Interview: Three marketing students analyzed the Beach County surf market
In anticipation of the surfing World Cup, marketing students from Santa Beach College decided to conduct a study of the surfboard market. They recently published the results in a relevant professional journal. Santa Beach Tribune has met the initiators of the study Sophie Petty, Karl Ruttiger and Daniel Barnes, as well as the supporting professor, Monica Albertson, for an interview to discuss the idea and the results of the study.
Barnes, how did you come up with the idea to conduct this study?
Daniel Barnes: The three of us are avid surfers and we were really blown away when the community announced that it was applying to host surfing competitions. Then we noticed that despite the busy surfing market in Beach County, there is practically no reliable information about the surfboard market in the area. This of course aroused our interest in being able to gain practical experience and to collect this information ourselves. So, we contacted Prof. Albertson and presented her our proposal – she was thrilled and agreed immediately.
We only have a summary of your study. Mrs. Petty, could you please explain to us the results of the study more accurately?
Sophie Petty: Of course! We proceeded very systematically and therefore, I will present the results also in this order. And I have to warn you that I must go a bit more into detail. We analyzed a very similar region and thus were able to make prognoses for the Beach County market. So, first the market: The prices of the boards are roughly around 600 euros. The need for surfboards here was 640 surfboards per company in winter and 700 in summer. We would also forecast these numbers for the Santa Beach market. For next year, a 35% growth is expected in both seasons. In the year after, the growth will probably weaken slightly. However, a growth of 18% is expected here. We also observed that sales between April and September were generally higher than in the winter season. We are curious to see how the coming winter season will develop in Santa Beach.
Now more precisely to the market participants: Along with their own sales, there is (especially for small suppliers) also the possibility to cooperate with large retail chains. These wholesalers buy products in larger quantities and sell them under a different brand name (usually at a reduced price) on neighboring islands. In this way, wholesalers are not impacting the domestic sales volumes, and Santa Beach’s surfboard producers can develop new, additional sales potentials. The wholesalers were, however, generally granted significantly lower prices than can be achieved in their own sales market. In the past, prices were around 320 euros. Each year (summer and winter season), approximately 100 surfboards were sold to a wholesaler. The wholesaler takes over the sales and the marketing completely so that there are no further costs for the surfboard manufacturers.
Wow, those are a lot of interesting facts that you analyzed in the study. Would you like to add something to that, Mr Ruttiger?
Karl Ruttiger: Yes, but not much. Sophie forgot to mention that we made two more discoveries regarding the consumer purchasing behavior. First, we have learned from the surveys that although surfboard buyers research and compare surfboards online, they only buy their boards from online retailers in the region. Many shoppers explained doing this because they usually know the manufacturers personally. Second, we found that the location within the region doesn’t affect the purchasing behavior. Thus, it does not matter how far the production site is from the beach.
Are there any hints you would like to give the potential market entrants?
Daniel Barnes: Yes, there are. We have heard many times that consumers want to have more choices. This refers, as mentioned by Sophie, to the number of surfboard producers, as well as to the individual design possibilities for the boards. If there is an intelligent way to differentiate yourself from the current competition, then you have good chances to establish yourself in Beach County. To conclude, in our opinion, the situation in Santa Beach is very positive for new entrants, which of course does not mean that it’s an easy task.
Many thanks for your honest opinion Mr. Barnes. And I thank you all for your time and the conversation.
To give the participants a general idea of the model’s sensitivity, the following benchmarks are given in the Startup Web (Surfing Special -> Benchmark). These values are based on the assumption that only one company will change this factor and the competition will not make any changes.
The benchmark is 3 employees for this division. As a result, the technology index increases by 10% in the first half-year. However, it should be noted that there is a limit to development acceleration. Developments take time, so a team of more than 5 people does not significantly increase development speed. If there is a technological advantage of 5% in comparison to the rest of the market, the company can expect about a 5% growth in sales.
On average, companies spend about €45,000 per half-year on website development. The study showed that with a budget of €70,000 or more, customers become overwhelmed by the additional functions, and the additional positive effects are minimal. Here, 3% sales growth was achieved with a lead of 5%.
The higher a company’s variant index, the more the company can individualize each surfboard according to the customer’s wishes. 60% of the variant index depends on the index of the company’s investments and 40% on the supplier’s index. If the index is increased by 40%, one can expect a 20% growth in sales.
On average, the companies employ 3 staff members in customer service. One customer service can generally advise about 200 clients per half-year. The fewer customers each advisor has, the better the advice.
The average market price of a surfboard is €600 per board. A price reduction of 5% would lead to a sales growth of 14%. A price increase, on the other hand, would lead to a decline in sales of 12%.
Terms of Payment
The market benchmark is immediate payment. However, any extension of this payment term leads to a sales increase. With a payment term of 6 weeks, an 8.5% increase in sales can be expected.
The average advertising budget is €45,000. A reduction of this budget to €40,000 leads to a decline in sales of about 3%. Respectively, an increase of investment to €50,000 leads to a sales increase of about 3%.
Our Surfer Special will cover the upcoming surfing competition. We would, therefore, like to provide our readers with some background information about surfboard manufacturing. We met with Jordan Cleary to make this possible. Jordan is the shaper at SurfTight, a surfboard manufacturer in Laketown. He agreed to take us into his workshop, where we experienced the entire surfboard production process from the “blank” to the finished board. Jordan also told us more about the craftsmanship and the materials used for shaping and shared a few stories based on his experiences.
Production of the blank
Surfboards can be made in one of three ways: from balsa wood, using the sandwich method or from polyurethane. However, we will only describe the last method, as SurfTight specialises in it.
Jordan starts the manufacturing process with a polyurethane “blank”. This blank is the core of the board and consists of polystyrene foam into which a stringer (wooden rail in the middle of the board) is inserted. Several stringers are also possible, depending on the length of the board and the envisaged driving style. The blank is produced by a machine. Liquid polyurethane is poured into a mould under high pressure and heat, reacts to the heat and forms dense, white polystyrene foam. After half an hour, the blank can be removed from the mould and left to harden. Moulds of various sizes are available for shortboards, mini malibus and longboards. At this point, however, Jordan explained that many surfboard manufacturers now prefer to buy ready-made blanks, as good quality is available at relatively low prices. Production facilities for blanks are therefore no longer necessary – but SurfTight has held on to them because they are part of the company tradition. Once the blank has cooled down and hardened, it is cut in the middle, one to three stringers are inserted, depending on the board, and the two halves are glued together again. The blank is ready when the glue has dried.