Market Based Solutions

When Opportunity Meets Obligation

The OHV industry is (4) decades behind that of its threat, which is often the outdoor industry. So why is the outdoor industry so intent with their damaging initiatives and activities? Simply put, these businesses make more money when they connect with their clients through relevant market based solutions.  There is an opportunity for the OHV industry to replicate these types of activities and strategies because research indicates that it improves the financial position of the participating business. 

The Outdoor Industry

The outdoor industry operates very differently then the OHV industry, committing themselves to activities at very high and complex levels that often threaten our sport. The outdoor industry raises millions of dollars annually, blurring the lines between private and public sectors, to support non-profits that designate land as not suitable for OHV use. They are very cohesive and operate very effectively in unison.

A great example includes The Conservation Alliance, which is a non-profit formed in 1989 by Outdoor Industry leaders REI, Patagonia, The North Face and Kelty. This nonprofit is on pace to raise $2 million annually for “conservation” initiatives that often declare public land as not suitable for OHV recreation. Since their inception, this alliance of 185 outdoor businesses has raised over $13 million dollars and has “helped save more than 42 million acres of wildlands” in North America. The graph below showcases noteworthy outdoor companies donating to The Conservation Alliance; this includes 8 companies donating over $100,000 annually:

 

Outdoor Industry Companies

 

Contributing to the Conservation Alliance

$100,000 Annually

Noteworthy Companies

 

Colombia

Black Diamond Equipment

Outdoor Industry Association

Patagonia

CamelBak

OutdoorIndustryJobs.com

REI

Eddie Bauer

Outside Magazine

The North Face

JanSport

Saucony

Merrel

Kelty

Smith Optics

Cliff Bar

Mountain Hardware, Inc.

Teva

KEEN

National Geographic Maps

The Timberland Company

Eastern Mountain Sports

New Balance

Yakima

 The 1% for the Planet, cofounded by Patagonia and Blue Ribbon Flies, maybe one of the best examples of how the outdoor industry connects with their clients and raises money for environmental causes. The nonprofit has raised over $100 million in 12 short years as businesses designate one percent of their gross sales to the environmental non-profits of their choice. This entity connects the consumer to more then 1,200 businesses that are giving to more then 3,300 environmental nonprofits.

There is a new reality that the outdoor industry is a political and economic force. Former REI CEO and long time commercial banker Sally Jewel is our nations Secretary of Interior. So why would Sally Jewell chief executive of REI earning an annual salary of $2 Million take a job paying less then $200,000? Peter Metcalf, president and CEO of Black Diamond Inc. shares that the outdoor industry became a political force by putting “money behind it”.

This move is clearly one that could prove to detrimental to the OHV industry. Jewel is in charge of one-fifth of the U.S. landmass, 700 million acres of subsurface mineral estate, 1.7 billion acres of offshore territory, 401 national parks, 561 national wildlife refuges, 476 bureau of reclamation dams, 2055 endangered or threatened species and the maintenance of good relations with 566 American Indian Tribes.

Patagonia’s CEO, Rose Marcario, is a former Vice President of a private equity firm that specialized in mergers and acquisitions. Since her arrival, Patagonia has doubled its scale and tripled its profits. How are they doing this? By acquiring and investing in businesses that are giving back to environmental causes. The outdoor industry is maintaining and growing their culture and strategies by “buying in” and becoming stronger.

The OHV Industry

As it stands it is difficult for consumers to know what powersports businesses are in the game of giving back. Unlike the outdoor industry we do not have a 1% for the Planet, and good luck trying to find a stewardship tab on a website that shows how the business is working on their customers behalf. There is a complete lack of transparency.

Some businesses are giving tens of thousands of dollars and volunteering their valuable time to the cause, while others maybe doing next to nothing. The following are real examples that are happening in the industry and in our community.

Retail Business “A” generates less then $10 million in revenue and is growing quickly. This business is highly engaged in OHV advocacy and has raised tens of thousands and has volunteered a considerable amount of time. Dealership “B” on the other side of town generates tens of million in revenue and donates not much more then the necessary requirements to be a dealer. Dealership “B” has not been to one of the monthly local OHV club meetings in years.

Portfolio Company “C” has been in business for over 100 years, abundantly sells powersports products and generates up to $1 Billion in annual revenue. They also happen to own some of our industries most iconic proprietary brands and they distribute these products in a number of different ways. In 2012 the company celebrated a very significant business milestone by donating $1.2 million dollars to entities that “advance art, culture and beauty in our community.” There is no mention on their website, or of their subsidiaries, of giving back to the OHV community that support their businesses. Portfolio Company “C’s” affiliated family foundation, which made the donation, actively manages $5.9 million in net assets and yet the foundation does not support its relevant market base.

Company “D” has record year over year with revenue and earnings before interest and tax deductions, and some claim that up to 75% of their products are offroad. While the annual report discusses risk and sustainability, it fails to discuss how the two are synonymous. Further more, the annual report does not discuss how they are advocating on the behalf of their customers to keep their OHV recreational opportunities alive and well. This is very unlike REI with their annual stewardship report.

So why should an OHV business give back to its community and participate with a relevant strategic marketing alliance?

Increases Gross Sales and Net Profit

Today’s business leaders incorporate relevant social causes and business strategy because they are learning it improves the bottom line. Corporate Social Responsibility and business are now one in the same thing, creating a new hybrid business model. Gone are the days of simple corporate responsibility and writing checks to non-relevant social issues.

 

When in an organization is involved in a cause that consumers feel worthwhile:

* 78% of them say they are more likely to buy the product

 

* 66 and 62% would likely switch brands and retailers

 

* 53% indicate that they would even pay a 10% premium

 

Adds Value to the Business

What would 1% for the Planet equivalent do for an OHV business? It would allow consumers to start buying from businesses that care and stop buying from businesses that are not in the game. Such an endeavor creates additional value for the business through goodwill and brand recognition. The marketing alliance is the goodwill and provides the platform for the business to initiate their CSR activities for brand recognition.

Many of our businesses have iconic brands or are connected to history in way that could be only enhanced through a foundation that gives to a relevant cause. For instance, what could a Malcolm Smith Foundation or a Marty A. Smith Foundation do? It could become a win-win activity for OHV advocacy and its brand.

Mitigating Risk

When a business chooses to participate in a relevant strategic marketing alliance, it’s making the decision to be actively involved in the solution. Companies often wait for a crisis to develop before seeking opportunities to collaborate. The opportunity for companies is much greater if they operate from a position of strength rather than in reaction. This is why businesses that join an alliance first tend to benefit the most.

Agencies such as the USFS, the BLM and the DNR make many of their decisions at the local level. The outdoor industry has been pretty clever about executing their exclusionary initiatives by taking advantage of this. What often has the appearance of a grassroots initiative is not, it’s often the outdoor industry funding from the top down. An OHV strategic marketing alliance could be critically important as pending local level issues are anticipated to be much more complicated and compounding up to national levels.

Closing Remarks

We cannot begin to address our problems effectively until we come together as a community. There is a sense of pessimism because many of us feel that the industry is small. However, the powersports dealer network by conservative numbers generates $22.5 Billion dollars in revenue. The challenge is that we are fragmented and we lack the framework to be effective. There is complexity and depth with a strategic marketing alliance because it encourages businesses of all sizes and sophistication to participate.

This article should challenge our business leaders to think differently as the act of donating to OHV advocacy should be recognized as one that helps businesses make more money. Consumers have all the power; they do not have to buy the products from those that are not in the game. Business leaders have the opportunity to promote their products and services by giving back to the relevant cause of OHV advocacy. The first companies that get this market-based alternative and invest in their customer’s equity will stand to benefit the most.