Sunday, September 28, 2008

Dual Citizenship

Am I the only one who is surprised by the amount of boaters who actually have more than one membership? This phenomenon is more common on the East coast, where the mix of national membership networks is for more equal than on the West coast. What I mean is, out west, many boaters have never even heard of Sea Tow, whose presence is pretty much limited to Southern California. Vessel Assist's (now Boat/US) market share out there is so great, folks pretty much figure there is VA and there is 'you pay'.

On the East coast, neither network enjoys that kind of dominance, and most boaters up and down the eastern seaboard would recognize both brands. They also know that, when you need help, if you can't get Brand A, you can almost always get Brand B. The reasons for this are varied; in part due to the geographical strengths and weaknesses each network has up and down the coast. If you're 100 miles away from your yellow harbor, you may find yourself in a territory with more red boats (and visa/versa). Furthermore there are areas where the market saturation has reached parity, and no one brand really dominates. In those kinds of markets, it's very likely that one brand or the other may have a long ETA on a busy day. Disabled boaters don't want to wait. They don't even want to take the risk of waiting, so they join both.

Let me repeat: they join both. This deserves some exploration, because it flies in the face of some common wisdom.

First, I ask that you stipulate that these dual members are informed boaters, as opposed to crazy fools. They have been around the bay long enough that they have gleaned the value of having an assistance membership. They have probably been a member for years, and they read the local and national boating publications. Perhaps they have even used the service. They are savvy enough to understand that Sea Tow and Boat/US are actually separate, competing entities, offering separate products. My point is the dual citizens weren't duped by some salesman pitching both brands (never happens), and didn't somehow end up with both through some ignorance on their part. They made a conscious, and in their minds informed decision on paying for two memberships.

Now, maybe you are thinking these are just belt & suspenders guys, boy scouts who never leave home without spare batteries and a full tank of gas. There is probably some truth in that, but consider the possibility that this customer has actually made a wise choice. What can we learn from this customer? Certainly not that Sea Tow and Boat/US have marketed the benefits of dual citizenship; we all know they do not.

Well, first of all, dual citizens obviously feel that the annual membership fee is so cheap that even paying twice for essentially the same service is worth it to them. They have evaluated the risks, and have decided that the upside is worth close to $300/yr.

I am willing to stipulate that dual members are in markets with high concentration of boats and long distances available for those boats to travel. Lake Watchacallit isn't likely to have any dual citizen, but Long Island Sound, Miami Beach and the Chesapeake Bay are. Ironically, these are the markets that constitute the very core of the towing memberships. How many dual citizens are there? Does anyone know? Is it one percent of the total members? Ten percent? Ten percent seems high, until you consider this – many boaters have a towing reimbursement clause on their hull insurance and still they join. (Which means that some of the boaters are actually TRI-citizens.) I will wager that way more than 10% of the members have this reimbursement, and yet they join. Have the networks been giving away the store at today's price points?

Every time the subject of the annual fees comes up, the response I hear from the networks focuses how price sensitive their customers are. My reply is: "Are they? How do you know?" The existence of the dual citizens certainly eases the dock lines on that argument, at least a little bit. Allow me to ease the price point barge off the dock even more; back in the 90's, VAAA had two membership levels – Captain's and Gold. The Gold Card was $139/yr, ten years ago, and more than 10% of the VA members were Gold level members. Adjusted for inflation, that card is worth $187/yr today, yet Boat/US markets the VA Gold Card in SoCal for $168 (less if you buy it on the internet) – same 100 miles coverage. Can anyone argue that the cost of providing Gold Card level service in SoCal has somehow gone down in the past 10 years? Then why did the membership? Examined strictly from an inflationary standpoint, the networks, if not guilty of giving the store away, are at least having a fire sale.

So, some boaters have actually, voluntarily ponied-up double what the networks are charging. Can you imagine how many more might be sold on that price, if only someone would put some effort into marketing a membership product at that price?

Obviously, there are far more boaters who are shopping price on every purchase, and the marketing guys have to keep that in mind. But there is a nuance here that I fear has been lost. If you sell a product, and you find that some of your customers are willing to pay double your price tag, what have you missed? be continued....