I just gotta sell ten thousand mattresses. How hard can that be?
Dave Young:
Welcome to the “Empire Builders Podcast,” teaching business owners the not so secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is us, but we’re highlighting ads we’ve written and produced for our clients. Here’s one of those.
[Best Home Services]
Dave Young:
Welcome to the “Empire Builders Podcast,” I’m Dave Young, alongside Steven Semple. Have you ever noticed how many mattress stores there are on every corner? I don’t know if this brand is in all the stores, Tempur-Pedic mattresses. Are these the inventors of memory foam?
Stephen Semple:
Not the inventors of memory foam, but the first to use it in a mattress.
Dave Young:
Okay.
Stephen Semple:
Memory foam, the product is called Visco elastic technology, and it was actually developed by NASA, to keep astronauts safe. Basically, the technology was developed by NASA, and these guys licensed it, and were really the first to put it into a mattress. Tempur-Pedic was founded in 1992, and today, it’s part of the Tempur Sealy Corporation, which does over $3 billion in sales of mattresses and pillows, and has over 7,000 employees. Usually, when we tell a story about a company like Tempur-Pedic coming together with Sealy, the automatic assumption was, Sealy came along with a big bag of cash and bought Tempur-Pedic.
Dave Young:
Yeah.
Stephen Semple:
No, Tempur-Pedic bought Sealy. Isn’t that interesting?
Dave Young:
There’s an interesting twist.
Stephen Semple:
Isn’t that an interesting twist? Tempur-Pedic was started by Bobby Trussell, who, like many of the empire founders that we’ve studied, had no experience in the industry. In fact, his background was horse racing, not mattresses. He even had a couple of failed businesses in the horse racing industry. Here’s a fun thing: he didn’t invent the product or make the product. This was about seeing an idea and being open to it.
Dave Young:
Okay, I’m scratching my head. He’s in horse racing, no experience in this, and he’s going to get into the mattress biz.
Stephen Semple:
He’s going to get in the mattress biz. How this whole Tempur-Pedic mattress started, as we were talking about earlier, it was developed by NASA, but it was licensed by Fagerdala, a Swedish firm, in 1989. They made the very first memory foam mattress. Now, back to Bobby and horse racing. It’s interesting, we were just recently in Milwaukee, and Bobby grew up in Milwaukee. When he was 11 years old, his dad bought him a riding horse, and Bobby was hooked. By the mid-seventies, he’s working at Belmont Racetrack, and what he really wanted to do is work up to being a trainer. His dad bought him what he calls a slow race horse, but it got him licensed as a trainer, and he eventually got a job at Gainesway Farm in Lexington, Kentucky. He started studying pedigrees, and this soon evolved into a really high level, and he was advising people on buying these $10 million racehorses.
He went out on his own, started Stallion Management Services in 1986, and he’s advising people on the horses to buy. It’s basically a way for the smaller farms who couldn’t afford someone in-house to be able to outsource this expertise. He also started Thoroughbred Advisor Group, which was really to advise people on horse transactions. There are a lot of legalities, and things like that around these transactions. As he puts it, it was a good idea with bad timing, because the horse business went into a recession, and he went broke. In 1991 he’s got two kids, he’s married, he had moved to a new house, could not sell the other house, so he now has two houses, and he’s a million bucks in debt.
Dave Young:
Ouch.
Stephen Semple:
What would happen is, these pre-approved credit cards would arrive, and he’d take them up, and he would basically charge groceries to the cards. This is how he fed the family. He always had this feeling things would turn around. He went to church, and he prayed for guidance, he needs guidance. He asked for guidance, but he said, “It did not have to be in the horse business.” He decided that whatever opportunity came along, he would just say yes. One day he gets a call, and it’s this Swedish horse chiro company. They have this product… yes, Swedish Horse Chiropractic Company.
Dave Young:
They’re on every corner, as I said earlier.
Stephen Semple:
They’re on every corner. They have this air cleaner that cleans horse stalls, and he decides to bring that product to the U.S. It seems like a great idea, except the U.S. has lower voltage than in Europe, and it’s priced really too high. It absolutely doesn’t work out. He had said he was going to say yes to every opportunity that came along. It’s 1991, he has to go over to Paris, because he still has some horses there. When he is there, he meets a few people, and they say, “Look, you’ve got to come see us in Sweden when you’re there. There’s this mattress you need to see.” He’s in yes mode, and he gets introduced to Mikael Magnusson, who owned the company that developed the first Tempur-Pedic product. The first one was a three inch overlay, and very temperature sensitive.
It was this three inch overlay that you put over your regular mattress. As we said, the technology was invented by NASA, for the space program, but they did a lot of changes to it. They made it better, they made it more durable, they made it easier to make. Basically, they started making these three inch overlays for nursing homes, because it was really good for bed sores, and also for people with bad backs. Bobby slept on one when he was in Sweden, and he thought, “This is amazing.” He comes back home and tells his wife, “We’re in the mattress business.”
Dave Young:
To Hell with these horses.
Stephen Semple:
Bobby told the manufacturer he wanted to get involved, but to get the exclusive marketing rights for North America, the agreement they came up with was, Bobby needed to sell 10,000 mattresses, and finance all the marketing themselves.
Dave Young:
Wow, okay.
Stephen Semple:
He was like, “How hard could that be?” He created a marketing plan in the U.S., reached out to a couple of his old high school buddies, and they wrote what he calls the world’s worst marketing plan.
Dave Young:
Here’s what I love about this guy so far: his eternal optimism.
Stephen Semple:
Yeah.
Dave Young:
If you remember the little story about the little kid, it’s a little longer than this, but he’s locked in a room that’s just full of horse shit and hay, and he just starts throwing it up in the air, and they’re like, “What are you doing?”
He’s like, “There’s got to be a pony in here somewhere.” That’s this mindset, it’s like, “Man, things are going to turn around. I’ve just got to sell 10,000 mattresses. How hard could it be?”
Stephen Semple:
“That’s all I’ve got to do. How hard could it be?” He writes together this business plan, as I said, they called it the world’s worst business plan. They’re going to sell it in truck stops, because this fits in the back of those cabs and semis.
Dave Young:
Actually, I really like that idea.
Stephen Semple:
This is the idea, and he figures he needs $500K for this. As Bobby puts it, he approached people who had invested with him in the past, and lost money on something he knew about, to invest with him on something he knew nothing about.
Dave Young:
Here’s the thing, Stephen. These guys are all used to placing bets on horses, whether it’s in a race or just buying a slow race horse. They’re used to this.
Stephen Semple:
Yeah.
Dave Young:
It’s not a stretch, it’s a gamble.
Stephen Semple:
He feels that they did it because they also loved the product. They would see the product, go, “This is amazing.” They got no traction on the semi truck idea, so the next thing they decide to do was put ads in chiropractic directories, and try to sell this through chiropractors. In the first year, they fell a little short of the 10,000 units. They sold 70.
Dave Young:
That’s a lot short.
Stephen Semple:
Yeah.
Dave Young:
Okay, 70.
Stephen Semple:
He burned through the first $500,000 in a few months.
Dave Young:
If I remember, these were expensive in the early days, right?
Stephen Semple:
They weren’t even mattresses yet. They were, first of all, just the cover on it, they absolutely were. They were 800 bucks for a queen.
Dave Young:
70 those, it’s still not a lot.
Stephen Semple:
It’s still not a lot. He burns through the first $500K in a few months, he has a container coming of mattresses that’s going to be $70,000, and he has no way to pay for it. He comes up with a deal with the company that’s making the mattresses, and they swap some equity ownership in his company for it. Basically, he’s got no leverage, he’s got nothing at this point. He had to do this several times. Here was the issue: the cover was not selling, and he was relying on chiropractors to sell this, who really couldn’t. It was a pad, not a mattress, you put it on a mattress. It was expensive, it was 800 bucks for a queen. He sat down with the chiropractors, and he said, “What would you do?”
Dave Young:
Stay tuned, we’re going to wrap up this story, and tell you how to apply this lesson to your business right after this.
[Empire Builders Ad]
Dave Young:
Let’s pick up our story where we left off, and trust me, you haven’t missed a thing.
Stephen Semple:
They said, they would make a pillow out of this stuff. In 1992, he came out with a pillow. He looked at it, he said, “This is a unique product, and what I really need to do is get this into people’s hands.” There are 40,000 chiros in the United States, and he had no rep force, so what he started doing was mailing out pillows. He started mailing out 500 pillows to 500 chiropractors. A big box, a letter, a pillow, and it said, “This pillow’s free if you order four. If you don’t like it, we’ll come by and pick up the pillow.” Think about this, this is a direct mail piece. He got 25% of the chiropractors to buy four pillows.
Dave Young:
That’s amazing.
Stephen Semple:
Isn’t that amazing? What a response rate, 25% bought.
Dave Young:
Everybody’s thrilled if they get 1% or 2%, right? That’s knocking it out of the park.
Stephen Semple:
The breakthrough here is, he gets 125 chiropractors buying four pillows a month at $49 bucks. He’s now doing $300K in sales. He’s got a way to get going here with these pillows, but he wanted to get it in the stores. In November, of 1992, he’s walking a mall in Cincinnati, and he shows the pillow to a manager of a Brookstone store in a mall. He managed to get the phone number for the headquarters, and he got a hold of the purchasing department, and he’s speaking to Steve Rich at Brookstone. He sent a pillow over. He called a bunch of times, kept calling him. Finally, two months later, Steve Rich calls him back, to tell him to stop calling. He had been calling so many times, the dude called him back and said, “Can you just stop calling?”
Bobby’s persistent. Bobby asks, “Have you taken the pillow out of the box?” Steve Rich says yeah, he did. He actually didn’t, because five minutes later, Steve Rich is calling back, saying he’d like to pitch this idea to the purchasing board.
Dave Young:
Be a pain in the ass until somebody calls you, to ask you to stop being a pain in the ass. Wait, to have the foresight to ask, “Did you actually even open it?”
Stephen Semple:
Right.
Dave Young:
That’s confidence in his product, because he knew if the guy had opened it, he’d see that this is not like every pillow you’ve ever seen.
Stephen Semple:
Obviously, it came across in such and such a way where, even though Steve said yes, he felt a little guilty about it, and actually did it, and then went, “Holy crap, this is actually really good.” They send demos to the stores, to get it into the stores. In two weeks, it becomes the hottest selling new product in Brookstone.
Dave Young:
Yeah.
Stephen Semple:
This is even though it’s a more expensive pillow. Brookstone has seven cheaper pillows, and they’re selling this pillow for 90 bucks. It becomes one of their hottest products. Bobby feels that some of the reason why it was successful was that it was more expensive. There was something about the price/quality combo that really made it distinctive. He actually feels, if it was a lower price point, it would not have worked.
Dave Young:
I agree, mainly because you have that halo effect from it being NASA technology.
Stephen Semple:
Yeah.
Dave Young:
You expect that to be pricey. “This is space technology.” Even if it doesn’t cost you a lot from a retailer’s point of view, the fact that it’s $90, and more expensive than all the other pillows gets people’s attention, first of all. Obviously, you’ve got to be different than everybody’s pillows.
Stephen Semple:
Absolutely, you’ve still got to be a better product, but that combination really made it stand out. Sometimes, people can be afraid of being that higher price. The next thing that they wanted to do was get the mattress into Brookstone, ’cause in 1994, they basically created a mattress. What they did is, they took a full mattress, and they did the overlays onto the mattress, and basically created a product, $1,300, that would work for the U.S. market. They could never get the chiropractors doing the mattress. They’re getting all these sales going through the chiropractors for the pillows, they’ve got the pillows going in Brookstone, they still haven’t found a way to really get the mattress going. They did get a chain called Relax the Back, which had about 40 stores in Texas, to pick up the mattress.
They started being able to market the mattress. The whole idea was around, if you’ve got back pain, they had these chiropractic endorsements and whatnot. They wanted Brookstone to sell the mattress, but Brookstone stores are tiny. Brookstone basically said, “No, we can’t do this. We can’t put a mattress in our stores.” Not to be deterred, Bobby started selling pillows to Sharper Image, Brookstone’s biggest competitor. Brookstone freaked out.
Dave Young:
Yeah.
Stephen Semple:
They said, “We don’t want you to do that. We want you to pull the pillows out of Sharper Image.” Basically, Bobby said, “We’ll pull the pillows out of Sharper Image if you sell the mattress.”
They said, “All right, we’ll sell the mattress.” Now, the mattress is in 200 stores of Brookstone’s, and they’re selling one per store every six weeks, is how it starts off.
Dave Young:
That’s slow.
Stephen Semple:
Then, it’s one every four weeks. Then, it’s two a week. They started getting this momentum. Parallel to this, they started running ads in the New Yorker magazine, and Wall Street Journal. What they found was, when they ran those ads, sales jumped in the stores near where those ads were being distributed. Now, they felt, “We could be anywhere,” because these ads drove the store sales. At the time, the market was dominated by Sealy, Simmons, and Spring Air, all these inner spring mattresses. They all were sold on price and terms, that was how it worked.
Along came 2000, and there were all these different Tempur-Pedic distributors all over the place, in different countries and whatnot, and they merged them all into one company. The U.S. was doing 60% of all the sales, and Bobby became the CEO of that. They took outside investment, they raised $350 million and bought the Swedes out, and three months later, took the business public. In 2006/2007, memory foam became really big, and in 2012, Tempur-Pedic bought Sealy. It’s now a market cap $2.5 billion.
Dave Young:
Wow.
Stephen Semple:
This all started from a guy who was in the horse business, with $1 million in debt, having no idea what to do, but saying, “I believe things are going to turn around, and I’m going to be open to any opportunity, even if it’s not in the horse business. I’m just going to say yes.”
Dave Young:
I love it. Here’s the thing: to me, this is one of the lessons here, and it has nothing to do with mattresses, it just has to do with saying yes. If you feel like you have the capacity for that level of optimism, that you just are like, “No, I know something good’s going to happen. There’s a pony in here somewhere.”
Stephen Semple:
There’s a pony in here somewhere.
Dave Young:
If you have that mindset, you’re going to eventually find something that you can succeed with. If that mindset makes you a little twitchy, and you go, “I could never do that. That’s just too much risk,” you’re probably better off working for a salary somewhere.
Stephen Semple:
No question. There are two other things that he did, in addition to saying yes. Saying yes got him out of the gate, but there are two other things that he did that I think are really important. One is, when it wasn’t working, when the mattress idea wasn’t working, he listened to his market. He went out and talked to the chiropractors, and they said, “Do a pillow.” He didn’t go, “We’re in the mattress business,” He did a pillow.
Dave Young:
Chiropractors don’t have room to display a mattress, either.
Stephen Semple:
He remained persistent with the pillow, because even though the pillow was selling through chiropractors, he still wanted to get it in the stores. He stayed persistent with Brookstone, but he never gave up on the mattress. He still cycled back to the mattress. The other lesson that he learned was, he didn’t become completely reliant on the stores. A lot of times, people think, “I’ve gotten it in the stores, I don’t have to do anything.” He figured out that if you ran these ads, it pushed traffic to the stores, and increased the momentum at the stores. He really kept at this.
Dave Young:
I’m just guessing here, but if you’re running those ads in those markets, in New York City, even if they don’t go to their local Brookstone store, they know in the back of their mind, “I’ve got a trip coming up.”
Stephen Semple:
Right.
Dave Young:
“I know there’s a store in the airport.”
Stephen Semple:
Yes.
Dave Young:
“I’ll see one of these mattresses when I’m flying out to LA six weeks from now.”
Stephen Semple:
Right.
Dave Young:
You have that in the back of your mind, and you’ve always got a little free time at an airport, if you’re like me.
Stephen Semple:
Yes.
Dave Young:
I don’t get limo’d straight up to the ramp like you do, Stephen. It’s always interesting to have a little plan when you’re in the airport, and go, “I know where the Brookstone store is.”
Stephen Semple:
The ads drove that traffic. Once he figured that out, he controlled his destiny, because he could run ads everywhere.
Dave Young:
So many people have trouble sleeping that it’s like, “I’ll roll the dice on a different kind of mattress.”
Stephen Semple:
Yep.
Dave Young:
“What else isn’t working? I might as well try something else.” Maybe it’ll work, maybe it won’t, but if it does, you’re super happy.
Stephen Semple:
Yeah. They started with this crazy little idea, where he was just saying yes, and being positive, being optimistic, being persistent, listening to his market, not relying on the store’s learning how to get control of his destiny with the advertising. The next thing you know, what you actually had was this interesting story where we’re normally reading about Sealy buying Tempur-Pedic, and no, Tempur-Pedic buying Sealy.
Dave Young:
David bought Goliath.
Stephen Semple:
David bought Goliath.
Dave Young:
I love it. That’s a cool story, I’m glad you shared that with us. I think it’s cool to find somebody that’s willing to just say yes, and keep at it.
Stephen Semple:
Yeah.
Dave Young:
Tempur-Pedic’s everywhere now.
Stephen Semple:
They are a big deal.
Dave Young:
It’s everywhere. You’ll find that brand name somewhere in Walmart, everywhere.
Stephen Semple:
There are so many memory foam mattresses now, too. They really created that industry.
Dave Young:
They created the whole category. Amazing. Thank you for sharing that one.
Stephen Semple:
Thanks David, glad you enjoyed it.
Dave Young:
Thanks for listening to the podcast. Please share us, subscribe on your favorite podcast app, and leave us a big, fat, juicy five star rating and review. If you have any questions about this or any other podcast episode, email to [email protected].
