It’s an admirable quality in a friend, a necessary quality in a spouse and an inherent quality in most dogs.
But what place does loyalty have in the business world, or more specifically, the boating industry?
As companies come and go, as brands change hands, as new technology and ever-changing regulation continually rearrange the playing field, how have brand and product loyalties been impacted?
Are boat and engine dealers still loyal to particular makes, models and companies? Can they afford to be? How about consumers?
Ask 10 dealers and you’ll get 10 uniquely individual opinions, each as valid as the next. Nobody has cornered the market on the right answers to these questions.
But the responses are interesting nonetheless. And with Brunswick’s acquisition of the Lund, Lowe and Crestliner aluminum boat brands, as well as saltwater fishing boat brands Sea Pro, Palmetto and Sea Boss, the question of loyalty has taken on added significance in recent months, and will continue to be an important one in the months to come.
In the wake of some of the recent sales activity, Boating Industry conducted a small, unscientific survey of 50 marine dealerships around the country to learn some of their feelings regarding the industry’s continued reorganization, and also to find out a little more about where their loyalties rest these days.
Several of the survey questions tried to determine whether dealers were more loyal to the boat brands or the engine brands they sold, and those dealers who responded showed a clear bias in favor of the boats.
When asked to choose between continuing to sell their outboard engine brands or continuing to sell their boat brands, nearly two-thirds (73 percent) of the dealers surveyed chose the boats.
Those results reflected a viewpoint shared by many of the dealers interviewed for the article, who agreed that, with some very notable exceptions, most consumers these days are shopping for a boat first, then the engine. In fact, 92 percent of the dealers interviewed agreed that the boat was most important component to a customer shopping for a boat/engine package.
Other questions, such as those trying to gauge dealers’ reaction to the Brunswick acquisitions were much less clear cut. Dealers responding to a question on whether Brunswick’s continued acquisitions would make them more likely or less likely to buy Brunswick product, split evenly down the middle.
But it’s important to remember that ownership changes are nothing new to the marine industry. Maybe no single event over the last five years forced as many members of the boating industry to reassess their loyalties as the bankruptcy of Outboard Marine Corp. in late 2000. If Brunswick’s recent aluminum boat brand acquisition caught some by surprise, OMC’s demise came as a shock to many.
Tracey Brotherton, manager of Sundowner Marine, a small Lowe dealership in southeast Missouri, said she was stunned to find out one morning while on vacation a few years ago that OMC, the company that supplied the boats her family sold, wasn’t around anymore.
“We were in Mexico and we woke up and didn’t know that the company we sold was non-existent,” Brotherton said. “I went down to the Internet lounge, like I did every morning, and I saw what had happened and I was like ‘Oh, my God.’
Sundowner became a Yamaha dealership as a result of the sale, invest in the new tools and training that come with taking on a new product.
“We were very loyal to Lowe, we could have taken on another boat company, but we were loyal to Lowe, so we just went ahead and did the Yamaha thing. And now we can’t even sell Yamaha because Brunswick bought Lowe. And I guess my point is that I don’t want to do this again with Mercury.”
Although Sundowner Marine — which has been in business 29 years and is the only Lowe dealer between St. Louis and Memphis — is a relatively small dealership, the impact it felt from OMC’s demise was shared by much larger dealers around the country.
Don Robertson, the owner and founder of Robertson’s Marine — a dealership in Salt Lake City that carries Crestliner, Glastron, Ranger and Carver, as well as Mercury and Yamaha — says his loyalties were all but destroyed by the OMC bankruptcy.
“With OMC, the way it faded out really created a problem and cost us a lot of money,” Robertson said. “I grew up with OMC, so I’ve lost my loyalty to any of them. I don’t trust any of [the manufacturers] anymore. They’re owned by big corporations, they make changes. It’s just a whole different world.”
Robertson said his dealership was selling between 300 and 400 Johnson and Evinrude motors per year before OMC went bankrupt.
“And then boom, they’re gone,” he says. “Bombardier picked them up, but people were leery. We were stuck with a lot of the engines.”
The aluminum sale
Robertson’s loyalties were tested again with Genmar’s sale of its aluminum brands to Brunswick.
“They called me from Genmar and told me they were selling and I said, ‘What the hell for?’ and he says, ‘About $90 million,’” Robertson recalls with a laugh. “Well that’s a good enough answer I guess. But it interrupts business when things like that happen.”
Casey Robertson, who is the sales manager at Robertson’s Marine - and is also Don’s son - said Brunswick’s purchase forced the dealership to make some tough decisions concerning its loyalties.
“We definitely looked at some other brands, because our loyalty was more to Yamaha than anything, and when we were faced with having a fishing boat we couldn’t get Yamaha’s on, that became a factor,” Casey Robertson said. “But then we just decided, you know I think the majority of people are really just buying the boat, and this Crestliner boat is a better boat than just about anything else out there as far as aluminum goes. So we all decided, let’s give Mercury a shot.”
Decisions like those weren’t unique to Robertson’s. Dealerships across the country must confront the same dilemma every time a company or brand changes hands.
In fact, in the Upper Midwest, where two Lund or two Crestliner dealers can be found across the street from one another, the only competitive advantage the two businesses had was the engines offered. With the two brands' expected move toward all-Mercury transoms, the dealers are left with little product to compete with.
For smaller dealers, such as Sundowner, the decision comes down to whether to be loyal to a brand that has been very good for business, or to look in another direction where the future is more certain.
“It’s very hard with a small business,” Brotherton says. “We’re doing fine now, but we’re going to explore other areas that are more profitable, like boat rentals, slip rentals, accessories, the Internet, things like that.
“Lowe has been wonderful to us, but there is a point where we have to keep selling our products too. We have to keep our options open and we have to make a living. We don’t have salaries.”
Brotherton says she knows larger dealerships in St. Louis and Kansas City that are having the same problems as Sundowner, but are able to better withstand the volatility because they carry more boat and engine lines. And more than anything else, Brotherton says she would like to have some confidence that the dust has settled so that her business can move forward with some certainty. Right now, that certainty doesn’t exist.
“I think right now there is a lot of volatility, especially in the aluminum business,” she says. “There are a lot of rumors out there. I think everything is for sale and I don’t think this is over yet. To be quite honest, we don’t care who owns Lowe, we just want to be able to look forward to the future, and right now, we don’t have that confidence.”
Whether or not the acquisition of the aluminum brands will ultimately prove successful for Brunswick may depend on which department you ask. As reported on www.Boating-Industry.com, the aluminum group took a hit late last year, with retail unit sales dropping by 7.5, 9.5 and 16.6 percent for Lowe, Crestliner and Lund, respectively, in the third quarter. The decline, coupled with a slow start to the 2005 boat show season caused a series of plant closures at Lund and Crestliner as the company made some “production adjustments” with the expectation to be back on track by later in the season.
But on the other side of the coin, there have been positive market share reports coming out of the Mercury camp.
“From the period when they bought [Crestliner, Lowe and Lund] in April, to year end,” explains Tim Conder, an industry analyst and the vice president of A.G. Edwards & Sons in St. Louis, “Brunswick’s market share on aluminum boat transoms went from 25 percent to close to 60 percent.”
While the aluminum group gets back on track and dealers get settled into new product lines, however, it’s becoming relatively clear where consumer loyalties lie.
“The motors are the accessories,” says Luke Kujawa, vice president of sales and marketing at Crystal-Pierz (Minnesota) Marine, which has won world-wide top-sales honors for both Crestliner and Lund. “(Consumer) loyalty is to the technology.”
“People are basically looking at the boats first and motors second,” adds Tom Stidham, president of Norris Marine in Norman, Okla. “I think the generalization is that people come in looking for boats and assuming that they are powered correctly.”
There were several qualifications that went along with that opinion, however. The dealers said bass fisherman and saltwater boaters were much more likely to consider engines to be every bit important as boats, if not more so, when looking to make a purchase.
“If you take a generic pontoon boat, I don’t believe that the customer is as concerned over the brand of the motor as long as it is an acceptable, known brand,” Stidham said. “He may have an opinion between two-stroke and four-stroke, but if you contrast him to possibly a bass boater who has owned and runs a certain motor, there is some loyalty there.
“You don’t find many people arguing over whose 50 horse is going to push their pontoon, where you would if you had a lifetime Mercury owner in a high-dollar, 200-plus-horsepower bass boat.”
Research conducted by J.D. Power and Associates for a recent customer satisfaction study lends further weight to the idea that consumers shop for the boat first. The global marketing services information firm recently asked consumers several questions pertaining to loyalty as part of a market research effort on behalf of its marine industry clients. One question, new to the survey this year, asked consumers whether they bought the boat, then chose the engine, or whether they bought the boat even though their first engine choice wasn’t available.
“We found a surprising number of boat brands that people bought in spite of the engine on the boat,” says Eric Sorensen, director of the marine practice at J.D. Power and Associates. “So that begs the question that of those boat brands that had people buy the boat despite the fact that they couldn’t get the engine that they wanted, how many customers did they lose?”
Where do other dealers’ loyalties lie?
Seventy-one percent of the dealers in Boating Industry’s snapshot survey also suggested that as a whole, marine dealers have more loyalty to the boats they sell than to the engines.
Robertson’s Marine, for example, was faced with just that choice after Brunswick bought Crestliner. The dealership had to choose between dumping the boat brand or taking on a new engine brand.
“We just said, ‘You know, I think the majority of people are really just buying the boat,’” Casey Robertson said. “So we decided the consumer is going to pick the boat and we can sell the engine, whatever it is. Seventy-five percent of them don’t care, they just want a good recommendation from their dealer and to feel comfortable that this is a good engine.”
The majority of the dealers surveyed either did, or would make the same choice as Robertson’s Marine, with 62 percent saying they would choose to become a Brunswick dealer if the company purchased a boat brand they carried, while the other 38 percent said they would not.
Dealers said the biggest factor in determining the loyalty they had to the boats or engines they sold was past experience with the brand. While it’s obvious that brand and product loyalty still have a place in the industry, past loyalties can be harmed or destroyed by the changing market place. Eric Sorensen says the J.D. Power research shows that many boat and engine brands still engender tremendous amounts of loyalty, or “brand equity,” with consumers. But as dealer loyalty begins to erode, it’s hard to believe that consumer loyalty won’t follow. With an industry struggling to carve out its niche in an increasingly competitive recreational marketplace, those changing loyalties bear watching.
1. If you had to choose between selling outboard engines OR boats, which would you choose to continue selling ...?
A. The engines (27%)
B. The boats (73%)
2. What is the biggest factor in determining your loyalty to the boats or engines that you sell?
A. The products themselves (33%)
B. The agreements you have with the manufacturers (10%)
C. Feedback from your customers (18%)
D. Your past experiences with the brand (39%)
3. Which do you think boat/engine dealers have the most loyalty to?
A. The boats they sell (71%)
B. The engines they sell (29%)
4. Which do you think is more important to the customer when shopping for a boat/engine package?
A. The boat (92%)
B. The engine (8%)
5. If Brunswick acquired a boat brand you carry would you…?
A. Become a Brunswick dealer (63%)
B. Stop selling the brand (27%)
6. As Brunswick continues to buy marine industry companies, are you more or less likely to buy Brunswick products?
A. More likely (50%)
B. Less likely (50%)
7. What effect has the engine-dumping controversy had on your willingness to buy Brunswick product?
A. A positive effect (12%)
B. A negative effect (45%)
C. No effect at all (43%)
8. Which outboard engine brand are you most loyal to?
A. Mercury (38%)
B. Yamaha (28%)
C. Suzuki (6%)
D. Honda (4%)
E. Evinrude (9%)
F. Johnson (4%)
G. Nissan/Tohatsu (11%)
9. Do you believe saltwater boaters have more loyalty to engines than freshwater boaters?
A. Yes (68%)
B. No (32%)
10. Do you believe the loyalty dealers show to manufacturers is returned by the manufacturers to the dealers.
A. Yes (25%)
B. No (75%)
Source: Boating Industry magazine survey of 50 random marine dealers.