Consumers have changed; adjust your expectationsPosted on Written by Mary Elston
Have you ever used electronic navigation devices to help you find your way? My cell phone has a navigation app I use when I’m traveling or in an unfamiliar part of town. Sometimes when I fire up the app, I start driving in a random direction, whether it’s the best way to go or not.
Soon the automated navigation lady’s staccato-like voice becomes a bit peeved. It sounds like this: “At the next intersection, make a right turn and proceed west for 1.2 miles.” (I make a left turn and drive east.) She continues emphatically with: “Course correction is required; make a U-turn at the next intersection.” (I don’t.) “Course correction is required! Make-a-U-turn-at-the-next-intersection!” (I still don’t.)
Is she annoyed or what? Who’s right, me or the navigation lady? Who cares? I only want to get where I’m going with minimal time and aggravation. Sometimes the random route I select achieves this goal; other times not.
How are you managing your business in the current marine market? Are you reaching your revenue destination on a random or a regular basis? Have you made course corrections to your business model, or is your navigation stuck in “wait till it gets better” mode?
Here’s the scary thing: A few managers actually believe the market will return to the ways of frivolous spending we saw a few years back, when everyone was burning through money and buying bigger, glitzier boats like Daddy Gotbucks. Stop the music!
The reality is it’s not going to happen. I’ll repeat it like the navigation lady does: “It’s-not-going-to-happen!” Why? Because consumers have been hit hard across two crucial elements of their economic existence: employment and housing. Join me as we walk through the numbers and look at what this means to you, the manager in the marine business, and what the new customer class and market reality will be in the future.
Unemployment at the end of 2010 hovered near 9.8 percent. At this rate, according to Money magazine, employment won’t return to prerecession levels until October 2013 or beyond. Housing foreclosures and short sales likewise continue to suck the life out of money markets and the general economy. Money magazine reports that in certain areas, such as Southern California, average home values have fallen more than 30 percent, with foreclosures and short sales expected to bleed on for years as people float in and out of jobs and financial solvency. In other regions, such as parts of Florida, home values have dropped 50 percent or more. In short, jobs and housing are looking poorly for many.
And there’s more. Previous trends in personal savings rates chime financial foolishness with a clobbering clang. The U.S. Department of Commerce’s Bureau of Economic Analysis reported in late November that personal savings rates ranged from 7 to 11 percent from 1959 through the 1970s, hitting a high of 12.2 percent in August 1981. After that, U.S. consumers steadily saved less and less for more than 20 years. Talk about living on the edge. Since November 2008, savings rates have improved to between 5 and 6 percent, with personal savings running at 5.7 percent, as of October. That’s part of the reason for a new consumer class, customer mindset and marine business model reality.
With housing and employment meltdowns, many consumers finally realized living on the economic edge is incredibly uncomfortable, especially when losing your job throws you into a nasty fiscal tailspin. Those with savings fared better. Others continued being smart and more conservative with their money. The result is a new customer class of value-minded, money-conscious and careful spenders. This concept was recently covered in the November 2010 issue of Soundings Trade Only. The aspirational buyer who wanted to emulate the rich by buying luxury items on impulse, including boats, is a thing of the past. Consumers have a new mindset, and everyone is more sensitive to the money they spend. This means large, high-priced boats loaded with frills don’t have nearly the following they had before.
Middle-class Americans need affordable boating options, or they’ll make do with what they have. Or worse, they’ll remain priced out of the market entirely. Manufacturers who are embracing this message are cranking up the volume on value-driven lines to attract buyers who have put big spending on hold. Value boats have essential features but are lean on amenities and additional accessories. Selected dealers have now rolled smaller, less expensive models onto the showroom floor and are offering value lines introduced by some manufacturers. The result is an appealing alternative for the value-minded boat buyer. While tough loan options for the foreseeable future will limit buying to those who have ready money, other buyers with stable jobs might be able to qualify for loans when the lending market loosens down the road.
With this new consumer class, how should you manage your boating business model? What changes should you make? The quote from Sea Ray president Rob Parmentier on the cover of the December issue of Soundings Trade Only summed it up well: “You have to change with the cards you’ve been dealt. If you don’t, you’re going to be one of the guys who are gone.”
With fewer dealers and fewer boatbuilders around, survivors have a refined business model that’s different coming out of the recession than the model they had going in. They’ve likewise taken advantage of a bright spot these same market forces have produced – expansion in the service sector.
Those who lasted through the lull also navigated the economic storm by judiciously managing costs, dynamically driving responsiveness to changing consumer needs and actively protecting customer relationships. They have a good handle on maintaining their profitability moving ahead. You won’t find market survivors expecting the economy to return to previous levels of spending. They know it won’t.
With the market bottom projected to continue through spring 2011 and a new value mindset for boating buyers in play, a fresh business model is mandatory. The future involves a smaller world with slow growth and less volume for both new and used boats.
As a manager in the marine industry, your navigation challenge will be to recognize and work with changing economic forces, realize your need to adjust for this latest consumer class, and amend your business approach accordingly. If you make a wrong turn along the way, there will be no automated navigation lady telling you to make a U-turn at the next intersection. You’ll have to figure it out yourself.
And I know you will because you have already plotted a course for continued business success – an extension of the course you plotted for surviving the downturn in the first place. Well done. For those who haven’t updated their business model yet, get going. There’s revenue waiting for you at your destination as long as your journey includes savvy, realistic market navigation.
Mary Elston has spent more than 20 years in management in the transportation, consulting and technology industries. She is a member of the National Speakers Association and author of the book, “Master Your Middle Management Universe, How to Succeed with Moga Moga Management Using 3 Easy Steps.” Contact her at firstname.lastname@example.org.
This article originally appeared in the March 2011 issue.