Select Comfort stages remarkable rebound
By David Perry -- Furniture Today, March 26, 2006
Minneapolis — It is difficult to imagine that airbed producer and retailer Select Comfort, one the brightest stars in the bedding galaxy these days, was enshrouded in dark days just six years ago.
The nation's No. 1 bedding retailer (with net sales of $691 million in 2005) and the No. 6 bedding producer has plenty of wind in its sails these days and looks like an unstoppable juggernaut in the highly competitive bedding marketplace.
But the story could have had a very different ending. In fact, it looked like a bleak ending was in store when the red ink was flowing in the late 1990s and a bedding rookie joined the reeling company.
The newcomer was consumer products marketer Bill McLaughlin, who joined the company from Frito Lay. He took over as president and CEO of Select Comfort early in 2000 and quickly came to a sobering conclusion: "We were in deep trouble."
The magic number
But McLaughlin, a resilient and resourceful marketer, wasn't ready to let the air out of the company's beds. As he took stock of the company's resources, he discovered a hidden gem buried deep in a closet.
It was a marketing campaign that would pump air into the sagging company. Hello Sleep Number Bed.
When McLaughlin saw the outline of the Sleep Number campaign, he thought it looked promising.
The idea is simplicity itself: Personalized comfort at the touch of a button.
A digital readout on the bed's Firmness Control System provides a firmness setting between zero and 100. The higher the number, the firmer the bed. The handheld remote allows consumers to easily adjust the amount of air in the bed, thus changing their comfort level — and their Sleep Number.
The Sleep Number beds take something that is very difficult to quantify — firmness — and translate it into a number between 0 and 100.
McLaughlin decided to make a heavy bet on the Sleep Number campaign. Early in 2001, the company rolled the campaign out in two markets.
While McLaughlin acknowledges the campaign was a risky move for the company, it wasn't launched without careful study. "It wasn't done blindly," he recalled. "There was a very solid strategy. We launched in two markets and expanded from there. We were very disciplined."
The company was at a crossroads. If the Sleep Number campaign failed, Select Comfort would have hunkered down and accepted a minor role in the bedding landscape.
"Had it not worked," McLaughlin said, "we really would have had to accept being a niche player. That would have been OK."
But the campaign did much better than OK. The initial success demonstrated that the company's air chamber technology could win broad acceptance.
The company turned the corner at an unlikely time: the third quarter of 2001. While the nation reeled in the wake of the terrorist attacks on that fateful day of Sept. 11, Select Comfort, benefiting from cost controls implemented by McLaughlin, managed to turn a profit. It was its first profitable quarter in almost two years.
Select Comfort was back from the brink. From that point on, the rocket gained altitude. Soon it would be in orbit.
Today, Select Comfort has a solid lead in the marketplace, with the Sleep Number bed at the heart of the company's product offerings.
"The Sleep Number brand is clearly creating awareness and educating consumers to what our unique product advantage is," McLaughlin said. "The brand attracts people to our stores. It lets our great salespeople find the products that are right for consumers. It's not just an advertising campaign. It is the cornerstone of our mission to improve people's lives by improving their sleep."
Select Comfort touts its Sleep Number story with millions of dollars in media spending, a significant amount of which is on nationally syndicated TV shows. There are few television watchers in America who are not familiar with actress Lindsay Wagner calmly explaining how a Sleep Number bed changed her life. Her story resonates with female consumers, who are the key bedding purchasers.
Select Comfort has largely kept its destiny in its own hands. Most of its sales are through almost 400 company-owned stores, often located in high-traffic malls. The company also sells through direct marketing, the Internet and on the QVC cable TV channel.
New retail partners
A recent strategy has been to expand distribution with carefully chosen retail partners, such as Sleepy's, the New York-based sleep shop chain that ranks as the No. 2 bedding retailer, and Houston-based Mattress Firm, which is No. 3. In December, Select Comfort and Sleep Country Canada reached an agreement to make the Sleep Number bed available at retail locations in Canada for the first time.
Select Comfort entered the hospitality arena in 2004, forming a partnership with Radisson Hotels & Resorts, making up to 90,000 Sleep Number beds available in their properties in the United States, Canada and the Caribbean.
Since Select Comfort launched its comeback in 2001 it has suffered nary a stumble. Sales continue to climb. Profits are healthy. Several key members have joined the company's management team, positioning it for international expansion. And a goal that McLaughlin outlined back in 2002 — to be a long-term growth company with more than $1 billion in sales — is not looking so far-fetched anymore.
"We have the potential to be the No. 1 mattress company in the United States, and eventually in the world," McLaughlin said at a company-sponsored event. The smart money is not betting against him.
