Tempur-Pedic Scores by Investing Rather Than Cutting Costs

In the fall of 2008, most industries were experiencing a period of economic uncertainty unlike any in recent history. The mattress industry was acutely feeling the brunt of consumers' spending pull-back. In fact, category sales were down 15% in Q4 '08 vs. Q4 '07. One premium mattress company was even in worse shape. Tempur-Pedic saw its sales decline 40% in the same period.

Most businesses in that challenging environment focused on protecting the bottom line through cost reductions. Tempur-Pedic chose a different path. The company's senior management knew they had to invest to re-ignite top-line growth despite the crisis.  

With help from Henry Rak Consulting Partners, Tempur-Pedic first developed a comprehensive understanding of the consumer. A detailed survey was fielded to capture consumers' mattress needs and usage habits, which showed that Tempur-Pedic only competed in a narrow segment of the market. Another study was fielded to determine the drivers of Tempur-Pedic mattress owners' satisfaction. The studies' findings were integrated with other information to create a growth strategy that encompassed brand positioning, product innovation and the retail environment:

A key finding of the consumer research was "people who sleep on Tempur sleep better and are more satisfied than those who sleep on traditional spring mattresses."  To compete broadly in the mattress market, the management team decided to connect the Tempur-Pedic Brand to this most critical consumer need -- better sleep -- thus leveraging the Brand's satisfaction advantage vs. competitors in meeting this need.  The Brand was re-positioned from a medically-driven, specialty Brand to one with broad appeal that is more motivating to consumers because it delivers "the best night's sleep."

A new product platform was launched and positioned directly against a key need that the company's current products did not meet.  Importantly, the positioning of the new platform reinforced the new positioning of the overall Tempur-Pedic trademark and helped insulate the trademark from competition.

The keys to winning over consumers in the retail sales process were distilled into specific selling messages for retail sales associates.

The result of this well-coordinated program was stunning. Tempur-Pedic's North American sales in the first half of 2010 increased +57% vs. same period year ago, while increasing gross and operating margins and significantly growing market share. Tempur-Pedic has accounted for half of the growth in the overall North American mattress market in 2010.

A new brand communication strategy was created, resulting in the "Ask Me" campaign, which leverages the brand's high satisfaction level with current owners. In addition, the company has changed its Mission Statement to reflect the new direction.

The new TEMPUR-Cloud Collection was introduced in 2009 to deliver a soft, comforting sleep surface, while still providing Tempur-Pedic's pressure-relieving support. The new line is now the company's best-seller and has been highly incremental. The other Tempur-Pedic mattress families have either maintained or grown volume over the same period.

The retail sales process has been strengthened by giving in-store sales representatives specific steps to follow to improve the in-store "close rate."

Tempur-Pedic's senior management's decision to invest when all of their competitors were slashing costs has imbued the entire organization with a higher level of confidence. More importantly, it has put the company in a stronger financial position than the competition.

The bottom line: Even in today's challenging environment, senior management can sleep well at night.