What are the three things that matter most when you're selling into a tough market? Position, position, position
Ron Clark is worried. The economy has been humming along for five years now, and he knows a recession is coming. Maybe not tomorrow, maybe not next week. But soon. And then what is he going to do?
Clark is president of Sundance Spas, a Chino, Calif., company that is one of the leaders in the outdoor-whirlpool market, and if ever there were a luxury item -- one that's an infinitely postponable purchase when bad times come -- this is it. And that's why Clark is worried. What's he going to do when the economy comes tumbling down?
The irony is that it was the last recession that caused Sundance to bubble to the top. It went from being just another run-of-the-mill spa maker -- in California it seems, if you don't make movies, you make spas -- into a company with sales of $38 million, up 1,400% since 1982. Pretax margins are about 8%, and the company has ranked on the Inc. 500 list of the country's fastest-growing small private companies for three years running.
The story begins in the late '70s, when Clark was just another young man who had taken over his father's business, a boats and plastics company. Clark Manufacturing became a job shop that specialized in catching the latest marketing wave. When vans became hot, it made custom conversion kits. When people discovered three-wheel motorcycles, Clark made one-of-a-kind motorcycle bodies, and when hot tubs became the rage, there was Clark Manufacturing, making housings for the air filters and motors.
From there it was just a short swim into making the spas themselves. But since Clark didn't have much money, he decided to make smaller, portable spas, the kind that come preassembled. Instead of spending $20,000 for a whirlpool that required you to dig a huge hole in the ground, you could buy one of Clark's spas for as little as $4,000.
Even though his units were smaller and less costly, Clark positioned them exactly as the big boys did. His ads featured sweet young things falling out of their bathing suits. The ladies were invariably blondes, with champagne glasses in their hands and come-hither looks in their eyes. In short, the pitch was hedonistic. A Sundance Spa was something no single man worth his gold chains and Porsche could live without.
That was fine and business was good, until the recession of 1982 hit. Suddenly all the Porsches were returned to their leasing agents, and swinging bachelors went the way of lava lamps, mood rings, and pet rocks.
"It was terrible," Clark recalls. "Traffic into the showrooms really fell off.'
And the few people who did show up were different. Gone were the male shoppers aged 25 to 49 with their shirts open to the navel. In their place were couples. And sometimes -- gulp! -- couples with kids.
"These people told us that they weren't going to go on vacation, it cost too much money," Clark remembers. "Instead, they were thinking about fixing up their houses, and looking for ways to entertain at home. We kept hearing that over and over again.'
When enough people tell you the same thing, eventually the light bulb goes on. Clark had discovered a new market! (Well, actually, it had discovered him.) And these new customers were describing what he had to do to survive. Clark started taking notes about what this new species of consumer was saying. "We listened, and then we played it back to them," Clark says. "We told them all the ways our spa could fit in with having a good time while staying at home and saving money.'
Now it was not quite that simple.
First off, the ads had to change. Exit barely clad nymphets. Enter mom, dad, and the kids frolicking in the backyard spa. And where those ads ran changed as well. They had always been in the sports section -- the first place a guy looks, right? From now on they'd be found among the home-improvement stories. After all, a spa was no longer a luxury but something you could add to your house -- like a deck or barbeque pit -- that would make staying at home more fun.
But it was more than advertising that had to change. The product itself had to change, and so did the attitude of the people who sold it.
Sundance's spas had always been small -- just perfect for two people who wanted to share a drink in the moonlight. Now, they would become large enough for the whole family. Seating, which had never mattered much, became more comfortable, and maintenance was made simpler. Macho guys might not mind crawling underneath the spa to change a water filter, but a busy mother of two would. Everything needed to operate and maintain the spa was put within easy reach.
And cosmetic touches became important. Before, the spa buyers were guys, and these guys liked everything to be in shades of dark blue or brown. But the new customers -- particularly the women -- wanted to match the rest of the house's decor. So Clark began offering "designer" colors -- sequoia and marble became big sellers. Tile was added to the trim, and the cabinets were covered with a variety of imported wood veneers.
All this was fine on the manufacturer's end. If customers wanted the product to change, Clark would change it. The fancy colors and cabinets boosted margins, something that wasn't hard to take. But retailers were having problems adjusting to the new market.
The typical retailer was like Clark's old client -- young, male, and single. They weren't quite sure what to make of married couples coming into their showrooms. And while they were eager to make a sale, they tended to rely on old habits. They directed their sales pitch to the man, and downplayed -- or forgot completely -- about what Clark calls the "creature features" that had been added to the spas. They still wanted to talk about the size of the motor that whirled the water, and all the electronic gadgetry that controlled it. Their reluctance to change is not all that hard to fathom. Just ask any woman who recently has tried to buy a car about her experience in the showroom.
"We had to launch an entire education campaign for the dealers," says Clark. "People sell from their own beliefs. We had salesmen pushing blue spas, because that's what they liked. We had to change that." Retailers got detailed information on the new features, plus new ads they could run in their local papers that underscored the repositioning. Said one: "By next month your vacation will be a fading memory. [But] Sundance Spas offers the 365-day-a-year vacation." Dealers were also told to stress the home-improvement value of the product.
"I won't say they thought we were nuts, but they were very reserved when we first tried it out on them," Clark says. "They came around, though. Given what was going on in the economy, I'm not sure they had much choice.'
Whatever reluctance they had disappeared when sales spurted. And all this home-improvement talk did not hurt revenues when better times arrived. The single customers returned, and so did ads in the sports pages depicting women in bathing suits.
That's well and good, but what happens when the bad times come again? Clark's ready for that, too. He'll just broaden his advertising approach. Ideally, he hopes to be able to convince people nationwide to purchase a Sundance spa as an alternative to taking expensive vacations. To make the offer more attractive, Clark has not ruled out the possibility of offering financing.
"I think we will be all right," says Clark, who has already instituted an internal cost-cutting program to hedge his bets. "What we did the last time worked. But all we did was listen to our customers. We will be listening again.'
RETHINKING YOUR PRODUCT
How to turn yesterday's luxury into today's necessity
After $100,000 sports cars and mink coats, a spa in your backyard has to rank as one of life's great luxuries. Yet when the economy turned down, Ron Clark of Sundance Spas convinced his market that spas were affordable necessities, not toys suited only for the lifestyles of the rich and famous.
Clark's repositioning strategy -- born out of desperation -- is nothing more than common sense. And it should also work if you're trying to turn a low-priced item into a luxury. Here's how he did it:
* Anticipate. "You have to talk to hundreds of customers about where they are going to be spending their money," says Clark. "They'll all talk about it differently, but you'll be able to find the common thread.'
* Move. Having spotted where the market is headed, you have to get there first. You have to determine how your product can be adapted to fit the changing marketplace.
* Sell the idea internally. The people who push your product sell it a certain way. If you are going to change your product's positioning, you'll have to convince them to change their selling approach as well. Counterculture-type salesmen may have been fine when Apple was trying to sell computers to college students, but it was time for haircuts and three-piece suits when they went to pitch the Fortune 500.
* Sell the idea externally. It should go without saying that all your advertising and marketing ought to be consistent with your new image, but sometimes not even the biggest companies catch on. For the longest time, the folks at Disney couldn't understand why nobody was coming to see the movies they aimed at adults. Then, they finally realized the name Disney means "family entertainment," and folks who like action films or love stories are never going to see a "Disney movie." When Walt Disney Co. created a separate division, Touchstone Pictures, to handle grown-up movies such as Who Framed Roger Rabbit? or Down and Out in Beverly Hills, sales soared.