Talking Price Points

Bob Gawlik is vice president and general manager of FreeFlow Portable Spas, a manufacturer of rotationally molded hot tubs in Ontario, Calif. AQUA recently asked Gawlik about the hot tub market and his company's place within it.

1. How've things been for FreeFlow?

Conditions have been very, very difficult the last couple of years. We all know that. From our perspective, our whole approach to the marketplace is we really specialize in a product that retails in the $2,000 to $5,000 range, and so, as bad as the general conditions are, we're seeing that more and more people are looking to entry-level products or to products in our price range to expand their current offerings, to just offer more to the consumer. In today's environment in particular, it's more and more important to offer a larger breadth of product, and I guess that's where FreeFlow comes in. And again, I know conditions have been difficult, but what we're seeing on the positive side is that more people are exploring our particular product line.

The basis of our product is a process called roto-molding, which is how we make the shell. People are asking, 'Well, what does this mean? How does it work?' So from that standpoint, it's been positive.

2. So you're getting your product into new dealerships that might not have looked at you in the past?

We're really having an opportunity to go ahead and talk to people who, let's say, two or three years ago, wouldn't have talked to us because the market was so vibrant and they were happy with where they were at. But people are rethinking their business models and expanding into the type of products we're making.

3. Do people who end up buying a rotationally molded hot tub go into the buying process knowing about the product?

In some cases they do. But I think people take a real hard look at what the spa is selling for and then get into the features and benefits. I think the other thing that comes into play is that our products are either plug and play or can be converted to 220. So the other attractive part of our product line is that it's simple to install. You're not really looking at a lot of pre- or post-installation costs. If you've got a good cement foundation in your backyard you're going to be able to make our product work. And that's the other thing that's becoming real appealing. So in addition to having an attractive retail price point, the installation is pretty easy.

I'd also add that FreeFlow has a very strong energy message. So the other thing that you're seeing is that the after-installation energy costs are very low, too. So what it amounts to is that it's a great package for a great price, and we'd like to think that it's in sync with the value-minded customer today and looking forward.

4. Switching gears, we hear a lot about keeping your Web site current so people will keep returning. I noticed you've got a blog that's updated pretty frequently.

Our president has been running that program. The meaning behind it is to generate leads for our dealers. The blog is brand new, started just a few weeks ago, but we're trying to create an awareness, and then, when we receive inquiries, pass them along to our dealer network. This helps explain to the customer what roto-molding is. They start researching hot tubs, find FreeFlow, do a little research on us, then hopefully inquire. So we're kind of kick-starting the process.

It links in with Facebook and Twitter, too. Our president has been working on all of that.

5. Do you have any insights into the coming year?

Well, I think it's going to be more of the same. I think it's going to be really challenging again. But the dealers who are becoming more aggressive as far as expanding their product offerings, marketing their businesses more aggressively, these are the guys that are doing well.

But when I look at a problem on the horizon that's been there and continues to be there, it's the lack of financing at the dealer level. There is a very limited amount of financing that's available. This is really a problem. I think one thing that would really help in the future is if somebody would step up and offer some general floor financing to the dealers. But that's been a real struggle ever since Textron went out of business. I think somewhere down the line something needs to happen there to really get things rolling.

GE has been very limited, from my understanding, in terms of the manufacturers they're allowing to use their services. So that's been problematic.

So financing, I think, is a real stumbling block for the future.

6. So if you have a dealer you're talking to, and he says, 'Great. Let's do this. I just need a few tubs but can't afford the floor inventory right now,' what can you do?

There's not much we can do. We're not equipped to offer any type of financing aside from taking a credit card or something like that. But we really don't have a floor financing program, per se. Some of the larger companies have the ability to carry a lot more of that than we do, so unfortunately that's a disadvantage for us. Again, in years gone by when Textron was available, people were able to take the plunge a lot quicker with new products because they had the financing available and had ample time to pay for it.

Once people become 'believers' and start offering what I'll call entry-level products, they start shifting inventory. They'll replace more-expensive brands with more economical ones. So for that reason we try to accommodate requests for one and two spas when necessary. So if someone wants to get started with our program, they'll wait until they sell one or two of the other ones, then get some from us to balance their inventory and broaden the price selection. We're seeing a lot of that. But it is a slow process.

7. Are tubs in this price point going to continue doing well once the economy turns around?

I think they're there to stay. You can't ignore the value at that price point. That concept of a good value for the price doesn't go away in good times. One of the things we take a lot of pride in is that we manufacture to the price points that I'm describing; we don't go up and down and in between everything; we concentrate on doing a very good job in the price range that I'm describing. So we like to think that that's going to stick long-term.

8. Any final thoughts?

The dealers who have broadened their thinking are doing OK. But the dealers who are just waiting and waiting thinking that things are going to go back to the way they used to be - they are struggling. That's really what it's coming down to. We're putting a lot of confidence in the dealer network, and we'll just have to wait and see what happens.

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