Scorpion, Inc. Increasing Share of Market by Selling Reliability to the Seasoned Snowmobiler
An interview with Warren Daoust
Published by SNOWsports Dealer News - August, 1971 - Volume 2, Number 3 - The Monthly Publication for Snowmobile Dealers, Distributors and Manufacturers
This transcript made possible by the editors of SnowGoer magazine.
Scorpion, Inc. is a major snowmobile company, founded early in the industry in a small town in the heart of the snowbelt in Minnesota, which has since been acquired by a large conglomerate corporation.
The company was founded in 1959 by Glen Gutzman, Dick Harrison and Eugene Harrison as Trail-A-Sled, with the primary product being an "air sled." The company changed its product direction and began manufacturing and marketing snowmobiles in 1963 and in 1969 was purchased by Fuqua Industries, an Atlanta, GA-based conglomerate. The company's name was later changed to Scorpion, Inc., and at the end of last season, general consensus is that Scorpion sold over 20,000 1971 machines.
Fuqua Industries also owns boat, yacht, trailer (Shoreline) and lawn and garden manufacturing companies as well as a chain of movie theaters and radio and television stations.
Emphasis from Scorpion since the introduction of its snowmobile has been on dependability and reliability, and the company's marketing philosophy is self-admittedly centered on the matured, seasoned snowmobiler as the primary buyer of Scorpion snowmobiles.
Although in the first half-dozen years of snowmobile production, styling was not a major concern of the company, the 1971 and new 1972 machines have been drastically re-styled and the new models feature many other changes, both mechanical and esthetic.
Scorpion is one of the few major snowmobile companies that has not yet branched out into other products, perhaps because of the parent company's diversification. It's only product is still snowmobiles, a fact which some dealers have found desirable.
Warren E. Daoust, 34, president and chief operating officer of Scorpion, is a New York native, and has been in sales and marketing positions throughout his business career. He joined Scorpion through Fuqua in March, 1970 as vice president of marketing. Prior to that he had spent several years in marketing and sales positions with a leading snowmobile distributor in the Midwest.
Daoust was named president and chief operating officer of the company in December, 1970.
SSDN: Please give us a little background on Scorpion and its beginning in the snowmobile business.
DAOUST: Glen Gutzman, a native of the Crosby area, for a long time had worked on equipment to be driven over the snow and other types of terrain. His primary work had been on an "air sled." Around 1963, he became involved in developing a snowmobile. He went to work on one with the idea of making it more durable and longer lasting than those he had seen. When he started to commercial build and market the snowmobile, he discovered he had a much greater market for it than for the air sled. As a result, he dropped the development of the air sled and went strictly into snowmobiles.
This was at the beginning of snowmobiling's boom period, and Scorpion was able' to take advantage of the rapid expansion.
From 1964 through 1968, Glen and his partner, Dick Harrison, ran the company on their own. As was the case at the time for many manufacturers, demand kept exceeding the supply of snowmobiles and Scorpion snowmobiles were under-produced.
Gutzman and Harrison for many years concentrated on building a very functional and reliable product. They did not do a great deal in the way of design change until the later years.
As the growth of snowmobiling became apparent to those both in and outside of the snowmobile industry, mergers began to take place. Fuqua Industries had been looking at snowmobiles and had studied many companies for possible acquisition. After a careful evaluation, Fuqua decided Scorpion would be one of the independent companies which had been independently financed and which had the potential to be one of the leaders after the inevitable shake-out period was over. So Fuqua made an offer to Gutzman and Harrison, and in 1969 bought Scorpion.
Dick and Glen were retained as active managers. Presently, both continue to be retained as consultants but are no longer actively involved in the day to day management of Scorpion.
SSDN: What are some of the other leisure time products and activities in which Fuqua is involved?
DAOUST: Fuqua owns Pacemaker yachts and Thunderbird boats, Yarbrough trailers (Shoreline brand), Snapper lawn and garden equipment (manufactured by McDonough Power Equipment), and the company is involved in a chain of movie theaters as well as radio and television stations.
SSDN: Why, specifically, was Fuqua interested in the snowmobile business?
DAOUST: Fuqua is a rapidly growing and diversified company. But while it is diversified, the company has placed emphasis on those areas which show the greatest potential for growth in future years. Some of these areas include leisure time, in which there will be a greater involvement in coming years. The company is also heavily involved in education and agriculture.
In taking a look at leisure time, Fuqua saw no industry which had experienced the fantastic growth record of snowmobiling. They recognized that the snowmobile was not something which was going to be replaced easily for winter-time recreational activity. And because there were not the alternatives for the consumer at this time of year, it appeared to Fuqua that snowmobiling was here to stay and was going to grow. So they wanted in on what was then a boom industry which had a long-term growth potential.
SSDN: Has the snowmobile industry, up until this time at least, met Fuqua's expectations?
DAOUST: Yes it has. But perhaps some of the projections Fuqua made were not as optimistic as some of the others that were being made at that time. The industry has a very solid and optimistic future. But while we are optimistic, we are very practical. So what we have seen happening in the industry thus far pretty much follows what we expected would happen a couple years ago.
SSDN: What do Scorpion and Fuqua see as the ultimate size of the snowmobile market?
DAOUST: The size of the market is something that is a little bit unpredictable at this time. Everyone has talked about selling one million units per year. I personally feel the point of saturation is an unknown. There are so many unpredictables no one can really say at this time. Legislation, ecology and other factors will have an unknown impact. However, with the programs the industry is now undertaking, I do not feel that these factors will hinder the growth of snowmobiles. At this time, it is my feeling that the ultimate sales figure for all of North America will be from 800,000 to one million units per year.
SSDN: And when do you think that figure might be approached?
DAOUST: Perhaps in three years. I am talking about retail sales, not production figures.
SSDN: What trends do you see with regard to the snowmobile market - in other words, the buyers of snowmobiles?
DAOUST: The customer is becoming more sophisticated. There are a lot of machines left over this year. In our opinion, many of them are of inferior quality. Many are machines which have not kept pace with technological advances, styling advances, and with parts and service requirements. The snowmobile customer, particularly the person purchasing for the second or third time, is not as easily influenced by things that don't count, such as race results. He is more influenced by what he saw happening with the group he rides with and his friends - the number of breakdowns, how reliable the machine was, the styling, the safety features.
If a company continues to keep pace and change with these consumer demands, it will be in good shape in the future, and is probably in reasonably good shape right now.
I don't think the profile of the successful company will change much. The company which continues to advance its technology and styling, with emphasis on safety and maximum performance and reliability, will be the successful company. I think the ultimate brand choice of the consumer will be based primarily on the reliability of the product.
SSDN: Do you think the growth of the market will come basically from the same buyers and geographic areas it has come from in the past?
DAOUST: I think it will come from a combination of the existing market and new areas and customers. I do not feel, as some others do, that there is a fantastic potential in the marginal snowbelt urban areas. This is because when it becomes difficult for a person to snowmobile, he is not going to buy in any great quantity. For example, Chicago looks like a very attractive market, and Denver has for years. The population is there, but the snow is not. Also, the ease of using the product is not present. I do see some market penetration in those areas, but no fantastic growth. Any growth will come at a high cost.
There will continue to be a growth in the number of machines per family. We see a trend toward two or three machines per family, and this trend is getting stronger.
We do not feel that the snowbelt itself is anywhere close to being saturated at the present time. We have conducted market studies which show there are areas deep in the snowbelt where the potential has not been reached. As a matter of fact, in some of these prime areas there is only a 60% saturation.
SSDN: With these conditions in mind, what do you see as the criteria for the dealer who is most likely to succeed?
DAOUST: First of all, a man who knows where he is going. A man who understands finance, who projects sales, who has a definite plan, who knows how much money he is going to make, who understands accounting, who recognizes the need for the right kind of facility - all the while keeping in mind that he only makes money if he gets his price. Profit orientation, in other words.
Along with this profit orientation and financial management, another necessary requirement is an attitude which shows responsibility toward the customer. And that is translated into parts and service ability.
And another requirement is that the dealer not be afraid to merchandise and to advertise.
I would say a man must have all three things going for him - financial knowledge, attitude and merchandising orientation – to succeed and prosper in the snowmobile business.
SSDN: What competitive advantages do you feel Scorpion enjoys in the snowmobile industry?
DAOUST: The first is that we feel we make the finest product available in terms of reliability, styling, safety features and we feel strongly we will compete with anyone in terms of performance.
One of the things which has been Scorpion's strength through the years has been the reliability built into the product. Although we have made styling and technical changes, we have tried to increase reliability even more as we went along.
SSDN: What are some of the short and longer range goals for Scorpion in the snowmobile business?
DAOUST: We have signs all over our plant and offices that say: "Number Two by 1973" and "Number One by 1975." These would seem to be general goals, but everything we do at Scorpion is dedicated to the achievement of those goals (by the end of the calendar years involved). From a short-term standpoint, that means we intend to increase our market share each year. We have specific market share goals, broken down by each geographic area.
Scorpion is examining other products in the recreational field, too. I cannot comment further on that at this time, 'but we are looking along the lines of motorized vehicles.
SSDN: To refer back to something you mentioned earlier - the total industry sales figure of 800,000 to 1 million units. What do you think must be done in order for the industry to accomplish that goal?
DAOUST: For one thing, the products have to become more reliable. We also feel the industry must continue to make machines safer and be ahead of legislators and their thinking.
There is nothing that is going to replace the fun and thrill of snowmobiling in the snowbelt areas. The one thing that could hinder the growth of the sport is product safety and reliability. It is the responsibility of the manufacturer to view 'his machine for what it is - a product being sold to the family for family fun. This means developing an educational program so both the dealer and customer understand proper operations and responsibilities.
The dealer must take this information and be sure he gets it across to both the consumer and local authorities involved in the enforcement of snowmobile laws.
SSDN: What are some of the products you would consider to be particularly complimentary for the snowmobile dealer?
DAOUST: Marine products and motorcycles because you have a built-in recreational-minded group of people buying these and snowmobiles. These are also products which are generally two-cycle machinery and have very similar service requirements. Plus the selling seasons do not conflict as much as with other products.
SSDN: Is it possible that through Fuqua Industries Scorpion might become involved in a year-round product line?
DAOUST: It is possible, but until this point nothing has been decided.
SSDN: To move on to another subject: How many snowmobiles does Scorpion sell in Canada, and what are your views on the Canadian market?
DAOUST: We sell about 7% of our machines in Canada. One of the problems, of course, is the 12% tax American machines are assessed going into Canada. If it were not for that tax, I think American manufacturers could easily sell as many machines in Canada as Canadian manufacturers do.
However, we have been gratified with the success in Canada despite the competitive disadvantage on price.
We have four' independent distributors in Canada - one in Quebec, one in Ontario, one covering Manitoba and Saskatchewan and another covering Alberta and British Columbia. And we have a Canadian regional manager who coordinates the efforts of these distributors.
SSDN: Are all your distributors in the U.S. independent?
DAOUST: The majority are, but we have two company-owned operations. One in Spokane serves that area and Boise, and our Minnesota distributorship is also company owned.
Our philosophy is that we always are 100% behind the independent distributor organization. The only time we would ever consider or have ever considered a factory-owned distributor was where we could not find the right kind of distributor in a particular region. Generally, we have been able to find the ones we want.
SSDN: You talked earlier of a shake-out of manufacturers. How extensive do you think a shake-out might be?
DAOUST: I really expected to see it this year. I am surprised to see there are as many manufacturers back in business this year as there are. However, there are some indications that it is coming. For example, I recently received a list showing there were supposedly some 133 manufacturers of snowmobiles. In going through the list, there are only 57 actually still in business. The rest have gone out or are going out.
I expect the shake-out to be more extensive than this, however, and still look for the number of manufacturers to be no more than 15 or 20 within three years, and perhaps 10 manufacturers in five years.
SSDN: Who do you think will be the victims of the shake-out?
DAOUST: I would say size has some importance, but more than anything else the strength of the dealer and distributor organizations are the key. If a manufacturer has a good product and a good organization to distribute and sell it, he will survive no matter what happens.
SSDN: Other than the shake-out you mention, what might be some of the other significant developments you see for the upcoming (1971-72) snowmobile season?
DAOUST: I expect to see a lot of remanufactured 1971 sleds on the market. I expect many companies will be selling last year's machines at low prices, causing a price consciousness in the marketplace by both manufacturers and the first-time buyer. The first-time buyer is attracted by that type of pricing.
However, we didn't expect that price situation to affect the Scorpion .buyer last year, and it didn't. And we don't expect it to affect him too much this season.
SSDN: Why is that?
DAOUST: The Scorpion buyer, we feel, is not primarily the fist-time snowmobile buyer, as a general rule. We have never priced our product to be the lowest, and we have, as a matter of fact, always been toward the upper end of the price scale. We will continue to be that way, because we intend to offer quality to go with it. We intend to avoid price cutting by offering quality.
Another development we could see in the year ahead might be attempts by some manufacturers to dramatize great technological advances which in reality will only be bringing their machines up to the standards other have had in the past.
I also expect to see more maturity in the marketing of snowmobiles, particularly in the approaches, guidelines and aids given to dealers. They will be much more sophisticated and follow more closely automotive-type merchandising.
At the same time, I see some companies making great strides in market penetration, primarily because of technological breakthroughs. This penetration will be particularly increased among the second-time buyers because these advances will be much more obvious this year than ever before.
SSDN: If it is technological improvements that interest the second and third time buyer, what do you think are some of the things that interest the first time buyer? In other words, what converts a non-snowmobiler into a snowmobiler, and what gets him to buy a particular brand when it is his first machine?
DAOUST: One of the things I think interests him, particularly in the prime snowbelt, is that he is finding that he is alone more and more in the winter if he doesn't own a snowmobile. His friends are out riding all weekend, and he feels left out.
If they have not been influenced at that point by someone talking about a particular brand and they just go out to buy a snowmobile, their fist consideration is: "How much does it cost?" They will normally get their feet wet by buying a lower-priced machine. After they own the machine for a period of time and are able to judge its performance merits, just like many other products, whether motorcycles or outboards, they will trade up. I don't think you will see any difference between what has existed in outboards and motorcycles and snowmobiles. The trade-up seems to be an inevitable thing, to a point, in recreational merchandise.
SSDN: How do you feel about factory racing, and what are Scorpion's plans for the upcoming season?
DAOUST: I think snowmobile racing in the hands of the local community without factory participation is good for the sport. I think stock snowmobile racing - testing one man's ability against another on a machine they both can purchase - is thrilling. There is camaraderie and a lot of fun created.
I think as soon as exotic machinery gets involved and factory teams begin to participate, the average man realizes he doesn't have a chance. Last year, there was ample evidence of this in that both crowds and participation dropped noticeably. The average guy is no longer interested when he doesn't have a chance, and yet he would like to race.
If the factories want to maintain the public interest in racing, I would think they would do one of three things: (1) differentiate professional racing from amateur racing, then make sure it is enforced; (2) make sure there is no such thing as a "hot stocker" so everyone is racing on equal terms; or (3) withc1taw from racing altogether and just leave it up to the amateurs. The local communities will take good care of it.
I think some real teeth must be put into racing rules by the associations. If they continue to allow the consumer to question the credibility of racing, then racing is going to lose its appeal and what is a vital tool for selling the enjoyment of the sport and giving people a good use or outlet for the product can be lost entirely.
SSDN: What are your plans for racing?
DAOUST: Scorpion will not race as a factory. We have produced what we believe is a product that will compete with anything in stock classes, and that those who drive our machines in stock classes will win their share. I will say that we are not sure of what others will do, and we are now looking at the possibility of entering one modified class. But the decision has not yet been made. Unless we receive a certain type of engine with the type of specifications we are looking for, we will not be involved in factory racing.
SSDN: You referred to racing as a "vital tool for selling the enjoyment of the' sport and giving people a use outlet." What are some of the other "tools" which fit this category?
DAOUST: Group activities, trail rides, safaris, father-son type snowmobile rides, etc. These things have to be promoted by the local dealer and snowmobile club, just like the races are. There is pure enjoyment in a family snowmobile ride that is hard to equal with just about any other type of recreational activity. It is a chance to communicate with your family, which is not present in just about any other type of thing. But it has to be promoted. People do not do it on their own. It must be arranged.
SSDN: Since you first became involved in the marketing of snowmobiles several years ago, has your thinking changed with regard to the marketing of snowmobiles? And has your thinking changed with regard to Scorpion since becoming president of the firm?
DAOUST: Yes, my thinking has changed, naturally. As an industry evolves, you must change to some extent. I think the area in which my thinking has changed the most probably has to do with racing and what we discussed earlier. At first, one of the events a factory had to get involved in was racing. But at that time a factory was involved more in promoting the sport rather than an individual win. As the horsepower advanced, it got to a point where speeds exceeded the capabilities of the facilities. So what was a safe, fun way for a. family to enjoy a weekend of participation and viewing became an exciting but unsafe way of promoting the product and sport. The result has .been some bad and undeserving publicity of the sport in general.
Another way my thinking has changed is that I have 'become more aware of the need for constantly upgrading the engineering of the product. At first, everyone could sell all they could make and no one was concerned. Today, it is much different. Quality was not a major consideration a few years ago. Today it is a necessity if a company is to grow in the snowmobile business.
Another area in which Scorpion has become more involved is that of industry and association activities. We realize now more than ever that if we are to overcome bad 'publicity and press, it is necessary to work together to get it done. Too many people and companies have not done enough.
We must define the problems and undertake the studies before others do it so we have the facts and are prepared to do something about the problems before someone does it for us.
SSDN: What are some of the industry's biggest problems right now?
DAOUST: The two biggest, in my mind, would include bad judgment by some manufacturers regarding production last year, and secondly, legislation being developed and authored by those who are not familiar with all sides of the picture.
SSDN: Do you think these will continue to be the biggest problems in the next few years?
DAOUST: Probably so. The industry will still be fighting to get its message across regarding proper usage. Education and legislation will still be a problem in the years ahead, and inventory will be a problem several years from now.
SSDN: How do you think these might be overcome?
DAOUST: With regard to legislation and education, positive action must be taken at the local level. Dealers and others in the industry should not deny the fact that the problems do exist. Then after recognizing they do exist, do something about educating the snowmobilers to the problems.
We tell our own dealers that unless you are known among the snowmobilers in your own area, you are not doing the job, both from the standpoint of merchandising and from the standpoint of industry education. We tell our dealers to make themselves available to local organizations and clubs and give talks on safety. We help him with these. We want dealers to make films available, and to sponsor rider education courses.
These are only some steps our company is taking to assure ourselves and the industry of future success in this very exciting business.