Delta still puts most of its money into the core Delta line, which comprises the company's primary source of revenue.

"That is where our growth and opportunity have been, and where a large degree of our focus has been," Metzger says. "It is the sweet spot in the marketplace, where most consumers shop."

Even so, Metzger points to the Brizo line's growth and says the company plans to expand it.

"Brizo gives us a brand and opportunity to grow as that market continues to grow," Metzger says.

"And, thanks to the popularity of reality-based home remodeling television shows, consumers are more interested in buying matching accessories. Those shows have a strong influence on what information consumers are getting. Consumers see you can complete a look with towel bars, vases and candles. That carries over into what consumers expect from manufacturers."

 

Adaptable design

Under Metzger's drive to be innovative, Delta Faucet's three-year design cycle is in a constant state of motion and evaluation.

"It's a very structured process," he says. "We set targets based on the research and get definitive case studies from engineering. We do careful reviews and can see early on if a product is not going to meet our expectations."

If it doesn't, Metzger is not afraid to abandon an idea and look elsewhere. Everything, he says, depends on the company's ability to gather and qualify information.

"It is all research-based," Metzger says. "We blend our interior design group with external design sources, and the research leads us toward the right style and finishes. The market also dictates what we stay away from."

Metzger recognizes the need for the company to continue to innovate to keep itself in that No. 1 position. And one growing threat to the company's market share is competition from outside the United States.

"The biggest challenge is the globally expanding marketplace," he says. "Low-cost imports are entering the market. It is a fact of life."

Metzger's strategy to deal with this competition is to leverage Delta Faucet's strong brand identity and adapt to the changes.

"When customers think of our products, what comes to mind is reliability," he says. "Consumers can buy our products with confidence. We will build on our brand equity and readdress what we stand for."

The adaptation part of the equation relies on Metzger's tight fiscal controls -- keeping costs down and continuously improving the company's processes.

"We are very strong in managing the supply chain," he says as an example. "It all comes down to meeting customers' needs. We will continue to pay attention to what the market is doing -- what changes are happening -- and respond to them."

Among the supply chain initiatives Metzger has initiated is a focus on Delta Faucet's central distribution center. He wants to ensure the inventories being stocked there match customer buying trends.

"If we ever stop improvements to this system, foreign competitors will overrun us," Metzger says. "We have to stay lean and drive waste out of the process and improve."

And, Metzger's not afraid to utilize outsourcing as one tool in his business toolbox. Delta Faucet outsources a small piece of its product manufacturing but, Metzger is quick to say, "We control the quality."

In the end, Metzger says his challenges for maintaining and increasing the company's success boil down to three focuses -- building the company's brand, introducing new products and meeting customer expectations.

"I will continue to focus on building on our brand basics, the introduction and installation of new products and improving our customer relations. We plan to be around for another 50 years."

How to reach: Delta Faucet, (317) 848-1812 or www.deltafaucet.com