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Fighting the impulse to lower prices

We know boat sales are being made at the fall shows. That’s the good news! But, they’re driven by lowering our prices and killing our margins. Hey, these days dropping price is more prevalent than President Obama on TV. That’s not good news (lowering prices, I mean!) Discounting is out of control. Why is it that when the economy slows, we knee-jerk to dropping our prices? Sure, there are times when discounting makes good marketing sense. But it’s like a drug . . . it’s addictive. Just ask auto makers or big box stores – they have literally addicted their customers to shop only “on sale!” So, they’re now stuck in a continuous discount rut. Oddly, in a similar way, we’ve “trained” boaters to doubt that our boat show specials are really special . . . because we foolishly run ads right after our shows proclaiming ”boat show prices still in effect.” Now that’s a believability killer!

But, if we’re going to give away our profits, marketing experts say discounting should be unusual and only in a disciplined plan to achieve a distinct objective – like, move out all center consoles. Moreover, there may be even better ways to make sales happen.

Promoting big discounts on “everything in stock,” particularly these days, can lead customers to see a red flag and conclude you’re desperate or in trouble. The better choice, for example, is to designate a specific model that’s on sale for a definite time. Moreover, it’s really critical to your credibility that you stick to it – when the time is up, it’s up, period!

An even better choice is to increase value rather than just hack up prices . . . again, on a selected model(s) for a defined time, not on everything in sight at the same time. If the experts are correct, the post-recession buyer we’re now facing is more concerned with value than ever before. It’s logical – because with many choices in boats, and the fact that there really is so much product parity today, dealers can only differentiate their boats by adding value others don’t.

In addition, studies indicate the post-recession consumer now looks at major purchases like boats in a much longer-term perspective. Accordingly, adding free packages ranging from desirable amenities they would likely add anyway to complete maintenance services for an extended period could be viewed as the increased value that will cause these buyers to close.

So make your discounting decisions carefully and as part of a smart marketing plan. You’ll likely profit from it.


8 comments on “Fighting the impulse to lower prices

  1. Schwarzel

    Norm, You talk about the car dealers with discount programs. We have that now in the outboard motor repower. Most customers will not repower a boat with out some factory incentive. Extended warrantys, free “smart” gauges or some “gimmie” package. We have tought the customer to wait for these. If you need proof, just look as far as the BRP’s Fall extended warranty deal. 5 year warranty for free. It does sell motors, I have sold 2 new motors in the last couple of days. Point is we had to have a program before any one would even look. How do we break the cycle? I for one have no idea but we better figure if out. Maybe if the warranty is 5 year, all the time that may help. But I am open for ideas.

  2. Komrade Carl

    If you don’t have real value in a product only the perception of such, then you can give that away by lower prices. If you have true higher value product (more costly components & parts) & you think you need to compete with the lower value product by lowering your price(& your profit margins) then you need to re-evaluate your sales ability. What we are finding in this smaller market (fewer qualified prospects) is that they in fact are buying quality. You need to get some sales backbone & educate those in your organization to sell the high value aspects of your products.
    If you are willing to give it away the wolves (bottom feeders) will line up to take it from you. Remember the last act of a desperate man is to give his products away.
    I agree once you start giving your margin(profit) away it is near imposible to get it back without changing your product & your reputation, to a cheaper persona. Look at the so called name branded products sold at the afore mentioned big box stores. Do you really think that the Millwaukee drills, Kohler Faucets, etc & other suposed”Quality” name brands at Home depot/Lowes/Menards, Wallmart, etc. are as good as the ones they made 10 years ago or are the same as the “commercial/industrial grade one they are selling through other chanels?? Please!!!!!!!!!!
    I now see so many boat companies anouncing lower priced lines & models and wonder why???
    The consumer understands that for them to do that they had to take something good (value) out.
    Discounts should be used sparingly to get buyers off the fence, not to tear the fence down & let the wolves in.

  3. Chip Hart

    I have constantly heard over the last 6-7 years that sales at boat shows aren’t what they used to be and the show gets the blame. You hit another nail on the head above: boat show prices remain in effect well beyond the close of the show if not for up to 4 months! It’s not the shows, it’s consumers having now been trained to expect the boat show deal any time they want it.

  4. Jim

    And speaking of low prices, when are we all going to call NADA out on their absolute butchering of what used boats are actually selling for? They cost boat dealers more money with their free online supposed book values than anything else–including “bank repos”–in todays market. This needs to be adressed and NADA needs to be contacted by all dealer networks immediately. The longer we wait to hold them accountable for their disinformation, the more it will cost us all.

  5. Noel Osborne


    Lots of side to this issue. Dealers have been too willing to over discount for years which has lowered gross margins and corresponding net profits to an acceptably low level. Much of this practice has been because our salespeople were not trained to sell value as opposed to selling on price.
    The big problem now is distressed product. Many dealers are desperate to unload product at any margin or lack of it. This places the dealer who is trying to hold reasonable margins at a decided disadvantage. You can try to gain a little more margin by selling the advantages of your dealership but in the final analysis the buyer is going to purchase their boat at close to the lowest price. It appears that the new retail is now at or close to dealer cost. I don’t know how a dealer who wants to hold reasonable margins can do so until the current glut of distressed inventory is flushed from the system.

    Noel Osborn

  6. Marc Grove

    There are more factors to the story for us in the Florida Panhandle and Gulf Coast. My friend Noel is correct about the glut of inventory . I reached a point earlier this year where I was either going to sell nothing or get some blood on my hands with the repos . I sold a few when to opportunity arose . Making something is better than nothing When you are 70 miles away from Textron’s and GE’s dumping ground and Genmar’s motor repository, you better sell your dealership’s quality and expertise .
    So who would like a boat with a Manufacturer that is bankrupt ? Who will not ask for a discount knowing there is no warranty on the hull? Norm , how about you ?
    We used to be in the nearshore/offshore fishing boat business. Economy aside ,who here would like to spend 50-150k or more on a boat that you can bring a handfull [still shrinking] of fish to the dock with . So should I just keep paying G.E and wait for the guy that hasnt heard the news yet ? Or should I discount that boat till it sells ? I still cant fathom ordering a new boat at dealer cost and paying interest on it when I know the customers can get one at last years invoice [or less] at will right down the street . Yeah , Ill discount till this stuffs gone if I dont go out of business first .
    I take an honest approach with my customers . I tell them I need to reduce my overhead,increase my service and would like to be there for them if they have an issue. I am ahead of the game to take a loss on the old and unsupported stuff . Hold those margins long enough and I will be shopping for those dealers boats at the repo store.
    Marc Grove

  7. Kyle

    In this day and age of the marine industry, you can not and should not compare it to the auto or home improvement industry. From products to warranties on boats, everything is quite different. With the internet, customers are shopping on line to find the best deals out there. If that means left over inventory, then customers are finding it. The days of floor planning large inventory are gone, unless you are ready to go out of business, you have to be able to market your sales and service staff better than the dealer down the street or on the other side of the state. You want your service department paying all your bills and the gravy coming from the sales side. You can’t hit a home run with every sale, but if you can work from a low margin, you will probably out last the boat manufactures products your selling or the other dealer is selling.

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