Hear the Rumble in the Distance?
Wanda Kenton Smith
April 18, 2023
Soundings Trade Only Online Reports from retailers and manufacturers following the boat shows, coupled with an informal survey I conducted with sales and marketing executives, tell me we need a mixed bag of tricks to address new-boat sales and the state of consumer confidence.
“It seems that the grinders have come back into the market — the people who always try to beat you down on price,” one retailer told me. “We’re having to sell again, which isn’t a bad thing, but it’s definitely different than what we experienced the past few years.”
Another top retailer said: “Builder inventory is still slow coming to the market, mostly in the larger-boat segment. Boat shows, in terms of attendance, are back to pre-Covid numbers and are becoming less relevant. Interest rates and political chatter are finally filtering to the $1.5 million buyers and below. In addition, inventory turns are slowing down, and borrowing costs are rising. … This will affect dealers who have not reserved for this during the better Covid times.”
Despite such challenges, this retailer added: “Larger-yacht buyers appear to be snubbing their noses at Washington and are going to enjoy their time. QTR — quality time remaining — is being heard from many customers. Baby boomers have worked hard and want to enjoy their earnings and inheritance.”
Another industry veteran concurred: “Sales have definitely slowed across the board, but there is a worse softening among smaller, less-expensive boats. The slowdown isn’t really hurting big-boat builders yet, as they still have an order backlog to work through, but that backlog is shrinking fast, and now we’re seeing inventory start to build up in dealerships. The consensus seems to be that consumers are moving to the sidelines to see what happens with interest rates, bank failures, global politics and the war in Ukraine, not to mention an election coming up in 2024.”
Such is the creep of uncertainty. While the recreational boating industry appears to be holding its own, we may be just one event away from a major headwind. This is the time for marketers to think about how we might navigate the potentially turbulent economy ahead.
Consider the sage advice of internationally acclaimed speaker, author, market researcher and affluence expert Pamela N. Danziger, who wrote in Forbes: “While there are pockets of secure consumers that can keep spending come what may, the everyday man or woman on the street is feeling the screws tighten on their spending. Consumers face an unsustainable situation with their spending, and retailers must prepare for what’s coming next.”
What’s a smart retailer or other type of boating business to do? Marketer Chris Ramey, founder and president of The Home Trust International, who has spent the past 25 years consulting with high-end brands in more than 35 countries, thinks about all this in terms of affluent audience segmentation profiles. He sees no single, monolithic wealth group, but instead, several subsets.
The Henrys, as he calls them, have household income of $200,000 to $250,000. They’re high earners, but not rich yet, and they comprise the largest segment of the wealth market. Their depth of wallet is limited, as there is a difference between high income and net worth.
Ramey’s next category is the Affluents. They have household incomes above $250,000. Most of them are successful working stiffs. They vacation and live nicely, but few of them charter or buy yachts.
Then, there’s the Hannas (HANNAS), with net worth of $1 million to $5 million. These are high achievers who don’t think of themselves as rich.
Next are High-Net-Worth Individuals (HNWI), whose net worth is $6 million to $30 million. They have a nice home — maybe a couple of nice homes — and they don’t buy luxury products impulsively. They also don’t live the life of the rich and famous, although a certain segment may be status-driven.
Finally, there’s the Ultra-High-Net-Worth Individual (UHNWI) with a net worth above $30 million. These people didn’t change their behavior much during the pandemic. They traveled between their homes, enjoyed their families and lived as they desired.
Ramey says the current mindset within these circles is clear: “The affluent aren’t as focused on wealth as much as those who aren’t wealthy. Conspicuous consumerism is mostly dead. Boating will always be popular because it’s a mechanism to escape.”
While that “escape” driver is advantageous for the marine industry, today’s volatile marketplace may thwart the skyrocketing growth we’ve enjoyed the past few years. Already, a smattering of troubling reports nationwide show presold production boat deals going south for a variety of reasons, despite the buyers’ loss of sizable deposits.
These and other early indicators mean it’s more important than ever to keep prospects and customers engaged. Here is Ramey’s advice for how to do that.
First, if your customer has a boat in production, it’s essential to maintain positive, ongoing communication while continuing to build desire. “Share the story of the vessel as it is built,” he says. “Remember, the sale isn’t over until they’ve taken delivery and you’ve earned your commission. The worst thing you can do is take your foot off the accelerator.”
For marketers seeking to nurture and create new engagement with prospects and customers, Ramey says, the focus must be on brand desire. “Any HNWI or UHNWI can buy whatever they want. It’s your job to create the desire for them to buy now. HANNAS can buy anything they want; they just can’t buy everything they want. The winner will be the one that creates the most desire.”
Another strategy he favors includes an aggressive, consistent approach to ongoing, tech-based marketing. “Leverage third-party data to identify and market to your best prospects every day. Make it a goal to increase your number of qualified prospects with financial capacity by 50% this year. Be present. Get your ads in front of prospects several times every week. Frequency elevates your gravitas. Good marketing tells your story, keeps your brand in front of best prospects and drives brand preference.”
Ramey says digital marketing is especially well-suited to do the heavy lifting, but he is quick to add that everything contributes: emails, articles, books, birthdays, pictures and personal touches.
“Focus your efforts on, and match values with, your best prospects,” he says. “Create serendipity by meeting them at philanthropic events, clubs. Send them books or articles you’ve enjoyed reading. Serve your prospects while everyone else is trying to sell them something. Act as their insider and thought leader.”
And, he adds, always be discreet. “Never be critical of anyone. Respect everyone. The same rules you were taught when you entered the business remain. Don’t talk about sex, politics or religion.”
Ramey expects the current economic environment to last through the next election, although it’s possible that sitting on the sidelines will get old fast for those who have full wallets they can open.
While we all may be feeling a sense of restlessness and some foreboding, I agree with Ramey’s take on what we should be doing today: “Those who invest in marketing now will be the first to emerge from the down market. Marketers who ignore the eventual will be the last to enjoy the revival.”
This article was originally published in the May 2023 issue.