For more than a half century, it has been the
people at Onan who made the company a success, but it was sound and innovative
marketing that gave those people the strategy they needed.
Of all the thousands of difficult marketing
decisions made over the years by Onan executives, the one that finally evolved
in 1947 undoubtedly was the key to the company's present success as a world
leader in power generation equipment.
That was the year D.W. Onan and his sons. Bud and
Bob, decided that manufacturing generator sets for retailers, such as
Montgomery Ward, to be sold under the retailers' brand names, would hamper
Onan's future growth. Although the company's private-label business was growing
and was profitable, there was discomfort over Onan's destiny being subject, to
such a great extent, to the willingness of the mass merchandisers to promote
Prior to World War II it was the additional sales
of Onan products by Montgomery Ward that, in a large part, were responsible for
the company's surviving, so there was a certain amount of loyalty to this class
of customers as well as apprehension over the prospect of doing without them.
Several other mass merchandisers had joined
Montgomery-Ward as important Onan customers, including Fairbanks-Morse, Wind
Charger, Winco and others. There were two main disadvantages of relying on
private-label business, however.
growth could be seriously hurt at any time merely by one or more of these
retailers' deciding to drop Onan as a supplier.
(2) None of the mass merchandisers offered the type
of service to buyers of generator equipment that Onan felt was essential to
keep customers satisfied.
In addition to the private-label business, Onan
had, since the founding of the company back in the 1920s, relied heavily on
direct selling through small magazine ads and promotional mailings.
The decision made in 1947 was to set up Onan's own
domestic and international distributor network and gradually to eliminate
marketing through private labels and direct selling. It was a crucial move and the timing was
critical. In retrospect, the decision was a wise one and the timing was
perfect, although it took several years to fully implement it.
Since the 1947 decision, Onan's marketing strategy
has undergone substantial changes at times and is constantly being fine-tuned,
but it remains basically the sale of Onan products to the end-user through a
comprehensive network of distributors and dealers. Today there are Onan distributors in every
state in the U.S., who, in turn, have more than 2,000 dealers across the
nation. In addition, Onan's International Division has approximately 100
distributors worldwide in about 75 foreign countries.
Onan also sells products directly to original
equipment manufacturers, to the U.S. government and the company has even
re-entered the private label business in areas it felt it could not reach
through the Onan distributor-dealer network.
The overwhelming success of the distributor-dealer
strategy can be attributed to the extreme care Onan has taken over the years in
screening and selecting the distributors in this network. And the network is more than a sales
organization. It also provides Onan
customers around the world with parts, service and application
engineering. Onan always has had a
pledge to service its products, no matter how or where they are sold or used.
At the company's Service Training Center in the
Twin Cities, a special training staff is continually instructing field service
people on how to repair and maintain Onan products. Onan frequently brings its distributors,
dealers and other customers to the Service Training Center for seminars on
proper servicing technique. Onan's
international staff, in addition, conducts training schools in foreign
The international market for Onan products has been
growing gradually since the end of World War II and today represents a very
significant portion of Onan's total business. Foreign sales have had some wild
ups and downs during Onan's first 50 years.
Since 1971, however, overseas growth has been carefully planned and
pursued, and the wide fluctuations are much less frequent than in earlier
Prior to World War II, 80 percent of Onan's total
sales came from foreign countries, but in the years immediately after the war,
this part of the company's business was insignificant. During the 1950s and 1960s there was an
attempt to increase overseas sales, but proper attention to this potential
market was never achieved.
In early 1972, Onan decided to split international
sales away from domestic sales where it had been treated as a step-child. International has since achieved division
status within Onan, and it now has all of the functions of a free-standing
business unit except manufacturing.
Tom Valenty, the chief executive officer at Onan
during most of the 1970s when international marketing came into its own, says,
"We made a lot of mistakes in the early to the mid-1970s as we tried to
increase our international sales volume.
We recognized the need for sales offices closer to the foreign
marketplace. We moved every single
trading company office location at least once since first implementing
them. We changed trading company
managers, several times in some locations, before we found the right
combination of qualities and capabilities.
We redesigned our products to meet foreign standards and we provided
literature in several languages. All
this effort has been costly, but now we have our act together. It works."
In 1972 Onan's export sales were well under $10
million a year. Valenty gave the newly formed international group a goal of $50
million annually in sales. The goal was
reached and exceeded significantly in 1981, although International Division
sales turned down in 1982.
Valenty says, "We set a strategy for increasing
international sales in 1972, put forth the effort, lived through many mistakes,
but after a decade of aggressively pursuing international business, we have the
A parallel can be drawn between Onan's marketing
efforts internationally and with it U.S. government sales. During World War II Onan was the primary
supplier of generator sets to various military services, producing a peak of
$50 million a year in government business.
This dwindled after the war to practically nothing and government
business didn't pick up again until a concerted effort was made by Onan in 1960
to acquire military contracts.
Onan had played a modest role as a supplier of
generating equipment to the U.S. military during the Korean conflict in the
early 1950s, but marketing results were far from impressive. In 1960 the
company made a decision to actively pursue U.S. military business on a
permanent basis, but unfortunately, Onan had let that market slip to the point
it didn't even have the initial contacts in which to start a sales campaign.
Tom Valenty, who knew an official at the
Engineering Research and Development Laboratories of the U.S. Army at Fort
Belvoir, Virginia, volunteered to assist Onan's marketing people in
establishing military sales.
Valenty recalls, "On our first visit, we were
allowed into the laboratories, but their development funds were already
committed, and they had no production requirements. Nevertheless, several of us continued to call
on the Fort Belvoir contacts for the next couple of years, and we got to know
the project engineers well. It turned
out that the smaller generator sets were being developed for the government by
a military products section of an industrial engine manufacturer. This group had good academic design experience,
but it was totally lacking in knowledge of generator set production processes.
Their designs were almost impossible to produce in large quantities and at a
reasonable cost. Needless to say, we
succeeded in getting our views across, but after two years of effort and the
expenditure of a fair amount of money, we still had no prospects of getting any
Unknown to Onan executives, however, events were to
occur to make their two-year investment worthwhile. In October 1962, Valenty received a phone
call from his acquaintance at Fort Belvoir.
He asked Valenty if he had read the morning paper yet. Valenty said he had not. Valenty's Army
friend said, "Well we might be at war today, and we don't have any
generator sets to fight a war with."
He was referring, of course, to the Cuban missile crisis and to the
confrontation between President John Kennedy and Russia's Nikita Khrushchev.
Valenty was asked if Onan was willing to quickly
build 12,000 five-kilowatt military design generator sets.
"I was elated," Valenty says. "Here was our chance at an order after
two years of coming up empty-handed." Valenty was asked for a price on
these 12,000 sets, and Valenty replied he would need drawings and specifications. He was told there was no time for that, and
that a price would have to be submitted that afternoon.
Valenty says, "What do you do when you. are
offered a tremendous opportunity, but have no drawings or specifications to
work with? They wanted a price in four
hours, but no one in manufacturing, finance or administration at Onan knew
anything about the product. " Valenty sat down with Harry Jorgenson and
the head of Onan's costing department and they worked out a price from the
limited facts available.
"The request was preposterous," Valenty
says, "but eventually we came up with a price of $1,234 per unit."
Onan quoted the price to the military and won the
contract. In executing the contract,
Onan had to completely redesign the family of military five-kilowatt sets so
they could be built on a production basis.
In the process of developing the generator set, Onan had to upgrade its
drafting, engineering, technical manual and quality assurance capabilities.
"We were a much better company by the time the production contract was
completed," Valenty thinks.
From this initial contract, Onan went on to produce
tens of thousands of five-kilowatt sets for the military, thousands of
1.5-kilowatt military design generators and regulators, some ten-kilowatt sets
and the first production quantities of the 60 kilowatt military standard sets.
Onan became a major supplier of generating
equipment to the military during the Vietnam war. The successful financial performance in the
military set business provided the drive to build the Fridley facility in 1968
and 1969, and the strong cash flow from government contracts enabled the
company to finance new product development, new production equipment and other
It's probably accurate to say that Onan's present
market strategy had its birth in 1947, became of age in 1958 when "new
blood" was brought into the marketing department, and since then has
constantly refined its sales programs to where it's the envy of its competitors
Onan's financial results bear out that
assessment. Business increased from the
$11 million annual volume in 1958 to $20 million in 1963 and $63 million in
1969. By 1973, Onan passed $100 million
in annual sales, and has had steady growth since then, reaching today's present
annual volume of around a quarter-of-a-billion dollars.
This amazing growth has been fed by many different
factors, but Onan's marketing strategies can take much of the credit. It's obvious that this marketing strategy has
been held together over the years by a single characteristic—persistence. As the strategy evolved, Onan was persistent in its marketing plans,
and this persistence has more than paid off in growth and profits.
Ed. Note. In large part, the stagnated
sales spoken of in the 1950s was the result of a stagnated Vice President for
Sales. Brought up in the early iron peddler tradition, he needed to retire.
sadly omitted part of this story is the contributions of Roy Mullin and Bill
Onan, my dad, could see what was happening and knew what he had to do. Vice Presidents could only be replaced by Bud
and Jack Shea, the Executive Vice President. A professional search was
initiated and candidates narrowed down. I remember my dad’s comment that the
candidate he liked best was going to be non-traditional and perhaps hard to
contain. But he said that he would rather try to focus the man’s energy than
whip him into activity. That candidate was Roy E. Mullin.
came from an automotive background, but not a technical one. In fact, Roy would
never learn much of the technical details of Onan generators. What he did well
was inspire people and lead the charge. With him came Bill Auger. Bill was a
counter point and able to carry out Roy’s programs.
brought the concept of Marketing to Onan. That is sales, promotion, market
research and customer service.
called ourselves the “World’s Leading Builder of Electric Power Plants” but did
not look like it with 1 inch ads in Popular Mechanics. We re-assessed
our advertising strategy, changed frequency and space size to look like a
leader. Some of the full page image building ads in Fortune featured Bud
Onan talking about the product. He owned the company. Most other advertising
was in prominent trade journals with hard hitting copy aimed at customers and
perception was that not all competitors units would perform to their nameplate
rating. A program of “Performance Certified” was begun. Each unit shipped with
a certificate saying it had been run and tested to assure it would meet its
nameplate performance rating with instruments who’s accuracy was certified by
an independent testing laboratory.
assemblers built standby generator sets but manufactured none of the
components. Then there were the engine or generator builders who assembled.
Along with a standby installation was switchgear to control the units start up,
switch the load to the generator, and return to normal status when the
commercial power returned. Onan could say it manufactured the complete package
and therefore was the only company who could take complete responsibility for
the installation. We called it “Unit Responsibility.” This was another item to
spotlight the difference in our products.
customers need special handling because they are not a client you typically
advertised to. Canadian fishing trips and sport outings, with the principal
executives of the customer and Onan, created a personal relationship that
encouraged sharing ideas and concerns. Knowing the customer on a first name
basis meant it was more likely we would be called than dumped.
company airplane, a DC-3 converted specially for executive travel, was used to
bring Onan prospects, customers and buying influences, like architects and
engineers, to the factory for 3 day conferences on Onan products. All expenses
paid! This was very well received and made the airplane a profit center. Not
often a corporate airplane pays for itself.
heart of the marketing effort was distributors. These independent business men
ran organizations that may themselves employed hundreds of people. They also
had local knowledge of specialize situations. Roy and Bill set up a Distributor
Advisory Council made up of representative distributors who they themselves
elected. They would meet twice a year at the factory and discuss issues of
importance including Onan company policies. It was very successful
loved to be a showman. In one instance he literally threw down the gauntlet to
Sherwood Egbert, who was then President of Studebaker-Packard and about to
introduce his pet project, the Avanti car; as to who would return the most
profit to the corporation. Of course, Roy won! He established a fraternity
called Onan Marketing Leader for the person(s) who contributed most to
marketing for the year. They got bright red sport coats to wear at all official
programs under Roy’s leadership had much to do with pulling Onan out of the
‘50’s stagnation. He nurtured growth in the motorhome, standby and OEM markets.
Unit Responsibility put service and parts in a prominent position. The Look of
Leadership was recognizable company wide.
worked for Roy for 6 years. I was in charge of advertising, sales promotion,
market research and product planning. We traveled around the world together;
and I was exposed to more about marketing from Roy than I could possibly
absorb. He had endless respect for my dad, but was never shy about telling him
when he thought dad, or anyone else, was wrong. At the same time, dad seldom
had to put breaks on Roy. When he did, Roy reacted professionally. You knew
where you stood with Roy. He was openly manipulative and honest.]
the One Millionth Unit in December 1967