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Entrepreneur David Oreck told a Kellogg audience how he built a strong brand around quality and customer service. He spoke April 17 as part of the Distinguished Entrepreneur Speaker Series.

‘Brand is trust’

Brand leadership built on reputation and quality, says David Oreck, whose eight-pound vacuums have been cleaning up for decades

By Adrienne Murrill

4/18/2007 - Nature may abhor a vacuum, but it loves the vacuum man, if David Oreck’s 40-plus years of entrepreneurial success offer any measure.
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Famous for the radio and print ads that feature his namesake household products, Oreck made a confession when he addressed a Kellogg School audience April 16 as part of the Distinguished Entrepreneur Speaker Series.

“I’m always trying to sell vacuum cleaners,” he said, earning some laughs.

All joking aside, it was clear to see that the 83-year-old founder of the Oreck Corporation is a salesman at heart, one that stands behind his brand.

“I’ve turned the Oreck name into a household name and put it on America’s shopping list,” he said. “There are more than 1,500 people working for the Oreck Corporation, and for every person we hire, 1.4 new jobs are created outside of Oreck.”

This success came relatively late for the entrepreneur: He didn’t get into the vacuum cleaner business until 1963 when he was nearly 40 years old. Oreck began his career in sales in New York, selling Whirlpool appliances and RCA televisions, he said. When Whirlpool, an RCA subsidiary, was unable to build success for its vacuum cleaners, the company gave Oreck rights to redesign and market the product in the U.S., and later he bought the failing business.

“When I introduced my vacuum, the experts told me, ‘It’s too light, put some lead in it. A vacuum has to be heavy to clean.’ Fortunately I didn’t take their advice but I did listen.”

What Oreck heard wasn’t that the machine was too light but that customers equated heaviness with cleanliness. “Therefore I decided to sell my 8-pound vacuum to places with a reputation for being clean, like luxury hotels.” Customers soon learned that what was good enough for a place that must always be clean was good enough for their homes. Today the company sells air purifiers and small appliances along with its vacuums.

Oreck said that following the fundamentals of business and marketing have been keys to his brand’s success. First, brand value is linked to marketplace reputation and the company that a business keeps. This is why Oreck said he has been careful to retain control of the firm’s image by using direct mail to grow.

Second, Oreck advised embracing a more sophisticated approach to pricing strategy. He avoids cutting prices for his products, believing that when a business does drop price this raises the issue of credibility. “Brand is trust,” Oreck said. “You can’t build trust if you’ve got this price today, that price tomorrow. You’re saying to the guy who bought tomorrow at the wrong price [that] he can afford the difference, but when his neighbor tells him he’s a dummy [for paying more], he can’t afford that kind of humiliation.”

Third, Oreck has always stood behind his products. “We’ll do anything to make it right, and we do that to this day. We will fix it, we will exchange it, we will give you your money back. We’re going to make the customer happy.”

The entrepreneur said he also believes in treating his employees with that same respect, which was reflected in the company’s actions to aid its employees affected by Hurricane Katrina in 2005. Oreck, who flew bombing missions during World War II, compared the devastation from the storm to that of Japan after the atom bomb was dropped on it. With the company’s home office located in New Orleans and its principal manufacturing operations in Long Beach, Miss., the Oreck Corporation was at the center of the destruction.

“Many of our employees lost everything … and it was our aim to be a cornerstone of sanity, which meant we had to get them back to work as soon as possible,” Oreck said.

Four days after the storm hit, Oreck’s son Tom, who is now the company’s president and CEO, arranged portable housing, generators, food, water, doctors and counselors to aid the company’s employees and families.

The Oreck factory was reopened 10 days after the storm. “We were the first company of the hurricane-ravaged Gulf Coast to be back in business,” Oreck said, “and what an emotional relief it was for everyone to have our people working again. If nothing else, we provided a great deal of hope to a great deal of people in despair.” Although about 1 million people lost their jobs due to Hurricane Katrina, every Oreck employee who had a job before the storm never missed payroll and still holds a job today, he said.

As for the company’s New Orleans-based headquarters, employees were temporarily relocated to Dallas, and the call center was moved to Denver the Friday before the storm hit.

Following the storm, the Oreck Corporation received praise for the ads it placed in popular U.S. publications stating that for every Oreck vacuum purchased, the company would donate one to hurricane survivors.

“The outpouring of support was phenomenal,” he said. “Americans helping Americans getting back to work has never made me feel so proud.”