Hot Tub Council Growth Initiative

1
Hot Tub Council Growth Initiative Research
Program Kick-Off
Prepared for Prepared by
January 30, 2008
2
The Reason We Are Here

• Having grown 5 annually from 1996 through 2004,
  the hot tub industry has now experienced three
  consecutive years of falling sales

Define what has caused the reverse in sales
Plot a course for the future
2001
1996
2004
TODAY
1996 Baseline Annual Unit Sales 253KSource
Pkdata
3
Harrison Group - Who We Are

• Harrison Group provides marketing research and
  consulting services to some of the biggest
  companies in the world
• We get involved when major strategic business
  decisions and directions are being taken. A few
  client engagements
• Microsoft
• Activision
• Volkswagen Beetle
• US Dairy Association and National Dairy Board
• Dunkin Donuts
• Cartier
• Coca-Cola
• Maui Land Pineapple
• Plum TV

4
The Process Preparation

• Kick-Off Meeting With The Hot Tub Council
• Category background, information and trends
• Challenges and opportunities (present and future)
• Generate hypotheses to test in research
• Qualitative 4 Focus Groups
• Reveal the consumer mindset and language
  surrounding hot tubs and explore deeper
  functional and emotional motivations for purchase
  and barriers to adoption
• Bring the quantitative survey to life
• 2 East Coast (NY or CT) and 2 West Coast (SF or
  LA)
• 1 Owner/1 Prospect Group in Each Market
• Opportunity to observe via Focus Vision (live or
  archive)

5
The Process Quantitative Survey

• 1,500 25-minute online interviews among a
  representative mix of qualified homeowners
• 500 interviews among Hot Tub Owners
• Currently own or have owned a hot tub in the past
  three years
• 500 interviews among Hot Tub Prospects
• Have shopped for but have not purchased a hot tub
  or who have an openness to purchasing a hot tub
• 500 interviews among Hot Tub Rejecters
• Short 5-min. questionnaire to establish broader
  market rejection factors
• Will provide for national and regional reads

6
Potential Contributors to the Decline in Hot Tub
Sales

• Eroding consumer optimism
• Only 57 optimistic about their own future
• Just 33 optimistic about the future of America
• In an emotional recession
• Waiting for another shoe to drop sub-prime
  mortgages, oil prices, US dollar, terrorism,
  stock market/401(k)s, etc.
• 81 believe something bad is going to happen in
  the near future
• Changing societal framework
• The backyard entertainment mindset has changed -
  people once built decks for the sole purpose of
  trimming out their hot tubs
• Lack of time available for completely passive
  recreation
• Have we shifted to a more conservative sexual
  mindset?
• Were Xers turned off by the sexual attitudes and
  associations with hot tubs held by their Boomer
  parents? How relevant are hot tubs to Millenials?
• Has the hot tub been presented too often in a
  manner that has cheapened the experience?

7
Potential Contributors to the Decline in Hot Tub
Sales

• Changing perspectives on health
• Shift in the health movement with consumers
  looking for products and services that more
  actively work with their own bodies for
  strengthening immunity, giving energy, improving
  digestion, etc.
• Desire for engaged relaxation and entertainment
• Hours spent with media and entertainment each
  week are at an all time high has the nature of
  vegging out fundamentally changed?
• Increasingly seeking more engaged sorts of
  relaxation that can distract us from our fears
  and doubts
• Challenges facing traditional media and the
  evolution of personal networks
• Broadcast media is an increasingly inefficient
  means of reaching targets
• DVR ownership stands at 32 of US households who
  are filtering out 2/3 of the commercials they
  encounter even more difficult to reach affluent
  households
• Replacing broadcast media is social networking
  which can either work for or against the hot tub
  business

8
Possible Paths Forward for the Industry

• Does the industry need to keep doing what is
  doing better or does it need to reinvent or
  redefine itself in the mind of the consumer
• Can we rely on the aging boomer population and
  their anticipated focus on health to reinvigorate
  the industry?
• Do we need to skip the Xers and go directly to
  the Millennials who might be inclined to make
  this more of a family purchase?
• Can hot tubs tap into new types of functional
  health benefits that consumers are seeking?
• Are there new ways to integrate or build in new
  health benefits to the hot tub experience? Could
  vitamins be absorbed through the skin for
  example?
• Are there new jet mechanisms that might help
  promote more health benefits?
• Can the hot tub help address obesity issues?
• What can we do to increase frequency of use to
  improve cost-per-use ratios?

9
Possible Paths Forward for the Industry

• What can we do to integrate engaged entertainment
  into the hot tub experience?
• What is the new way to introduce fun and
  happiness into the hot tub experience?
• How does the hot tub need to present itself in
  the new American lifestyle and backyard?
• How do we leverage growth and increasing reliance
  on family connections
• Parents and teens desire to connect and be
  friends at all time high
• Teens are having an enormous impact on
  decision-making for the household
• Mom the key purchase decision
• Are there opportunities to develop a new viral
  networking process for the hot tub?

10
Industry Challenges Opportunities

• Against the backdrop of these market dynamics
• What are the challenges that the industry is
  facing in each of the following areas?
• What is the vision for the evolution of the
  industry?

11
Hot Tub Market Segmentation
We believe allmarket segmentations mustmeet the
following criteria
In every segmentation we conduct, we ensure
resulting groups are unique and differentiated,
replicable, reachable/targetable, and
differentiated by needs, demos, and behaviors

• Exploratory, not confirmatory Let the data
  direct segments
• Face validity of segments can they be
  intuitively understood?
• Sufficient size of segments do they merit
  marketing efforts?
• Current and future value of segments are there
  segments that represent greater purchase volume
  and/or future potential?
• Actionability can we target the segments and
  incorporate them into future marketing
  initiatives?
• Consistency with pre-defined corporate
  objectives is this view of the world something
  the organization can deal with and act against?

Motivations/Needs/Imagery
To ensure products and messages are tailored to
target consumers
Demo- graphics
Category Behaviors
To ensure valuedsegments can be identifiedand
targeted
To identify the most valuable consumers from a
current and future value perspective
12
Industry Communications Brand Building

• Ultimately, we will construct a framework that
  will allow you to think of the hot tub industry
  in the context of a singularly focused core
  brand promise