Dealers welcome fewer choices, lower prices

Many boat builders in the “value” segment of the market have been moving toward fewer options and more options packages. Boating Industry magazine interviewed executives from five boat dealerships to determine how this is impacting dealer operations and how it has been received by consumers.

The dealers interviewed include Tom Mack, president of South Shore Marine, Huron, Ohio; Paul Davis, president of Omaha Marine Center, Omaha, Neb,; Brent Christian, owner of Tobler Marina, Hayden, Idaho; Lauren Woodard-Splatt, general manager of Woodard Marine, Hydeville, Vt.; and Jeff Olson, president of Saratoga Boatworks, Inc., Saratoga Springs, N.Y.

How do you feel about offering entry-level boat buyers fewer options in exchange for a lower price tag?

Tom Mack: Simple is a good thing. Consumers are tired of being “over-choiced.” Especially if fewer choices equates to manufacturer efficiency and lower prices, buyers will see the value and be motivated by the savings. They still want quality, reliability and nice options … just not too many of them.

Paul Davis: We are all in favor. Local market share shows that the price point boats are still the stronger sellers. The largest challenge on price is the up charge on the 2011 motors facing us this year.

Brent Christian:  I think fewer color choices and options are a win-win-win in the entry-level market. It streamlines manufacturing with colors and options, increases efficiency in production, and minimizes quality and small part stock issues. At the dealer level, it helps with turns by being able to sell the stock vs. order because of an option. At the consumer level, it allows fewer choices, best value, and also should decrease the delay in ordering time as the manufactures can build quicker, or possibly even have some stock built and on hand for quick shipment because they know someone will be buying it exactly like they have it built.

Lauren Woodard-Splatt: I believe having an entry-level boat is essential to keep new boat buyers interested in our industry. For our market, having less options and seating arrangement in the base model is a great idea. This allows us to keep the cost of production down, and sometimes less options to a new buyer is better. The new boat owner usually is not familiar with the options and their needs. Once they get into boating, they tend to upgrade within a few years, and at that time, they are more specific on options, seating arrangements and colors. The key is they got into boating at first with an entry-level boat and then stayed in boating during their upgrade later on.

Jeff Olson: I believe that offering something for the entry-level buyer that is affordable is critical to the long-term survival of the recreational marine industry. Throughout the recent recession, it is evident that the entry-level boat buyer was missing from dealer showrooms. This has an immediate effect on new boat sales as well as a longer-term effect that may not be as easy to measure. While prices for an entry-level boat have risen dramatically over the last three to five years, the disposable income for the consumers has not, and in many cases, their income has declined.

Many manufacturers have added standard items that were previously options in an effort to raise prices. The manufacturers call this adding “value.” It may add value to the product, but the higher prices have driven away the entry-level buyer. Many of these entry-level buyers have drifted to the pre-owned boat market, away from boat dealer showrooms.

While a few of the manufacturers have done a good job offering something affordable to the entry-level buyer, I believe that many of the boat manufacturers have missed the opportunity to offer a new boat to this buyer. Value packages are a great way to entice the entry-level buyer back into buying a new boat.

How receptive would entry-level boat buyers be to options packages, similar to those offered on cars? Or if your manufacturer already offers options packages, how have customers responded?

Tom Mack: Again, buyers appreciate the simplicity found in packages: i.e. comfort package, fishing package, navigation equip package, etc. Also, if the manufacturer can streamline their factory options, it offers the dealer sometimes greater opportunity to add options for the customer exactly to their liking. For example, often manufacturers’ canvas packages are more average quality and certain buyers may want to personalize or customize/upgrade in this area.

Paul Davis: That is a good question and can be interpreted many different ways, but I don’t think you should use the “C” word as comparison. We trade and sell cars as part of our other businesses. Most customers will purchase a car from the level their budget will allow. The packages or options added are non-existent because if they want more features they just go up to the next trimmed level in model. 

From our experience, the add-on packages are not understood very well even with the detailed signage we use. The new customers just want to get on the water and go for a boat ride.  If they want all the bling, they will just move up to the model that has that. At the higher price point, it’s not an object of concern usually.

Brent Christian: We have seen consumers respond very positively to the fewer options product and marketing. We have had great success in stocking base models well featured with standard options in black and then the upgrade package in the same color. One choice to make at about a $2500 or $30 per month upgrade makes it simple for the consumer to either buy at the base price and upgrade to options such as canvas and fishing equipment over time, or buy it with all of the options and be ready to go fishing now.

Lauren Woodard-Splatt: One of our manufacturers, Bayliner Boats, offers option packages (i.e. preferred equipment package). I think this is a great concept. Again, the new boat owner (this is typically who is looking at the entry-level boats) tends to not know what they want for equipment. These packages make it easy for them to make decisions and decipher which options are the most popular.

When there are too many options, it can be overwhelming and they tend to order no options because they are not sure what they need. By making option packages (tow packages, lounging packages), it helps the consumer decide that options fit their needs without getting overwhelmed. Our customers have responded very well to these option packages. They are able to relate to their needs and are much happier with their purchase in the long run.

Jeff Olson: Again, I believe that the entry-level buyers will and have responded positively to the manufacturers that have an entry-level product to offer. Start with a base boat at an affordable price, and option out with a few choices to give the consumer a great value. If that buyer has a positive experience at the dealership, most of those entry-level buyers will not want to risk having a bad experience with a private sale of a pre-owned boat and will continue to shop at the dealership when the time comes for an upgrade.

Some boat builders argue that fewer options mean a better chance that what you have in inventory will fit what the customer wants. Conversely, fewer options might mean that you can’t offer the entry-level boat buyer what they want and they may go elsewhere. Where do you stand on this issue? What has experience taught you?

Tom Mack: A big factor for entry-level buyers is finding the right dealer where they are comfortable, trusting, and know they will be guided to a good decision. This would be much more important than specific details on an option or two. As long as the options choices are carefully thought out, the buyer will typically be happy with the combination of the dealer experience and the best choice in boats – even if it’s not exactly what they would have spec’d out.

Be very careful listening to buyers’ wants in your market. Understanding and stocking the right options on various sizes and models that satisfy all “needs” and most “wants” is important. Thankfully, good manufacturers know what the large majority of buyers want, so when there are fewer options, most buyers’ wants have already been covered.

Paul Davis: The shortage is in used boats right now due to that pricing issue. The current boat builders that have the most aggressive price are thousands of dollars less (yes, with a stripped down boat) with four times the units being sold in our market. Thus, the list of options the boat has or does not have is not the issue. The boat needs to be a boat, motor and trailer package with a stereo and cover. This is what is and has been the strongest selling units in our market analysis with market share data backing up the results.  Most manufacturers are not willing to offer stripped down boats due to their branding and lack of field selling. They feel that they do not want to be grouped in the already known price brands.

Brent Christian: We have seen consumers being very positive with this streamlined manufacturing and consumer need-based product. You have to have the items on the product you know 80-percent-plus of the consumers will want. Research and talk to the dealers so manufactures don’t cut the wrong options out and include the ones that are essential to make it a success. By packaging the other regional popular options together, you get a price point base product with option packages by region for staying competitive.

Lauren Woodard-Splatt: We carry multiple lines in our dealership. We offer entry-level and luxury boats. We feel this is the key to not losing the entry-level buyer. We are able to offer an entry-level boat with fewer options at a competitive price tag. We also show them what other brands are available at our dealership, and feature and demo both the entry-level and luxury boat side by side. This allows the customer to see what they can afford and what they need versus want. This strategy has worked very well for our dealership. It allows the entry-level boat buyer the opportunity to look at all options (both within their budget and not) without leaving our dealership. They do not have a need to go elsewhere because we are able to show them all ends of the spectrum and make a decision that fits their lifestyle best.

Jeff Olson: My own experience with the entry-level buyer has been that we are more successful with products that offer fewer choices. Not having experience with the products, the entry-level buyer tends to be overwhelmed and confused by too many choices. As that buyer matures and gains experience, they will naturally learn more about the choices and options that they desire and will gravitate towards the products that meet their needs.

How have fewer options and more packaging of options impacted your sales process or how might it impact your process in the future?

Tom Mack: Our sales team finds the simplicity of fewer choices helpful in the sales process in selling value, not debating so many pros and cons of various options, building confidence that the boat’s options are best for resale based on market value, etc. In summary, it saves time and lessens the variables in the process. When you go to a nice eatery with a short menu, don’t you order pretty quickly?

Paul Davis: We simply order specific models loaded with all or most of the option and then stock certain models with little to no option to try and accomplish our selling price goal. This mix offers customers options with price in mind.

Brent Christian: It has really helped us out. We have a much easier time with product knowledge at the salesman level, an easier time concentrating on the customer needs and way less time spent explaining away items not needed or quoting multiple scenarios getting them above their budget, and then having to bring them back down to the affordable buying level again. We really like the packaging of the most popular options and have done that at the dealership level for simplicity even if the manufactures haven’t offered it. We will call it the Northwest package or Tobler Preferred option package, or Pro Staff package to get the items bundled together and help at retail and at ordering time.

Jeff Olson: Our sales process overall has been positively impacted by the packaging of options. Just as it is confusing to the buyer, it is also confusing to the salespeople to have too many choices. In addition, our process and systems have to be more robust in order to handle all the different options and choices. As the number of choices increases, so too does the complexity of the sales process.

What other observations would you like to share regarding the pricing of and options available on entry-level boats in today’s market?

Tom Mack: At our dealership, entry-level buyers are typically purchasing pre-owned. At that point, its really about the dealer comfort level, the preparedness of the unit (i.e. being as like new as possible), and trust regarding making a wise decision based on quality, “fit,” etc. If that buyer transitions from pre-owned to new, providing sound guidance without too many variables typically works best for all.

Paul Davis: One observation we have made this year is more new customers than we have seen for many years are shopping for their first boat. These customers have very little knowledge but are basing 75 percent of their buying decision on the lowest price. They are very computer illiterate and will come in with boats they have found online that may not be comparable to what they are looking at in stock or what their true boat needs may be. Years ago, the decision was based on the color of the boat or number of unique features or options. That is not the case today.  Price and benefits are leading the unit sales count from our experience. 

Brent Christian: By having a well-featured base model in stock and an upgraded model with packaged options, we are able to price and market the base model, and then by qualifying the needs of the customer, offer the upgrade for only X dollars per month. It really helps the consumer see and feel the value and make an easy decision for what fits them best. It doesn’t matter how many of the options you have or they want if you can’t deliver the product at the time they want it.

Lauren Woodard-Splatt: I feel that entry level pricing is key in today’s market. We are finally getting boaters back into boating, and new boaters are interested in our lifestyle again. The key to this strategy is for both the manufacturer and dealer to make larger margins while at the same time giving the customer a great entry-level price to keep them interested in boating. This is the ideal win-win-win situation for the manufacturer, dealer, and consumer. Once you start shortening the margins on any end of this matrix, it will make the end result to the consumer unsatisfactory. Shorter margins equal less satisfaction and less satisfaction equals less boaters.

Jeff Olson: In our market, the “sweet spot” seems to be under $20,000 for an entry-level 18-foot bowrider. We have a seemingly endless stream of consumers today visiting our dealership (either online, via phone, or walking in) looking for something they can buy for around the $10,000-$15,000 range. We track closely where these consumers end up if we are not able to sell them something and the majority end up buying privately.

Ideally, a base boat would start around $10,000, and packaged to retail for $15,000-$20,000. Recently, because of the increase in engine prices, most manufacturers have had to price their entry-level product beyond that “sweet spot,” and as a result, have missed the opportunity to sell a new boat to that buyer.

The manufacturers that do offer a product near that price range are gaining market share steadily, and it appears that more manufacturers are now attempting to reach that “sweet spot” buyer.

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