Reality Check; Input From the Outside World

Sometimes I get accused of being too much of a pessimist. Maybe sometimes I am. On the other hand, maybe the correct question is whether or not my occasionally pessimistic outlook is justified . I’d prefer to think I’m just taking a hard look at real business issues.

 
For a change, I’m going to let somebody else raise the tough issues and, incidentally, write half my column for me. Can’t beat that. I received this email unsolicited. It is published here complete and unedited. Go read it and then I’ll tell you what I suggested when I talked with the guy (It’s below). Hurry up please. I’m late getting this column done.
 
I had lots of no doubt accurate and valuable platitudes about business cycles I recited to Dale. None of them seemed to make him feel much better. I received this email over a month ago (more by the time you read this). Thinking about it since then, I’ve come up with a couple of ideas, or maybe just helpful perspectives.
 
First, let’s all decide to call the wood from China birch. That’s apparently what it is, and there’s no reason we should be helping to perpetuate the myth that it’s anything else.
 
Second, recognize that it’s been around a long time and is going to continue to be around. For cheap completes sold in big chains it probably makes sense and may even have the benefit of getting kids skating cheaper.
 
Third, it’s clear that Chinese birch skateboards don’t hold up when used by real skaters doing real skate tricks. So while some of the major brands may be tempted by cost to try and use it, enlightened self interest will make them back off. They can’t afford to have their decks collapse on a massive scale in the way Dale describes. The issue, then, becomes whether Chinese manufacturers can procure the harder Canadian maple and make and deliver decks that are as good as what’s made currently in the US. What I’ve said is that they can and will if the market makes it worthwhile in the same way they have with so many other products.
 
If the quality is there, and the price is lower, then they will become a standard and only new technology in skateboards will slow that process down. I suppose the other thing that could happen is that the major brands could decide as a group not to buy decks from China. Aside from the issue of legality, that’s a level of industry cooperation I rarely see. Even if it exists, it can break down if business pressures get too strong.
 
The other problem is that we already know that blanks take a big piece of the market. If Canadian maple Chinese decks of good quality become available, I suspect people who are willing to buy current blanks, and maybe some others, will be more than happy to buy an even cheaper, high quality product.
 
But where will the Chinese get their Canadian maple? It doesn’t appear that they will get it from LaGrand Lumber & Veneer. It sounds like Dale would have to price it in such a way that he’d lose money if he wants the business. Well, maybe if they get in early they can corner the market, but it doesn’t sound like Dale and the other members of management at LaGrand are the kind of people who believe that you can lose a little on each piece but make it up in volume. So unless LaGrand can dramatically change its business model, it doesn’t sound like losing money selling to the Chinese while helping knock its existing domestic customers out of business makes much sense.
 
Dale might do five things- the first one of which he is probably already doing. Talk to all the other domestic veneer suppliers and find out how they are reacting. Second, he might publicize the quality issue (I guess I’m starting that for him) with an ad or two in Skateboarding Business to begin to create some awareness- sort of like “Intel Inside.”
 
The third one is to meet with the companies he sells veneer to and talk about their plans and their reaction. Is there room for some form of cooperation on new skateboarding technology? Fourth, and he’s probably already doing this too, he has to look at the source of the existing decline in veneer sales. How much does he really believe is the result of Chinese decks coming into the country, and how much is the slowing of skateboard sales?
 
Finally, and depending on the answer to four, he should certainly be looking for new markets. That’s something any business should be doing all the time. It’s worth some attention even when part of your business isn’t threatened because it positions you much better when, inevitably it seems, some threat emerges.
 
The devil, of course, is in the details. I can’t offer specific advise to Dale or LaGrand without specific information about their business. I hope my general advice is useful, and I thank Dale for sharing this very real issue with us.
 
Jeff Harbaugh is President of Jeff Harbaugh & Associates, an action sports consulting firm that helps managers and owners improve profits by focusing on the few issues that are really important. Reach him at (206) 232-3138 or at jharbaugh@msn.com.
 
SIDEBAR   
 
Dear Mr. Harbaugh:
Thank you for your insights and ideas you submit in your columns in Transworld Skateboarding Business magazine. I always appreciate your hard line on doing what is best for the business in general.
I am the sales manager here at LaGrand Lumber & Veneer, Inc. and am very alarmed by the Asian influence on business here in the States in general and especially with the Skateboard Industry. We supply Hard Maple veneer from our three mills to skateboard deck manufacturing plants throughout the US, Canada and sometimes abroad. In an average year we sell nearly *** . 25%-30% is skateboard veneer which we have been supplying for nearly 25 yrs.
As you are probably aware, the furniture industry has taken huge hits from imported components shipped in from China. Over a dozen plants have been closed forever in North Carolina because those companies now order their components and completed goods from China, idling over ten thousand workers. I have clients in the component manufacturing business here in the States that have lost 50%+ of their business to Pacific Rim countries. This is trade they’ll never get back.
Mean while, when you and I go to buy a new piece of furniture for our home, none of the cost savings benefit reaped by the mfr is gained by us. That same $3,000.00 sofa made two years ago completely in the States still costs $3,000.00 even though it cost far less to produce overseas. The mfr and the Chinese govt. are the winners.
While furniture imported from China, made from Chinese raw material may be acceptable in appearance and performance, my experience with skateboards is totally different. As was indicated in the article, Skateboard Science (Skateboarding Business, April 2002) Chinese raw material (veneer) does not match Hard Maple which has been the standard forever. The veneer, touted as "China Maple" is in fact not Maple. It is a specie of Birch. Tests performed at the Forest Research Laboratory in Madison, WI prove that this specie has approximately the same physical characteristics as Soft Maple, a specie long ago abandoned by the skateboard industry.
I have two customers who bought China Maple veneer from a sales rep here thinking they were buying North American Hard Maple. That rep should be tarred and feathered (or worse), but that’s another topic. Anyway, they manufactured the decks and sent them out through their normal distribution channels. In short order, literally thousands of decks were returned in various states of ruin and decay. Decks were split, broken, and mushy. All due to the quality of veneer used to manufacture them. One customer nearly lost his largest account because of the poor quality. He was able to salvage the account when we provided him with the necessary veneer to quickly replace the order.
My fear is that as a raw material supplier I should have seen this coming long ago and it may be too late to react. I believe that if we don’t do something soon, cheap imported decks will become the standard. Once riders become accustomed to a lower standard they will no longer know the difference and imported decks will be acceptable. I know this may be insulting to the current rider who can tell the difference, but my concern is perpetuating the business and I’m afraid the young, new rider won’t know and won’t be told.
You should know that what really convinced me to write you is an experience I had yesterday with an export agent. He called requesting a quote on container loads of skate veneer going to China. Upon quoting him our standard prices, he laughed and told me that if I wanted to do business with China, I needed to learn how to lower my prices. We price veneer based on the cost to produce plus a reasonable profit margin. I asked him what benefit I would gain from hurting my loyal US customers by selling overseas for less and loosing my profit margin. He laughed and responded that I’d have my foot in the door when the Chinese totally take over US skateboard manufacturing.
There is no doubt that manufacturing is down due to the economy. However, there is also pressure coming from beyond the economy and if we don’t react now while we are slow and have the time to react, we will all be left in the dust when the next surge (and I’m confident there’ll be one) comes.
I am venting this on you because you are a connected person who people seem to listen to. We do as much as we can to promote the industry including attending shows and working on promos with our customers. Try as I may to get the message out that quality and integrity starts with the raw material, it seems to fall on deaf ears.
Is the skateboard manufacturing business preparing to roll over and allow imported decks become the standard? Should I start looking for new markets to replace our skateboard veneer sales? Should I "learn how to lower my prices to China"?
Please advise.

Best Regards,
Dale Rosema
Sales Mgr – LaGrand Lumber & Veneer, Inc.

 

Hype, Technology And Trade Shows; Not Enough of Some, too Much of the Other.

Slowing growth, or a decline in year over year sales if that’s what your company is experiencing, was inevitable in skateboarding. Sure, we would rather it didn’t happen. But since we all knew it was going to happen, it might as well be sooner rather than later so it’s less painful.

What I didn’t see in San Diego, happily, was what I saw at the Vegas snowboard industry show in 1995. Or was it 1996? Whatever. Vegas that year was the biggest snowboard party I’ve ever seen with lots of hype and lots of new brands. And then the snowboard consolidation wiped out most of those brands.

Skateboarding doesn’t seem to be doing that to itself. The number of brands isn’t expanding dramatically. We’re resisting, so far, “net never” dating, and there isn’t a Japan around that’s going to yank the financing many companies need to survive as there was in snowboarding.
 
Still, this setback has wonderfully focused the mind on some significant business issues. Here are some of the ones mine is focused on.
 
Hype
We need less hype. Between network television, Investor’s Business Daily, The Wall Street Journal, The New York Times, and more bad ads featuring skateboarding than I can even begin to count, it’s just too much. Maybe what I mean is we need the right kind of hype. At least part of skateboarding’s success has been its ability to be underground, a little dark and urban, and maybe somewhat unintelligible in its humor and attitude toward non-participants. That kind of hype—the kind that makes people curious about skateboarding is a good thing.
 
I’ll go a step further. The kind of hype we want encourages people to skate or learn to skate better—not just to buy a T-shirt. I recognize that we can’t do much about the people who just want to create an association between their brand and skating for the sake of selling a product and don’t really give a damn about skateboarding. I hope the skate-industry companies will look at all their advertisements and promotions through that filter—does it encourage people to skate? I think that for the most part they do.
 
Two people I respect have pointed out that the slowing of skateboard growth may be related to demographics. As they put it, we’ve got a lot of sixteen-year-old boys who are discovering girls and cars to the detriment of skating. We’ve also got a lot of seven, eight, and nine year olds who are discovering skating, but their disposable income is limited and their purchases largely controlled by their parents, who tend to favor spending less rather than more and buying pricepoint decks. The suggestion is that our slowdown/decline may be caused by the loss of older kids before the younger ones, although they are coming up, are ready to replace them. In this scenario, everything will be fine in a couple of years.
 
I haven’t checked out the census data recently, but if the numbers bear it out, I can see some validity to this scenario. The caveat, and this is where we get back to hype, is that it won’t matter how many kids there are if too many of them think skateboarding is lame because of how ubiquitous it’s become.
 
Technology
Meanwhile, cheap decks from China are happening. I’ve written enough about that and the potential (probable?) impact in previous articles. What’s the typical strategic response in any industry to lower-cost foreign competition? Technology and product improvement that can’t be matched, at least not immediately.
 
Of course, the skateboard industry has spent some years now explaining that a seven-ply Canadian maple deck is what a skateboard is, and nothing else is a skateboard. Nevertheless, if you’re a factory making skateboards and you want to compete with Chinese labor costs, you’d better figure out a better skateboard technology that gives you a competitive advantage.
 
Over at PS Stix, to nobody’s surprise, Paul Schmidt has taken a shot at that. His Featherlight technology results in a skateboard he describes as lighter and stronger. It contains a layer of new material that results in a stronger, more consistent pop back when you flex it. The new material doesn’t go all the way to the tips, and the deck will still wear out.
 
The good news is it looks just like a traditional skateboard. The bad news is that it looks just like a traditional skateboard. How do you sell something nobody can see when they inspect the product?
 
PS Stix’s answer is to have a display for the retailer that shows the cross sections of the deck. An awful lot of people tried this in snowboarding to differentiate their constructions, and it never seemed to work. Maybe the differences weren’t significant enough and maybe there were too many of them. Probably both. PS Stix seems to have first-mover advantage on this, and there won’t, at least at first, be 100 guys using cross sections to explain why their construction is better and their decks perform better.
 
PS Stix’s Featherlight deck will sell for about ten percent more than a traditional deck. That’s what you expect from a product with a competitive advantage. If it catches on and the volume justifies the effort, eventually the low-cost producers will figure out how to make it for less. Then PS Stix and the other manufacturers will have to move on to another new technology. Sounds to me like it could be good for the consumer. Oh yeah, I guess that’s what competitive pressure is supposed to accomplish.
 
How do we get notoriously conservative skateboarders to accept these new technologies as they come along? We’ve created the form of rock star known as the teamrider. We’re more or less convinced that what they ride influences what other kids buy. It’s pretty clear, then, that we have to get our teamriders to ride decks with the new technologies.
 
That shouldn’t be so hard. The company says, “Hey, you need to ride this new technology from now on and love it.” The rider says, “I don’t want to!” The company says, “Do you want to get a check every month?” The rider says, “Yes!” The company says, “Given the number of blanks being sold and the margin pressure we’ll be under if this new technology doesn’t work out, you won’t get that check unless you ride and love this new technology.” The rider suddenly feels love for the new deck welling up in his heart. People with agents should be able to see the business necessity.
 
Trade Show
Over at the International Coup D’Etat Skateboarding Exposition, sponsored by Alien Workshop and Foundation Skateboards and supported by others who showed some product and paid for some of the festivities, companies had a good time and got some business done. Tum Yeto’s Tod Swank says he spent less cash than he would have spent exhibiting at ASR and was able to make, because of the involvement of his and other companies, a contribution of at least 10,000 dollars to the Children’s Museum where the event was held. Nice.
 
Powell, Nixon, and Gravis were upstairs in rooms at the convention center. Bet they saved a few bucks with no loss of business. I thought the atmosphere up there was more conducive to doing business than it was on the floor of the show.
 
Meanwhile, various companies were spending well over 100,000 dollars to attend ASR, not counting lost business and management time. Under current business conditions, I think they have to look themselves in the mirror and ask, “If I didn’t come to the show or cut my presence way back, would I actually lose much business?” They might consider spending some or all of the money they spend at ASR on other ways of meeting their customers’ needs. If you haven’t seen it, you might check out my article (“Trade Shows Again”) in the July 2002 issue of TransWorld SNOWboarding Business. It suggests an alternative trade-show strategy used by some snowboard companies that might be appropriate for some skate companies. (If you e-mail me, I can send you a copy.)
 
Then there was the “secret” meeting called by ASR to address issues that the skate companies have with ASR. I’m told about 25 skate-company heads were invited. I didn’t go. Couldn’t find the secret room. Don’t even know the secret handshake.
 
The skate companies are unhappy because of the cost of ASR and the pressure from ASR to participate in other kinds of advertising and promotion as part of the perceived price for getting the booth you want in the location you want regardless of how long you’ve been coming to the show. They also don’t feel it’s right that ASR pays SIMA a bunch of money to support the show but don’t pay a dollar to skateboarding now that skate is arguably more important to the show than surf.
 
I guess there was also some frustration expressed with the fact that there’s no beer allowed in the booth. You know, that one bothers me, too—especially after waiting in a long line to pay four dollars for a small beer when I could have gotten a big one for free somewhere.
 
I think these concerns are justified, although I’m not so worried about the beer as the other issues. It’s getting harder and harder to justify the expense of the shows. I imagine ASR recognizes these issues as being legitimate. But they can justifiably ask, “Who, exactly, should we negotiate with?” There’s no skateboarding equivalent of SIMA, and unless IASC gets more industry support and Jim Fitzpatrick is ready to quit his day job, we can’t really point there.
 
There’s an old Chinese curse that says, “May you live in interesting times.” For a lot of reasons, including those discussed above, this would be a good time for the skateboard industry to cooperate in ways it never has before. The industry’s history is such that I won’t hold my breath. Still, imagine if we could.

 

 

You Did What !!?? Starting a New Snowboard Brand

Your first reaction is that they must be crazy. Starting a new brand when the snowboard market is dominated by five companies fighting to take market share from each other, pushing distribution to every corner of the retail world and, to some extent, using price as a weapon in the battle doesn’t seem to make a lot of sense. You can’t meet their prices. You can’t afford their ad budget. You can’t pay big bucks for team riders.

We all remember the uncounted brands that died when these market conditions started to emerge. What’s changed? Something? Or maybe nothing, and the people starting the brands have decided they’d rather have a good time losing their money in snowboarding instead of losing it in the stock market and not having any fun.
Like the stock market, the time to get involved is often when everybody else is fleeing into the night. It’s at least possible that the market conditions that make it look like the worst possible time to start a brand actually make it the best.
Making the Case
The argument would go something like this. There are a group of smaller (or at least non chain) snowboard retailers who are, above all, snowboard shops. They need a product that everybody else doesn’t have. There are a group of snowboarders for whom snowboarding is important. That is, it’s still part of their lifestyle, they think of themselves as snowboarders and they aren’t interested in just buying what’s on sale. Maybe that group isn’t as large as it use to be, but it’s still there and it’s still big.
To succeed as snowboard shops, those retailers need a product that everybody else doesn’t have, that has roots in snowboarding, that offers them a margin they can live with and the high probability of selling it at that margin. The customer they are looking to serve also wants something everybody else doesn’t have that confirms their deeper interest in and commitment to snowboarding. The new brands, the argument goes, provide a way for these retailers and these snowboarder to do some business together based on a common need and interest. It’s niche marketing.
The downside for these new brands is that success may mean fairly slow growth and staying pretty small (Option and Never Summer are the pioneers in recognizing and implementing this strategy over many years). In fact, if they tried to grow too fast, they’d lose the market advantage they have over the large players. They can succeed because they don’t have to compete on price and don’t have to run a huge advertising and promotion program that’s required to reach the mass market.
Hell of a theory. The counter argument is that even if everything I said above is accurate, the business may still not make financial sense. You’re may be paying more for decks and other products than larger companies. Slow growth is fine, but how long can you afford to lose money while you’re true to the market strategy. At the end of the day, can you get big enough quickly enough to provide a reasonable return on investment? Maybe even for “core” shops, the terms, prices, and support they get from the big guys is just to compelling to leave much room for new, small brands.
I guess I know which side of the theory the guys at the new brands will come down on.
Rome
Josh Reid, along with Paul Maravetz the founders of Rome Snowboards, takes a philosophical approach to building the Rome brand. No, no, no, he’s not getting marketing ideas from reading Plato’s Republic (Didn’t somebody already do that and name their brand Atlantis?). But he believes that snowboarding continues to be “rooted in the counterculture,” if not to the same extent it was ten years ago and that as a result the “philosophical aspects of the brand are more important than in other industries.”
What he means is that there are still a lot of committed snowboarder who see their choice of snowboarding as more than a sport and the equipment they purchase as more than getting the best deal on what they need to participate in that “sport.”  Those people are Rome’s target customer.
Well, so far it seems to be working. The brand came out two months before Vegas- not necessarily the best timing to attract dealers for the coming season. Still, they’ve got around two hundred dealers in North America and, both last season and this season are getting requests for more product from dealers who have been surprised by demand.
Mike Arbogast, at Mountain Riders in Stratton, says there’s lots of buzz about Rome. He doesn’t know exactly why- maybe the kids are just looking for something different. Mike would probably agree with Josh’s comment about the counterculture. According to Mike, “Every kid who comes through with a Grenade sweatshirt is looking for a Rome hat [“sex, drugs, and snowboarding”] to top it off.”
It’s telling that Mountain Riders carries only four brands total. They’ve cut back on the two large ones to make room for more Rome and Allian. They’ve dropped a third large brand this year season.
By design, Rome has chosen not to meet the requests for more product. They built to orders for this season. Dealers may be disappointed at not being able to meet demand, but hopefully they’ll console themselves with good sell through at full margin and remember to order more next preseason.
In the long term, that’s probably good marketing for Rome, but it also reflects financial realism, something was often sadly lacking in the snowboard feeding frenzy of seven or eight years ago.
Rome’s on track to be profitable in the next year or two. They could have shown a financial profit the first year but decided, correctly I think, that there were some required expenses that had to be made consistent with the brand strategy.
Allian
Allian is practically an old timer among the new post consolidation brands. Their first season was 2000-2001. “It’s run and owned by people who stand on top of 100 foot cliffs and jump off them for no good reason,” is how Sales Manager John Stanos puts it. “We’ve had enough head injuries that maybe we can see a little clearer. It’s not complicated. It’s just snowboarding.”
Allian has a target market of the kids who spend a hundred days on the mountain. They are in about a 175 shops in North America and have about 20 distributors world wide. They only make what they can sell, and they try not to spend money they don’t have. The company expects to be self sustaining financially this year.
There’s a certain relaxed attitude and flexibility that I see as contributing to their success. They see their shops, reps and riders as partners. Sure they want to grow, but they don’t want shops to take product they can’t sell. Of course the reps have a sales budget, but it’s doing what’s right for the brand that’s important. “If there are five shops in town, we should only be in one right now,” says Stanos.
Boardsports in Eugene, Oregon is an Allian dealer and Jon Faulkner is one of the owners. They started looking at new, smaller brands a couple of years because the distribution of the usual brands was getting so huge, and because they don’t carry any ski brands of snowboards. John said they liked Allian right away because, “It was new, it was local, and the boards rode great for how basic they were- the company wasn’t based on hype or design or team.
What strikes me and is that the first dealer I called described the brand to me in essentially the same way Allian Sales Manager John Stanos did. It’s not about hype and craziness like it was the first time around. It’s just about snowboarding. If Allian can maintain that connection between its brand and its dealers, it should do great.
So What Do We Got?
Rome was a bit more formal in describing its business model. Given the owner’s background, that’s not too much of a surprise. But both brands have much the same strategy and market concept.
They’re both rider driven. But that doesn’t mean just team riders like it use to mean, but serious snowboarders in general. That’s both brands’ target market. They both want to grow, but not at all costs. The brand’s positioning has to be maintained. They know the mistakes other brands have made, and are going to make building a snowboard brand a lot more fun by not making them.
They won’t spend money they don’t have, make product they can’t sell, or try to be “the next Burton.” It may be snowboarding and it should be fun, but it has to be good business. There’s a sense of realism that didn’t exist in a lot of brands that aren’t around any more.
That’s a good model for success.

 

 

Resort Retention and Occam’s Razor; Keeping it simple makes a lot of sense.

William of Occam was a Fourteenth century logician and Franciscan friar born in the English village of Ockham and, yes, somehow I’m going to get this back to snowboarding without claiming that he invented the first one. He’s the author of what’s become known as Occam’s Razor. It states, in its original form, “Entities should not be multiplied unnecessarily.” It’s been massaged and interpreted to mean that when you have multiple possible solutions to a problem, then, all things being equal, the simplest one is usually the correct one.

All things never seem to be equal. Still, I thought about Occam’s Razor at the National Ski Areas Association in New Orleans this spring. Mike Barry, NSAA’s president, was beating the drum for the group’s growth model, and talking about the issue and importance of retention. It shouldn’t come as a surprise to anybody reading this that one of the long term problems of the
winter-sports industry is that only about one of ten people who try snowboarding, or skiing for that matter, stick with it.
As consumers, maybe we can say that’s fine with us—the fewer people on the slopes, the better we like it. Of course, we also like fast lifts, lots of choices, and great amenities. And at a cheap price, too. But those things cost money, and the only way resorts can afford them is if enough people show up to cover the costs and leave at least a little profit.
If the retention rate doesn’t improve, the rate of snowboarding growth declines, and aging baby boomers drop out of skiing, then we could see a decline in snow-sliding participation that’ll leave the winter resort business in a world of hurt. That could leave us all with a lot fewer, more expensive choices. Taking a cue from Mr. Occam, isn’t there a simple way to improve retention?
Complexity
Studies have been done. Models created. Rental programs revised. Snow-sliding lessons revamped. Instructors reeducated. The competition analyzed. Lots of money has been spent. Some of it has been our money. Well, actually maybe most of it has been our money—the winter-sports industry’s that is.
This is, I guess, all good stuff. Certainly the problem’s urgent enough to require and justify some of our attention and treasure. And I even have a sense, though I couldn’t prove it, that we might be making some progress.  Buried, or at least obscured, under all this noble activity is something we all know and accept without question. It’s that the upsurge of skiing in the 70s and snowboarding in the early 90s was driven by people who started young, got hooked, and stayed passionate about the sport. Especially in the 70s they
somehow managed to have a good time without a lot of five-star restaurants, quad lifts, on-snow condos and, from our perspective at least, good equipment.
Snowboarders, generally a younger group than skiers, are still a bit like those skiers from the 70s. They just want to be there and are willing to put up with some inconvenience if necessary to get on the mountain. No doubt that tendency will decline with age—there’s something to the phrase “youthful enthusiasm.” But it seems clear that, at its simplest, what we (you, me, and
the resorts, too) have to do is get them young and create a habit. How?
Simplicity
Sometime during my stay in New Orleans, I had occasion to hear Mike Shirley, the Chief Executive Officer of Bogus Basin, talk about his resort and to talk with him. Bogus, I learned later, is a community resort—a 501C4 corporation that doesn’t pay income taxes. There are no investors or stockholders and this, according to Shirley, lets them think long term.
I didn’t know all that in New Orleans. What had caught my attention was Shirley’s mentioning of Bogus Basin’s season pass program where any kid aged seven through eleven can get a season pass for 29 dollars.
Okay, I heard that. Then I waited for more explanation. There wasn’t any. My MBA-scarred mind, accustomed to sophisticated business models and complex financial strategies, froze. Could something this simple really be an affective approach to the problem of retention? And, equally important, how the hell was I going to write a Market Watch analyzing the idea when there wasn’t anything to analyze?
This was weighing heavily on my mind a couple of months after the convention when I finally called Shirley to try and get enough information for the article. He took pity on me and gave me something to work with. It seems that Bogus, like other resorts, used to have a complicated and arcane method of pricing lift tickets and season passes. Then in the spring of 1998, they chucked it all and went with a 198-dollar season pass and the 29-dollar pass for kids seven through eleven.
The idea of a cheap kid’s pass wasn’t new. Colorado was already giving free passes to all fifth graders. Bogus now sells around 30,000 season passes a year of which around 5,000 are the kid passes. Shirley thinks the purchase of the kid passes is often associated with the purchase of other season passes, but there’s no requirement for that.
What’s the short-term financial impact of the 29-dollar kid pass? Shirley sees it as not costing money, but of course you can’t know that unless you know what the actions of the pass purchasers (and their parents) would’ve been if they hadn’t bought the passes. What we can say is that the incremental cost to the resort of putting another butt in a lift seat is more or less nothing. To really evaluate the financial impact, we’d have to be able to answer the following questions:
  1. If these kids hadn’t bought 29-dollar passes, would they’ve bought the199-dollar pass or a bunch of lift tickets?
  1. What would their parent’s behavior have been if the 29-dollar passesweren’t available?
  1. Did they spend more days on the mountain and, as a result, spend more money on things besides lift tickets then they would’ve otherwise?
Shirley can’t offer specific answers to these questions. But he did tell me Bogus Basin is full of kids, and their visit numbers have doubled in the last five years. I don’t have any information on what the resort’s overall
financial performance is. Obviously, if they’d gone from making to losing money over the last five years, the strategy would be less attractive.  “It’s so easy to convert these kids,” Shirley says. “We’re creating a lifelong habit without them even thinking about it.”
Return On Investment
Neither Shirley nor I, unless we know the answer to the three questions above, can tell what Bogus’ cost is for this program. From a cash point of view, it’s probably close to nothing, though there may be an opportunity cost as described above. Conceivably, it’s cash positive, but we can’t really tell. I’d go one step further and point out that by simplifying its pricing structure, Bogus has actually cut some administrative expenses, and that savings has to be included in any cost calculation. I don’t know if Shirley has measured that or not.
Looking down the road, the return on investment has to be huge if only because the cost is apparently so small. We can’t conclude that Bogus has doubled its visits in five years only because of this program, but it’s hard not to believe it’s worth the cost, if there is any cost. The NSAA study emphasized how valuable, in terms of dollars spent, a snow slider who started young was compared to one who started as an adult. Bogus’ 29-dollar kid pass is consistent with that thinking.
There’s another value to creating committed snow sliders early that I don’t think I’ve ever heard anybody talk about. If resorts have customers who are going to get there no matter what, come more often, and stay longer, they are going to be cheaper to get. And easier to keep. That has a favorable impact on your cost structure from top to bottom. Think of the competitive implications. Suddenly, you’re only competing with other winter resorts—not with Disneyland, cruise lines, and Arizona golf packages. Your committed snow slider has already decided they are coming to a winter resort.
I’m not prepared to proclaim such programs as the retention solution. But it’s simple, apparently cost effective, and consistent with what we all think creates committed snow sliders. I hope more resorts consider it, or other equally simple ideas.