Plotting a new course Featured

7:00pm EDT February 27, 2006
“We need to give the consumer a product and experience in using the product that they have never had in this industry.”

Dustan McCoy, chairman and CEO, Brunswick Corp.

“The first thing we need to do is take the complexity out of their business in unbelievable amounts.”

Dustan McCoy, chairman and CEO, Brunswick Corp.

“It can be really intimidating to operate a boat. If you get into a certain size boat and hit the marina slip or dock, a 10-ton boat can do a lot of damage.”

Dustan McCoy, chairman and CEO, Brunswick Corp.

If you’ve ever been around boats, you know that they can be a lot of fun. If you’ve ever owned a boat, you also know that they require a lot of effort and money to maintain.

For many people, the hassle, effort and cost associated with boating ends up not being worth the limited time they spend on the water, so they leave the recreational activity behind.

Dustan McCoy wants to put a stop to that.

“We need to give the consumer a product and experience in using the product that they have never had in this industry,” says McCoy, chairman and CEO of Brunswick Corp. “Our products are fundamentally, across the industry, of lower quality than consumers expect in expensive durables like boats.”

The problems are many. Boats are assembled as more of a collection of available parts rather than as an engineered product, making it difficult to offer warranties and consistent service. Dealers are selling competing brands out of the same showroom and are often left to track down service issues with the parts manufacturers rather than with the boat manufacturer. The end result is frustrated customers and a high churn rate for the industry.

McCoy has a plan to solve all these problems and place Brunswick squarely at the top of the marine industry. It involves rethinking the way everything is done in the industry. It means building a product oriented to what the consumer wants in a way that dealers can more easily maintain, and it means changing the whole manufacturer-dealer relationship.

It means reinventing an industry. Here’s how McCoy is going to do it.

Maneuvering into position
Brunswick is well-known in the bowling and billiards industry, but its marine division accounted for about 88 percent of its $5.2 billion in sales in 2004. Marine brands such as Sea Ray, Bayliner, Mercury and Boston Whaler were already in hand, but there were gaps in the portfolio.

“The first decision we made was we needed a full suite of brands and products — leading brands and products — so we could go to any dealer anywhere in the U.S., Europe, Asia or South America and say that we can provide you, as a single OEM (original equipment manufacturer), the best brands and best products to meet any consumer need in the market.”

The company made acquisitions to fill gaps in product and price point to reach this goal. In 2004, for example, it bought Crestliner, Lund and Lowe aluminum boat companies to provide Brunswick the ability to offer products in all major aluminum boat segments. It also acquired the Sea Pro, Sea Boss and Palmetto saltwater fishing boat brands, which gives Brunswick an array of products in the offshore saltwater fishing category.

“We now have 19 boat brands,” says McCoy. “Today, we can provide any dealer a boat, from a 10-foot aluminum boat you would put on top of your car to a 100-foot yacht that you could take a king or queen on.”

The company also picked up companies that will help it build better products. For example, it acquired the remaining 30 percent of Navman NZ Limited, which will help Brunswick fully integrate electronics and global positioning systems into its products. It’s this integration that’s key to winning both consumers and dealers.

“We have begun to make a fully integrated, sophisticated vessel,” says McCoy. “Every piece works in support of another. In the past, we didn’t engineer systems on the boat. Great auto and aircraft manufacturers, they engineer whole systems.”

Brunswick is moving away from building a boat from the parts available on the market to engineering every system so the products are of better quality.

“When you do that, you significantly increase the level of quality and usability of the product,” says McCoy.

By acquiring key electronics suppliers and focusing on systems engineering, Brunswick can start integrating the entire electronics system on a boat, allowing different components to communicate. A larger cruising boat, for instance, might have a stereo, DVD and two televisions. In the past, this would have meant four separate remote controls.

“If you reduce that to one controller, as well as allowing the user to use the television in the master suite to look at a chart system, check on the instruments, watch TV or get on the Internet, then you are getting to the point of delivering the same level of performance as they would expect in something they pay a lot of money for,” says McCoy.

Using systems engineering to improve quality also allows Brunswick to start offering an end-to-end warranty, which helps entice consumers to buy a Brunswick product. It also gives it more control over its parts system, because it is specifying every part rather than relying on what’s currently available on the market.

“It allows the dealer to go online and find any part for any boat, and they can actually order it and know that it will fix the boat that they have,” says McCoy. “If we then begin to give same- or next-day service, we have now created an entirely different customer experience.

“If you are doing great systems engineering, everything in the boat is built in an integrated fashion and everything is spec’d and designed properly, then what you have really done is created a platform from which wonderful designs flow. Once the fundamentals are down, it creates the ability and the time to take the thing to the next level.”

The dealer experience
Brunswick is a manufacturer. Consumers buy boats from boat dealers, which is a fragmented part of the industry providing varying levels of customer service. Part of the problem is the way the entire industry is set up.

“If you look at most boat dealers, they are relatively low-volume activities,” says McCoy. “They generally carry several brands, and the brands they carry are not from the same OEM. They are dealing with maybe four or five OEMs. Now think about the different models they have from each, which are not integrated. They can’t go online to one source and order parts.

“Seven warranty claims means dealing with seven different manufacturers, and even if they are on a computer system, it means going to seven different sites or portals. You begin to see the horrible complexity they have to live with.”

It’s a complexity that McCoy that Brunswick is aiming to eliminate.

“The first thing we need to do is take the complexity out of their business in unbelievable amounts,” says McCoy.

The integrated-products initiative means a specific part number from Brunswick that Brunswick will stock and distribute, eliminating the guesswork on repairs. A distribution system has been put in place to deliver the parts either the same or next day to help the dealer put the customer back on the water as soon as possible, increasing satisfaction with both the dealer and the product.

In return, McCoy wants dealers to change the way they sell products.

“We believe dealers should be exclusive in the brands they sell,” says McCoy. “It makes their life easier, and through a reduction in complexity, they become more profitable.”

That’s where the brand portfolio comes into play. Brunswick can now go to a dealer and offer it an array of products similar to or better than any combination of products or price points it may already be offering.

Dealers will be given protected areas so they are not competing against the same brands and will be offered longer-term dealer agreements so they can earn certifications in Brunswick’s sales and service programs. Currently, most dealers operate on one-year agreements with their OEMs and always have the fear of losing a brand. McCoy wants to eliminate that fear by rewarding dealers with better agreements.

“In order for us to really help the dealer, there has to be a whole suite of other products and services we bring to the dealer to make them more profitable,” says McCoy. “It means financial services for the dealers, which varies from the ability to borrow money so they can buy boats for us or ensure consumers can get the retail financing, extended warranties or the insurance they need to complete the purchase.”

To make sure these services are available, Brunswick acquired Marine Innovations, a provider of extended warranties for boaters, and continued its promotion of Brunswick Acceptance Co., a joint venture that provides wholesale financing to its marine dealers.

Even with the right brands and a level of services not offered by anyone else, changing the dealer-manufacturer relationship across the industry is a slow process.

“A dealer and his or her sales rep from a brand may have been together for decades,” says McCoy. “They may have had an association with a brand for decades.”

Convincing dealers to make the change means telling them what Brunswick is doing and delivering on promises.

“I don’t think we’ll have a problem attracting the best and brightest dealers,” says McCoy. “We’ll describe what we’re doing, and as more of them see the execution and understand the transformation that will occur and that we will be the leader, we have been finding that they contact us.”

Changing attitudes
McCoy also wants to change the way consumers perceive the boating industry.

“We need to help dealers enhance consumers’ experience in learning to use the product,” says McCoy. “It can be really intimidating to operate a boat. If you get into a certain size boat and hit the marina slip or dock, a 10-ton boat can do a lot of damage. If you are out on Lake Michigan, you might go out and not see land for three hours. There’s some intimidation that goes with that.

“Unless you help them learn to use the navigation and charting systems, they can feel lost. We need to help people through that. We need to help people understand what type of boat to buy from someone they can trust and that they will know it will work. Boating is not an activity like driving, where everyone is out doing it. We need great dealers who can provide that sense of community, warmth and comfort to permit people to get into the activity.”

It will take the effort of the entire boating industry to fully achieve this. That’s why Brunswick is supporting industry efforts to promote boating.

“It’s another way to reach consumers in a nonbranded way that will bring consumers into boating,” says McCoy. “They will not all come to us, but it’s important, and the industry needs to be doing it.

“We need to be growing the public’s perception and understanding of boating so we can grow the industry at faster rates. My children and I, our best days have been spent together on a boat. Wonderful things happen on the water. Families actually talk to one another. There’s a lot of camaraderie. There’s teaching and communication going on throughout the family. As difficult as it is to boat, that’s why it does so well. Those that become part of it become captivated by it and never want to leave it.”