Interview with Yamaha Marine Group President Phil Dyskow

We sat down with Yamaha Marine Group President Phil Dyskow at the company’s Yamaha University Dealer Management Symposium at the Ritz Carlton in New Orleans, La., on Dec. 1, 2004. The symposium is an opportunity for dealer principals to learn how to utilize business basics to operate profitably in the marine world today. As you’ll see from this interview and the articles that complement it in the March issue of Boating Industry magazine, Yamaha puts great importance on its multi-faceted training program. The interview has been edited for brevity and clarity.

Boating Industry: What was your goal for participation in the Dealer Management Symposium?

Phil Dyskow: We were shooting for 275 dealers. This is one of the largest classes, simply because everyone likes coming here. They’re not all quite this large. Our Chicago session and our Atlantic City session were smaller than this. And now our Orlando session will be larger than this. People like going to those venues where they can have some fun and learn something at the same time. We’re going to learn from that ourselves and make sure that we select venues like this or Las Vegas or Orlando that are fun places for people to go.

Boating Industry: How many years has Yamaha been holding these sessions?

Phil Dyskow: Four years.

Boating Industry: This event used to be called Performance 500. Do you like the concept of the Yamaha University title better?

Phil Dyskow: Well, I’ll tell you how that evolved. We’ve used the name Yamaha University for some form of training for over a decade. We have service training and we have business training for service managers. We have sales training for dealership sales people, and then we have this type of training for dealership principals or general managers. We decided to put them all under the Yamaha University umbrella because they all inter-relate. They all overlap. So that’s why we changed the name to Yamaha University. It’s the umbrella name for all of the Yamaha dealer training.

Boating Industry: How do you feel about the mood or the excitement that the dealers are bringing to the event?

Phil Dyskow: Well, what we’ve always said about these courses is that we don’t want to spend one second of time trying to sell anybody anything at these events. We’re not trying to sell Yamaha. You sat through the sessions. You know. They’re not a sales opportunity for us. It’s a training opportunity.

What we want to be able to do is to get each dealer principal or dealer manager that’s here to take home what ever he can absorb, whether that’s one or two items, whether it’s 10 percent, 15 percent, 100 percent if we’re lucky, although that’s not too realistic. We want to take something home and implement it to improve the profitability of their business.

We worked hard on Noel’s (Osborne) presentation to tailor that to be the real essence of what this is about. The average dealer doesn’t make enough money. Why doesn’t he? He doesn’t because he leaves some on the table somewhere in their business. The purpose of this training is to make him aware of where he’s leaving money on the table and what he can do to change his way of doing business to be more profitable. You’ll hear success stories. You’ll hear all these people that say “I did this and this and I made 5 percent more.”

If we were able to sell our products cheaper, or if boat companies were to sell boats cheaper, or if accessory companies were to sell their products cheaper, that doesn’t necessarily make the dealer more profitable because so many people sell based on price and will pass that on. You see that happen all the time. We all have. So price is a factor in profitability but it is only one of many, and we’re really working on a lot of the others. We believe that the boat and engine sales is one component of the dealer’s profitability. Service is another. Parts and accessories sales are another. F&I is another. What has happened over the years, is people focused on the boat sales and haven’t understood where they’re losing money on the other parts of the business.

The best analogy we can give you is that automobile dealers, to date, bill out in excess of 100 percent of the paid hours in their shop. Marine dealers bill out less than 50. I’d like to say that it’s 50 (percent), but Noel says it’s 40, and he’s probably right since he’s researched it. So what does that tell you? The dealer is losing a lot of money because he is not understanding how that piece of his business is functioning.

And, if you think about it, on the engine side, who is the biggest customer of the dealer? It’s not necessarily the end consumer. It’s the sterndrive manufacturer, the outboard manufacturer. And we pay full shop rate. If he’s doing warranty work, we pay full shop rate on that. So at least on the warranty work, they ought to be billing out the appropriate amount of hours. It’s not a simple process to identify. That’s why we spent so much time on that portion it.

Boating Industry: You’re putting a lot of commitment and effort into this program. What drove Yamaha to offer something like this training to its dealers?

Phil Dyskow: We’re spending more than $1 million a year on this. The obvious thing is we can’t invent or create new dealers. Our best approach is to improve the profitability of the dealers we have. Yamaha, today, has about 2,000 dealers. I don’t know where we’d go to find 2,000 more. You know yourself that there are probably about 5,000 good marine dealers out there. So we have the right number of dealers and to increase our sales and to strengthen our organization, I don’t know how else to do it other than through training.

There used to be a number of traditional trainers in the market who aren’t really offering this kind of training anymore. So we saw a need and we saw an opportunity. But a healthy, profitable dealer network is in our best interest. And if Yamaha dealers are more profitable than other types of dealers, we benefit from that, as well. Our selfish interests are that we want our dealers to be profitable and successful because we benefit from that.

Boating Industry: Really, as you pointed out with the idea of not being here to sell Yamaha, per se, you’re making an effort to improve the industry as a whole … because how many of your dealers sell other brands, as well?

Phil Dyskow: Obviously, they all sell many boat brands, and many of them sell more than one outboard brand. And we’re not worried about that. If we improve their business with Brand X as well as their business with Yamaha that’s fine. What we really want to get as an end result, is a healthier, more profitable, more successful dealer network. Because we benefit from that. Again, we’re not doing it out of noble virtue, exclusively. We like to feel that we are, but bottom line is everyone benefits from this. And I think that all the Yamaha people that are here enjoy this because we are giving something back. At least that’s one way of viewing it: yes, we benefit, but at the same time if these guys become more successful and profitable, that makes us feel good, too.

Boating Industry: What are your thoughts on the change in agenda, going from a week-long seminar to two-and-a-half days?

Phil Dyskow: We’ve looked at different formulas. What we have found is that dealers like to be in their dealerships on Monday, and they like to be there on Friday because a lot happens in a dealership on those days. And of course on the weekends. That’s why we have these courses on Tuesday, Wednesday, Thursday.

Now, I would say that there are still some dealers that miss the week-long course, and maybe at some point there will be some week-long courses, as well as the shorter courses. Many of these dealers have attended prior courses, so what this is is a more-intense approach to getting them to the next level without spending the week out of the dealership. I would say that, of the people we’ve talked to, probably 80 percent prefer the shorter format. And this year, we’ve had more attendance than we’ve ever had before, so my guess is that this is a successful format. As we expand training, I think we’ll have a short course version and a long course version. That’s just my guess. Right now, this is the size that most people seem comfortable with. But you do speed through the materials.

Boating Industry: There has been a lot of discussion throughout the seminars about how important training is for dealers. How did Yamaha come to the realization that training was so important for the company to pass on to dealers?

Phil Dyskow: We didn’t know how else we could have an impact on improving the strength of the dealer and the profitability of the dealer. More discounts didn’t necessarily help us; they were simply going to be passed through to the end consumer. They didn’t make the dealer any more profitable.

I look at the automotive business and how it has evolved over the last 3 to 5 decades. Training was an integral part of that evolution. Look at how sophisticated the dealer is today. As a comparison, look at the margin that a car dealer works on on car sales. It’s a very low margin. Way less than what we make on a boat. Our dealers would be appalled if they knew what the margin was on a car. But look at the profitability of their dealerships – because they understand F&I; they understand service profitability; they understand after market accessory sales; they understand extended warranty sales; they understand overhead management; and they understand business management. And that’s a training process.

Those automotive dealers participated in a training process over time to get those skills, and we can’t expect marine dealers to acquire those skills via osmosis. It’s no different. If we want to have those kinds of results, we have to put in the investment and the effort on the front end.

Boating Industry: Have you been able to attribute any of Yamaha’s success, in terms of market share or units or profitability directly to training events like this?

Phil Dyskow: Yes, but let me preface that. This is not a one-year investment. This is not a three-year investment. When we started this, I told all of our people that this has got to be a 10-year investment in order for us to make the commitment to initiate this. That doesn’t mean we stop after 10 years, but you can’t expect an instantaneous turnaround. Have we seen progress? Yes. Do we get testimonials? Yes. You’ve probably heard some at this event. But this is a long-term commitment on our part.

And again, we do have our own selfish interests in that a healthy dealer organization benefits us as well. But it’s a long-term investment, and when I agreed to do this originally, I said we’ve got to be making a 10-year commitment here or else we’re not going to see the results. You can’t do this for one or two years and stop.

What we have today, all these courses evolved. This course is really focused today on business management, business planning and CSI improvement as a tool to improve profitability. Tomorrow you’re going to hear how CSI can improve the profitability, and Matt, I tell you, it is so obvious. I can tell you, I have never had to repossess a dealer with high CSI scores. Ever. And the other correlation that’s so obvious, and you’ll see it tomorrow, a high CSI dealer can make a higher margin of profit on the product he sells because the customer will willingly pay more to do business with him. The guy that has a low CSI and a poor reputation only has one tool to sell, and that’s price. So he’s always the guy not making money. So this course has really evolved to focus on business planning, business management and CSI improvement.

The sales training program for dealership sales people has evolved significantly as well. It started as a program to teach the features and benefits of outboard motors – why they should buy a Yamaha outboard versus somebody else’s. It’s evolved, now, into a program that still spends about half of its time on features and benefits. The other half is teaching the science and the professional side of selling. We have two goals for that training. One, of course, is to provide them knowledge of Yamaha products. The other goal is to give them the necessary selling skills, and we do these just before the boat show season, to sell the minimum of one more boat than they would have without this training. And you say, “well, that’s not very much.” But if you train 3,000 sales people, that’s 3,000 boats and at least 3,000 outboards, so it is a big deal. We found a huge improvement in the success of those classes when we started to focus equally on the science of selling, the skills of selling, as opposed to just the product itself.

Then we have another course. We talked earlier about how the service part of the business is so different in the marine industry from the auto industry, billing out 40 percent of your hours versus 105 percent. There’s a huge gap between those two. So we have a course for service managers. Valerie (Ziebron) teaches that course, also. Again, it’s trying to teach the profession of service management and how to make that service organization more profitable.

So we have all sorts of training, outside of the typical technical training that all outboard companies do. The intent is to focus on the service side of the business, the sales side of the business and right now, on the business management side. That’s what this course is all about. And we haven’t had courses on F&I. We haven’t had courses on insurance or any of those things individually. We may at some point, but we’re not focusing on that right now. The core subjects are service management and improving the profitability of the service entity within a dealership, sales training and then business management training.

I don’t know the exact statistic, but a shockingly low percentage of dealers actually have a business plan. A shockingly low percentage actually have a financial (profit and loss statement) within a reasonable period of time after the close of a month. Most people look at them once a year, after it’s happened and after it’s too late.

Boating Industry: And that seems surprising because, and this is more for new dealers, you can’t go out and borrow the money to start a business without showing the creditors a business plan.

Phil Dyskow: That’s true. Now if I’m getting into the business and I want to get a million-dollar mortgage on a property, I want to set up lines of credit and everything, I would need to set up a business plan. But what happened in our industry, a lot of people started small – maybe they started as a shade-tree mechanic working on a street corner – and they evolved into the business. Getting a line of credit to buy boats or motors isn’t that difficult. So what happened is they migrated into the business because of their love of boating or fishing or they migrated into the business through the service side and they’ve never had those skills or training and never realized the importance of a business plan. But you’re right, if your first step was to walk into a bank and borrow a million-and-a-half bucks, you’d have to have a business plan. But that’s not how a lot of people started in this business.

Boating Industry: Is there any way that training dealers like this figures into the bigger picture of the Grow Boating initiative?

Phil Dyskow: Absolutely. And let’s not get confused about Grow Boating. We agreed to do three things. We agreed to do a national awareness/marketing campaign. We agreed that all NMMA members will meet ABYC certification with their products. And we agreed that there would be dealer certification, including a consumer bill of rights.

Now, and I’m not picking on any of these guys because I like them, but I just recently attended the MRAA conference and sat on a panel and everyone was sitting up there saying “what are you manufacturers going to do?” Well, we’re all going to have to make an investment in time and money to improve this industry.

I had a little presentation I gave two days ago, at the beginning of this session. If you look at the statistics today, participation in boating, about 72-73 million people say they participate in boating. If you combine the total of registered and unregistered boats, there are about 17 million boats out there somewhere. You can dispute the number, but there’s roughly 5,000 viable dealers. If you just do the division, there’s enough customers and there’s enough boats to make all of us rich.

The problem we have, let’s say we grow boating today by 2-3 percent a year – I don’t know what the total is, but it’s about that -and the goal of the Grow Boating campaign is to grow it by somewhat more than 5 percent a year. If we don’t improve CSI and we don’t improve the boating experience, we won’t grow this industry because we will lose a higher percentage of existing boaters than new boaters that we can bring in.

What people don’t understand, it doesn’t work out because the math isn’t perfect, but as an industry we have an 80 percent CSI score. That means that 20 percent of the people aren’t happy and a portion of those are going to leave. Let’s say half of them leave, so 10 percent of them leave, we’d have to bring in 10 percent more people every year just to stay ahead of the game.

I don’t have the statistics to back it up, and I don’t know how you’d get them, but I’d be willing to bet that we’ve been bringing new people in at a significant rate today. But we’re losing existing ones because of low CSI scores. That’s why it’s so important that the Grow Boating campaign include this idea of manufacturers getting our acts together and also dealers recognizing that they have to make an investment in CSI improvement, as well, if we’re going to retain these people. The retention is way more important than the attraction of new people.

I think that the rhetoric around Grow Boating is not focusing on those issues as much as they could because they’re not popular issues. When you go out and tell manufacturers that you’re going to have certify your products or you can’t belong to NMMA, that’s not popular. When you tell dealers that you’re going to have to go through a certification process and you’re going to have to commit to a minimum level of customer service, a customer bill of rights, if you will, those aren’t popular. It’s much more popular to rail at manufacturers and say you guys have to cough up the money to help us grow the business.

Boating Industry: We’ve heard that you were one of the driving forces behind the mentality of a multi-tiered campaign.

Phil Dyskow: Yeah, and I don’t have an agenda other than I want to make sure that this thing works. I don’t think the popular position is necessarily the appropriate one. I want to take the one that will work. And I can’t stress enough that it’s going to take sweat equity and capital on everybody’s part throughout the distribution chain: engine manufacturers, boat manufacturers, dealers, accessory manufacturers … we’re going to all have to work together.

I think it’s public knowledge, so I don’t think this is a bombshell – you know that at the last NMMA board meeting, we approved a special assessment to launch the Grow Boating campaign. I don’t know what that assessment will be, but I think the number that was passed around was about one-third of our annual dues. And every manufacturer would be assessed that.

That’s a wonderful opportunity because everybody wants to wail on passionately about what this campaign should be, but now everybody has a chance to put some money down. That’s good. I love that. In fact, I was the one who recommended it simply because that means everybody now has a stake in it.

That’s what we need to do. We need to get everybody on board. I think it was a great idea, and it was a great way to jumpstart this thing with some money. Because whatever funding model we come up with will take a while to sort out because we can’t really finalize it until we know the results of this whole dumping thing. Then the lawyers will have to tell us how to do that. It’s not something MRAA and NMMA can put together. They don’t understand the legal side of that.

Boating Industry: How did you come to work with Stemnock & Associates (the specialized training group that organizes and produces Yamaha University)?

Phil Dyskow: We were looking for someone who knew the industry that had the right contacts to get the kind of presenters we wanted. What we wanted here, Matt, was a uniquely marine course. There’s lots of generic business training. You can get that anywhere. What we wanted was a uniquely marine-dealer-focused program and really understand the outboard boat, the outboard motor dealer. Michael (Stemnock) had that capability. He has been in the marine industry himself, and he had the contacts.

We also wanted to pick a company small enough that we would be important to them so we would really get a lot of attention and focus. So what we were attracted to was that the size of the company was right for us and their unique talents and their unique resources to draw on talent that understood the marine business. And they’re sitting right there in Tampa. They’re close to us. They’re only an hour flight away. If you’re going to teach marine training, you’ve got to be in a marine market. So they’re in the right place. And it’s worked well.

We’ve learned together how to make this course more successful. Each year it’s gotten better.

Boating Industry: How about the presenters? Have you crossed paths when them in the past?

Phil Dyskow: I’ve know Noel for well over two decades. I bought products from Noel when he had his dealership in Pennsylvania. I also know that he’s very passionate about this industry and he has been very successful as a dealer. He’s a poster child for what this course is all about. But I know that he was passionate about giving back to the industry that’s been so good to him. And he really does want to do that at this point in his life. He doesn’t need to make more money. What he really felt passionate about was how to give something back.

Valerie brought something else to the equation. Valerie did a lot of automotive-type service. We were really intrigued with how profitable service is in the automotive sector versus the marine sector. We wanted someone who understood that process. She was willing to immerse herself in the marine business. Work behind the parts counter in the dealership. And you learn all about this stuff, rather than just start teaching without knowing what it was all about. We wanted someone who had that automotive background.

Some of the other presenters don’t have as specific of marine experience. That’s not what we were looking for from them. Jay Conrad Levinson and his organization, we wanted someone who really had major track record experience in various aspects of marketing. You know, when he tells his branding story, when he says, “I’m the guy who invented the Marlboro Man,” that’s credibility. The whole idea of a dealer creating a brand for himself, that’s really cool because it doesn’t cost him a nickel. You know, “Quality Marine where everyone is treated like a king” … whatever it is … that’s powerful. And that doesn’t cost you a nickel. As he points out, it only takes 5 or 10 minutes to think it up.

So we drew different kinds of talents, but we wanted the program grounded in people who really understood and had a track record in the marine business. And we changed it again this year. The first few years we had simply professional presenters. This year we started a new system where myself, John (Rigsby), Dale (Barnes) also gave presentations about specific aspects of Yamaha. John talks about our CSI program and our mapper program. Dale talks about the Yamaha brand and how they can capitalize on the Yamaha brand. And I give a presentation that’s basically on how we evaluate the economy and the industry to predict future trends and forecast the industry and what our business plan is all about and how they can tie into that.

Most people figure out what’s going to happen next year by looking at the previous year. That doesn’t do much, so I kind of give them some insight into what tools we use to think about what the industry’s going to do next year. Not that we’re always right, but we’re a heck of a lot more accurate by forecasting next year’s results as opposed than simply looking at last year’s results and trying to extrapolate that into the future.

Boating Industry: I’ve heard two or three references to the story you told about the dealer who told you he didn’t know how many F150s he needed, but that you had better had enough. Can you tell me that story?

Phil Dyskow: As an industry, we tend to not plan as perfectly as perhaps we should. And the story I give is that I was at a dealer meeting a couple years ago at the cocktail reception in the evening and a dealer got up in my face and said, “are you going to have enough of those F150s for me this year?” And I took a step back and said, “I’m not sure, can you tell me how many you need?” And he thought for a minute, and he said, “well, I don’t know, but you had better have enough.” And that’s the problem with our industry. We’re always chasing supply and demand. It doesn’t matter if it’s a boat, a trailer, or an outboard motor. You need some reasonable forecast of what the customer demand is going to be and the more accurate that forecast, the better supplier we can be.

Today, I think, and it doesn’t matter whether it’s Yamaha or anybody else, there’s enough capacity to meet customer demand almost perfectly. The problem is the mix and the timing. The mix and the timing are never right because the information we have is less than ideal. If we can improve the forecasting and the demand information in the market place, we can be much-better, on-time suppliers. And industries that have done that have been able to be better suppliers. So when we have supply issues in our industry, and it doesn’t matter what the product is, it’s usually because we use imperfect information to do our production planning.

Boating Industry: And it all starts at the dealer level?

Phil Dyskow: Well we need to improve our capability, as well. But it is a true story and we get that all the time: “Well, you better build a bunch of them.”
“How many do you need?”
“A lot.”
“Well, how many?”
“Tons.”
It’s amazing how that happens.

Boating Industry: Even before coming down here, we heard a lot about how there are the A-, B- and C-level dealers, but no one’s been able to define that. It was nice to hear Noel’s (Osborne) presentation.

Phil Dyskow: In the industry, a lot of people used to refer to A- or B-level dealers by their volume. But what Noel is telling you is that they could all be the same volume. It’s about how much money they make. And a profitable dealer is so much safer for us as a customer than someone who is marginal. Because that marginal guy, if he goes broke, who’s left on the hook? Usually the boat company and the engine company. So those A dealers are important. And what he said is absolutely true, that A manufacturers hook up with the A dealers and the C manufacturers hook up with the C dealers. It happens every time.

We don’t have a formal grading system. We have a CSI program where every dealer knows his CSI rating on his engines, boats and dealership. He can see the actual surveys live on the internet. It’s a wonderful program. But we don’t use that system to grade dealers. That was a commitment we made, that we wouldn’t use it as a scoring tool to punish or reward them. It’s a tool for them to improve their CSI. So we don’t have a formal grading system.

So, I think he’s using (the grading system) as an analogy, and I support it 100 percent. We try to hook up with A-level dealers, but we don’t have a formal grading system to figure out who they are. We know who they are, and they know who they are.

Boating Industry: Do you have contracts with your dealers?

Phil Dyskow: I’m on the NMMA committee that’s supposed to look at dealer agreements. And it’s a bipartisan committee in that we have dealers and manufacturers on it. Progress has been made, and from what I’ve seen there is a significant amount of common ground. Once you get the rabblerousers out of the room, whether they are manufacturers or dealers, there’s a lot of common ground

If there’s an ability to make a universal agreement that everyone’s comfortable with, it could come out of that committee. And there are some good dealers on there that have brought some very good, insightful information that could be implemented. I think what happens sometimes is that people get so frustrated and all we hear are the soundbites from the rabblerousers. We don’t hear what the mainstream wants. I think it’s time to improve dealer agreements. Are they terrible? No. Are the engine ones better than the boat ones? Probably. But, do they need improvement? Yeah, that’s why we have this committee. And I think we can get some common ground.

Boating Industry: Anything we haven’t covered?

Phil Dyskow: No, I don’t think so. We aren’t trying to wave our own flag in this thing. We just hope that when it’s all said and done, we have a stronger dealer organization as a result. And if we do, we’re going to benefit from that. The investment will pay back tenfold. When you look at the kind of money we spend as a company, a million-dollar investment isn’t going to break us. We’re hoping we get a good return on this over the long haul because it is a long-term commitment. I don’t think you see immediate results. This is a long-term commitment. It has to be or we’ve made a mistake. And we are committed to it over the long term.