Hot tub manufacturers map out a plan to get the market back on course

4 Q 709 AqI reached Jim Johnston on his cell somewhere in the western part of Kansas, driving across the Great Plains en route to Florida. I was hoping to hear some positive news about the state of the spa industry, and vice presidents of sales and marketing are usually reliable sources of hope and optimism.

"You're trying to write an article about positive things?" he deadpanned. "How many people have you talked to?"

I chalked Jim's initial response up to road fatigue and the barren and flat terrain (some would generously call it "gently undulating") he was crossing on the return half of his near-coast-to-coast tour of Marquis dealers.

Further west, in sunny Southern California, Bob Hallam, CEO for Vista-based D1, sounded similarly gloomy on his office phone, echoing Johnston's sentiments with eerie precision:

"Well, if you're looking for positive information and news, there really isn't any. I'm an extremely positive person, but we're busting our butt to break even and make a little bit of money."

Clearly, this wasn't the weather or the topography talking.

"Right now the industry is down more than people think," Hallam added. When I told him we'd been hearing it was down about 50 percent from where it was just a few years ago, he said, "You can cut that again in half. It's 25 percent of what it was back five or six years ago. And every hot tub manufacturer seems to be surviving.

"How can that be?"

Hallam's guess is that a lot of the smaller manufacturers have been simply hanging on to see if a bump in springtime sales reversed their fortunes enough to keep business going.

"April and May are usually good months," he adds, "and we start to see business increase. And that's happened. Business has increased. We're still half of what we were last year, but more are being sold and people are happier."

Hallam and Johnston shared their ideas about how they plan to keep their businesses and their dealers from running off the road, as did Laurie Batter, a PR executive who represents Watkins Manufacturing.

Each mapped out a different course, with eyes on navigating the rocky road the industry is traveling. One company is cutting back on R&D; another plans to innovate its way around the potholes. One advises its dealer network to hunker down, another tells them to get out and make things happen. But there's a common thread. They all plan to get by - with a little help from their friends, the dealers.

Strategy Sessions

Spa manufacturing executives spend countless hours meeting to come up with strategies to help their dealers, whether that's through new product designs, lower price points, merchandising materials or simply words of support and encouragement. But in the end, the industry's success depends heavily on the vast network of thousands of disparate dealers that dot the map.

"Dealers need to be able to lean on a manufacturer for support, assistance and training - and to help them get through this tough time," Batter says. "They need a manufacturer who will provide all that support and assistance they need to provide their customers with the absolute best spa-ownership experience."

Toward that end, Watkins is focusing its energies on new designs and new features for its flagship brands.

"Hot Spring has given what I'd call a next-generation product update to all models," Batter says. "And with that come a lot of innovative changes and customization."

Batter says Watkins has also made big changes to its Caldera line, which has what she describes as a "more-organic" look and feel and is positioned as more of a health and wellness product.

"There is reason for hope and optimism because people are responding to things that are new and different and innovative and fresh during these tough times," she says. "And so we see hope for the future."

Dimension One also prides itself on innovation, especially in an area Hallam calls "hydronomics," which he describes as a study of the principles of how a hot tub is going to work on a bather's body. But right now, that's not his company's primary focus.

"We have 80 or 90 patents right now, and we spend a huge amount of time and energy on that," he says. "But guess what? We have cut back on R&D. Those are things that made the company grow, but you've got to cut back on it when you're in, let's be honest, survival mode."

The company has been stressing that same survival mentality to its dealers. Instead of jet setting dealer trips (Hallam's description: "Come down to Mexico and we'll have a big party and we'll celebrate! We'll do a little bit of this and that, but mostly partying!"), D1 did regional seminars throughout the country, connecting with about 80 percent of its dealers, most of whom were able to road trip to one of the five more-practical destinations.

"We got the dealers - small guys, big guys - to sit down and we took them through what it takes to survive," Hallam says. "We explained to them, 'You don't have to go out and spend a lot of money on marketing, and every dollar you save is a dollar earned.' And we got them to start to look at what I call the 'Hallam One Percent Rule.'

"That means go find one percent in every corner of your shop. If you can save a couple of dollars on your advertising by being more efficient, if you can get another one percent out of your chemicals, if you can sell one more chlorine generator, all of those things add up.

"There are very few grand slam homeruns in this business, but there are a lot of singles."

Johnston, still driving, says success really comes down to attitude. He cites one dealer who "simply refuses to participate in the recession," a notion he says has some validity.

"If you're willing to just show up every day and try to make something happen," he says, "and take extraordinary measures to make something happen, it's probable that something will happen.

"The ones who sit tight with that bunker mentality? Those guys are getting hammered pretty good.

"The other people who are going off-site, even if it's out to their own parking lot, to try to draw more attention, more activity, more awareness, they're doing better."

Turns out it's not about working smarter instead of working harder. You've got to do both, and you've got to accept that the rewards might not match the effort. That's not what matters today, according to Hallam.

"When things were rolling, you didn't have to worry about the small things, you know?" Hallam explains. "If you didn't worry about the small things, instead of making $100,000 you made $90,000. You were pretty happy either way.

"But now that you're making $10,000, it would sure be nice to be making $15,000 or $20,000."

Driving Business

Though it seems like dealers have to work twice as hard for half the results right now, there are a few things they can do to offset the dip in spa sales. Perhaps the best way to do that is through the service department, which in addition to adding trip charges and chemical sales, gives dealers a chance to speak with customers face to face.

"When our dealers started pushing ozone generator repairs and replacement, sales of those went through the ceiling. So many people in the industry never bother to tell the customer that they've got to be changed.

"So if somebody goes out and replaces one for $200, the customer has a new hot tub and he's going to be happy for another two years.

"The dealers make some money, but more importantly they've gotten back to talking to their customers. Maybe that customer will want some chemicals. Maybe they just want to say, 'Hi. You know, we've really enjoyed our hot tub, and our neighbor is looking for one.'

"It's cheap, intelligent business practice."

Still On The Road

After speaking with Johnston (driving and talking and fatigued) for a good half hour, I thought it best to let him get both hands back on the wheel.

Asked for final thoughts, he told me about the dealer in Kansas City he'd visited during his weeklong trip.

"In the hour I was in the store, they sold three spas. Part of it was the luck of the moment; that I just happened to be standing there. But there are clearly customers out there.

"Yes, there are a lot of questions about the economy. But at some point, as long as a person hasn't lost their job and hasn't lost their home, at some point they can no longer suppress the urge to go out and buy those things that will enhance their lives. These people have been putting it off for a year now. But a lot of people are coming out of it going, 'You know what? I'm still here, life is still good, and I want to make my home environment a little more interesting.' And a spa is a great thing for that. So I feel good."

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