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>> EXPERT ADVICE FOR STRENGTHENING YOUR BUSINESS <<

Master the non-verbal Get back to the basics Send the right message Operate with plan Learn from the prosperous Focus on your strengths Exceed expectations Capitalize on opportunities

A BOATING INDUSTRY WHITE PAPER CONTENTS THE POWER OF THE NON-VERBAL 5 REASONS WHY STRONG 3 By Matt Gruhn with Duane Spader 11 DEALERS PROSPER By David Parker, Parker Business Planning GE’S SIX TIPS FOR SURVIVAL 5 By Matt Gruhn FOCUS ON YOUR 13 STRONGEST BRANDS EFFECTIVE MARKETING IN By Phil Dyskow, Yamaha Marine Group 7 A TOUGH ENVIRONMENT By Dale Barnes, Yamaha Marine Group 15 EXCEED EXPECTATIONS By Debbie Davis, Waypoint Group, Inc. 9 OPERATE WITH A PLAN By Noel Osborne, Consultant MYRIAD OPPORTUNITIES AVAILABLE 17 By Phil Keeter, Marine Retailers Association of America Back to Basics hen the economy is booming and boats Business basics seemingly sail out of the dealership, it’s easy W to forget the trials and tribulations that pre- can sustain marine ceeded this period of prosperity. Like most retail channels, the marine industry is dealers — even cyclical. But the huge investment in inventory and staff required to run a successful dealership can turn sour during tough times. when the economy isn’t so hot, as many dealers are find- ing out. Reactionary measures may sustain a dealer in the short-term but aren’t likely to help in the long run. Boating Industry spoke with top consultants and industry experts to get their take on surviving and thriv- ing during all economic conditions. Although the experts vary widely among their positions in the industry, a num- ber of common themes emerged from their responses. Most involve sticking to one’s business plan while looking for quality growth opportunities in closely relat- ed areas, concentrating on marketing and advertising, taking a critical look at each employee should layoffs For the latest need to happen, asking manufacturers for help with cus- news and data tomer appreciation functions and taking steps to move regarding industry older inventory. trends, subscribe ’s not the time to panic. Now’s the time to heed to the Boating Industry e-News the advice of experts and refocus your efforts on your and visit dealership. >>>>>>>>>>>> boating-industry.com.

www.boating-industry.com WHITE PAPER - Boating Industry 2 BOATING INDUSTRY WHITE PAPER

The power of the non-verbal How the right attitude can help you survive the tough times.

CONTENT FOR THIS ARTICLE ith the current economic condi- mind you. Trying the ol’ rah-rah-hoop-de- tions at the forefront of his doo doesn’t work. It’s like the old mantra WAS DERIVED FROM A W mind, the No. 1 thing Duane Spader has taught for years: Good habits CONVERSATION WITH Spader began telling people last year, was are formed during tough times; bad habits DUANE SPADER that dealer management had to be responsi- are formed during easy times. ble for the non-verbal portion of its opera- It’s an attitude of professionalism and OF SPADER BUSINESS tions. Sounds a little too philosophical, but it respect for one another. It’s a message of MANAGEMENT. makes sense. And dealer principals need to teamwork that took years to build. It’s much understand the effects of the non-verbal. more than just trying to give away boats at a BY Often in tough times, business owners low price. It means cleaning up the facility to MATT GRUHN. begin looking for the one instant answer to improve your appearance. It means making solve all of their problems. And let’s be hon- sure the bathrooms are clean. It means greet- est, with the Middle turmoil, gas prices ing every customer who walks through the and a resulting economic condition that does- door. It’s improving those 1,000 different n’t seem to favor boat buying, times could aspects of your operation. definitely be considered tough. So it’s impor- Does your dealership succeed with the tant to pay attention to what Spader coins as non-verbal? Evaluate how your employees the non-verbal. And that amounts to a com- talk about each other. And what their atti- bination of many things. To Duane, it’s the tude toward management feels like. What’s Your Non-Verbal message he’s been sending to all of the suc- the attitude among different departments? Essentials Checklist cessful dealerships he’s been working with for The attitude should be one of confidence K Exhibit confidence years: It’s not the one thing that you do 1,000- … that you and your employees are doing K Display professionalism percent better that matters, it’s the 1,000 the professional things that can be done. K Show respect for other things you do 1-percent better. It all starts with the understanding that Not all dealers are doing poorly during customers buy one boat at a time. And employees & customers these times, either. The truth is that those they want to buy that boat as opposed to K Ensure a clean facility dealers that are doing those 1,000 things being sold a boat because of a cheap price. K Greet all customers better make more money during soft times And it sure is easier to talk and write about K Improve every aspect of than they do during good times. That’s this than it is to implement it. But if price your operation because they are doing all those things bet- selling is happening, you’re just com- K Sell one boat at a time ter and the non-verbal of the dealership is pounding your problems. better because everyone is productive. In There is a methodology to it that dealers K Tackle the cost-cutting soft times people want to buy, but they really have to concentrate on, and that’s sell- K Advertise your strengths want to buy from dealerships where the ing one boat at a time. Typically, what hap- non-verbal is good. pens when the market goes soft, dealers for- The non-verbal message that a business get that, and they giving away one boat at elicits is its attitude. It’s an aura of confi- a time, rather than selling one boat at a time. dence that is visible and obvious to anyone And giving it away creates more of a nega- who walks through the front doors. It’s the tive effect than selling it. By giving it away, solid confidence that says, “things might be the sales rep is selling only price and empha- tougher, but we can do better.” It sends a sizing to customer that the industry is soft: statement that says, “times might be tight, “Other people are not buying, so you but we don’t have to give up.” Instead of shouldn’t buy even though the price is giving up, it says “we have to do better. We good.” Selling is based upon addressing cus- can do better. And we’re going to put more tomers’ needs and being positive about it. efforts into doing the right things.” That Customers don’t want to be sold; they want doesn’t mean the gimmick of the month, >>>>>>>>>>>>

www.boating-industry.com WHITE PAPER - Boating Industry 3 THE POWER OF THE NON-VERBAL

During tough economic times, what is your No. 1 focus? During tough economic times what is your No. 1 focus?

8% Hold margins

33% Reduce inventory

24% Cut costs

15% Create additional revenue streams

Increase revenues from existing 25% products/services

Other 10%

0%5%10% 15% 20% 25% 30% 35%

Boating Industry magazine polled dealers in a number of to buy. When we get into price selling, it’s areas focused on surviving in tough economic conditions. company is demoralized. And that is actu- the salesman selling and not letting the cus- In all, 221 dealers responded to this survey. Of these ally chasing customers away from the dealers, 74 percent had only one location, 21 percent had tomer buy. two or three locations, and 5 percent had four or more dealership. It’s also subconsciously telling locations. Additionally, 29 percent of these dealers noted When it comes to evaluating the cost- their annual revenues to be between $2 million and $5 customers, don’t buy here. You have two cutting side of the business, you need to million; 31 percent were less than $2 million; 35 percent types of employees: productive and busy. were between $5 million and $20 million; and 7 percent first understand where your costs are were $20 million or greater. When tough economic times Everybody starts getting busy and nobody hit, 33 percent of these dealers focus first on reducing associated and which are the largest. The their inventory. becomes productive because of lack of No. 1 cost in a dealership is people. No. 2 direction and dedication to the work. They is interest. No. 3 is advertising. You can right time to buy from a strong business. will often get busy just looking busy. When tackle all the nickels and dimes, which are Without advertising, you will be less likely to employees know someone should be let important, but if you don’t tackle those move boats, and if sales are dropping and go and the owner does it, then they go three, you’re not going to make progress. you have excess inventory, your problems back to work. They are the toughest, yet Those three make up about 65 percent of are compounding because the interest rates the most important, decisions and should- your total expenses, if you’re managing continue to climb. Focus on selling one boat n’t be handled lightly. the business properly. at a time as discussed above. When the market forces are bigger You have to be careful with cutting The toughest place, but oftentimes the than the dealership, both on the way up back on your advertising (see “Effective most productive place to cut back is with and the way down, you have to adjust marketing in a tough environment, page the people. You’ve got to look at your peo- your business to the plateau level. You 7). All advertising should be planned well ple. Evaluate the positions needed depart- should do it by each individual depart- in advance and executed accordingly. You ment by department; not by the total deal- ment so that you don’t have to do that cannot advertise your way out of short- ership. And that is the most gut-wrenching by the entire dealership. Many dealer- falls. You have to sell your way out. The and difficult process for dealership owners ships have been saved by understanding tendency with dealers in tough times is to go through. The most difficult responsi- and adjusting to those plateaus. And in always to promote low prices. That’s bility a business owner has is to have to dis- most cases, the adjustment is successful going to tell the customer that this is not miss some of their people. only because the employees understand the right time because no one else is buy- But it’s a double-edged sword. If an as well. Their understanding of ing now either. owner doesn’t let someone go, and it your business’ needs will help create a Now is the right time to buy, and it’s the needs to be done, then everyone at the solid non-verbal. I

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GE’s six tips for survival An inside look on ideas gleaned from best practices and years of experience.

CONTENT FOR THIS ARTICLE ith more than 3,000 dealer cus- ing and maintaining multiple revenue tomers, 300 manufacturer cus- streams, you will maintain relationships and WAS DERIVED FROM W tomers and 30 years of experi- drive sales. For example, by removing the CONVERSATION WITH ence, the Marine Group at GE Capital worries customers often have about storage EXECUTIVES OF Solutions has a deep understanding of — and or maintenance, you will allow them to commitment to — the marine industry. The enjoy their boat. GE CAPITAL SOLUTIONS. company not only has the ability to gauge 2. Cultivate existing customers. Create BY the flow of business through daily interac- more business opportunities from your exist- tions with customers, but it also hosts its own ing customer base. Your repeat customers MATT GRUHN. dealer council and works closely with many and referral customers are great opportuni- manufacturers that interact with the best ties for growth, and that type of business is dealers in the industry. Factor in the compa- what is going to help you survive. Existing ny’s first-hand knowledge of how inventory customers already know you and trust you. costs affect dealer business, and executives You won’t be attempting to convince some- are a wealth of information. one to come into boating, which can be a “As a leading marine lender, we’ve had much tougher sell. the opportunity to work with the best man- 3. Work with your manufacturers. ufacturers and dealers over the past few Manufacturers want to help and there are a decades and learn what has been fundamen- number of initiatives underway to support tal to their success,” said Bruce Van dealers in this environment. There are short- Wagoner, president of the GE Capital term strategies, such as incentives and retail Six tips to consider Solutions Marine unit. “These strategies — promotions aimed at driving traffic: gas 1. Expand your business model coupled with GE’s market research — may cards, rate buy-downs, discounts or rebates. 2. Cultivate existing customers benefit many retailers across the country as Other strategies are more long-term and 3. Work with your manufacturers they assess their current business practices.” can require structural changes. For example, 4. Expand F&I While admittedly not on the front line of a couple of programs have surfaced recently. 5. Avoid asset birthdays marine retail, GE’s proximity to it has given One is an inventory transfer program, 6. Develop your pre-owned business it the knowledge needed to develop innova- through which manufacturers take steps to tive programs — such as the new 30-day free make it easier for dealers to move inventory financing for pre-owned units — to assist across the channel. One dealer might have dealers both in the good times and bad. low inventory of a certain model, while They also take advantage of opportunities to another might have a surplus of that same collect valuable data on trends around the model because it isn’t selling as quickly in industry, through informal discussions and their particular market. Manufacturers can formal surveys. Using their industry knowl- alleviate this burden by helping to redistrib- edge, experience, and information they have ute the inventory amongst their dealers. gathered, GE has offered the following six GE has also seen manufacturers roll-out suggestions that may help you weather the pre-owned programs. Pre-owned units play current economic storm. an important role in a consumer’s boating 1. Expand your business model. Provide lifecycle and manufacturers are increasingly consumers multiple ways to do business providing support to their dealers and giving with you by offering them more than just a them an incentive to be more aggressive with boat. This philosophy not only provides a their pre-owned business. Every sale counts great experience for the customer, but it also and if you feel confident about taking a trade- brings in additional revenue sources, in you are going to be in a better position to whether it’s storage, fuel and maintenance or make every prospect a customer. parts, garments and accessories. By develop- >>>>>>>>>>>>

www.boating-industry.com WHITE PAPER - Boating Industry 5 GE’S SIX TIPS FOR SURVIVAL

What would you consider your second-most-important area of focus? What would you consider your second-most-important area of focus?

15% Hold margins

20% Reduce inventory

36% Cut costs

17% Create more revenue streams

When it comes to buck- 12% ling down during the Increase revenues tough times, the majority of dealers (36 percent) turn to cutting costs as their second-most impor- 4% Other tant area of focus.

0% 5% 10% 15% 20% 25% 30% 35% 40%

4. Expand F&I. The best dealers do very units. Additionally, you may have to offer the last 40 or 50 years, that is still below the well in this area but many dealers leave an added incentive to your sales team. average. Carrying costs associated with money on the table when it comes to Finally, you might want to consider swap- inventory are getting higher and it is diffi- financing and insurance. ping that unit with another dealer if they cult for dealers who had been enjoying the 5. Avoid asset birthdays. Carrying costs have a better market for it. Creating a plan benefits of low interest rates. So if you have on aged units are significant and you need and focusing effort and energy on selling an aged unit, it is likely that the associated to focus on moving these units. The histor- aged units will go a long way to breathe carrying costs have increased over time. If ical data that GE has gathered surrounding some fresh air into your dealership. you can take a trade while selling an aged aged inventory paints a picture of the 6. Develop your pre-owned business. unit, the interest cost savings will be a ben- negative impact of not turning these units. Convert every opportunity. Take trade-ins. efit and the trade can also provide a solid GE reviews liquidation trends across the The pre-owned market is an $11 billion profit. The pre-owned market has been a portfolio and it is clear that the curve slows segment that, for dealers, represents a huge focus of GE for a while, and the company down for units older than 12 months, and opportunity for additional revenue. If you has even introduced a 30-day-interest free becomes flat for units past 15 months. The are already taking trades, ask yourself if you program for pre-owned units. inventory just stays there. are doing everything you can in the pre- Sometimes challenges can open the Steps must be taken to move these units owned market. Are you out there buying door to opportunities that would never out of your store immediately because the boats? Think about it this way: 1 million have otherwise been explored. While some market is not going to do it for you. The pre-owned units change hands every year. of these ideas may not be big revelations, scenario becomes a tangled web: You have Compare that to a little over 300,000 new going back to the basics and focusing on new product arriving but you are still sell- units that sell annually. fundamentals can help your business grow ing last year’s models. Some inventory The potential buyer base on the pre- — not only when times are tough, but in the reaches the 12-month aging mark, but you owned side is significantly larger than it is on long run as well. still have a chance to sell it. Then it reach- the new boat side. When things get tough “This is a challenging time for the entire es the 15-month mark, and it becomes psy- with moving new inventory, you need to industry, and we are dedicated to helping it chological. You should not hold out for a expand your customer base. Give customers and our customers continue to thrive,” buyer to come in and buy an aged unit for fair deals on pre-owned units to move new states Van Wagoner. “Our commitment to the price you originally expected because inventory, especially the aged boats. our customers extends beyond a floor plan- the data shows that it does not happen. Here’s an example that GE uses to ning relationship.” If you have one unit, you could probably show why it’s important to focus on both These 6 tips come from GE’s observa- work through that. But if you have multiple of these last two items: The prime interest tions of high performing marine businesses aged units, you really need to take action rate is at 8.25% (as of August 1st). For many and are offered as suggestions only. By tak- and do something innovative on the sales dealers, especially those who came into the ing advantage of the potential opportuni- and marketing side. You have to develop a business within the last 5 years, that rate ties that these ideas provide, you may just plan to generate traffic and interest in these appears to be very high. But if you look at find this storm a little easier to weather. I

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Effective marketing in a tough environment Facilitate positive change with a marketing plan.

BY ery industry, be it automotive, marine, Step 1: Asking the Right Questions real estate, etc., has experienced or How do you begin to develop a campaign? DALE BARNES, Ewill experience the effects of a “soft” First, you need to consider your dealership DIVISION MANAGER, market. For retailers in particular, soft market competition. Ask yourself: MARKETING, situations can have a major impact on sales I What is their strongest advantage? and consumer behavior. The marine industry I What is their greatest weakness? YAMAHA MARINE GROUP is going through one of these situations now Then turn the questions right back and some dealers are beginning to feel the around at your own dealership: effects on their businesses. I How well do you really know your In a soft market, consumers have a ten- customers? dency to stall their purchasing decisions, espe- I Why do they buy product from you? cially when it comes to “recreational” pur- • Customer satisfaction/experience chases like boats. In these kinds of market • Convenience/location/ease conditions, consumers tend to open their • Selection (niche, depth, new, used) minds a bit more to alternative choices. This • Customer care is dangerous for boat dealers because, not • Ownership/lifestyle relationship only could the consumer choose not to pur- • Knowledge chase a boat altogether, but they could also • Reputation have the tendency to look a little closer at The first step is to hone in on your other dealers for comparison purposes. unique selling advantage and determine When marine dealers are faced with the how it differentiates you from other dealer- challenges of a soft market, they basically ships. You also need to know why that is have three choices: important to your customers. I Go about business as usual and wait until the market comes back around Step 2: Building a Marketing Plan I Cut any marketing expenses to save Once you have identified the strengths and money during a down market weaknesses of your competition and have I Take an active approach by rolling up determined your own competitive advan- the sleeves and digging in to find creative tage, it’s time to start building your market- marketing alternatives. ing plan. To do this, you need to ask yourself I believe that the third choice is the best. the following questions: Dealers who choose an active approach I What is my business objective? during a soft market not only keep the I What am I planning to do to achieve momentum flowing but also have a better that objective? chance of leveraging that momentum when I Why am I implementing this plan? the market turns around. Most importantly, I Who am I targeting with these aggressive marketing, even in a thriving marketing efforts? market, does not require spending a lot of I When and where will I execute my plan? money. Award-winning ads and grand slam I How will I communicate my key marketing campaigns are nice but not usual- messages and execute my plan? ly the best use of funds. However, there are Now, we are going to take a look at some inexpensive, extremely effective tac- these questions individually. tics dealers can use to boost momentum, even in a soft market. >>>>>>>>>>>>

www.boating-industry.com WHITE PAPER - Boating Industry 7 EFFECTIVE MARKETING IN A TOUGH ENVIRONMENT

What strategic changes will you make or consider making now through year’s end?* The most difficult strategy for a dealer remains the same every year. We have to project what boats will be in Answer 1: demand at which time of year. The manufacturer knows ahead of time, based on the dealers’ orders, what to produce, but the dealer can only guess as to what to order. If the dealer projects incorrectly, he is left with stagnant inventory and missed sales opportunities.

Ensure that every possible lead or offered business is worked quickly and thoroughly. Answer 2: We can not afford to miss any opportunity to close.

*Answers to our survey were provided anonymously.

Defining Business Goals • Include pick up and delivery in the and Objectives pricing of the product The easiest way to measure the success of a • Offer a scheduled maintenance marketing campaign is to first determine a upgrade special goal you would like to reach through the I Promote the product and program program. The goal is really the “why” of the aspects of your business plan, encompassing the business priorities, • Free 10-point inspection customer satisfaction, or unique selling • Limited time upgrade offers advantage. Some examples include: • Trade-in extravaganza • Low-interest financing I Sell 10 new ACME packages this month • Easy finance qualifications I Turn used boat inventory by 25 percent • Free fishing license for life in August” • Cross promo specials (i.e. throw in I Increase service income for the month an iPod for the kids or spa or by 25 percent shopping certificates for mom) I Increase new customer traffic by I Host special events or create activities 25 percent around other events I Enroll 10 boat demo appointments next • Free 10-point inspection weekend • “By invitation only” new product previews Who is your audience? • Special seminars or demos (ex. Now that you know what you would like to “How to Master the Launch do to achieve your business goals, it’s time to Ramp”) determine who you need to reach to accom- • Host local boating club meetings plish the objectives. Are you looking to target: • Teach “Joys of Boating” courses at I Loyal, active customers? local community colleges of I Inactive, past customers? recreation centers I Active new prospects? • Customer appreciation BBQ I Future prospects? • Invite local CPA to use your I A combination of the above? dealership for appointments during tax season. Offer a discount to What are you going to do to reach customers who apply their tax refund out to your target audience? toward the down payment on a new Any dealership can advertise lower prices, product but is that really the best way to achieve your business objectives? Consider these The “where”: Your dealership can alternatives: play a big role in the success of I Promote the service aspect of your your marketing initiatives business When you think about when and where you • Free 10-point inspection want to execute your marketing plan, you • Free boat wash – even an oppor- need to think about your own dealership. tunity to get the community involved The most effective way to continue to here by joining forces with a local “brand” your dealership is to actually host high school >>>>>>>>>>>>

www.boating-industry.com WHITE PAPER - Boating Industry 8 EFFECTIVE MARKETING IN A TOUGH ENVIRONMENT

What strategic changes will you make or consider making now through year’s end?* Reduce inventory purchases due to the slower economy and higher interest rates. We’re not in a rush to take Answer 3: advantage of “early buy” discounts.

Take a hard look at every employee. Lean times give you a reason to cut loose any dead wood in Answer 4: your organization.

*Answers to our survey were provided anonymously.

events at the facility. However, it’s critical The success of your communication that you take a good look at your facility and efforts will depend on the effectiveness of staff before launching a campaign. your database. There are many customer Does your dealership: database resources available to dealerships. I Stage the dream of owning a boat? Most states give data vendors access to reg- I Justify the price point you are selling? istration information and those lists are also I Do your displays promote your unique available for purchase. Another option is to selling advantage? exchange customer lists with a cross-pro- I Are all departments presentable to the motions partner. same standard? Does your staff enhance your brand? Key to Successful Marketing Are they… During a Tough Market I Enthusiastic? The key to successful marketing in a soft mar- I Friendly? ket is getting all of your employees involved I Knowledgeable? in the message. Make sure they are aware of I Do they take self initiative to satisfy? the brand development process and ensure I Do you take the time to involve them in they understand the reasons behind the mar- the marketing strategy? keting campaign. Set measurable objectives for your campaign as well as your employees How will you communicate your so they feel they are a part of the overall mis- marketing messages to your target sion of the company. Contributing employ- audience? ees are often your best brand evangelists. Now that you have taken a good look at your Most importantly, measure the success dealership, and defined your objectives and of your campaign. Make sure you under- plan of action, you need to determine what stand why it worked/did not work. While methods you will use to communicate your not all marketing programs are successful, plan with your target audience. no marketing at all can lead to “brand paral- ysis” during a soft market. Don’t be afraid to If you are reaching out to loyal be aggressive with your marketing. Not only customers and active prospects, will you gain a deeper understanding of you may want to consider the your current customers, you may gain a following communication tactics: new understanding of your business’ I Phone call invitation priority strengths and weaknesses. I Direct mail and email follow-up Marketing campaigns facilitate change, If you are trying to recruit new cus- whether in customer behavior or improved tomers, you may want to try: business processes. There are many inex- I Getting included in a newspaper article pensive methods for reaching your target by a local outdoor writer audience and you never know how effective I Conducting club events at your they may be until you try. Businesses that dealership embrace change will continue to weather I Direct mail to local demographics even the toughest of markets and will enter I Cross promotions with other local a strong market cycle with increased retailers momentum. I

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Operate with a plan Managing adversity begins with knowing where you’re headed.

BY agree with you that the industry is in for expect to see some dramatic changes in the some tough times and that a number of buying habits of our customers. NOEL OSBORNE, I dealers will probably fail because they The lower end of the market, or entry CONSULTANT are not prepared for the downturn. When level buyers have been slow in purchasing you are only operating on a Ideas to include in your plan new boats for several few percentage points of years. During this peri- 1. Project cash flow and act profit, it doesn’t take much od, the larger boats accordingly of a downturn to financially have been the only 2. Get “lean and mean” cripple your store. bright spot in the indus- 3. Advertise your services We have been doing try. Now these folks are 4. Do not fall “out of trust” quite well as an industry for getting scared and are 5. Counteract “expense more than 10 years. As you going to wait and see creep” know the economy goes what the outcome is 6. Get employees involved through cycles with or going to be for all of the 7. Conserve on costs without wars or gas prob- areas of concern I 8. Find service work lems. You simply cannot noted above. 9. Follow-up on every lead combine the ending of a Those dealers who 10. Sell your competitive prosperous period of the followed the recom- advantage economy, $3.00+ gas mendations of individu- 11. Control your inventory prices, significantly higher als like myself and are interest rates and a very volatile situation in operating their dealerships in accordance Whtheen youmiddle look to eastincreas ande rev enuesNorth, what's Korea, your No. and 1 pri notority? >>>>>>>>>>>>

When you look to increase revenues, what’s your No. 1 priority?

4% Increase F&I business

23% Increase service business

6% Sell more P&A

16% Create new revenue streams

19% Sell more boats by cutting prices

38% Sell more boats, holding price

4% Other

0% 5% 10% 15% 20% 25% 30% 35% 40%

For those dealers looking to increase revenues, twice as many (38 percent) say they try to drive more sales while holding their prices as those (19 percent) who say they look to sell more boats by cutting prices. Additionally, 23 percent of the dealers said they focus first on increasing their service business.

www.boating-industry.com WHITE PAPER - Boating Industry 10 WhenOPERATE you look to create new revenue streams , WITHwhat option do you consider A first? PLAN

When you look to create new revenue streams, what option do you consider first?

New market, such as 19% powersports or RV

32% New boat or engine line

21% New or expanded storage business

29% Other

0% 5% 10% 15% 20% 25% 30% 35%

Sixteen percent of the 221 dealers polled by Boating Industry said their No. 1 priority when it comes to increasing revenues is to create new revenue streams. Of the 221 dealers, 40 percent said that they look first to adding a new boat or engine line when it comes to creating new revenue streams. Of the 9 percent who chose “other,” 33 percent said they’d add new products or services to their offering, while 22 percent said they’d look to move into new markets or acquire other dealers. with a solid business plan should be able in revenue if sales cannot do it. Are the deal- them that it appears that times are going to to weather the storm by managing adver- ers advertising these services? If not, now get tougher and that you need their help. sity. Anyone can make money during the may be the time to start doing this. Ask them to conserve by cutting down on good times, but only those who know Typically the biggest problem that devel- telephone calls, recycle shop supplies, do how to manage adversity can survive the ops when the dealers run short of cash is service walk-arounds for every service cus- bad times. that they fail to pay off sold boats within the tomer to obtain more work, and follow up The first key step is to project their time-frame stipulated by the lender. This of on every sales lead. cash-flow needs for the next 12 months. course is referred to as being “out of trust” If your salespeople do not know what This can be accomplished by conducting a and is the kiss of death to a marine dealer. your “competitive advantages” are, you bet- break-even analysis. Simply project each They simply cannot allow this to happen. If ter teach them now. By the way, most do month’s operating expense totals and the dealer feels that they are going to be not. As inventories climb, the competition determine what level of sales it is going to short of cash, contact their lenders and let will become fiercer, and it will become more take to produce the gross profits to cover them know that a potential problem exists. difficult to preserve your gross profit margins. those expenses. Ask for the lender’s help. The lender does Consumers will become more cognizant of Hopefully the dealers did not wastefully not want to see the dealer fail and will in all the reasons why they should buy from a par- all of the profits they made over the likelihood, attempt to assist them in surviv- ticular dealership, who provides added value past 10 years and can utilize some of that ing the financial problem. to them. It is up to your salespeople to tell cash reserve to weather the storm. If they Whenever times are good, dealerships them what those added values are. did not do this, then they only have one tend to encounter what I refer to as Inventory control becomes key during hope and that is to produce enough gross “expense creep.” They do not closely mon- difficult economic times. Do not overstock. profit monthly to cover their expenses. itor their expenses monthly and certain Remember that you need three inventory Now is the time to get lean and mean. expense areas increase because nobody is turns for new boats to be profitable. If you Look carefully at your entire employee paying attention to them. Examine every are projecting a 20 percent decrease in base. Which key employees would it be expense item and ask yourself these ques- sales, then you better factor that into your very difficult to replace? We know that serv- tions, “does this expense item seem high?” turns and cut back on your purchases. ice personnel are very difficult to find and “Is there a better and less expensive way to Look close at your parts and accessory the dealers must do everything possible to address this expense area?” inventory levels. Can you cut back on some keep them. In addition, we must recognize Get your employees involved. Don’t try of them and free up cash without suffering that service must play a key role in bringing to handle these problems . Explain to poor customer relations? I

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5 reasons why strong dealers prosper Sales are up for some dealers; here are a few ideas why.

BY hen I was asked to comment on old, get all the margin you can, but be the downturn that many dealers willing to take invoice or less and pay a DAVID PARKER, W are experiencing this year, the spiff in order to sell it. Again, be ruthless PRESIDENT, first thing I thought was, “what downturn”? in reducing inventory. PARKER BUSINESS To double-check myself I looked at the aver- 5. Log all customers into a Guest Register age of all five of my 20 Groups to see how or Customer Log and follow them up. PLANNING they were doing. Sales are up 9.3 percent This sounds simple, yet I am amazed at through May over last year. However, since how few dealers actually do it. some dealers in the country may be experi- 6. Have the sales manager (or better still encing a downturn, hopefully I can offer the owner) call to thank each customer some helpful strategies. for coming in. Ask if they were taken care of properly and if they have any HERE ARE THE AREAS THESE 1. Reduce Inventory Excess non-current more questions. DEALERS FOCUS ON TO inventory is one of the primary reasons deal- Don’t forget to ask how your boat brand ers go out of business. It is important to rec- is “stacking up” in their shopping process. If REMAIN SUCCESSFUL ognize that you have a depreciating product you do not want to follow-up yourself, you that is costing interest payments every can hire an outside firm such as CSI or month. Be ruthless when it comes to getting Applied Concepts to do the follow-up for inventory to the right levels. A good rule of you for a nominal fee. You will be amazed at thumb is to have no more than 20 percent of what you can find out. expected annual sales (in units) of a particu- lar brand in inventory by July 31, and no 2. Personnel Adjustments The best way I more than 10 percent Labor Day. For know to approach any personnel reduc- example, if you expect to sell 100 units of a tion is to mentally fire everyone in the particular brand of boat (2007 models), then dealership and then ask yourself “Would I you would have no more than 20 units in rehire this person again if I had the oppor- stock by July 31, and no more than 10 units tunity?” If the answer is no, then you in stock by the end of Labor Day weekend. know what to do. If you decide that a par- The 2008 model year’s product usually ticular employee is too valuable, then you comes with free floorplan, so it is not a con- may want to carry this person regardless cern at this time. of your volume loss. However, if you have If you are caught with significant determined that you absolutely have to amounts of inventory above these parame- lay some people off, do it from the top ters then you could do the following: down. This means that you eliminate one 1. Clean the boats up and present them or more of the layers of management as professionally as possible. above the production people. For exam- 2. Have the sales people do a “Feature/ ple, if you have a sales manager, he/she Benefit” presentation to each other on becomes an assistant sales manager/sales these so-called “Old Dogs” to enhance person again, deriving the bulk of income their knowledge about the boats. from personal sales. Many times ego will 3. Increase the commission or put a spiff not let them do this, so you may lose on the boat if sold at normal margins. them from your dealership. The same This will help to increase enthusiasm. would apply to a service manager. He/she 4. If the unit is more than 12-18 months >>>>>>>>>>>>

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When you focusWhen you onfocus cuttingon cutting costs, costs, where do yowhereu look first? do you look first?

46% Inventory

30% Semi-fixed costs

7% Fixed costs

12% Marketing/advertising

12% Personnel

Other 5%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

For those dealers who responded to Boating Industry’s survey, 46 percent said they’d look to reduce inventory first when cutting costs.

moves to a shop foreman position and professionalism and profitability for its turns wrenches 25 percent to 50 percent members. Any floor plan lender will tell you of the time. that, as a whole, 20 Group members are bet- ter financial risks than the bulk of the indus- 3. Budget Although this is listed third it try. In fact, one floor plan lender made a really should be first. An annual budget statement during a presentation to one of (when I do this for a client I call it a my 20 Groups that, “20 Groups are the only “Strategic Profit Plan”) will give you much effective means of learning for a marine greater peace of mind if you will take the dealer today.” time to produce one and then MONITOR it (compare it to actual) each month. One 5. Lines of Credit Now is the time to benefit of a monitored budget is it will establish any additional lines of credit. It highlight any area of sales or expenses that is much easier to do so when times are need attention. better than in the middle of a downturn. In addition, I recommend you always 4. Join a 20 Group There is no better way to have two sources of floor plan. We have stay abreast of what is happening in the all seen the many lenders who have come marine industry than being in a 20 Group. A and gone in the marine industry. Two 20 Group is a group of non-competing deal- sources of floor plan would save you a lot ers (up to 20) who are committed to each of grief if yours is one of those that depart others best interest, that meet around a the industry. round table and compare their financial There are many other things that could information on a common format, three or be done to help improve your business; four times per year. You share and teach however these strategies will give you the each other the best industry practices. It is a most return on your efforts if faced with a statistically proven process that improves downturn. I

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Focus efforts on your strongest brands When times get tough, focus your resources.

BY think it is doing the industry a disservice mal business hours. I think that the manag- to take the position that all business is off er needs to be responsible for keeping that PHIL DYSKOW, I and that all dealers and manufacturers sales force there and focused. PRESIDENT, need to hunker down. If you look at the Like in the car business or the real estate YAMAHA MARINE GROUP Southeast and all of the devastation that business, when it is a buyers’ market occurred down there in 2005, Louisiana and because of the available overload of invento- Mississippi, for example, enjoyed double- ry, advertise that fact. Advertise for buyers. digit growth with all the replacement busi- Let people know this is a wonderful time for ness, whereas the industry in Florida is still a them to take advantage of the buying bit softer. opportunity. Rather than hiding from the When times are booming, the boomer problem, advertise it. Shout from the tops of can sell anything that he can get his hands mountains; let people know that you have a on. Most of the well-known brands are in great inventory of products and that prices short supply, so a dealer takes on extra will never be better than they are today. brands just to meet demand. When the mar- By focusing on operations, a dealer can ket gets a little tougher, those marginal grow market share when the market tight- brands are usually the first ones affected, ens up and then really cash in when the often in dramatic fashion. Strong brands market turns around. I would be the last to that have consumer loyalty and retail say that business is not tougher and more demand tend to weather those adjustments competitive today than it was 18 months in the market far more successfully than ago, but that does not mean you can’t have other brands. a phenomenal year, even in a tough market. During tough times, the smartest strate- You definitely have to reassess and refocus gy a dealer can pursue is to focus his your business. resources – whether it be people, floor plan Remember, the entire market isn’t or whatever – around his strongest brands. down. There are segments, there are geo- If a dealer has five brands during boom graphic sectors and there are specific brands times, he might want to rethink that strate- that are down. Dealers need to understand gy when the market is down. So switch where there is softness and avoid those gears immediately and circle your wagons areas. Find out where the opportunities for around your stronger brands. growth are. For example, in our market we And just like in the housing market, a saw some of our traditional sectors soften dealer will have to reassess his profit expecta- up last year, but we made that up in other tions per deal. I think the take-it-or-leave-it sectors. Our growth last year did not come approach to pricing is much more difficult where we had originally planned it to come, during a reduced market. Don’t let any poten- but it came in other segments where we saw tial buyer walk away. A dealer should take opportunities and took advantage of them. any good deal he can get. No secret there. Dealers should look for ways to cut I think another key point is to keep your costs wherever possible. Two places to sales force motivated. Many times when avoid cutting are marketing and promotion- floor traffic and volume are significantly al expenses because those are very visible. If reduced, salespeople look at this as an you stop advertising, consumers will per- opportunity to take a vacation, shorten their ceive that perhaps your business is off. work hours or do other things during nor- >>>>>>>>>>>>

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What is your No. 1 tactic you pursue when focusing on reducing your inventory? What is your No.1 tactic you pursue when focusing on reducing your inventory

Special event 33% (in-house or otherwise)

34% Increase marketing

32% Cut prices

1% Other

0% 5% 10% 15% 20% 25% 30% 35%

And when looking to reduce inventory, 34 percent of When you look at where to cut overhead, I exploding in Lebanon, they are going to the dealers who responded to Boating Industry’s sur- vey said they’d increase their marketing, while 33 per- would cut it in non-visible areas. Instead of show villages being destroyed in Iraq, and cent and 32 percent said they’d cut prices and hold hiring a service to clean your boats, have they are going to show you leaders in Iran special events, respectively. your employees clean boats or clean them shaking their fists. yourself. Instead of hiring a lawn service to They are not going to talk about hard mow your grass, have your workers do it. facts, facts such as consumer confidence Reduce your electricity bill. Reduce your being actually much higher right now than water bill. Focus on things that do not it was projected to be. Peak growth is actu- directly impact sales. The last thing you ally pretty good right now and higher than want to do is make the situation worse by it was projected to be. There is lots of good reducing your advertising. I am back to this positive information out there: unemploy- brand analogy, “circle your wagons around ment is still low, interest rates have crept up your strongest brands.” Don’t waste your ad a little bit, but there is still no shortage of dollars on third- or fourth-tier brands. good, very competitive boat loans. This is Spend your ad dollars exclusively on your the kind of stuff that does not make good bread-and-butter brands. news bites, but it is much more important to I immerse myself in information: your business. whether it is statistical data, one-on-one I guess the biggest point that I could phone conversations or face-to-face meet- make is in line with strong brands because ings with dealers and boat builders. If I were I know a lot of dealers that had a good year a dealer, I would use every resource avail- in 2006. I know some dealers that had mar- able to get as much information as I possi- ginal years and I know some people that bly could to make informed decisions in my are just in areas that have been just totally market. I would certainly not make business smacked like southeast Florida or south- decisions based on what I hear on the 6 west Florida. They have to work a lot o’clock news. They are there to shock you harder for the same amount of money, but and to entertain you, not to give you good they still had what I would categorize as a information. They are going to show bombs great year. I

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Exceed expectations Create a new level of service excellence — and live by it.

BY he concept of exceeding your cus- you should do is meet a customer’s expecta- tomers’ expectations has never been tions and, therefore, satisfy them. DEBBIE DAVIS, T more important than today in the That’s why, in order to thrive and not just WAYPOINT GROUP, INC. retail boat business. Not only because we’re survive, in today’s business climate, you must vying for recreational dollars that have an surprise and delight customers and exceed increasing number of options they could be their expectations in order to build loyalty. directed, but also because the manufacturer’s Loyalty, after all, is the difference between today are tying more fiscal incentive to enjoying a customer for life vs. a customer Customer Satisfaction Index ratings than for the moment. ever before. So your goal should be to instill a service Figure in the sensitive economic times excellence culture at every level of your we face today, and you must ensure that you organization. I believe you should begin that are capturing every income opportunity pos- by creating a culture of communication sible, leveraging those you do have, and throughout your company, discussing finan- enhancing volume, revenue and profitability cial and operational objectives with your prospects by delivering an exceptional buy- employees. ing and ownership experience. Communication is key. Communication can So, let’s break it down. Random House take on many shapes and forms, but the back- Dictionary provides the following defini- bone of the concept should be based on tions: encouraging and rewarding service excel- I Service, n. an act of helpful activity; aid lence. Try sending a handwritten “Welcome I Excellence, n. state of excelling; superiori Aboard” card to every new hire who joins ty; eminence your team. Their success is your success and I Expectation, n. the act or the state of they need to know that they play an integral expecting, looking forward or anticipating part in delighting your customers. Host new What’s more interesting than the defi employee orientations, taking the opportuni- nitions were the synonyms. For ty to personally communicate the impor- example: tance of service excellence and encourage I Service is synonymous with help, assis- them to bring you suggestions for continual tance, value improvement. Recognize top service per- I Excellence is synonymous with great- formers when someone goes above and ness, superbness, high quality beyond for either an internal or external cus- I Expectation is synonymous with tomer. Acknowledgement and recognition words like hopefulness, optimism, and trust alone go a long way in getting everyone on So when we put it all together, here is board and keeping everyone on track. what it looks like: Customers who are hope- CSI strategy. If you haven’t already done ful, optimistic and trusting believe that they so, you need to develop and implement a will receive great, superb, high-quality, valu- company-wide CSI campaign to bring able help and assistance. That defines “serv- awareness to the manufacturer surveys, ice excellence.” That’s one tall order. Or is it? when they can be expected and how impor- Whether you are a manufacturer, a dis- tant they are to you and your organization. tributor, a retailer, a marina operator or a Disseminate 100-percent of the surveys provider of services of any type, isn’t service returned to 100-percent of your team. If you excellence what you aspire to deliver and, question whether or not someone on staff more importantly, what you expect to should see the scores, ask yourself which receive? “Satisfaction” is no longer the team member is more or less important to benchmark; it’s simply not good enough to delivering service excellence? Your answer merely satisfy your customer. The minimum >>>>>>>>>>>>

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What advice would you give to other dealers who might be feeling the heat during these tough times?* Offer great service after the sale, and you will survive. Take care of your employees — they make the wheels Answer 1: turn. If they are happy and motivated, you can survive during the tough times.

Do your best to sell whatever you have for whatever you can get for it, but don’t advertise blow-out sales or let Answer 2: the public know the market is tough.

Allow yourself and your business to be flexible. Change with the times instead of grumbling about the effects Answer 3: the changing times are having on your business.

It takes time to see the results of cautionary moves made to maintain the company’s well being. Don’t wait too Answer 4: long to start.

*Answers to our survey were provided anonymously. should be, “none.” The ultimate key to suc- have your service expectations met. Operate cess when it comes to CSI is in earning a from strength, not weakness. It has been said top score, not by asking, buying or embar- that excellence is the result of caring more rassing your customer into giving you one. than others think is wise, risking more than Insightful analysis. Conduct a financial others think is safe, dreaming more than analysis to determine not just how much others think is practical and expecting more you’re giving away in customer goodwill than others think is possible. (i.e. your sales and service policies), but Improving processes. Service excellence is also the “why” you’re giving it away. The as much about internal process as it is supe- key to reducing this counter-productive rior customer service. Consistently assess bucket of waste, is to identify it and edu- internal systems, processes and their corre- cate about it. Once you dig in, you will find lating results. Then explore new ways for countless opportunities to plug the holes in betterment. The best resource for this is the proverbial dam by further educating your team. Who knows better what chal- the customer about things such as your lenges they face daily or how best to resolve service process (how to obtain service, those challenges? Take a proactive approach scope of warranty coverage, normal wear to service excellence. You can talk the talk, and tear, customer responsibility, out of but you’ve got to walk the walk. area service resources, extended product Be the author. There are a lot of authors protection plans, third party vendors, etc.). of books on the subject of exceptional cus- Likewise, expand your new-owner orienta- tomer service: Sewell, Covey, Ziglar, tion to reduce the non-recoverable costs of Maxwell — the list is lengthy. They all offer repairs or mobile service calls due to lack of something meaningful and valuable. But, owner indoctrination. Create value-added perhaps, the most valuable book of all is weekend workshops to address redundant your own and has yet to be written. Take and recurrent troubleshooting issues. They the time to define what service excellence can be taught by your own sales, service or means to you and what it should look like delivery personnel. This serves to bring within your organization. Then brand it to customers in to your showroom, provides set you apart from your competition so that weekend saving tips and reduces your you not only represent the boat brand of costs of non-recoverable goodwill sales choice but you also become the dealer of and service policy. choice in your marketplace. Engage and Excellent extensions. Service excellence communicate with your team while does not end with you. It extends to your empowering and rewarding them for per- vendor partners as well; you are dependent forming to those standards. The financial on each other. Establish vendor standards benefits may be the initial driver; and the and require your vendors meet those stan- overall results will be the motivation to stay dards in order to earn your business. It may the course. Hence the cliché, it is a journey, appear difficult to set expectations for how a not a destination. It is a marathon, not a third party operates; however you are the sprint. It is a culture, not a CSI score. I customer in this instance and are entitled to

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Myriad opportunities available Staying aggressive will keep you positioned well.

BY n an economic environment like we have business. I do think, though, that dealers today, it is critical that dealers increase the need to look at the competition, and if PHIL KEETER, Iamount of foot traffic into their stores. someone is beating them up on a particular PRESIDENT, Now, there are many ways to do this, but model for some reason, then they need to where we find dealers have the most success try to correct that or get out of that market. MARINE RETAILERS is with initiatives like direct mail campaigns, They should resist the temptation to take on ASSOCIATION OF AMERICA or mining their database for customers who new products without first understanding should be ready to trade up; or host some their market. You have to stay with what weekend events — maybe a customer appreci- you are the very best at and do that. ation — to create some sort of an atmosphere Bold dealers are stealing business from to get the people into their dealerships. But other dealers. In order to maintain sales or the key is to do this immediately. increase a little, they are really working the One area where dealers tend to shy away consumer base while the other guy is sitting from is to ask their manufacturer partners for back on his haunches and not doing anything some incentives to help them. We hear of but crying the blues. This is probably a bigger some of the top manufacturers doing quite a issue, but there will be opportunities for few things for their dealers as far as assis- aggressive dealers, well-positioned in a mar- tance is concerned — helping them plan a ket, to take over smaller dealers. Some guy party, helping them host an event, helping who is just barely getting along but has one them subsidize that event, having factory good boat line or a good location might be personnel there and that sort of thing. I think prime for a takeover. I think there are some dealers need to say to their manufacturers, real opportunities out there that dealers need “Hey, now is the time I need some of your to look at because those opportunities are not help, some of your expertise. I need some of going to be any cheaper than they are today. your people here for an event this weekend, Dealers also miss the opportunity to sell and I need some extra marketing money.” new boats when units come in for service. Some of them are going to give it and some There should be somebody in your sales of them are not. But in the spirit of the part- department, either your sales manager or a nership, it’s OK to search for options. good salesperson, who looks at every boat I don’t believe dealers should cut back that comes in for service, calls the cus- on any of their marketing expenses. I think tomer and starts talking about making a they need to be bold about marketing and trade. Some dealerships do that, even put- do so just as quickly as they can. There are ting a trade-in quote on service tickets. I all sorts of people who can help them with think dealerships need to expand that that. We have a relationship with Shared opportunity. If those people are out there Marketing, for example, and these guys can still boating, and are out there using their plan an event for you. They can do it boats and bringing them in for service, you instantly. They can get a direct mail cam- know they are good customers. paign started instantly. You give them what I see an awful lot of dealers right now you think you want to do, and they will adding storage facilities to their property — run with it. This is not something that nothing more than lot storage. Customers takes them months to turn around; they don’t have to worry about hauling their boat can turn it around in a few days. And that back and forth to the lake, parking it in their kind of a turnaround is crucial for dealers neighborhood, storing it in their garage or who want to thrive in these tough times. renting a storage place. Dealers can say, I don’t think it’s a smart time to expand “Store it here. We’ll make it a good deal for your market or take on new product lines you and we can service it for you too.” unless some particular event prompts it, I think dealers don’t recognize many such as a competing dealer going out of opportunities right in front of them. I

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