LP launched its SmartSide siding line in 1997 despite being in the midst of an historical class-action lawsuit directed at the company's Inner-Seal line. The result one decade later is impressive — SmartSide sales are enough to cover 1 million homes. (Photograph courtesy of LP)

In 1995, with widespread claims levied against Louisiana-Pacific's Inner-Seal exterior wood siding, most companies would have packed it in and abandoned the siding market. Instead, Louisiana-Pacific (LP) re-engineered its product and, since 1997, has sold approximately 3 billion square feet of SmartSide siding without one warranty claim for fungal decay.

In what was the largest class-action lawsuit in the history of the siding industry, LP paid out more than 37,000 claims. In fact, the company had initiated the class action lawsuit to speed up the process and, according to the judge presiding over the case, "got the most money to the most people in the quickest amount of time based on my experience."

LP's comeback should be required reading in graduate marketing classes, and it's also a story that, according to the company, has never been widely told.

LP acts quickly

A number of managers in LP's siding division received their walking papers from the company's board of directors soon after the case was settled. LP chairman of the board Harry A. Merlo resigned July 31, 1995. Meanwhile, other key executives convinced the board not to abandon the siding market.

"Convincing our sales force, our board, and then our customers was the hardest part," Ben Skoog, business marketing manager for LP sidings and moldings, says. "Most companies would have chosen to exit the market, considering we were in so many profitable categories already, but we showed everyone we had the science to back up an improved siding product."

In contrast, when non-reinforced polyvinyl chloride (PVC) membranes began failing in the low-slope roofing market several years ago, a couple of manufacturers stayed the course and reinforced their products, but others disappeared almost overnight. Moreover, the number of PVC failures was only a small fraction of what LP experienced.

While LP "managed its way out of the problem" in the North, in cities such as Houston and Atlanta, where Inner-Seal had a stronger presence, production ceased virtually overnight. "This left some folks without a supply and put a bad taste in their mouths," Skoog says.

For those still with the LP division, as well as for newcomers such as Skoog, it was a marketing nightmare of epic proportions.

"Inner-Seal cost us a billion dollars, so we had to have a lot of confidence in the science behind the new product — one that incidentally looks very similar to the original on the back side of the board," Skoog says. "Some people here definitely put their careers on the line when they decided to go ahead with SmartSide."

Inner-Seal complaints generally revolved around excessive moisture absorption and came mostly from regions that see a lot of rain, such as the Northwest and central Florida. As the industry knows, oriented strand board (OSB)-based products tend to absorb water and expand. This phenomenon caused a number of problems on Inner-Seal jobs.

One of the key ingredients in LP's SmartSide product is an EPA-registered zinc-based treatment that resists fungal decay and termites. The factory impregnates the chemical throughout the entire board to ensure performance during cutting of the product or when contractors neglect to prime the edges.

"After our previous experience, we definitely over-engineered the product," Skoog says. "We have invested more than $10 million. We also use a third-party scientist and have performed the testing equivalent to 30 years of outdoor exposure. This gives us the confidence to offer a warranty that puts us on par with fiber cement."

LP offers a 5/50 limited warranty with 100 percent labor and material coverage in the first five years and prorated materials coverage in years six through 50, which is transferable to a second owner.

One of the company's biggest challenges was instilling this same level of confidence in builders, distributors, and other customers.

"SmartSide looks a lot like OSB on the back side, and you can't see the zinc borate and other resins we use by eye," Skoog says. "The 'science' is invisible."

However, when leading builder Pulte Homes agreed to put the new product to the test, LP knew its efforts had paid off. In 2003 the Bloomfield, Mich.-based builder began exclusively using SmartSide products in the Houston market. Pulte also serves 50 other markets in 26 states, with consolidated revenues of more than $14.3 billion in 2006.

"Houston is a tough market in terms of climate and competition, so Pulte's decision created a 'halo' effect with other builders," Skoog says.

LP still gets some resistance in the Portland and Seattle markets, "but time and our continued efforts are overcoming that," Skoog adds.