“Jeff, This is a Hard Business!” Why Is That and What Can You Do About It?

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That unsolicited quote is from the President of a snowboard brand that you all know and that’s been around for a while. It would generally be considered successful. I consider it successful.

It’s not the first time I’ve heard the comment. I’ve responded by agreeing and by explaining why it was true. Over the years I’ve had some suggestions as to how you could work to counter, it but I’ve never really had a strategic answer about how to deal with it.
Now, as a result of some thinking, consulting, and reading I’ve done, I’ve got some new ideas on the subject. This article does not end with a Deus Ex Machina like an ancient Greek drama that resolves everything, so don’t rush to the end to read THE SOLUTION. It’s not there. But I think I’ve maybe figured out how some of our old assumptions about snowboarding, and marketing in general are no longer valid, and how and why they have changed. Maybe when we know that, we’re a step closer to running our businesses better.
Ancient History
Somewhere around 1995 I started the process of making myself the messenger that everybody wanted to shoot by writing that there wasn’t room for 300 snowboard companies and that most of them were going to go away. I talked about what happened when a fast growing industry matures and consolidates.
Any of you who may have followed what I had to say about consolidation back then can relax. I’m not going to say it all again, though lord knows I’ve gotten a lot of mileage out of my list of changes in consolidating industries over the years.
I use to write about how you could find a competitive advantage in the snowboard industry. Maybe you could get your product faster, or cheaper, or have a better pricing structure, or make it better with more features, or have a business that was less seasonal. Then I talked about controlling distribution to have a market niche. Some of those things worked well when snowboarding was younger- for a while. A little while. A very little while.
Snowboarding, because of changes in information technology, the sheer speed of market evolution during our growth and consolidation phase, the impossibility of maintaining a real product advantage, etc. was experiencing what other industries were already experiencing.  Access to and control of information has moved down the food chain from the manufacturers, to the distributors and now, via the internet, etc. to the consumer. Nothing stays the same very long. And nothing stays exclusive. What one company has done, another can duplicate sometimes literally over night.
Though it took us all (in snowboarding and lots of other industries) a long time to figure it out, it turns out there was no longer a sustainable competitive advantage as traditionally defined resulting from anything you do operationally. The price of entry was making a good product, pricing it right, delivering it on time, supporting your dealers, having good information systems, hot team riders and, uh, well, a whole lot of other stuff.
Let’s say that again for emphasis. Doing everything right doesn’t give you a competitive advantage. It just let you play in the game. It was the entry ticket.
A few years ago I even wrote that. I said, “Hey, you got to do everything well just to be here!” I was right, but I didn’t make the leap I needed to make.
The Focus on Branding
Well, if everybody can do what you can do, and pretty much do it at least as quickly and as well, and if the consumer can compare prices and product features with hardly any work, what exactly can you do besides price it lower, give the dealers longer terms, sell it to anybody who will carry it, and spend more money on marketing? No wonder this is such a hard business.
Back in 1997 I wrote, “Realize that all you have is your brand name and do everything you can to build and protect it.” Perhaps that wasn’t quite as obvious back in1997 as it is now. But it quickly became obvious and companies did the usual things to try and build and protect their brand names to give them that alleged Holy Grail of business, the sustainable competitive advantage.
They boosted the marketing and promotional budget, hired more team riders, made films, did deals with resorts, sponsored contests, expanded product lines, put stores in stores. Fighting for market share was the mantra, and it killed a lot of brands who couldn’t afford it.
Nobody would deny that some of these companies did great marketing- and it worked. They grew and their brands became better known and established. But no amount of good marketing changed the fact that product was the same, consumers had lots of information, what one company could do another could duplicate, and the demand for growth caused sprawling distribution.
Advantage to the big diversified players with the year around business. But even they weren’t getting rich in snowboarding.
So I was right- we were all right. Your brand was all you had and you had to do the right things with it. But I still didn’t make the leap. Maybe some of you did.
What is Marketing?
Well, it sure isn’t The Four Ps anymore- product, price, place, promotion- like they taught in the 60s and 70s. Your only advantage may lie in your brand. That’s what everybody apparently thought as they spent buckets of money on marketing.
But the marketing they spent, and are still spending, all that money on was developed back when the conditions of rapid change, perfect consumer information, etc. that I describe above didn’t exist. It was done not for the benefit of the customer but for the benefit of the company to tell the consumer, what to buy, where, and why. The consumer, having many fewer choices of product and purchase location and no easily available product comparisons tended to do what they were told.
It must have been wonderful.
Now the consumer doesn’t need you, or anybody else thank you very much, to tell them what to buy, where to get it, how much it should cost and whether it’s good or bad. Just what the hell, exactly, do they need you for?
Just make it good and sell it cheap and they’ll figure out the rest. Not much of a business model from our point of view is it. Might it imply that a goodly chunk of your marketing spending, as currently configured, is wasted?
Marketing is no longer about telling your customer what they want and where they can get it. They don’t need you for that because of their ease of access to information. But you have the same access to information, and you can make your company one big marketing machine.
But it isn’t up to the marketing department. It’s the job of the whole company. Oh god, how’s that for an overused cliché? Let me be more specific.
First, marketing happens, and you are probably gathering information on your customer, every time they are in contact with you. When they call customer service. When you send them an invoice.   When you try and collect that overdue bill. When you ride up with a kid on the lift. Every point of contact creates an impression with the customer. What impression? How can you make those points of contact, to the extent they are predictable, into a positive experience that reinforces the customer’s relationship with your brand?
You can’t- unless you identify them and analyze how you can make them better in a coordinated way. The best example I can think of in winter sports is the way some resorts have evaluated, torn apart, and completely reconstructed the process of renting equipment and taking lessons to make it more pleasant for the customer. That’s what I think marketing means now. And obviously it wasn’t done by the marketing department.
Second, your customers may have all this information that makes them less dependent on you, but you know a lot more about them now as well. Who are your best customers? What are they worth to you over a period of time? Why do they identify with your brand? Easy questions for me to ask. Damn hard to answer. See, I warned you at the beginning you would not find THE SOLUTION at the end.
At least some of this information is already available in your existing data bases. But often the various systems aren’t compatible and they haven’t been structured to provide the data you need. If you think the accounting department designed it’s systems to make it easy to extract information on customer behavior, you’re dreaming. But the accounting department has a lot of contact with and information on your customers. Get your hands on it
Use your information to find out why your customers are loyal to you. Or why they aren’t. Take just a bit of the money you’re throwing at advertising and promotion and use it to extract this information where available from your existing data. I’ll bet you do a better job of spending that advertising and promotional budget when you know more about your customer.
We don’t sell products any more. We sell a customer brand experience. Certainly your traditional marketing influences that, but it doesn’t get to the heart of customer motivations. Please stop telling me how “rider influenced” your product line is unless you can prove to me that your best customers have the same motivations as your team riders.
Marketing means something different than it use to. This new marketing may be the only way to create a competitive advantage that lasts longer than twenty minutes.

 

 

Watching the Big Box Selling Process; Thoughts for the Specialty Retailer

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Store One

 
I would guess the girl was 14. She was at this big box sporting goods store with her parents picking out a board, boots and bindings. She didn’t say much and was following her parent’s lead. Their credit card I suppose.
 
It isn’t easy, you know, to hang around through the whole sales process- close enough to hear what’s being said but far enough way so that the sales person doesn’t call security.
 
In this particular case, security should have been called. Not for me but to hold the sales person until the police could show up to arrest her for impersonating somebody who knew something about snowboarding.
 
I didn’t hear any discussion about whether the girl had snowboarded before. I don’t think she had. The first criteria for selecting the board was length, determined by the girl’s height. Her weight was never asked. There was no discussion of flex or where she might be riding and how she was going to learn.
 
The second criteria was color. Blue seemed to be the mother’s preference, so blue snowboards was what the sales person showed them. She seemed to be able to distinguish blue from other colors, so at least she wasn’t color blind.
 
It was at this point I started to get a little antsy. My growing disquiet didn’t decline at all when they started talking about bindings. The mother took the lead on this. Arguably, she was the most knowledgeable one in the group- including the sales person. At least Mom knew what she wanted and why.
 
And the major criteria for selecting a binding was? You guessed it. It had to coordinate with the board. So without a word, the sales person started showing them bindings that looked good with the blue board.
 
Well, that was easy. The parents looked relieved. This was obviously going very well. Their daughter just stood there.
 
Next, the sales person asked, “Are you going to mount these yourself?” Suddenly, the father looked troubled. It was clear where even semi-mechanical duties lay in this family. After an uncomfortable pause, the sales person came to the rescue, if you insist on calling it that, by saying, “We can mount them for you for $10.00. Looking relieved, the father readily agreed.
 
“Which foot do you want forward?” asked the sales person. “Can’t you ride either way?” queried the mom.  “Yes, but most people have a preference,” was the reply.
 
There was an uncomfortable silence. Showing her great knowledge, the sales person said, “Well, most people ride with their left forward, so how about we mount them that way?” That was agreed to, and represented the end of the mounting discussion. No talk of angles or stance width. Granted, the girl probably didn’t know what angle or width she wanted, but the concept that it could make a different might have been mentioned.
 
Now, onto boots. Though I’ve never sold a snowboard in my life to a consumer, I would have started with boots, but what do I know.
 
However, I would not have started with these boots, by which I mean any of the boots in the whole store. Everybody reading this knows the kind of boots I mean. No support, a lousy lining, cheap construction.
 
This is the end of my story. I don’t know what happened with the boots, or if the sale was consummated. Though I’d seen it before, I never react very well in these circumstances. My frustration and stress level goes so far through the roof that I either have to get out of the store, or rush over to the family and beg them to let me help. That’s what I should have done.
 
There were good Oxygen boards there from last season that would have worked. They even had some blue in them. There were some perfectly serviceable bindings, but they didn’t go with blue. Oh well. Boot wise, I would have told them to flee into the night. I don’t think that would have gone over very well with store personnel.
 
I should have jumped into the middle of it. I should have fed them information until I was thrown out of the store. But I chickened out. And though she’ll never see it, I want to apologize to that poor girl who is going to have something less than an ideal experience when she goes to learn to snowboard and to her family, who think they got a good deal but really got something else.
 
Store Two
 
In a second chain retailer, arguably a step up from the first, the couple told the sales kid (who had told me he was a snowboarder) they were looking for a board, boot and binding for their 14 year old daughter who had been snowboarding a couple of years. Something not too expensive. The sales kid’s immediate response was, “Well, these are the setups we have on sale.”
He cued off the “not too expensive,” perhaps assuming if they were in his store, price must be the most important thing. That’s why you’d come into his store, right? Much of the rest of the conversation was in generalities and was driven by the customer. The sales kid responded in generalities to customer assertions like, “We want something that’s kind of medium quality.” “How about this one?” he’d ask, reaching out to pick up a binding.
I left before the conversation ended. The kid was sort of starting to wonder why I was hanging around and watching out of the corner of my eye. I don’t know if he sold anything or not. If he did, I have no reason to believe it was a good fit for their daughter.
 
What I Learned
 
Let’s do a little customer segmentation work here. Look at the admittedly oversimplified grid below.
 
                                                            NOT
KNOWLEDGEABLE           KNOWLEDGEABLE
 
 
PRICE SENSITIVE
 
PRICE INSENSITIVE
 
                                                                                                                                  
 
 
Just to save me some typing, let’s call these “ideal type” customers NKPS, KPS, KNPI, and KPI. NKPS, for example, refers to customers who fit in the box with Not Knowledgeable on top and Price Sensitive on the left.
 
Obviously, most customers don’t fit perfectly in one of these boxes. They are not, for example, knowledgeable or stupid. There are a variety of levels of knowledge and of price sensitivity. Nobody is completely price insensitive. But they give us a way to think about the customer base.
 
The KPIs are the ones that specialty shops tend to own. They will find you, appreciate your product knowledge and know they could buy cheaper somewhere else but not really care. God bless ‘em, I wish there were more.
 
The biggest challenge for the specialty retailer is the NKPS customer. The customers I’ve described above are examples of them. In the first place, they are the least likely to show up in your shop. If they do show up, they are the hardest to convince to buy because they start off knowing the least and have a predilection to spend less anyway. You can spend a lot of time educating them only to have them buy somewhere cheaper.
 
You have the same problem with the KPS types, but at least you can hope to spend less time educating them before they buy somewhere cheap.
 
The NKPI customers are the ones where you can best spend your time and hope to make your knowledge a real competitive advantage.
 
What I suggest is that your sales staff be armed with questions to determine how each customer could generally be characterized. If you’ve done your sales training, they already have most of those questions- they just need to think about the answers in terms of this classification.
 
In the first place, it would be interesting to see how many of your customers fell, more or less, into which category. I also suspect you could provide information, guidance, and help in product selection to the customer more efficiently based on how they were categorized.
 
I think what I might have just said is that you can do a better job of creating value for the customer. It is a matter of faith that the specialty shop competes by “creating value.” What I think that means is providing the most useful information in the most efficient and understandable way. I’m suggesting that this classification of customers might help you do that.
 
I’ve also visited a number of specialty shops and I think I spotted a couple of things that the successful shop does way better than the chain- and a couple they have to do as well. More on them next article.

 

 

Product Line Size; The Impact on the Way We Do Business

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It began, I suppose, a couple of months ago when somebody at Burton sent me their complete catalog, buying book, whatever you want to call it, including prices and terms. Damn near five pounds it weighs according to my handy, dandy bathroom scale including colorful blue binder. It contains all of the Burton Company’s brands and certain product for international distribution that won’t be seen in the States, so sure it’s big.

Ride’s catalog isn’t as big by weight, but it comes with two CDs full of product images and photos.
Well, you get the picture. Big product lines and lots of information to digest. I wouldn’t be surprised if there were more products to choose among than when there were 250 snowboard companies.
Big product lines aren’t new, and at least for the larger brands, no retailer buys everything the brand offers. But what struck me like a blinding bolt of the probably obvious is how much the business of snowboarding has had to change just because the product lines have become so large. Over the last eight or ten years in snowboarding we’ve studied changing competitive conditions, discussed diversification as a way of overcoming seasonality, the impact of foreign production, the role of chains, and “fixing” the buy sell cycle. I’ve been in the middle of some of those conversations.
Imagine my chagrin when I considered the possibility that a simple thing like the increased size of product lines may have been as or more important to industry evolution than the other apparently more important and more complex business factors we’ve taken so much time and energy to discuss and try to manage.
There is the chicken/egg factor to consider. I’m arguing that certain industry changes happened because of the increased size of product lines. You might also argue that product line increases were largely a response to the other changes mentioned above. I’ve previously suggested that to some extent increases in the size of product lines were a response to what competitors were doing rather than an attempt to meet identified customer needs. To the extent that is true, I am comfortable suggesting that large product lines have changed the way the industry functions.
Where are these changes? In general, the process of getting a specific order takes more preparation, a more cooperative and business oriented relationship between the company’s rep and the retailer, and more time if only because there are more factors to consider. Specifically, the role of trade shows, the selling process, and the reps function and relationship with the shop are all different. Let’s see how.
Trade Shows
How long, exactly, do you think it would take one of the major brands to present its whole product line to a retailer? Three hours? A day? After that presentation, assuming you can still hold your head up, how much do you think you’d remember? How long would it take to figure out your order and get it written? No retailer should be allowed into a product presentation meeting without first chugging two Red Bulls and presenting a notarized affidavit that they got a good night’s sleep.
For many brands it’s difficult at best (Impossible for most brands in my opinion) to show what they need to show to all the retailers they need to show it to, at Vegas alone. Mervin Sales Manager Greg Hughes says that the SIA show has become more important for them because it’s a preview show. “But we have a hard time showing all our product to all the retailers who want to see it at the show, and we’re smaller than a lot of other guys.”
If you think about the sheer time commitment, and logistics of getting an order together from a major brand it’s pretty clear why SIA adopted the “See it, try it, buy it” approach for the buy sell cycle and why Vegas is more “See it” than “Buy it.” If you do complete your buy there, it’s likely that a lot of preparation went into it before the show.
Burton National Sales Manager Clark Grundlach says Vegas is not about writing orders any more. “It’s an opportunity for dealers to review previous decisions and maybe see some late stuff. Sixty percent of our dealers will have seen the line before Vegas. We can’t show the line any other way given its size. The six weeks between Vegas and when everything has to be wrapped up just isn’t enough time.”
Clark didn’t say, but I’ll bet sixty percent of dealers means north of eighty percent of total sales.
The regional shows seem to be either more or less important, depending on who you are. For Burton, with eighteen territories and its own showrooms, the regional shows are a good place to sell accessories and to see some smaller dealers who didn’t get to Vegas. According to Mervin’s Hughes, on the other hand, “Mervin gets a lot of solid orders at the regionals. We can show our whole line there.”
Rossignol Marketing Manager Christine McConnell sees it a lot like Hughes. “They see it in Vegas, and buy it at the regional shows,” she says, but notes that around forty percent of accounts have seen at least some product before Vegas.
Selling Process
Remember the days when your whole product line (nine decks, one binding and some ts and hats) fit on a trifold? Assuming the retailer had decided to carry your brand, you could show the line and get the order in about twenty minutes. Then you both just had to pray the stuff actually showed up somewhere near when promised and that the quality wasn’t too bad. Some of you are smiling as you read that, remembering a very different snowboard industry. Some of you (your loss I’d say) don’t know what I’m talking about. God, it was more fun then.
Sales meetings tend to be in early to mid December now. Especially with soft goods, which typically have to be delivered before hard goods, an early start and on time delivery is more critical than ever. Limited showing of product lines seems to take place in December. According to Rossignol’s McConnell, smaller retailers have their hands full trying to sell everybody’s current product. “The reps have their samples in December and are ready to go, but don’t really start showing product until January. They don’t want to get in the retailer’s way.”
For chains and large accounts, where the selling and buying isn’t done by the same person, I suppose you can do a December presentation without disrupting the selling process. Still, if I were a retailer, big or small, I’d like to know what my sell through was like before I talked about new buys. And that doesn’t happen until the holidays are over, at least in hard goods.
Role of the Rep
More and more, it seems to be the rep’s role to consult with and recommend to shops what product they should carry. Armed with a lot more detailed information then they use to have on last year’s purchases, sell through and the retailer, they can and often do propose a buy for the customer that fits their size, open to buy dollars, and customers.
Mervin’s Hughes put it this way. “Good reps suggest what to buy. They know the shop, and they know what’s going to be highlighted in ads and videos, and that drives sales.”
In hard goods, I suspect retailers, especially smaller ones, are inclined to listen to a well-prepared rep. These days, all hard goods are highly functional. Brand choices are a lot fewer than they use to be, and brand switching, as a result, less common. Hell, what are you going to switch to that’s going to make any difference?
A decline in product differentiation from brand to brand means the reps can be an important competitive tool in placing product with a retailer. The quality of the business relationship between the rep and the shop buyer may have a lot to do with the brand’s success in the shop. Rossignol’s McConnell puts it succinctly: “Between the rep and buyer, they know what’s up in the shop. Their combined efforts go a long way towards insuring the right purchasing strategy.”
This relationship helps the process of getting the order together. There should be broad, early agreement on what parts of a large line are or are not appropriate for a given retailer. In some cases, the brand simply isn’t prepared to sell certain product to a retailer. The retailer’s size and open to buy for the brand may also dictate where to focus the buy in a product line they can’t possibly carry all of.
Finally, the rate of change in snowboard product simply isn’t as great as it use to be, and that takes some of the angst out of trying to pick the “right” product and reduces the difficulty of working through a huge line. Inertia can be seductive, though dangerous.
I suppose the possible downside for the brand comes at the end of the season if the rep recommended product didn’t sell through which, at the end of the day, is what it’s all about. “Hey, your rep told me to buy this stuff, which is still sitting here, and you’re pushing me to pay this bill?! Back off.” I’ll bet that conversation is the basis for a deal or two in the annual snowboard industry rite of spring- settling accounts.

 

 

Resort Retention and Occam’s Razor; Keeping it simple makes a lot of sense.

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William of Occam was a Fourteenth century logician and Franciscan friar born in the English village of Ockham and, yes, somehow I’m going to get this back to snowboarding without claiming that he invented the first one. He’s the author of what’s become known as Occam’s Razor. It states, in its original form, “Entities should not be multiplied unnecessarily.” It’s been massaged and interpreted to mean that when you have multiple possible solutions to a problem, then, all things being equal, the simplest one is usually the correct one.

All things never seem to be equal. Still, I thought about Occam’s Razor at the National Ski Areas Association in New Orleans this spring. Mike Barry, NSAA’s president, was beating the drum for the group’s growth model, and talking about the issue and importance of retention. It shouldn’t come as a surprise to anybody reading this that one of the long term problems of the
winter-sports industry is that only about one of ten people who try snowboarding, or skiing for that matter, stick with it.
As consumers, maybe we can say that’s fine with us—the fewer people on the slopes, the better we like it. Of course, we also like fast lifts, lots of choices, and great amenities. And at a cheap price, too. But those things cost money, and the only way resorts can afford them is if enough people show up to cover the costs and leave at least a little profit.
If the retention rate doesn’t improve, the rate of snowboarding growth declines, and aging baby boomers drop out of skiing, then we could see a decline in snow-sliding participation that’ll leave the winter resort business in a world of hurt. That could leave us all with a lot fewer, more expensive choices. Taking a cue from Mr. Occam, isn’t there a simple way to improve retention?
Complexity
Studies have been done. Models created. Rental programs revised. Snow-sliding lessons revamped. Instructors reeducated. The competition analyzed. Lots of money has been spent. Some of it has been our money. Well, actually maybe most of it has been our money—the winter-sports industry’s that is.
This is, I guess, all good stuff. Certainly the problem’s urgent enough to require and justify some of our attention and treasure. And I even have a sense, though I couldn’t prove it, that we might be making some progress.  Buried, or at least obscured, under all this noble activity is something we all know and accept without question. It’s that the upsurge of skiing in the 70s and snowboarding in the early 90s was driven by people who started young, got hooked, and stayed passionate about the sport. Especially in the 70s they
somehow managed to have a good time without a lot of five-star restaurants, quad lifts, on-snow condos and, from our perspective at least, good equipment.
Snowboarders, generally a younger group than skiers, are still a bit like those skiers from the 70s. They just want to be there and are willing to put up with some inconvenience if necessary to get on the mountain. No doubt that tendency will decline with age—there’s something to the phrase “youthful enthusiasm.” But it seems clear that, at its simplest, what we (you, me, and
the resorts, too) have to do is get them young and create a habit. How?
Simplicity
Sometime during my stay in New Orleans, I had occasion to hear Mike Shirley, the Chief Executive Officer of Bogus Basin, talk about his resort and to talk with him. Bogus, I learned later, is a community resort—a 501C4 corporation that doesn’t pay income taxes. There are no investors or stockholders and this, according to Shirley, lets them think long term.
I didn’t know all that in New Orleans. What had caught my attention was Shirley’s mentioning of Bogus Basin’s season pass program where any kid aged seven through eleven can get a season pass for 29 dollars.
Okay, I heard that. Then I waited for more explanation. There wasn’t any. My MBA-scarred mind, accustomed to sophisticated business models and complex financial strategies, froze. Could something this simple really be an affective approach to the problem of retention? And, equally important, how the hell was I going to write a Market Watch analyzing the idea when there wasn’t anything to analyze?
This was weighing heavily on my mind a couple of months after the convention when I finally called Shirley to try and get enough information for the article. He took pity on me and gave me something to work with. It seems that Bogus, like other resorts, used to have a complicated and arcane method of pricing lift tickets and season passes. Then in the spring of 1998, they chucked it all and went with a 198-dollar season pass and the 29-dollar pass for kids seven through eleven.
The idea of a cheap kid’s pass wasn’t new. Colorado was already giving free passes to all fifth graders. Bogus now sells around 30,000 season passes a year of which around 5,000 are the kid passes. Shirley thinks the purchase of the kid passes is often associated with the purchase of other season passes, but there’s no requirement for that.
What’s the short-term financial impact of the 29-dollar kid pass? Shirley sees it as not costing money, but of course you can’t know that unless you know what the actions of the pass purchasers (and their parents) would’ve been if they hadn’t bought the passes. What we can say is that the incremental cost to the resort of putting another butt in a lift seat is more or less nothing. To really evaluate the financial impact, we’d have to be able to answer the following questions:
  1. If these kids hadn’t bought 29-dollar passes, would they’ve bought the199-dollar pass or a bunch of lift tickets?
  1. What would their parent’s behavior have been if the 29-dollar passesweren’t available?
  1. Did they spend more days on the mountain and, as a result, spend more money on things besides lift tickets then they would’ve otherwise?
Shirley can’t offer specific answers to these questions. But he did tell me Bogus Basin is full of kids, and their visit numbers have doubled in the last five years. I don’t have any information on what the resort’s overall
financial performance is. Obviously, if they’d gone from making to losing money over the last five years, the strategy would be less attractive.  “It’s so easy to convert these kids,” Shirley says. “We’re creating a lifelong habit without them even thinking about it.”
Return On Investment
Neither Shirley nor I, unless we know the answer to the three questions above, can tell what Bogus’ cost is for this program. From a cash point of view, it’s probably close to nothing, though there may be an opportunity cost as described above. Conceivably, it’s cash positive, but we can’t really tell. I’d go one step further and point out that by simplifying its pricing structure, Bogus has actually cut some administrative expenses, and that savings has to be included in any cost calculation. I don’t know if Shirley has measured that or not.
Looking down the road, the return on investment has to be huge if only because the cost is apparently so small. We can’t conclude that Bogus has doubled its visits in five years only because of this program, but it’s hard not to believe it’s worth the cost, if there is any cost. The NSAA study emphasized how valuable, in terms of dollars spent, a snow slider who started young was compared to one who started as an adult. Bogus’ 29-dollar kid pass is consistent with that thinking.
There’s another value to creating committed snow sliders early that I don’t think I’ve ever heard anybody talk about. If resorts have customers who are going to get there no matter what, come more often, and stay longer, they are going to be cheaper to get. And easier to keep. That has a favorable impact on your cost structure from top to bottom. Think of the competitive implications. Suddenly, you’re only competing with other winter resorts—not with Disneyland, cruise lines, and Arizona golf packages. Your committed snow slider has already decided they are coming to a winter resort.
I’m not prepared to proclaim such programs as the retention solution. But it’s simple, apparently cost effective, and consistent with what we all think creates committed snow sliders. I hope more resorts consider it, or other equally simple ideas.

 

Trade Shows Again, Kind of

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Following Vegas, in the last issue for the season of TransWorld Snowboarding Business, I wrote about trade shows and the issues we have with them. To make a long article short, I basically said, “We’re screwed!”

Lot of people agreed with that, which was hardly a surprise. But I was bothered all spring and into early summer because that didn’t seem like a very productive approach to the problem.
 
Since I wrote that, I’ve been to the Snowboard Industry Conference in Alaska, The Surf Industry Conference in Cabo, and the National Ski Areas Association Conference in New Orleans. Tough job I’ve got. I’d go to the Skateboard Industry Conference if they’d just have one. Well, at least if they had it somewhere nice.
 
The surfers are worried about skateboarding taking their soft goods market. The skateboarders are worried about Chinese skateboards. The winter resorts are worried about retention of people who try snow sliding. The snowboard industry is worried about turning into the ski industry (too late?) Everybody is worried about sales in the aftermath of a (minor) recession.
 
Everybody’s worried.
 
Now’s my chance to say to the snowboard industry what I’ve already said, either in a speech or in print, to the surf, skate, and resort industries. Don’t worry; I will manage to bring it back to the trade show issue. Basically, I’m going to suggest that somebody make not going to one or more trade shows a benchmark of their marketing program and a way to differentiate their brand within the industry. More on that latter.
 
The Speech
 
Here’s what I’ve said to everybody who would listen.
 
Business is a risk. It’s a risk whether you sit on your butt and do nothing or go out and try some new things. If you do nothing new, you may get clobbered anyway.   We all know the list of brands that were around and now aren’t. Try some new things and some of them probably won’t work. But some of them will work, you’ll learn something when you fail, people will notice and you’ll be in control of your own fate instead of waiting to react to what others do.
 
In the final analysis, doing nothing and trying some new things may be equally risky- it’s just that new things tend to make us uncomfortable and therefore seem riskier.
 
I’d argue that new things aren’t riskier- as long as they are based on a careful analysis of your market and customers and are consistent with clearly specified goals. In fact, with that kind of planning as a basis for your actions, I’d expect them not to even be perceived as riskier, but as just the right thing to do.
 
Okay, end of speech. Now I’ve got to tie that rambling soliloquy (but at least a strategic rambling) back to trade shows
 
Why We Go To Vegas
 
Obviously, to see friends, drink beer and party. Uhhhh, maybe I better start again, though it’s interesting that that’s the first thing that came into my mind. I think I’m supposed to be finding new consulting clients there or something.
 
But if you sell snowboard products, you’re in Vegas to sell those products, see what the competition is doing, spot trends and meet with reps and distributors. And it’s possible you might see friends, drink beer and party a little too.
 
Those are all valid reasons to be there as an exhibitor.
 
At an even more fundamental level, however, we’re there because everybody else is! There’s concern that competitors will take business if we aren’t exhibiting right next to them. There’s worry about the inevitable rumors that will start about why we aren’t there- obviously, we must be out of business or damn close to it.
 
So we do what everybody expects us to do and what we’ve always done. We book our space at Vegas and other shows and spend a lot of money getting and being there.   It’s not exactly doing nothing, but it’s reactive as hell and it’s certainly not perceived as being risky.
 
Except, of course, that business is a risk whether, as I noted above, you do nothing or you do something. Doing what everybody else does seems closer to doing nothing than doing something.
 
Maybe that was okay when times were better, and trade shows not quite so pervasive. Now, growth and profits are hard to come by, but we keep doing the same thing in the same way, selling the same products that are an awful lot the same as the other guy’s products. Now that’s a risk.
 
New Trade Show Strategy
 
This isn’t a strategy for the industry. It’s possibly a strategy for one or two brands. I’ve already informally suggested it to a couple of people. I’ll be interested to see if anybody actually tries it.
 
Start by asking yourself where you actually write your orders. Do the reps write orders at shop visits? From regional shows? From separate presentations you do for major accounts or buying groups? At the major shows like Vegas and ISPO? Next, ask if where you write the order is where you actually made the sale. Or was the sale made due to an existing relationship or because of the success of your sales and marketing programs over the past year?
 
What’s the real relationship between making the sale and writing the order? If you weren’t at show X, and had let everybody know months and months in advance that you weren’t going to be there, how much business do you really think it would cost you? I’ve had brands tell me they didn’t actually sell anything at the show and that “All their business was done before they got there.” I wonder if they meant it.
 
As a next step, figure out just how much it costs you to go to trade shows. The hard costs are easy. We’ve all got this huge number under “trade show expense” on our income statement. But that’s not the whole number. You’ve also got to think about the management and employee time involved. What could all those people be doing if they didn’t spend all that time preparing for and being at a trade show?
 
Now, remember that business you thought you’d lose if you didn’t go to show X? How does your profit on that compare to the cost of going to the show? But of course we’ve got to be more specific than that.
 
Talk to a bunch of accounts- especially, where you can identify them- those you think have to see you at the show. Could they see you at a different show? Ask them right now- months and months before the show- if they would buy from you if you weren’t at the show and used the money you saved to promote the brand. Or give them POPs, or a better discount, or whatever.
 
Maybe the resounding answer is, “You’ve got to be at that show.” I guess that would be the end of this new trade show strategy. Still, even if that happened, you would have had another contact with important customers, solicited their opinion, learned something and have tried something new- even if this one didn’t work.
 
My guess is that if you approach them in a positive and thoughtful way, you’ll be a positive response in many cases. Get them to acknowledge that the trade show schedule is kind of tough on everybody. Suggest you’d like to work with them to make it easier on everybody. Tell them your plan and see what they think.
 
And if they agree, haven’t you just made a sale? I know it’s never for sure until that elusive paper shows up, but you’ve gotten a customer to agree to work with you to address an issue of mutual concern. Might be the easiest sale you ever made for the best reason you ever made one. Okay, you’re taking a risk. But you’ve also just changed the nature and level of the conversation with your customer. Instead of “Buy our snowboard stuff because we’re cooler” (or have known you longer, have better graphics, are dependable, have a better team, or whatever), you’re saying, “Let’s do something to address an issue of mutual concern that can help us both out.”
 
Pretty good way to create some excitement and brand differentiation it seems to me.
 
This isn’t a strategy you can just adopt a little. A decision to do it means that you announce it immediately. There are phone calls, visits, emails to all your retailers. Explain how you are going to use the money you save. Get your reps together and get them on board. Their job and schedule will change some.
 
To be honest, if I were running a snowboard company again, I don’t know if I’d have the nerve to this. I’m suggesting you try and change, at least for your company, the way the industry does business. But my gut is that that’s all the more reason to do it. Meaningful changes that fundamentally impacts the way business is done typically seem weird and impossible when first suggested.
 
Is it a risky? You bet. But less so if you plan and execute it well. And we’ve all more or less agreed that the present trade show situation is unworkable. Reducing booth size, sending fewer people, staying in cheaper hotels are all tactical responses that leave the situation more or less the same. That’s risky.
 
Don’t just react. Be in control.

 

 

Product Selection and Merchandising: The Blackjack Analogy

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I guess this is a little incestuous, but the idea for this column came from reading Sharon Harrison’s “Ten Shops, One Question” in the June issue of this prestigious rag. The question was “What type of bearings are skaters in your shop buying?”

 
What struck me was how each retailer had similar, but different answers. It made me think about how they selected and presented skate products in their shops. If you read between the lines of that article, there were, I thought, some lessons and ideas that could be generalized for decks, shoes, wheels, trucks and clothing as well as bearings.
 
What They Said
 
“It’s the brand.” It’s the price” (low or high). “It’s the packaging.” “It’s the ABEC rating.” “It’s our service and reputation.”
 
Obviously, there are some customers who want the lowest price. Period. Some just want the cool package. For quite a few, it’s the brand that dominates the purchase decision. 
 
But there’s a lot of ambiguity, and purchasers often fall within those extremes. They’d like a certain brand, as long as it’s not too expensive. They want to keep the package, so they’ll pay a bit more. They got to have what their friends’ have- unless you’re out of that in which case you can probably transition them to another product.
 
About a hundred years ago, in the first marketing book I ever read, a guy named Kotler introduced me to the concept of the four Ps in marketing; product, price, place, promotion. In traditional marketing at least, they are the cornerstone of how you sell any product. And you’ll notice they correspond pretty well to what retailers said motivates buyers of skateboard bearings.
 
I never miss an opportunity to remind us all, including me, that we may all love skateboarding, but from a business perspective it’s, well, just business. At its core, the process of choosing, pricing, merchandising and selling the product is the same as in every other business. Enthusiasm and commitment is part of business success, but so is realism and objectivity. We can’t just believe what we would like to be true.
 
But I digress. I know (hope?) there was a point I was trying to make. Maybe if I keep writing it will come back to me.
 
Ambiguity- How To Utilize and Minimize It
 
There’s good news and there’s bad news. There always is. On the one hand, you know your customers’ basic motivations. You understand in a general sense why they buy what they buy. On the other hand, for the individual customer, those motivations are often pliable depending on the choices presented to them at a given moment. If you understand your customer you can help them make good choices. I almost used the word “manipulate,” but that has a nasty connotation to it. I’m suggesting you can support the customer in making decisions that are good for him and for you. That’s not a bad definition of successful retailing.
 
Casinos love people who play blackjack but know nothing about the odds. They make a whole lot of money from that kind of person. That’s why they give you free drinks. They also like, though not as well, the person who is sophisticated enough to more or less play the so-called “neutral strategy.” The casino will consistently win around one and a half percent from that person.
 
They hate the card counter. She will minimize her risk and make big bets at the right time and, over the long run, take money from the casino. She won’t win all the time. She may not even win half of the time. But when she does win, it will tend to be big, and that can make up for a lot of small losses. She doesn’t have perfect information. But she has the best information she can get and uses it to control how she plays. That’s not a bad strategy in the stock market either.
 
I want to suggest you can use a similar strategy in skate retailing.
 
The ambiguity of customer motivations isn’t a hell of a lot different from the ambiguity of how the cards will come out in blackjack- even when you’re counting. A single blackjack hand is a statistical, probabilistic result. A single customer’s decision is not. But a lot of customer decisions, taken as a group, are.
 
Goals
 
What’s the goal of blackjack? Easy- to make money. Right? I can’t argue with that, but I’d point out that setting a goal of making money doesn’t tell you what to do or how to go about it. If you set a goal of making your bets according to the count of the cards, you will make money in blackjack.
 
In retailing, the goal of making money suffers from the same shortcoming- it doesn’t tell you what to do. Every time I look at a retail situation, I end up suggesting a focus on the same two goals:
 
1.    Get the customer to come back.
 
2.    Maximize your gross profit dollars.
 
By doing these two things, you maximize your chance of making money.   
 
Gross Profit Dollars
 
Where do your earn the most gross profit dollars by percentage and total dollars by product category and by brand? Do you communicate that to everybody who works in your shop? Do you make your purchasing decisions with that information in your hand?
 
Yeah, yeah, I know- “Well, we make most of our money on shoes and clothing.” That is not an acceptable answer. Neither is:
 
  • “Hey, I’ve been in this business a long time and have a good gut for it.”
  • “We just buy what the customer wants.”
  • “We don’t have the system to track that.”
  • Etc., etc., etc.
 
That’s all a bunch of fatuous blather and if you’re taking anything other than a quantitatively rigorous approach to figuring out where you make your gross margin dollars, you’re no different from the guy who sits down at the blackjack table in Vegas with no knowledge of the odds, has five drinks and bets in the dark. You may have fun, but it’s not likely to last for long.
 
Getting Customers Back
 
I don’t get into enough shops, but I have never gone into one and gotten a good answer to, “What factors are most important to your customers in making their buying decisions?” Everybody names all the same factors, but nobody can rank or quantify them in a valid way. What I’m always hoping for is “Well, we don’t talk to every customer, of course, but the data base of responses we’ve kept tells us that 32% come in here because they know us and we’re conveniently located. 27% know us as a shop that has the brands they want and the rest are guys trying to pick up the cute girl we’ve got on the floor.”
 
Why haven’t I ever gotten an answer like that? Because nobody asks their customers in a systematic way and tracks the answers. The more customers you ask the more valid the responses become. To go back to the blackjack analogy one more time, it’s a lot like a card counter that doesn’t keep track of how many ten value cards are left in the deck. He has no idea how big a bet to place or when to place it.
 
Now we’re getting somewhere. It’s always nice when I’m writing one of these and that finally starts to happen. There you are sitting with concise information about where you get your gross margin dollars, and some solid insights into your customer’s motivations. What might you do with that information?
 
First, recognize that there’s some inevitable conflict between giving your customers what they want and maximizing your gross profit dollars, especially where there’s a lot of price sensitivity. Welcome to specialty retail, where your success as a shop will depend on your ability to position yourself and the brands you carry so that customers don’t just focus on price. 
 
Perhaps you’ll move some product around to highlight high margin, fast moving products. Are there brands being asked for you aren’t carrying? When you’ve been out of, say, a specific deck, has the customer bought something another one and does that tell you anything about how many brands you really need to carry? If you do a lose some sales because you don’t carry as many brands, but sell some higher margin stuff instead, are you better or worse off? Maybe you should forget all this and just hire more cute sales girls.
 
Let me share a little secret with you. What I’ve been trying to do with recent article is to help shop owners prepare themselves for a recession if it happens. Last issue, I think, I suggested a few steps you might take to prepare yourself for a slowdown that made good business sense even if one doesn’t happen. This article has a couple of more. As I write this, the Federal Reserve has come out with its “beige book-“ a regional anecdotal survey of economic conditions. Manufacturing is still suffering, but the gloom is spreading to other sectors. Consumer spending is looking like it might falter and the stock market shows no signs of reviving.
 
Nothing I’m suggesting is a bad idea even if skateboarding continues to boom. Try it- you’ll like it.

 

 

“I Don’t Think We’re In Kansas Anymore, Dorothy.” Skate Retailers in the Lifestyle Market

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Let me start by telling you, in no particular order, some things you already know.

 
1)            Margins on hard goods suck, but carrying them draws customers in and legitimizes you as a skate retailer.
2)            Truth be known, hard goods from different brands are pretty much the same. You may have some brand loyalties, but you’ll buy what your customers wants. 
3)            You make most of your money in higher margin footwear, apparel and accessories.
4)            You’re a “lifestyle” business. Most of you don’t sell just to skaters, but to people who want to be part of the culture.
5)            Your hard goods go beyond skate. Maybe you also sell snowboards, maybe some other stuff.
6)            A lot of your soft goods aren’t skate specific. They come from brands that are focused on the actions sports lifestyle- not just on skateboarding.
7)            With so many brands (hard and soft goods) and so little real product differentiation, price, terms, service and support from the brand plays a larger role in your product selection.
 
First, the usual caveat. Not all of the items on the list apply equally to all shops and obviously where they do apply, they apply to different degrees.
 
Look at each item on the list again and think about how each was different a few years ago. How has your customer base changed? Margins? What was the importance of footwear compared to now?
 
They say a frog will jump out of a pot of boiling water, but will boil to death if you put him in cool water and raise the temperature gradually.   All these changes have happened gradually. Sitting here, writing this, I’m struck with just how dramatic the changes are for retailers. Looks like I’ve got something good to write about this month after all. What a relief! I was kind of worried when I started this.
 
As we’re all smarter than the average frog, we should have noticed the changing temperature and clambered out of the pot before the water temperature climbed past that of a comfortable hot tub. Still, it’s been my experience that when you’ve got a business to run, the seemingly easiest thing to do is see if you can stand a couple of more degrees.
 
Let’s look at the implications of these “things we all know” and see how running a shop may have changed as a result.
 
Margins and Profitability
 
My educated guess is that soft goods and apparel account for north of 60% of sales in many shops, and a lot more of the total gross profit. You cannot succeed financially if you try and rely on hard goods sales for your turnover. It’s not possible to sell enough to have adequate gross margin dollars to pay the bills.  
 
Points one and three from the list suggest some obvious changes that have largely already occurred in response to the financial facts of life. Carry the hard goods you have to carry, but leave the most space, and the best space, you can for the higher margin footwear and apparel. Maybe it makes sense to use hard goods in displays to establish the credibility of the store. What I’ve seen happen is that thoughtful stores tend to put the decks and other hard goods towards the back of the store, making customers move through the apparel and footwear on their way to them. I don’t know this statistically, but my expectation is that skate decks are a planned, purposeful purchase. Soft good purchases can be more spontaneous. If that’s the case, then the location of hard goods isn’t a consideration in people getting to them and buying them. Might as well use that location to encourage other purchases.
 
Customer Base
 
The message from points four and six is that your customer base is probably larger and broader, and you can appeal to a much bigger group of people. I am not suggesting you can be all things to all people. You still have to know who your customer is and is not. But the days when all your customers are core skaters are gone for many shops. And if you do it right, having new customers won’t alienate the old ones.
 
In some ways, of course, life was easier when the definition of the customer of a skate shop was most likely to be somebody who skated. Appealing to a broader customer group while maintaining the edginess and legitimacy that made you successful in the first place isn’t an easy thing to do. I’ve got two suggestions.
 
First, if there’s one piece of market research you should be doing, it’s to ask each customer (when it isn’t obvious one way or another) if they skate. If you were willing to go one step further, you could mark your copy of their receipt (when they purchase something) with the answer to the question. Based on a few simple calculations involving adding up sales and calculating gross margins, you could make a good start on learning where you’re earning your money, and how your customer base has or is changing.
 
Second, in your product selection and merchandising, move towards the mainstream cautiously. But move. That’s where skating is going and seems likely to keep going. Whether we like it or not.
 
Well, it’s always great to sit here and be able to spew forth some fatuous blather like “move towards the mainstream cautiously,” sound like I know what I’m talking about and then move on. Let me try and say a few useful things on just what that means.
 
It means that the process of selecting the brands you carry, and how deep you go with each, is more complicated. You aren’t going to carry all the shoe, apparel, deck, truck and wheel brands there are. Nobody has a store that big.   It’s complicated because there are more to choose from and you have to select brands that appeal to a broader customer base, but maintain your credentials as a skate shop.
 
It means, if you want to take advantage of the broader market, that you may need more square feet, or at least creative ways to display more product.
 
It means changing your product planning and purchasing habits. Decks, trucks, and wheels can typically be gotten pretty quickly. Skate shoes and apparel have an order/production/delivery cycle that’s a lot longer. You either have to take an inventory risk, or accept the chance that you may run out, not be able to get more, and lose sales.
 
It means recognizing, like it says in point two in the list, that there are few meaningful differences among products of equal quality- either soft or hard goods- and that the differences are mostly created by advertising and promotion (teams are just one method of promotion). This has tremendous implications for how you select and work with brands.
 
Brand Selection
 
These days, most brands produce quality products. The differences the consumer perceives are largely marketing driven. If, as I’ve suggested, your customers are more mainstream and more diverse, your product offering has to be too. But you are limited in the number of brands you can carry in each product line and in the number of sizes and styles you can carry of each brand. At the end of the day, like buying stocks in the stock market, you’re going to have made some good choices and some bad ones.
 
To carry the stock market analogy one step further, there’s really no effective way for you to evaluate all possible brand purchases and combinations of purchases for your store and to select “the best.” While you can, by careful study and based on past history, make selections that are more likely to be successful, there are no guarantees. As in the stock market, you want to purchase quality brands for your shop at good prices. Most of your portfolio, as a stock market investor or a buyer in a skate shop, should be in known, quality companies.
 
New brands, like the stocks of Internet companies, aren’t likely to make you rich any longer. You are better off with a portfolio of consistent, if not spectacular winners which, if they won’t make you rich overnight, won’t leave you in debtor’s prison either.
 
These are the brands your more mainstream customers are going to want anyway. They are the ones who can afford the ongoing advertising and promotion to differentiate themselves. As a group, they are the brands the customers usually ask for and, with a few obvious exceptions, if you didn’t or couldn’t carry one of them your shop could probably get by with another.
 
The result, as it says in the list, is that pricing, terms and service move up the list in importance as you consider which brands to carry.   
 
Next Step
 
By necessity, I’ve had to discuss these issues in general terms. To bring the discussion around to your specific situation, begin with the seven items listed at the beginning of the article. Maybe add one you think I’ve missed and throw one out if you don’t think it applies to you.
 
Next to each point, write down the situation as it existed with regards to that particular issue, say, three years ago in your shop. Where have the biggest changes happened for you? How, specifically, have you modified the way you do business in response? Where is it obvious you need to change and haven’t?
 
We all know how much retailing has changed. Take a little time and evaluate how you’ve responded to those changes.

 

 

Using Consumer Data for Marketing Decisions; “Yeah, We Ought to do More of That.”

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It’s a bad idea to write something requiring you to talk to the marketing people at snowboard companies during the selling/tradeshow season. But the topic is a critical one. Most companies in this industry don’t do a good a job collecting and utilizing consumer information as they should. They understand that success in a tough market requires it, but don’t do it in a systematic way.   Why?

What are the barriers to doing it? Why is it important? What are some of the possible benefits in the snowboard industry? Let’s find out.

Why Do It?

Slower growth, margin pressures, a difficulty differentiating between product lines, and the resulting need for higher advertising and promotion budgets means it’s harder to make money in the snowboard b. Knowing your consumer keeps you focused and helps you run your business efficiently.
 
Think about the demographics. The average snowboarder is getting older. The female market, at least in soft goods, is taking off. Your distribution has changed and expanded. A growing percentage of young people are non-white. The SIA Customer Retention Survey shows that only ten percent of people who try snowboarding go back for a second shot- just like in the ski industry. 
 
 Are your customers the same they were three years ago? How do you know?    Has their motivation for buying and participating changed? How?
 
“Danger Will Robinson!” These are fundamental strategic issues that will affect everything about how you run your business. How can you even begin to make good tactical decisions unless you know your customer? What decisions might you make differently, and what would the benefit be?
 Dennis Jenson at Burton discovered through the brand’s consumer demographic data that more snowboarders were mountain biking. That research made him look at Burton’s advertising mix and think about what part mountain biking magazines should play. If a company stops advertising where it isn’t reaching its target customers and started advertising where it does, it saves money and reaches more buyers. That kind of focus is critical in this competitive environment.
   
  When you internalize the knowledge of who your customer is in your organization, you create a focus and a decision-making filter that
improves and simplifies much of your decision-making. For example, it should be easier to form a consensus on which retailers you should be in or not be in Around the turn of the twentieth century some mogul said, "I know half my advertising budget is wasted-I just don’t know which half." Knowing whom your customer is not only positions you to sell better-it saves you money.
 
But this isn’t just about your advertising and promotion budget. It’s about how you make decisions on product line breadth, pricing, staffing. To use an obvious example, how many race boards do you need in your product line when you sell very few? Are the people designing your graphics representative of your customer?    
Arbor Snowboards knows who their consumer is. It’s the older snowboarder. They figured that out before they started the company. They have never wavered from it. It’s the focus of the decisions they make every day.
That focus probably helps to explain why Arbor could start a new snowboard brand at the height of the consolidation and still survive. In
fact, while it’s a smaller brand, Arbor has continued to grow. "We’re focusing on who our customers are-not what our competitors are doing," says Carlson. "We’ve done that since the day we started the company."  Focus on the customer seems to be something of a mantra at Arbor. As they found out, the need for survival is a good reason to make sure you know who your customer is and what they want.
 
Standard Industry Practices
The marketing people I reached were generally consistent in their descriptions of how they collected consumer information and what they did-or didn’t do-with it. Here’s what I heard. Bare in mind that this is an amalgamation of what a "typical" company does. Some do it better, and some do it worse.
Companies check out some of the industry studies available (for example from SIA or BoardTrac). The information isn’t always brand specific. They tend to have looked at, or are at least aware of, general demographic data and trends.
They collect information from consumers who are interested in their products from warranty return cards, and from internet and telephone catalog requests. Consumer or retailer focus groups are pretty common and they seek out the opinions of their team riders-especially in product development. They further rely on the usual anecdotal evidence and their own experience as snowboarders.
In most cases, the information collected from consumers is limited to name, address, phone number, and age. In other instances, such as on warranty cards or on some internet surveys, different questions are asked.
 
The process of deciding what information to gather seems to be a little informal. That is, there isn’t typically a process by which questions relevant to the company’s strategy are discussed and selected. It’s more like the guy designing the warranty card has room for another question and asks the sales manager what they should ask.
Once the data is collected, most companies don’t think they make the effort they should to systematize and utilize it. It’s a lot of work to
create and maintain a database. So, the typical company collects some data, but doesn’t put all that much thought into what data they should collect, or what the goal is in collecting it. It isn’t collected consistently. Once collected, it’s often not analyzed or even systemized. Completed warranty cards can gather dust in a desk drawer.
I don’t think that snowboard companies are worse than companies in other industries of similar size in collecting and utilizing consumer information. But we could sure be better.

Why is This So Hard?

Given the almost universal consensus that market research is a good idea, why hasn’t it happened more? I can think of five reasons in
snowboarding.
First, in spite of the consolidation, snowboarding is still an industry with a lot of snowboarders in management positions. We believe-and correctly I think-that we’re pretty close to our customers and see that as a substitute for market data. But we’re all getting older. Our continued ability to be close to the market has to become more of a concern.
Second, collecting and utilizing consumer data is a pain in the ass. It takes a lot of time and costs money. When you’re done, you may have more questions than you started with. The costs are always hard costs that you see on the expense side of the income statement. The benefits are more touchy feely, and don’t show up immediately unlike the invoice for the data collection and computers to analyze it in.
Third, we’re a small industry, and, until recently, the costs may not have been seen as justifiable given the potential financial benefit.
Fourth, somebody has to have the responsibility and the authority to make it happen. It’s a full-time job. Getting the data from the catalog requests into the database can’t be seventh priority on the list of things the receptionist has to do. Burton’s Dennis Jenson put it this way, "Data is like produce-it tends to rot." So if you don’t use it in a reasonable amount of time, the cost and effort of collecting it is
wasted.
Fifth, the technology to make it easy and cost affective wasn’t around until pretty recently. That’s changing, but it’s usually a while after
the technology works that the benefit is realized. It was about 1982, for example, that the "experts" started prognosticating on the
improvement in productivity that would result from computers. It seems to have started to happen within the last couple of years, and only recently is it being generally recognized.

The Times, They Are A Changing

The computer, scanning, and database technology needed to actually make sense of consumer information is readily available and getting cheaper all the time. The process of consolidation also means that most of the surviving companies are larger and more sophisticated. They are more likely to have the resources and the awareness to collect and utilize the data. Finally, the new financial model I outlined above almost requires better consumer knowledge.
Mark Bujold at Rossignol sees consumer research as an important issue. He acknowledges that with budgets tighter across the industry, it could be hard to justify the hard costs by the longer-term soft benefit. However, "Rossignol is stepping up the effort [to collect and utilize consumer data] company wide," he says.
Hayley Martin at K2 Snowboards described her company’s efforts at consumer market research as progressing. This is the second year for the brand’s revamped consumer data collection program, which includes a survey attached to every product they ship, offering the consumer the opportunity to receive regular product information from K2 in return for completing the form. K2 has contracted with an outside agency to maintain and build the database, and expects to start making more regular use of it to reach consumers. "The dealers can utilize the same database," she says. "They can call us and get mailing labels for people in their area who are interested in K2 Snowboard product."
Recently, I heard about a conversation somebody who has been in snowboarding a long time had with a friend about his kids. “Are your kids snowboarding yet?” the friend asked. “Are you kidding?” he answered. “They’re skiing. Snowboarding’s what dad does.”
 
It would be dangerous to draw any conclusions from a single anecdote. But we all have some tendency to internalize as “the truth” things we hear often enough if they fit our mindset. Lacking good information, what else are we going to do?
 
Our winter sports cousin, the ski industry is a case in point. We’re damn close to being married to our cousin, and incest can produce some dangerous genetic conditions. Skiing has been in decline for many years. Aside from jumping on the snowboarding bandwagon, the ski brands have been slow to change their market positioning. I don’t know if the information wasn’t there, or they just didn’t want to look at it because of the inevitably unpleasant reality it represented.
 
Snowboarding has the chance to make the same mistake. Or not. Work hard to figure out who your customer is and how that is changing. Save money. Sell more. Have fun.

 

 

Beset by Opportunities; How Can We Take Advantage of Them?

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There are sixty million kids people in the United States between the ages of 5 and 20. Over half of them haven’t entered adolescence yet. It’s the biggest demographic bulge since the baby boomers.

 
Every large, mainstream company in this country from Levis, to JC Penney to Fidelity Mutual Funds needs credibility and brand recognition with at least some piece of this generation. It’s not an over dramatization to say that their future depends on it.
 
They are struggling to figure out how to reach this generation. Some are doing better and some are doing worse. Some are screwing up unbelievably badly but don’t even know it. However well they are doing, they are changing skateboarding right long with other pieces of the action sports business. The resulting broader, growing market isn’t just about selling skateboards to skateboarders. It includes a growing number of customers, or potential customers, interested in the lifestyle, fashion, culture and attitude that’s being toned down and homogenized for this larger market.     
 
Is this an opportunity, an inconvenience or a big mess? Since it’s not going to go away, and many of these behemoth companies wouldn’t have a significant financial event if they suddenly controlled 100% of the skateboard market, I guess we better make it into an opportunity.
 
Marketing
 
Not running ads. Not going to trade shows. Not promoting team riders. Not sponsoring events. Those are promotional tactics. Maybe they are good ones. In the past, in most segments of action sports including skateboarding, they could pass for marketing because customer identification was simple. Anybody who bought skate product could reliably be assumed to be a skateboarder. It was an enthusiast market where your customer segmentation was done for you. You sold skateboards and skateboard products to skateboarders. There was nothing to figure out.
 
Now there’s a lot to figure out. It’s not only skateboarders buy skate shoes anymore, to use what’s probably the most obvious example. Who are your customers now if they are not all skateboarders, and why do they buy from you if it isn’t just to skateboard? Now we’re talking real marketing- something the industry has never had to do before.
 
“Figuring all that out sounds expensive, time consuming, like a pain in the butt and generally no fun,” you say. “It is,” I agree. “Well, I’m not going to bother,” you announce. “I’m going to sell what I’ve always sold to the people I’ve always sold to.”
 
No doubt that’s a viable strategy for some people. Why might it be right for fewer and fewer?
 
Competition by the Numbers
 
I guess this is either everybody’s fault or nobody’s fault, but hard goods have become a commodity. That is, they are easy to make, more or less the same, there’s too much product and manufacturing capacity, quality is generally high and uniform, and the customer knows it. Barring a major strategic breakthrough in how the industry functions or a technical breakthrough in how product is made, neither of which seems to be on the horizon, I don’t see that changing.
 
Soft goods have some of the same issues, though it seems to be easier to differentiate shoes and clothing because of distinct visual differences and new materials than it is with boards, trucks and wheels. It use to be conventional wisdom in the snowboard business that you sold boards first, and boots, bindings and soft goods would follow the boards right into the customer’s hands. When that changed- when the board became something you just needed to sell because you were in the snowboard business after all, then it was time to manage differently in the snowboard business. That’s where the skate board business is right now.
 
If you do business the same old way, you will be competing by the numbers. Here’s how the numbers can get you if you find yourself in that position. If you are perceived to be selling the same product everybody else is selling to the same people everybody is trying to sell to, then you’re competing strictly on price. Your gross margin will fall. To achieve the same level of profitability, you have to increase your unit volume. But the only way to do that in this kind of competitive situation is to reduce your price. It’s an ugly, vicious circle that ultimately forces a lot of people out of the business.
 
You may, of course, be determined to differentiate your product to avoid margin deterioration. If your product is actually not different from your competitors, the only way to differentiate is through advertising and promotion. Hype, to coin a phrase. But hype costs money. Lots of money. You may maintain your gross margin, but higher operating expenses will leave you with the same depleted bottom line, everything else being equal.
 
Sounds hopeless, but it’s far from it. Like I said in the title, we’re beset by opportunities if we just know what to do with them.
 
Marketing Again
 
Typically, competition by the numbers works only for one or two large players in each industry. So it’s a condition to be avoided- especially in an industry where there are no large players. What’s the choice?
 
Your only choice (other than to count on being lucky, which will work from time to time) is to be able to answer the following questions:
 
·         Who buys my product?
·         Why do they buy it instead of another brand?
·         What are the attributes of my product and, given those attributes, who besides my current customers might buy it?
 
What a pain in the ass. It’s such a pain, in fact, that I’ve heard executives of larger companies who have to find a way to deal with the emerging demographics say they have to earn their revenues from the baby boomers while positioning themselves with the kids.
 
It’s a great idea. But I anticipate the execution, if that’s as far as the analysis goes will leave something to be desired. If you try to appeal to everybody, you often end up appealing to nobody. It’s a seductively simple sounding solution. “There- I’ve done my market research.”
 
In skateboarding, the similar rationalization may be “My customer is the 13 to 17 year old male who hasn’t discovered girls or cars yet.”   That may be true for many companies and no doubt represents successful customer segmentation for some. But it can’t be valid for everybody and if you don’t remember why reread the Competition by the Numbers section and reflect on the overall profitability of the industry.
 
What to Do?
 
Retain a team of students from the local university MBA program to do a market research project for you. They may work nearly free, will get credit for the project, and they will be guided by a faculty member. Read some books on marketing. Get your team riders asking the people at skate parks some focused questions. Have employees canvas customers. Work with a shop to get fifteen of their customers together for pizza and ask them what they bought and why. Call up the brand managers or marketing people at Levis, Pepsi, Proctor and Gamble or another large consumer products company. Have lunch or a long phone conversation with them. You could help them figure out what’s up, and they could maybe help you structure your marketing research or even supply you with some data. I suspect you might uncover some mutually beneficial opportunities to work together. There’s a lot of that going on.
 
Once you’ve taken a shot at answering the questions posed above, be prepared to step out of your comfort zone. If selling the same stuff to the same people in the same way doesn’t represent a good business opportunity anyway, what do you have to lose?
 
Doing your marketing, and answering the questions above (or similar questions that seem more appropriate for your circumstances) will typically identify both opportunities and inconsistencies in your current market approach. Imagine being able to identify your most profitable customer groups and the marketing tactics they respond to. What’s that worth not only in incremental sales, but also in more efficient use of advertising and promotional dollars?
 
There was a time when straying outside the core specialty market threatened your credibility with that customer group. Maybe it still does, though to a lesser extent. In any event, if focusing on that core specialty market exposes you to competitive conditions where you can’t make any money, who cares?
 

Demographic changes, market homogenization caused by a fashion/lifestyle/cultural focus independent of actual participation in the sport, and the financial resources of large corporations are expanding your market. The catch is that you have to figure out what piece of that market you can compete in. Do your marketing

 

Just Who Are We Anyway? Perceptions of Market and Industry Evolution

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One day, a few years ago, we looked up and had become “the snowboard industry.” Growth, friends, good margins, optimism, an endearing naivete about the future and a quotient of bullshit was all part of what made it fun. The boundaries were clear. We were on the right side of that boundary and knew what was up. If you were on the other side, you didn’t. It was simple. We sold snowboards to snowboarders.

But fast growth and high margins can create an illusionary sense of control and invincibility. When these went away, the boundaries collapsed along with an awful lot of brands. Now it seems like the snowboard industry, for practical purposes, has become a piece of the winter sports industry. The retailers, the resorts, the ski companies, and everybody who is interested in hitching their star to the alternative sports market all have or want a piece of snowboarding- or at least of what snowboarding represents. Take Mountain Dew as an example. It doesn’t want to sell snowboard products, but it wants to be legitimized in the eyes of the consumer the snowboard market represents.
The reason that’s so important to Mountain Dew and others is because the Echo Boom Generation- loosely defined as the thirteen to twenty-five year olds- is projected to grow at a compound rate approaching fifteen percent between 1995 and 2005. There are a lot of them, and they have money to spend.
It’s no longer simple, and it’s not just about selling snowboards to snowboarders. At its 1998 annual shareholders’ meeting,  Ride Sports (note the previously announced new company name) CEO Bob Hall talked about the company’s mission as “creatively marketing high quality, technologically innovative contemporary sports products and extending those brands into apparel.”   Burton has started a shoe business. Morrow owned West Beach has a summer clothing line.
These companies are not just selling a product. They’re building brand equity with the goal of servicing the broader needs and interests of their target market. If the brand is legitimate in the eyes of that target market, they can sell an awful lot besides snowboards. And they can sell it at good margins.
In the past, I’ve called this market evolution “homogenization.”   That continues to be a good term. But it might be construed as implying a high level of “sameness” to a much larger action-sports market. In fact, what you’ve got is an increasing overlap among what use to be smaller, distinct segments: snowboarding, skateboarding, wakeboarding, etc. The boundaries have gotten fuzzy, as lifestyle and attitude become more important to a larger market.
What does this means for companies, resorts and retailers? They share some of the same strategic business issues, and are increasingly dependent on each other. Maybe they were always dependent, but they are recognizing the dependence and, in fact, seeing it as an opportunity.
Companies
Transworld Snowboarding Buyers’ Guide includes around seventy-five board brands.  I counted only around fifty exhibiting at Vegas. Once there were over 300.  The number will decline further. Most of the “How are you guys doing” calls I make seem to end up discussing layoffs and budget cuts. Orders are up for the coming season, but up twenty percent when you were down fifty percent the year before doesn’t cut it. Breakeven points are up. Everybody seems to be talking to everybody else about merging or being acquired. Making it as a snowboard-product-only company is tough.
Ski companies, in a declining market, aren’t making money on skis. Rossignol effectively recognized that when it tripled the company’s snowboard marketing budget last season. Salomon makes most of its money on golf.
Successful business strategies for these companies probably involve a year round business and less seasonality, multiple product lines, higher volume, better expense control and the creation of brand equity.
Resorts and Ski Areas
During the ‘85/86 season, there were 52 million visits to U.S. ski areas. In ‘96-97, the number was 52.5 million. If essentially none of those ‘85-86 visits were by snowboarders, and eighteen percent were by snowboarders in ‘96-97, then the number of skiers has declined by eighteen percent. Over that same period the number of North America ski areas has declined by 22 percent.
The 1996-97 Economic Analysis of United States Ski Areas, prepared by the National Ski Areas Association, noted the following trends during that season:
·         Increases in capacity and infrastructure improvement.
·         No change in total revenue per skier/boarder visit.
·         Declines in the net working capital and current ratio measures.
·         A 2.3 percent decline in operating profits and a 9.8 percent decline in pretax income.
Obviously, some of these numbers are open to interpretation, and results vary by region and resort size. But if participation is even (and may decline when snowboarding growth slows), balance sheets are in some sense weaker and profitability is declining, what is the justification for capacity and infrastructure improvements?
Sounds a little like the frantic competition for market share in the snowboard industry that led to product oversupply and a decline in the number of brands from over 300 to 50 and still falling. What’s a ski area to do?
Successful business strategies for resorts and ski areas probably involve a year round business and less seasonality, multiple product lines (golfing, real estate, tubing, etc), higher volume, better expense control and the creation of brand equity.
In fact, that’s what’s happening. Vail, American Ski Company, Intrawest and Booth Creek are purchasing other resorts. They are trying to remake resorts as year round destinations, create purchasing synergies, sell real estate, reduce seasonality and create brand equity they can cross market among their resort locations. Together, these four companies probably account for 35 percent of North American skier/boarder days.
Retailers
The National Sporting Goods Association recently released its Cost of Doing Business Survey for Retail Sporting Goods Stores. The survey is done every other year. It reported the following changes in financial results for full-line and specialty sport shops between 1995 and 1997.
                                                                        Full-Line Stores             Specialty Sport Shops
                                                                        1997     1995                 1997     1995
Return on Total Assets                                      9.4%     8.6%                 5.3%     9.8%
Return on Net Worth                                          23.3%   15.6%               16.6%   23.9%
Net Operating Profit                                          4.8%     5.0%                 4.1%     4.5%
Gross Margin on Merchandise Sales                  35.9%   34.7%               36.4%   36.5%
The full-line stores’ financial performance seems to have improved, even though their net operating profit declined by four percent. Specialty sports shops saw their performance decline, with operating profit down almost 9 percent.
The United States simply has more retail space than it needs in almost every product category. This is reflected in sporting goods stores in the low net operating profit percentages shown above. Remember that operating profit is before interest expense and taxes, so bottom line returns are even worse. When there is too much of something, the laws of supply and demand kick in and it gets hard to make money. It’s true in snowboard brands and ski resorts as well as sporting goods stores.
My belief is that specialty sport shops are also experiencing the market changes described earlier in this article. They can’t, for example, just sell snowboards to snowboarders any more. They have to cross-market different products to the alternative sports lifestyle market.
Successful business strategies for specialty sport shops probably involve a year round business and less seasonality, multiple product lines, higher volume, better expense control and the creation of brand equity.
A Community of Interest
I’ve used that last sentence three times now to describe what I see as the business imperatives of the ski and snowboard companies, resorts and ski areas and winter sports retailers. They are all operating in oversupplied markets and trying to focus on the same basic consumer group. I expect this emerging common focus to cause them to increasingly coordinate their efforts and evolve new relationships.
For example, we’re already seeing buying groups have more leverage with brands. The large resort groups are beginning to own their own retail space. The resorts are also working directly with the brands to supply their own product needs. Witness Intrawest putting its rental equipment needs out to bid and going with Rossignol. Brands are working with resorts to promote not only their products, but the sports themselves. Salomon made a major effort to work with resorts in promoting mini skis this past season.
What we’ve got going on is a huge change in the market, how it is perceived, and how it’s sold to. Put a dozen small circles of different sizes on a piece of paper, with none of them touching the others. Put one big circle around all of those smaller ones signifying the relative isolation of those related, but distinct markets. Those were the markets we focused on a couple of years ago. Now take those same circles, grow them, and have them intersect with each other in various ways. They don’t all touch each other, but are all connected if only through a common connection with another. And the connections change spontaneously. Finally, make the boundary of the big circle into a dotted line, signifying that it has become porous.
This is our new market. It’s bigger, but tougher to target. There’s greater interdependence. It’s not just composed of enthusiasts. Competitive pressures don’t come only from companies who make the same product you do. Single product/market companies are becoming increasingly rare.
Where do you fit in the new market?