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Table of Contents

What is DEMA? ............................................................................................................... 3

Consumer Marketing Committee Update ........................................................................ 6

DEMA Show Committee Update ................................................................................... 11

Finance Committee Update........................................................................................... 13

Manufacturers’ Committee Update ................................................................................ 15

Mission Task Force Update........................................................................................... 16

Public Policy Committee Update ................................................................................... 20

Research Committee Update ........................................................................................ 30

Retailer Resource Committee Update ........................................................................... 44

DEMA Member Benefits & Overview ............................................................................ 47

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What is DEMA?

The Diving Equipment and Marketing Association is a non-profit trade association. Monies earned through the industry’s participation in the annual DEMA Trade Show, along with sponsorships, and from DEMA Memberships, fund all of the activities and expenses of the association. Unlike for-profit organizations which typically raise money at trade or consumer shows or events and funnel it AWAY from the diving industry, DEMA channels proceeds earned TOWARD the diving industry including market and industry research, legislative issues, disaster assistance, marketing and PR programs, and other industry efforts, all for the benefit of DEMA Members. Business and trade associations like DEMA have several functions within the recreational diving industry. DEMA provides value to its members by seeking out ways to collaborate from within the Industry and though business outreach; DEMA promotes recreational scuba diving and snorkeling through PR activities, delivers educational programs for members and consumers, lobbies on behalf of the diving industry, and many other functions. DEMA is a (501 [c] 6) California Corporation.

Description: Worldwide Trade Association for the Recreational Diving and Snorkeling Industries; Includes more than 1,400 member companies worldwide.

DEMA’s Mission: Bringing businesses together to grow the Diving Industry worldwide.

Strategic Goals: 1. Build a community among DEMA members with a culture and environment that will produce

valued relationships. 2. Create worthwhile opportunities for DEMA members to share and exchange information and

knowledge. 3. Provide learning opportunities that are responsive to DEMA member needs and relevant to the

changing dynamics of the Diving Industry. 4. Be on the forefront of addressing the legislative and regulatory initiatives that affect the

Recreational Diving Industry.

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Strategic Objectives: Engagement: To provide a community culture in the Diving Industry through personal interaction. Industry Practices: To model and foster an inclusive culture in the Diving Industry, sharing useful and successful practices originating from DEMA members and the Industry. Innovation: The process of creating and delivering new value for DEMA members. Education: Through a culture of engagement, provide relevant professional development along the continuum of careers and activities within the diving community. Resources: To serve as a resource for the Diving Industry including;

Sharing useful and successful business and management practices

Research

Appropriate Standards

Creating opportunities for the DEMA community to advance personally and professionally through collaboration

Tactical Goals: 1. Produce an annual trade event for the industry which serves the needs of its stakeholders and

produces a successful financial outcome for the association 2. Engage in marketing programs which promote non-commercial diving of all kinds, create new

customers, drive consumers into retail stores and resorts, and promote customer retention 3. Dedicate resources to preventing potential legislation which could adversely affect the industry 4. Engage in marketing research programs which will:

a. Define the universe of divers b. Determine the rate of erosion among existing divers c. Determine the number of entry level scuba certifications which take place in the United States

and Caribbean each year. d. Seek opportunities to obtain global data on diver certification and participation. e. Provide retail operational data.

5. Engage in activities which promote the health of aquatic resources while protecting diver access to those resources.

Committees: DEMA Committees are an opportunity for qualified DEMA-Member volunteers to participate in the activities of the Association and to have an impact on the effectiveness of the Association. Committees are made up of Members and may include Board members or other volunteers from the diving industry. These committees are advisory to the Board of Directors and DEMA Staff, and bring a wealth of experience to the Association. In 2015 there are a number of standing committees helping to provide input to the Board of Directors and Staff of the Association. Having opinions and insight from the diving community is critical, and the learning curve works both ways; many volunteers learn the inner workings of a non-profit business and trade association, including the nuances and challenges of providing the best services and promotions that meet the needs of all five stakeholder groups simultaneously.

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2015 Board of Directors

A1-Manufacturing Scott Daley, Body Glove International

Mike Hollis, American Underwater Products

A3-Dive Publishing, Media, Consulting and Non-Retail Service Providers

William Cline, Cline Group Advertising, Inc. Dan Orr, Dan Orr Consulting

A2-Diver Certification and Training Agencies Tom Leaird, Scuba Educators/PDIC International

Kristin Valette, PADI

A4-Retailers Darcy Kieran, Divers Direct

Werner Kurn, Ocean Enterprises, Inc.

A5-Travel & Resorts Stuart Cove, Stuart Cove's Dive Bahamas Tim Webb, Caradonna Dive Adventures

2015 Committees

Consumer Marketing Committee

William Cline Stuart Cove Scott Daley

Darcy Kieran Doug McNeese*

Kristin Valette, Chair Laura Walker*

DEMA Show Committee

Jenny Collister, Chair* Stuart Cove Scott Daley

Linda Sue Dingel* Neal Watson*

Finance Committee

Tom Leaird, Chair Dan Orr

Tim Webb

Manufacturers’ Committee

Stephen Ashmore* Scott Daley, Chair

Mike Hollis Stefan Michl*

Mission Task Force Dan Orr

Doug McNeese* Jeff Nadler*

Jenny Collister* Mark Young* Mike Hollis Mike Lever*

Tom Leaird, Chair

Public Policy Committee Al Hornsby* Darcy Kieran

Jeff Nadler, Chair* Dan Orr

Carlos Santana* William Ziefle*

Research Committee

William Cline, Chair Darcy Kieran Jeff Nadler*

Dan Orr Ray Purkis*

Ronny Roskosch Tim Webb

Mark Young*

Retailer Resource Committee

Skip Commagere* Patrick Hammer* Floyd Holcom* Darcy Kieran Werner Kurn

Tamara Leaird-Connelly* James Murray* David Riscinti*

Sid Stovall* Scott Taylor, Chair* Paul Wagenseller*

*Not a current Board Member.

DEMA's Board Committees are generally determined at the first meeting of the year using an application process. DEMA member companies with an interest in serving on future committees please contact membership@dema.org.

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Consumer Marketing Committee Update Kristin Valette, Chair

Among DEMA’s primary goals is to develop valuable marketing tools which DEMA Members can use to acquire new customers and encourage previous customers to return to diving. DEMA also seeks to engage consumers directly and drive them into Member businesses. The DEMA Consumer Marketing Committee consists of individuals from the DEMA Board of Directors and from the DEMA membership. For 2015 the DEMA Consumer Marketing Committee included, William Cline (Cline Group Advertising), Stuart Cove (Stuart Cove’s Diving); Scott Daley (Body Glove); Darcy Kieran (Divers Direct); Doug McNeese (SSI); Kristin Valette, Chair (PADI); Laura Walker (Bonnier) and Tom Ingram (DEMA Executive Director). Using data gathered by DEMA in 2014, the Consumer Marketing Committee has been working diligently throughout 2015 to develop a new diver acquisition program slated for launch in 2016. This campaign, called “Go Dive Now,” will launch on social media, and tools from the campaign will be made available so that DEMA Members can save promotional money and expand their marketing reach by creating their own marketing campaigns based around Go Dive Now!

Why Is DEMA Doing This Now? The global economy has been in slow recovery for several years, contributing to the struggle of many specialty and recreation businesses, including recreational diving. In addition, societal changes and changes in US and global demographics are driving a change in the diving market. These market issues must be addressed if recreational diving is to thrive. DEMA’s own Certification Census, a quarterly gauge of the health of the Diving Industry, indicates a long-term downward trend in the annual number of open water-level certifications. From 2005 until the end of 2014, with some yearly variations, the number of certifications declined overall by about 13% or an average downward trend of about 1.5% annually. The trend has continued in 2015 with an average annual first quarter decline of 2.1% between 2005 and 2015, and an average annual second quarter decline of about 1.3%. Clearly there is a need for action to help reverse this trend.

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Understanding more about what is causing this decline is also critical in determining the action steps needed to slow, halt, or reverse the trend. To more clearly understand the reasons for this trend and better plan for the steps needed to reverse it, the Consumer Marketing Committee turned to the DEMA Research Committee for consumer targeting recommendations. Among the solutions recommended by the Research Committee was using DEMA’s subscription to the AnySite Marketing Information System to target “households” containing persons of different ages, household income, net worth, and life stages. In 2014, using more than 470,000 actual diving consumer records DEMA already determined the most appropriate target diving consumer households. Now, using this marketing information system makes it possible for DEMA to select specific geographic locations for its own advertising efforts (using social media and postal codes) and also makes it possible for DEMA Members to analyze their own customers and select the most appropriate target households. The AnySite data also provides recommendations regarding the media to which members of these target households are most likely to respond – social media, print, broadcast and more. An important consideration in this effort is the need for DEMA to engage Industry Members to act as “multipliers” of these positive promotional messages.

What are the Go Dive Now Campaign Marketing Objectives? There are two areas of consideration in determining the campaign’s objectives: Business to Consumer (B2C) and Business to Business (B2B). B2C:

Increase the number of entry-level certifications, as measured quarterly through the DEMA Certification Census.

Create and stimulate an interest in scuba diving.

Activate this interest by creating an “invitation to participate” in scuba diving.

As data points to the social component of recreational diving as a key to keeping consumers engaged, promote the lifestyle (social aspects) of diving, including the friends and family aspects of diving.

Increase sales of diving equipment, including soft goods and hard goods. B2B:

Engage DEMA Members in the process of creating this consumer marketing campaign.

Activate DEMA Members to tag on and utilize the collateral materials to help in their own promotions, taking advantage of the Industry-wide campaign effort. It is particularly critical that Dive Retailers and Dive Resorts use these consumer-level marketing materials, as well as engage in marketing to their current and prospective consumers using a similar targeting process.

Increase wholesale sales of diving equipment as measured by DEMA’s Manufacturing Sales Index.

130,000

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170,000

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Entr

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Open Water Certifications (US Only) 2005 - 2014

OW Certifications

Linear (OWCertifications)

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How is DEMA Addressing the Problem Trend? From a marketing perspective there are several steps required to address these issues:

Use the best research available to determine an appropriate target consumer

Engage the Industry in the process of program development so that DEMA is sure to reach the right consumers

Bring in the professionals – utilize the services of a marketing/advertising agency to develop appropriate and targeted collateral material

Engage the Industry in the use of the brand and the collateral marketing material so that the national campaign assists DEMA Members, and DEMA Members help multiply the campaign.

The Research - Who is DEMA Targeting? Objective demographic and life stage data from more than 470,000 divers as well as direct survey responses from more than additional 20,000 divers provided insight into diving customer behaviors. The data suggests that there are multiple target household types. While these households are similar in some respects, there are also substantive differences, making it possible for DEMA and DEMA Members to select from a variety of targets, choosing the households that provided the greatest return on promotional investments, and selecting appropriate targets living near dive centers. Profiles of the three target households recommended by the DEMA Research Committee can be found here: http://www.dema.org/resource/resmgr/Documents/Recommended_Target_Household.pdf

How Do We Reach These Potential Consumers? To be successful at reaching new prospects will require effort from both DEMA and the Diving Industry. DEMA has hired Mob Media, a professional marketing and advertising firm, to help develop the collateral material as well as to create an approach that both DEMA and the Diving Industry can use. The campaign concepts include: Name of the Campaign: “Go Dive Now” The Messages:

Scuba diving is fun!

Scuba diving is easy to learn

Scuba diving is something they want to experience

Scuba diving is a social activity (lots of families w/teens, friends, happy people)

Scuba diving is adventurous

Scuba diving can “amaze” them

Scuba diving is relatively safe and not something to be feared

They get to learn something new

They get to try cool scuba diving gear

Scuba diving is all around them (everywhere there is water, there is diving – local to exotic). Diving is even available in purpose-built facilities such as aquariums.

Consumers will know that:

Scuba diving can be what you want it to be – adventure, relaxation, family and “extreme;” all are attainable

Scuba diving can be a very fun, trendy sport

Scuba diving can turn fear into courage

Scuba diving is transformational – it changes your life. Diving is an emotional/awe-inspiring experience

Breathing underwater allows you to access new environments in your world and discover the other 2/3 of the planet

There is a healing power in the underwater realm that builds confidence and improves awareness

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Scuba divers are ambassadors to the underwater environment

Scuba diving allows you to connect/bond with people (your family, your friends)

Scuba diving allows you to escape from your everyday life – it can be a “Zen” experience

They can go diving on their next vacation/travel experience

Diving is attainable on just about any budget

Scuba diving is aspirational and inspirational. Examples include divers who have limited physical mobility but are able to overcome gravity and move underwater in three dimensions.

There are hundreds of thousands of certified scuba diving instructors locally and around the world to teach you to dive.

Intended consumer response (outcomes):

The consumer fully engages in, and experiences all aspects of recreational diving, including certification and purchases of equipment and services.

The consumer goes scuba diving in addition to the certification experience, by diving locally and traveling to dive.

Creative Considerations The campaign must be very visual – scuba diving is a visual experience; underwater images need to truly showcase this amazing activity. The Diving Industry must play a role in this aspect of the campaign by contributing imagery and multiplying the impact of the campaign!

1. Images need to show the “sexiness” and the social aspect of scuba diving (young couples, families with teens, a variety of ages) as well as culturally diverse participants. Images should also show the instructor/student relationship (in pool, on boat, at surface, etc.)

2. Images should show a variety of dive environments (local diving in springs, lakes and ocean), as well as warm and clear water. This can also be demonstrated through top-side images that show dive lifestyle as well.

3. Images must depict divers in groups of two or more, and should look easy and accessible, but realistic (mix of wet suits and no exposure suits)

4. Since diving certification can be obtained in both retail and resort settings, imagery should reflect this (Most divers learn at a retail store, but an increasing number are obtaining their certification through a dive-related resort).

Campaign Deliverables The Go Dive Now website design.

Mobile Ads (various sizes).

Facebook - Newsfeed Ad and Cover images

Other social media platforms to include (Google +, YouTube, Instagram, - utilize an automated feed service to schedule out posts) – With a wide variety of underwater video available from user groups, YouTube should be a prominent part of the social media campaign.

The Go Dive Now website will be the hub of the campaign experience. All communication will drive the consumer to this site. The website must be mobile friendly. Ads will be put forth through social media popular with the target consumer.

Website Goals The website will serve as the central marketing hub of the new campaign and will truly bring the campaign to life and make it more personal for the user through powerful and inspirational content. All advertising will drive users to the website where they can engage and connect with a dive center. The website will use a “storytelling” platform that incorporates photo galleries, social sharing, as well as video. The site must be fully compatible with, and automatically adjust to, viewing on mobile devices and tablets. Site visitors will be directed to a Dive Center Locator to learn more or purchase a course. Success will be measured by:

Primary:

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o Conversions to purchase - click-through rate of visitors to Dive Center Locator for fulfillment o Lead Generation Captures

Secondary: o Site visitors o Time on Site

Dive Center Locator: o The logic on the Dive Center Locator should default to Go Diving Local, which is a zip code

from geo-locator of visitor. This store listing will list ALL stores in database, with premium notation given to those stores that are DEMA Members. Dive Center Locator will also include a map function that shows pin drops of stores as well. Each store listing denotes mile/km radius away from visitor.

o Side-by-side an option will appear for Go Diving on Vacation, with zip/city/state/country search to allow for out of area searches.

o On messaging of the Dive Center Locator will indicate “find a certified instructor to Go Diving.” Link will go to Dive Center Locator.

DEMA is planning an early 2016 launch of the Go Dive Now campaign and the Consumer Marketing Committee values your input. To learn more and contribute to this exciting new program, plan to attend the DEMA Go Dive Now Campaign Meeting, Saturday, November 7 starting at 8:30 am in S210 DE!

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DEMA Show Committee Update Jenny Collister, Chair

A New DEMA Show Venue Under the direction of the DEMA Show committee, DEMA staff continued to investigate additional cities in which DEMA Show could be staged. For the last several years DEMA has attempted to locate cities that meet the Board-approved criteria with the goal of adding a third venue to the Show’s current rotation of Orlando, FL and Las Vegas, NV. Finding convention centers that are sufficiently large, hotels that are reasonably priced, and dates that are acceptable to all, in a location that meets the many needs of the Show, its attendees and its exhibitors, is no easy task. DEMA Show locations and timing are determined using Attendee and Exhibitor surveys as well as by researching convention center and hotel availability. DEMA Show is one of the 250 largest trade shows in the United States and as such, there are a limited number of convention facilities large enough to hold the annual event. When evaluating and selecting the convention facilities, city, and hotels, DEMA uses Board-approved criteria including:

The city must have cultural or entertainment attractions and special event venues appealing to the diving professional. There should be a variety of restaurants and other entertainment within a 10 minute walking distance of the host hotel/convention center.

The Show city must be a major airline destination for North American and international travelers. The city should have a substantial number of direct flights coming into the city, and be a hub for at least one major airline.

“Blended” labor rates for the city must be within 10% of the median average as compared to the convention industry market for the previous five years.

The convention facility must meet DEMA’s exhibit and meeting space requirements, and be in a location convenient to major hotels, an international airport and city points of interest. The minimum conventions center size is 500,000 gross square feet.

The convention facility must include a minimum of 30 meeting rooms in the convention center, capable of holding at least 50 to 100 people while using classroom style seating.

There must be first-class hotels convenient to the convention and exhibit facility for 10,000 attendees. Hotel facilities should accommodate a minimum of 1,200 to 1,400 rooms peak night pick up, with 4,000 minimum total room nights required within DEMA’s block. This number of hotel rooms must be within a 5-mile radius/15 minutes travel time (whichever is less) of the convention center.

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In late 2015 DEMA successfully secured acceptable dates and a destination exhibitors and attendees have been requesting for years … New Orleans, LA! The Show last staged in New Orleans in 2001 and the Show committee is excited to report that the Show will once again return to the Big Easy from November 4-7, 2020!

DEMA Show Honored as One of the 50 Fastest-Growing Shows and

Included in TSNN's 2014 Top 250 Trade Show List! DEMA Show was recognized as one of the fastest growing shows in the U.S. by Trade Show Executive Magazine during the Fastest 50 Awards & Summit on May 19-21, 2015 at the Hyatt Regency Chicago. DEMA Show grew by more than three times the average rate of all trade shows in the U.S., and was ranked number 22 in the listing of the Fastest 50! DEMA Show was also recognized once again as being one of the top 250 tradeshows in the US in 2014 by Trade Show News Network. The Show Committee thanks all who participate in DEMA Show, making it possible to help keep costs down for everyone!

2015 DEMA Show Website Receives WebAward for Outstanding

Achievement Since 1997, the Web Marketing Association's annual WebAward Competition has been setting the standard of excellence for Website development. We are happy to share that the DEMAShow.com website received the 2015 WebAward for Outstanding Achievement in Web Development!

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Finance Committee Update Chair Tom Leaird (Board Treasurer)

The Finance Committee provides oversight to all budgetary activities of the Association, approves the budget for the fiscal year, and reviews all Association financial transactions. DEMA’s financial standards are developed using Generally Accepted Accounting Principles. In addition to following these high standards, DEMA also retains the services of an outside professional accounting firm to conduct annual audits of all financial activities of the Association, as well as periodic evaluations of financial data. The association’s audited financials are posted on www.dema.org for member review.

Giving Back to the Industry One of the most important objectives of the Association is the opportunity to place money back into the diving industry for business purposes. Since January 2003, DEMA has carefully placed money into successful promotions and other business-related efforts that were then evaluated for their return on the investment, using standard financial evaluation techniques. DEMA considers funding many different projects and allocates funds to these projects taking the following into careful consideration: Projects Managed Directly by DEMA (Board or Staff) – This is the most common type of project, usually involving extensive committee and Board discussion, plans and evaluation prior to implementation. Projects of this nature may be proposed internally or by an outside entity, but are managed by DEMA Staff with Board supervision. As such:

1. Projects are under direct control of DEMA Board 2. Project costs can be more easily evaluated and controlled 3. Project success can be more easily and accurately measured 4. Compliance with anti-trust regulations can be more easily monitored 5. Compliance with association objectives and corporate standards can be more easily monitored 6. Safety risks can be mitigated more easily

Projects managed directly by DEMA require evaluation by DEMA staff, recommendations to the Board and Board approval. Projects Not Directly Managed by DEMA – When projects not managed directly by DEMA staff are considered for DEMA funding, the following should be considered:

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1. Projects are NOT under direct control of DEMA Board or staff. For this reason additional information is required before approval of funding.

2. DEMA sets limits on funding to prevent cost overruns and expects periodic reports from the project management team.

3. Clear objectives and evaluation measures must be provided by the team managing the project prior to funding.

4. Written information must be provided to DEMA regarding the individuals involved, their qualifications to conduct the project, the responsibilities of each, and the terms, limits and conditions of the project.

5. Project proposals are reviewed by DEMA counsel prior to approval. 6. DEMA must be indemnified against losses, injuries, violations of anti-trust regulations and laws,

and other issues appropriate to the project in question. 7. Projects must DIRECTLY benefit the diving industry overall. 8. Consideration should be given to DEMA member companies when appropriate. 9. Adequate liability insurance naming DEMA, staff and directors is required and should be

incorporated into any funding agreement as appropriate. 10. Approved project funds can only be dispersed after a written agreement is executed.

Projects not directly managed by DEMA require evaluation by DEMA staff and, in some cases, may require evaluation by outside sources. Such evaluation by outside sources may involve additional cost to the team proposing the project prior to recommendations being given to the Board and prior to the necessary Board approval. Pursuant to the Bylaws of the Diving Equipment and Marketing Association (DEMA), you are hereby notified that you have the right to receive a copy of the DEMA Annual Financial Report upon request. This Annual Report and the Audited Balance Sheet, Income Statement, and Statement of Changes in Financial Position constitute the DEMA Annual Financial Report. As Treasurer, I hereby certify that those accompanying documents were prepared from the books and records of DEMA. Audited Financial Statements are available to DEMA members via www.dema.org. DEMA’s annual report is posted each year on its website. The names and addresses of current members of DEMA are located at the DEMA Office at 3750 Convoy Street Suite 310, San Diego, CA 92111. In 2015, DEMA engaged in no transactions which involved more than $50,000, or aggregating more than $50,000, with the same person, and in which any director or officer of DEMA or any holder of more than 10% of the voting power of DEMA had a direct or indirect financial interest. In 2015, DEMA paid no loans, guaranties, indemnifications, or advances to any officer or director of DEMA.

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Manufacturers’ Committee Update Scott Daley, Chair

The Manufacturers’ Committee represents all member manufacturers. Representatives on the Manufacturers’ Committee come from the DEMA Board and can also include non-Board members. The Manufacturers’ Committee monitors and allocates monies from the Manufacturers’ Fund, which was established in 1994 when DEMA was re-organized to include all stakeholders in the Diving Industry. The Fund is composed of 5% of the gross receipts from DEMA Show each year and is used at the discretion of the manufacturers to promote recreational diving. The allocation of the funds follows a Board-approved process, and the Manufacturers’ Committee has been supportive of many different initiatives over the years. The Manufacturers’ Fund allocated $111,000 in promotions for the industry during 2015. Programs supported include:

$40,000 Be A Diver Pool Tour

$35,000 Retail Retention & Research/AnySite-MicroBuild Subscription

$17,000 Strategic Planning & Governance Review

$16,000 Be A Diver and Other Industry Promotions

$ 3,000 Manufacturing Sales Index (MSI)

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Mission Task Force Update Tom Leaird, Chair

In April 2014 Diving Industry leaders representing DEMA’s five stakeholder groups, the DEMA Board of Directors, and the DEMA Staff met in San Diego, California for a Strategic Learning Session. The two-day session, under the guidance of a professional strategy consultant, was designed to use the knowledge of the Industry leaders present to address significant concerns and ensure that both the Association and Industry thrive in the future. The DEMA Mission Task Force consists of individuals from the DEMA Board of Directors and from the DEMA membership. For 2015 the DEMA Mission Task Force included, Jenny Collister (Reef and Rainforest Travel); Mike Hollis (Pelagic); Tom Leaird, Chair (SEI/PDIC/Leaird Underwater Services); Mike Lever (Nautilus Liveaboards); Doug McNeese (SSI); Jeff Nadler (PADI); Dan Orr (Dan Orr Consulting); Mark Young (Dive Training and Dive Center Business Magazines); and Tom Ingram (DEMA Executive Director). The group was challenged to address a variety of Industry and Association issues and brainstorm the plausible future direction of the Association, as well as think through the possibilities for how DEMA can have a positive impact on the Diving Industry. Among other initiatives, the group determined that DEMA should: Pursue holistic solutions to strategic challenges facing the diving Industry - DEMA should be the convener and coordinator of more inclusive and generative conversations designed to tackle the complex challenges facing the Industry that cannot be solved by any one organization or stakeholder group working on its own. Help build retailer capacity by increasing market intelligence - The success of the local dive store depends on its ability to nurture and maintain loyal relationships with diving enthusiasts who will purchase products and services over time. DEMA can help facilitate more meaningful relationships that drive business by providing deeper and more dynamic support using the AnySite marketing information system as the core of a comprehensive approach to build retailers to thrive in the years ahead. Operate as the Diving Industry’s data gathering and interpretation resource - DEMA is already conducting important research and data collection to better understand the emerging business dynamics facing the diving Industry today and in the years ahead. DEMA can expand and deepen this effort by working more closely with retailers, manufacturers and other Industry contributors to identify which currently unavailable data should be collected for the shared benefit of all stakeholders, and by making sense of those data to facilitate better strategic decision-making. Commitment to review and re-align DEMA’s Mission Statement with the organization’s strengths, capacity to create collaboration, and needs of the industry - This will help Members take advantage of areas of expertise such as legislative advocacy, business and industry research, face-to-face meetings

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and events, business education and member services that provide value and help facilitate business for all stakeholders. The group identified that, as a non-profit association, creating opportunities for Members and the Industry to collaborate was the best opportunity space in the market for DEMA. Creating this so-called “Collaborative Advantage” would require DEMA to re-think its primary mission, as well as its strategic goals and objectives. A Mission Task Force was formed in June of 2015, consisting of several Industry leaders who participated in the original two-day strategic learning session. Joined by DEMA staff members Tom Ingram and Nicole Russell, members of the Mission Task Force included:

Dan Orr – Dan Orr Consulting and DEMA Board Member

Doug McNeese – Scuba Schools International (SSI)

Jeff Nadler – Professional Association of Diving Instructors (PADI)

Jenny Collister – Reef and Rainforest Travel

Mark Young – Dive Training Magazine and Dive Center Business Magazine

Mike Hollis – Pelagic and DEMA Board Member

Mike Lever – Nautilus Liveaboards

Tom Leaird (Chair) – Scuba Educators International (SEI)/Professional Diving Instructors Corporation (PDIC)/Leaird’s Underwater Services and DEMA Board Member

After consideration of the elements essential to DEMA’s direction, as well as the input from DEMA’s strategic consultant and Industry stakeholders, members of the Mission Task Force recommended that the DEMA Board change DEMA’s Mission Statement, Strategic Goals and Objectives, and Tactical Goals.

The Essential Elements of DEMA’s Direction The Mission Task Force considered a set of “elements” that should be included in DEMA’s direction. These include:

1. International Scope: The Association should be viewed as international/global in scope; it is estimated that 24% of Member businesses are located outside of the U.S.

2. DEMA Members First: The Association must focus first on providing value to DEMA Members. The diving Industry as a whole, while integral to DEMA’s success, should be connected to the Members’ growth and the value provided to Members.

3. Education: DEMA should continue to provide business-related and other pertinent education programs. DEMA should also encourage sharing business and operational practices as well as encouraging Members to obtaining education that is pertinent to them, regardless of the source.

4. Research: Market research is a critical function, needed by the Industry. 5. Marketing Tools: DEMA should continue to create marketing and promotional tools for the

Industry to use as part of the Member value proposition. 6. Media Outreach: Items that reach into the main stream media can help keep diving visible to the

general public and should continue to be utilized (e.g.: Be A Diver Pool, and other events). 7. Public Policy and Spokesperson: The Association is rightfully seen as the voice of both its

Members and the Industry, and as such serves as the Industry watchdog in regard to public policy issues which may include legislative, regulatory and environmental concerns.

8. Industry-Related Standards: DEMA should be involved in developing the structure for helping the Industry self-govern, which includes monitoring and managing standards that apply to the Industry. These could include manufacturing-related, standards for travel, and standards for training. Standards and the infrastructure necessary to maintain them are viewed as important, but this function does have legal ramifications. The Association should consider using proper accrediting channels such as ANSI to help manage this process.

9. Collaboration: The opportunity space for DEMA is to help connect businesses and assist in growth. Bringing the Industry together, focusing on collaboration as a key strategy to help promote positive growth by encouraging the Industry stakeholders to work toward a common goal of growth. This is crucial for the success of the Association and the Industry as a whole.

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10. Events and Meetings: Creating Face-to Face Meetings/Events/Shows to foster collaboration and growth and a participatory culture. These are the best forms of promotion within the Industry that DEMA can organize and provide.

These ten essential elements help set the direction, and DEMA’s Mission and Goals were developed using the information from this list.

Recommended Mission Statement “Bringing businesses together to grow the diving Industry worldwide” This statement is measurable and addresses the essential elements:

Measurable: connections and growth

The statement emphasizes connections – the very heart of any “association”

Growth can include everything pertinent to the Industry - including preventing adverse legislation, the need for PR and marketing tools that Members can use, and other aspects

The Trade Show is a definite “connection” point

Includes a global focus

The Task Force recommends that DEMA use “Retailer Growth” as a proxy for Industry Growth. Retailer growth is directly measured in certifications and sales, numbers of dives, return customers, etc. These elements can be influenced by DEMA programs, and can result in overall growth of the Industry.

Recommended Strategic Goals Strategic Goals tend to remain the same over time, changing only when long range market changes occur. The following are recommended by the Mission Task Force: DEMA’s Strategic Goals

5. Build a community among its Members with a culture and environment that will produce valued relationships.

6. Create worthwhile opportunities for Members to share and exchange information and knowledge. 7. Provide learning opportunities that are responsive to Member needs and relevant to the changing

dynamics of the Diving Industry. 8. Be on the forefront of addressing the legislative and regulatory initiatives that affect the

recreational diving Industry.

Recommended Strategic Objectives Like Strategic Goals, Strategic Objectives tend to remain the same over long periods of time. These are the “30,000 foot views” of DEMA’s activities recommended by the Task Force: Engagement: To provide a community culture in the diving Industry through personal interaction. Industry Practices: To model and foster an inclusive culture, sharing useful and successful practices originating from Members and the Industry. Innovation: The process of creating and delivering new value for Members. Education: Through a culture of engagement, provide relevant professional development along the continuum of careers within the diving community. Resources: To serve as a resource for the diving Industry including;

The sharing of useful and successful business and management practices

Research

Standards

Opportunities to advance personally and professionally through collaboration

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Recommended Tactical Goals Tactical goals can change from year to year or more frequently as needs arise. These goals were recommended by the Mission Task Force for 2016: 6. To produce an annual trade event for the Industry which serves the needs of its stakeholders and

produces a successful financial outcome for the association 7. To engage in marketing programs which promote non-commercial diving of all kinds, create new

customers, drive consumers into retail stores and resorts, and promote customer retention 8. To dedicate resources to preventing potential legislation which could adversely affect the Industry 9. To engage in marketing research programs which will:

a. Define the universe of divers b. Determine the rate of erosion amongst existing divers c. Determine the number of entry level certifications which take place in the United States and

Caribbean each year. d. Seek opportunities to obtain global data on diver certification and participation. e. Provide retail operational data

10. To engage in activities which promote the health of aquatic resources while protecting diver access to those resources.

The Mission Task Force completed its work in October 2015 with the following additional recommendations to the DEMA Board:

1. Adopt the Mission Statement, Strategic Goals and Objectives, and Tactical Goals effective January 1, 2016.

2. Re-visit the Mission Statement, Strategic Goals and Strategic Objectives at least every two years 3. Revisit the recommended Tactical Goals in late 2016.

The DEMA Board is grateful for the hard work and effort required by the Mission Task Force and congratulates the group for its recommendations.

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Public Policy Committee Update Jeff Nadler, Chair

Each year DEMA establishes a Public Policy Committee which includes DEMA Board members, DEMA Member volunteers and DEMA staff. The Committee works directly with the DEMA Office to review US and International issues, gathers input from members of the diving industry, and provides input to government officials and organizations via the DEMA staff. The Public Policy Committee works for the betterment of the recreational diving industry, seeking to engage in activities which promote the health of aquatic resources while protecting diver access to those resources so that we all have a place to dive that is clean and healthy. The Committee is actively engaged in monitoring legislation and government administrative activities globally which may adversely impact diving businesses or dive site access, and encouraging activities which protect the underwater environment. Legislative advocacy can require a substantial amount of time, but can be well worth the effort. Advocacy provided through DEMA’s Public Policy Committee provides DEMA Members with a direct voice in the legislative process. When DEMA has the opportunity to act or publicly comment on potential legislation which may have a far-reaching impact on the diving industry, DEMA Members have the added bonus of receiving notifications regarding those changes to federal, state, local, or international laws. One of the goals of this effort is to provide such notification in time for Members to also participate in actions affecting these issues. DEMA monitors and responds to many pieces of legislation, and many are listed in this report. It is important to note that some legislative attempts in the US may be vetoed, do not pass out of the senate, assembly or legislature, or may pass in spite of DEMA’s or the Industry’s objections. To the extent possible, the Public Policy Committee reports this legislative activity to the DEMA Membership so that they stay informed of issues that relate to the Industry. The 2015 Public Policy Committee is composed of Al Hornsby (PADI), Darcy Kieran (Divers Direct), Jeff Nadler, Chair (PADI), Dan Orr (Dan Orr Consulting), Carlos Santana (Hawaiian Islands Recreational Scuba Council), William Ziefle (Divers Alert Network), Tom Ingram DEMA Executive Director, and Bob Harris, DEMA’s Legislative Advocate.

DEMA’s 2015 Public Policy Initiatives Goliath Grouper stocks The South Atlantic Fisheries Management Council and the Florida Fish and Wildlife Conservation Commission met in January in Key West, Florida to again consider reopening the goliath grouper fishery.

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DEMA has consistently opposed the lifting of the moratorium on harvesting goliath grouper due to several factors:

These fish are slow moving, unafraid of divers

They are slow to mature

It appears that they are unsafe to eat due to high levels of mercury

There is insufficient data to determine if they have reached a point where harvesting would cause no damage to the population

In late December 2014 DEMA issued a member Legislative Alert to all Florida-based Diving Industry businesses, asking that individuals attend this meeting. DEMA’s legislative advocate, Bob Harris, attended the meeting, along with several individuals from the diving industry, including several dive center owners/managers. Three individuals spoke about the science of stock assessment and the inability to accurately assess the current stock and maturation of goliath grouper as a fishery, and suggested the use of alternative methods that seemed more reliable. Dive operators in attendance testified in favor of maintaining the moratorium on the goliath grouper harvest and gave personal information regarding the current level of stock and the value of goliath grouper in terms of dive tourism. The Council will continue to review the situation to determine the best method to get accurate numbers on stock and mortality rates. In addition, DEMA received a proposal to fund a stock assessment study, and with the help of Chair Jeff Nadler, directed the researcher to appropriate sources of funding. The proposal was eventually funded in part through the Project AWARE Foundation. Lionfish Eradication Issue The invasive lionfish continues to be an issue in Florida, as well as coastal areas of the Gulf of Mexico and along the east coast of the US. Although divers are harvesting these fish and removing them from the reefs, they continue to spread. DEMA has proposed a funding effort from the state of Florida to help study and control this invasive species. The proposed fund is in collaboration with Florida’s Fish and Wildlife Conservation Commission (FWC), and would point funding toward The Reef Environmental Education Foundation (REEF) and several Florida university partners, including the University of North Florida College of Arts and Sciences-Biology, the University of South Florida College of Marine Science, Nova Southeastern University, Halmos College of Natural Sciences and Oceanography, and others. DEMA is seeking funds which would be allocated for Research, Control, Market Development and Public Awareness/Education. Specifically DEMA is seeking to fund projects to address the following: Research Objectives

Quantifying the economic and ecological impacts of invasive lionfish on Florida’s coastline communities

Developing methodologies and tools to eliminate and/or control invasive lionfish species (i.e., trapping, attractants, etc.)

Determine appropriate priorities for directed lionfish removals including locations, timing and frequency of removal effort

Determine the effectiveness of removal efforts and direct efforts to high priority areas

Conduct risk assessments of other potential marine invasive species in Florida waters Control Objectives

Sponsorship of lionfish derbies, or other focused removal events

Supporting and encouraging ongoing removal efforts by individual divers

Developing a commercial harvest model for lionfish

Training divers, snorkelers and fishermen in safe and effective collecting

Identification of and creation of partnerships with bordering countries and states to help reduce lionfish abundance due to ocean currents (i.e., modeling)

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Market Development

Promotion of lionfish as viable seafood products

Developing non-traditional uses for lionfish products (i.e. jewelry from fins, export market, medical or drug purposes, etc.)

Minimizing regulatory hurdles for sale of harvested lionfish

Working with restaurants and chefs to familiarize them with handling and preparation of lionfish dishes

Public Awareness and Education

Public education/outreach and data gathering projects regarding the invasive species

Facilitating continuing media coverage of the lionfish issue

Developing messaging and materials to aid in public awareness

Promoting best practices to prevent other non-native species invasions

Organizing conferences and workshops to bring together key stakeholders to share latest research and control information

Demonstrating correlation between STEM careers and marine biology This funding proposal would be from recurring revenue, until such time as the numbers of lionfish significantly decline. DEMA has the support of the National Coral Reef Institute (NCRI) and the Guy Harvey Research Institute (GHRI), and are seeking the support of: The Florida Keys Commercial Fishermen's Association; Ocean Conservancy; Coastal Conservation Association; Congressional Sportsmen's Foundation; American Sport Fishing Association; International Game Fish Association; Boat U.S.; The Billfish Foundation; National Marine Manufacturers Association (NMMA); Conservancy of Southwest Florida; 1,000 Friends of Florida; Surfrider Foundation; Sea Turtle Conservancy; and Oceana. Expiration of Special Permits for Pressed Steel Tanks & Worthington Scuba Cylinders In late January DEMA issued an update on the pending expiration of a special permit under which Pressed Steel Tanks (PST) could remain serviceable. PST went out of business in 2006 but Pressed Steel Tank’s assets were obtained by PST Cylinders LLC. PST Cylinders last renewed the special permit (SP9791) in 2011, and this latest permit was set to expire on January 31, 2015. Once a special permit of this type expires, dive stores are, by law, not permitted to fill or service these tanks and they may not be hydrostatically tested. DEMA was alerted to the situation by several dive centers. In response DEMA contacted the Department of Transportation and the new owner of PST Cylinders LLC to determine if an extension had been filed. DEMA also reached out to DEMA Members XS Scuba and Professional Scuba Inspectors (PSI) to find out more information. DEMA spoke directly with the DOT’s representative and determined that the special permit extension had been filed within the 60 day window. Such filing, even without immediate approval, extends the special permit until such time as a decision is made to approve or disapprove. DEMA, working with Professional Scuba Inspectors (www.psicylinders.com), obtained a copy of the new special permit which expires in 2018. This means that all PST tanks with the neck stamped with SP9791 or E9791 which are visually inspected and within hydrostatic test date are valid and may be filled (or may be hydrostatically tested as needed). Once confirmed, DEMA, PSI and XS Scuba released this information; DEMA on social media and through press releases. A similar situation regarding the expiration of the special permit for Worthington cylinders was to occur in early February, 2015. This special permit has also been extended until 2018. DEMA and PSI also disseminated this information via social media. Retailers and Diving Instructors: Worker’s Compensation & Independent Contractors Two issues, somewhat connected, have arisen recently with regard to retail dive centers and diving instructors.

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Independent Contractors vs Employees – Some dive stores contract with diving instructors with no intent of making them employees, but rather making them independent contractors. For some stores in two states (Florida and Arizona) those instructors who were independently contracted have been re-classified during IRS audits, forcing affected stores to pay fines and taxes. Worker’s Compensation - Somewhat connected to this is issue is that of workers compensation. Depending on the state, instructors who are independent contractors must supply their own means of caring for any on-the-job injuries. But employees must be provided with workers compensation insurance. Complicating this issue is the sometimes-cited requirement to provide a special insurance for in-water work, effectively classifying the recreational diving instructor as a “commercial diver” for workers compensation purposes (also called “Jones Act” insurance). Both employee workers compensation insurance options can be prohibitively expensive for the dive center. DEMA strongly recommends that dive centers work directly with their accountants and attorneys to be certain they are in compliance with all such labor and tax related issues. Information on independent contractors can be found on the IRS website here: https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee Scuba permits in Hawaii A new rule was implemented in Hawaii in September, 2014. New fees and permit requirements are now in effect for commercial recreational operations in state small boat harbors, facilities, and near shore waters. Prior to the implementation of this new set of administrative rules commercial permits were only issued for use of state harbors and impacted mostly boat-based businesses. There were no permit requirements for commercial operators conducting business from private marinas or from shore. Commercial operators who already pay 3% of gross receipts under a harbor commercial use permit will not be required to pay an additional fee for issuance of the new commercial permit for use of state ocean waters. Unfortunately the actual implementation of this rule negatively impacted some Kauai companies, as these businesses lost money when they were forced to close unnecessarily during the winter holidays. Governor Neil Abercrombie signed the new rule in September 2014 but company owners say they were never told when it would be implemented. For example one company – in business since 1990 - was forced to discontinue operations over the holidays, turning away $10,000 worth of business. This company eventually obtained a license but others have had difficulty in doing so because government officials were also not aware of the permit requirements. Business owners have also received emails indicating that they would be allowed to operate without a permit until March 1st. This issue first arose in 2011, but there has been no activity for almost four years as businesses and divers were alerted at that time and raised concerns with their legislative representatives. When a January 5

th televised news story was provide by Hawaii-based Committee Member Carlos Santana,

Committee Chair Jeff Nadler contacted several operators in Hawaii for additional information. In 2011 the Department of Land and Natural Resources (DLNR) official overseeing this, Joe Borden, indicated that he would continue to work with the diving industry but has since “neglected to remember” that promise. In early 2015 Chair Nadler contacted Borden via email, and in his reply, Borden indicated that, “a public hearing was held regarding the requirement of acquiring a permit to operate in/on the ocean waters of the state. The notice of the public hearing was placed in each of the County's newspapers, informing the public of the date, time and place of the meetings and how to make comments regarding the rule amendment. To ensure we were in compliance with the Sun Shine Law as per the Hawaii Revised Statutes §171, it was placed in these newspapers no less than 30 days prior to the hearing. The rule went into effect September of 2014.” Despite the operator reports and news stories to the contrary, DNLR and Mr. Borden took no responsibility for the obviously-bungled implementation of the rule.

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Shark Fishing from Swimming Beaches in Florida This issue continues to have relevance with the diving industry as it may impact shark feeding in general, and attracting sharks while diving. The Mayor of Melbourne Beach, FL witnessed fishers, fishing for sharks in heavily used swimming beaches. The Mayor proposed regulations to restrict or prohibit this practice. In response, advocate Bob Harris attended a meeting on this issue in late 2014 an again in 2015, testified with the following talking points:

This is an issue of public safety o Jessie Arbogast-8 year old boy attacked by shark in ~2 feet of water (Pensacola, 2001)

and permanently disabled o There are lots of regulations on the books already dealing with user conflicts and public

safety. Unfortunately many of these regulations are “not enforceable” unless someone turns in the offender

o DEMA requests a rule based on public safety; Can’t chum within 300 yards of shore for the purposes of catching sharks

Regulations should be consistent - If shark fishing/chumming from shore near swimmers is okay then fish/shark feeding should be allowed as well

Florida Fish and Wildlife Conservation Commission (FWC), Division of Marine Fisheries Management believes that a non-regulatory approach should be used on this issue, including an outreach effort to produce the best outcome. FWC proposed that they would travel to Melbourne Beach to talk to local shark fishermen first. If the outreach campaign did not work, FWC would revisit the idea of potential regulations in the future. Many issues would have to be addressed before a draft rule was ever presented. From the Melbourne meeting several action items arose, including the need to finalize outreach information and safe shark practices and engage shark fishermen statewide, and meeting with the Melbourne Beach Town Commission and community. Ultimately additional regulations were discussed but no regulatory changes have taken place as yet. Florida Springs Groups United In December 2014 several springs protection advocacy groups have joined forces in the hopes they will accomplish more together than separately. Representatives of nine groups, including four from North Central Florida, established the Florida Springs Council. Together, they plan to advocate for "comprehensive" springs protection legislation during the upcoming legislative session in Tallahassee, as well as potentially mount legal challenges against groundwater pumping permits, water supply plans and minimum flows and levels that they feel harm or do not do enough to protect the state's springs and the aquifer. They also plan to launch an education campaign to distribute technical data on the springs and aquifer. According to Bob Knight, with the Howard T. Odum Florida Springs Institute, the Silver Springs Alliance and the newly formed coalition's executive committee, "The idea is to bring all these groups together to speak with a unified voice on springs protection, to educate and advocate on springs issues." Other member groups from this area include the Ichetucknee Alliance and Our Santa Fe River Inc. From other parts of the state, the Save the Manatee Club, Wakulla Springs Alliance, Kings Bay Springs Alliance, Friends of Warm Mineral Springs and Withlacoochee Aquatic Restoration Inc. were also organizing members. With committee meetings in Tallahassee underway in early 2015 ahead of the legislative session, advocating for a springs bill was an early priority for the group. The group planned to obtain monies from the state of Florida to fund their activities. In 2014, state Sen. David Simmons, R-Altamonte Springs, introduced a bill that unanimously passed the Environmental Preservation and Conservation Committee, chaired by state Sen. Charlie Dean, R-Inverness. That bill then went through numerous amendments that removed or loosened some specific requirements and timelines for setting minimum flows and levels, and recovery plans for water bodies that were below historic flows, as well as the basin management action plans for cleaning up impaired water

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bodies and watersheds. The bill eventually passed the Senate unanimously but did not move through the Florida House. Survival Craft and Dive Charter Vessels By February 2016 a law will be implemented which requires that owners and operators of small passenger vessels (including diving vessels) presently allowed to have either an approved buoyant apparatus or life float as a survival craft must have an approved survival craft that, “ensures that no part of an individual is immersed in water.” This could have the effect that life floats are no longer accepted and each vessel currently required to have primary lifesaving will need to replace life floats with either an Inflatable Buoyant Apparatus or Life Raft. According to the Act (HR1987), “the Secretary shall require that a passenger vessel be equipped with survival craft that ensures that no part of an individual is immersed in water, if — (1) Such vessel is built or undergoes a major conversion after January 1, 2016; and (2) Operates in cold waters as determined by the Secretary. The law may be viewed at this website which will give additional information on the issue. https://www.congress.gov/bill/114th-congress/house-bill/1987. In August 2015 the USCG issued a Marine Safety Information Bulletin which included some general guidance, to ensure that vessel operators are aware of this issue and are starting to plan for this requirement. The Coast Guard is also working on developing a more formal Policy Letter to assist industry and field units with the actual enforcement steps that will be taken. The Marine Safety Bulletin can be seen here: http://c.ymcdn.com/sites/www.dema.org/resource/resmgr/Documents/MSIB_09-15.pdf The lifesaving requirements for this ruling are outlined in a table in 46 CFR 180.200. Operators are advised to keep in mind that this will mean lifesaving will be “All or None,” and any allowances for 50% lifesaving, such as vessels on a limited coastwise route in warm water, will not be allowed; it will be 100% Life raft or Inflatable Buoyant Apparatus. The Coast Guard has indicated its willingness to work with individual vessels to develop implementation plans over time the short time prior to the implementation of the rule in early 2016. The intent will NOT be to issue No-Sail 835's or restrict operations immediately on February 26th, 2016. Vessel operators are encouraged to contact their local USCG representative office for further guidance. Cayman Islands Cruise Ship Berthing Facility In June the Cayman Islands Department of Environment made an Environmental Statement (ES) public regarding the proposal to construct a Cruise Ship Berthing Facility in George Town Harbor. The Environmental Statement can be found here: http://www.doe.ky/wp-content/uploads/2015/06/CaymanCBF-ESNon-TechnicalSummary-FinalDraft02Jun15.pdf According to the ES, the construction and maintenance of this facility will substantially damage the living coral reef in the George Town Area (specifically Devil’s Grotto and Soto’s Reef) and damage the Balboa wreck. After review, DEMA sent a letter to the Cayman Islands Department of Environment expressing concerns regarding both the economic and environmental impacts of the proposed facility. DEMA also issued a Public Policy Alert asking industry members to comment and also sign an online petition asking the Cayman Islands to halt the project. The DEMA letter can be seen here: http://c.ymcdn.com/sites/www.dema.org/resource/resmgr/Documents/2015-07-02-DEMA_Letter_to_Ca.pdf DEMA’s Public Policy Alert can be found here: http://www.dema.org/news/news.asp?id=239405&hhSearchTerms=%22cayman%22 The online petition can be found here: https://takeaction.takepart.com/actions/do-not-dredge-in-the-cayman-islands?cmpid=san

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In September 2015 the Cayman Islands government announced they would “proceed to the next steps in the process of construction” of the cruise ship berthing facility. DEMA continues to monitor the situation and will assist where possible. Dive Flag and Dive Buoy – Public Service Announcements Through the Public Policy Committee, DEMA issued a remake of its Dive Flag/Buoy Public Service Announcement (PSA). The updated PSAs are available in two time versions; 15 seconds and 30 seconds, as well as in English and Spanish, increasing the opportunities for television air time. The PSA’s are available for Member use on their websites. Divers Down Flag - English 30-seconds PSA: https://www.youtube.com/watch?v=SzeZ1M7oYmk&list=PLVgRT0DpAwvEQwdc9XN97jQNi3EGM1Met&index=3 15-second PSA: https://www.youtube.com/watch?v=QZ4LEN35yss Divers Down Flag - Spanish 30-second PSA: https://www.youtube.com/watch?v=DoQZv-A6Mfo&list=PLVgRT0DpAwvEQwdc9XN97jQNi3EGM1Met&index=4 15-second PSA: https://www.youtube.com/watch?v=rr_pBvkj-Eg California Lobster Season – NEW Public Service Announcements DEMA completed the production of new Public Service Announcements (PSA) regarding the California Lobster Season. In the past few years there have been a number of diver injuries and deaths in California during the opening days of the lobster season. To call attention to this issue and to assist in driving business into retail dive centers, DEMA produced two versions of this PSA and released it to the diving industry and public in early September. The PSAs themselves remind divers to get their equipment checked and to upgrade their skills in order to prepare in advance for the lobster season which began in October. The California Lobster Season PSAs are available in two time versions; 15 seconds and 30 seconds, and in English and Spanish. California Lobster Season - English 30-second PSA: https://www.youtube.com/watch?v=vRGTNjfKv7k 15-second PSA: https://www.youtube.com/watch?v=0gmxYzjGs2A California Lobster Season - Spanish 30-second PSA: https://www.youtube.com/watch?v=itF0NYJzph8 15-second PSA: https://www.youtube.com/watch?v=0GjHBVXByfo Florida Lobster Mini-Season and Lionfish Harvest Bonus Initiative In June the Florida Fish and Wildlife Conservation Commission (FWC) proposed a rule which would create a program enabling those divers who take 10 lionfish also be allowed to take an extra lobster during Florida’s Lobster Mini-Season. Instead of the normal lobster limit of six per day during mini-season, a diver with 10 lionfish to show law enforcement would be allowed to take a seventh lobster. Information on the proposal can be found here: http://www.keysnet.com/2015/06/17/503151_fwc-proposes-a-bonus-during-lobster.html?rh=1 DEMA collaborated with Reef Environmental Education Foundation (REEF) and wrote a letter to the FWC asking them to oppose the concept, and cautioned the Commission in moving forward on such a proposal without more information on the impact to both the species and the diving community. DEMA also suggested that other incentive programs could be devised, such as a free or reduced fee lobster fishing license when a diver takes 10 or more lionfish; such an alternative program would apply less pressure on the already-sensitive lobster population.

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DEMA’s letter can be found here: http://c.ymcdn.com/sites/www.dema.org/resource/resmgr/Documents/DEMA_Letter_to_FWC_on_Lobste.pdf Unfortunately the proposed pilot program was enacted for 2015. See: http://content.govdelivery.com/accounts/FLFFWCC/bulletins/10bd77f DEMA also issued a release to the Diving Industry which included a link to DEMA’s video Florida Lobster Mini-Season Public Service Announcement, along with a poster, allowing retailers and others to remind divers to upgrade their skills and have their equipment serviced prior to the opening of Florida’s Lobster Mini-Season on July 29 and 30. The video Public Service Announcement is here: https://www.youtube.com/watch?v=FyG6LEdBWt4 The Florida Lobster Season Poster can be found here: http://c.ymcdn.com/sites/dema.site-ym.com/resource/resmgr/PSAs/2015PosterLobsterSeason_Fina.pdf

DEMA and Federal Business-related Legislation In the US, numerous bills, executive orders and administrative rulings will likely impact all US-based businesses, including businesses in the diving industry. The proliferation of these rules and laws has made it necessary for DEMA’s Public Policy Committee to become more involved with these broader business issues. Below are several that are of immediate concern. Affordable Health Care Act (ACA) – The “Cadillac Tax” Under the ACA, beginning in 2018, both fully insured and self-funded employer health plans will be assessed a nonrefundable 40 percent excise tax on the dollar amount of any employee premiums that exceed annual limits of $10,200 for individual coverage and $27,500 for family coverage. While stand-alone dental and vision plans are excluded from the cost limits triggering the tax, the law does include several other costs paid by employers and employees such as contributions to flexible spending accounts or health savings accounts. The Cadillac Tax will impact businesses of all sizes and businesses in the Diving Industry should be aware of the implementation of this tax. According to the ACA, the tax was created to help pay for expanding coverage to the uninsured and to reduce health care usage and costs. Employees are already facing higher deductibles and other cost-sharing requirements. Even with current efforts, studies show that nearly half the health plans in the US will trigger the tax in 2018 and many more will trigger it shortly thereafter. The result of this tax is that there will be less in the way of discretionary income available for consumers to spend on recreational diving. This will also have an impact on the way diving businesses construct benefits for their employees and perhaps on actual employment in the diving industry. How Does This “Cadillac” Tax Work? Example of Self-only coverage A $12,000 individual plan would pay an excise tax of $720 per covered employee: $12,000 - $10,200 = $1,800 above the $10,200 threshold $1,800 x 40% = $720 Example of Family coverage

A $32,000 family plan would pay an excise tax of $1,800 per covered employee: $32,000 - $27,500 = $4,500 above the $27,500 threshold $4,500 x 40% = $1,800 DEMA Members should consult with their insurance professionals for advice in constructing their health care plans. Trans-Pacific Partnership (TPP) Agreement DEMA was asked by one of the members of the Committee to review the recommendations for passage of the Trans-Pacific Partnership Agreement made by colleagues at the Outdoor Industry Association,

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(OIA) and inquired whether or not DEMA should also make such a recommendation to our audience. DEMA followed up with a number of DEMA A1 (Manufacturing) members, asking them their opinions on the passage of the bill. While waiting for responses (all of which were eventually supportive of the bill) the agreement was passed by both the House and Senate and was signed by the President, negating any additional activity by DEMA’s Committee. OIA’s comments can be found here: http://oia.outdoorindustry.org/webmail/51282/114490391/44e67d774d76d4b76bb4007adbea8f6e Information on passage of the bill can be found here: http://thehill.com/homenews/senate/246035-senate-approves-fast-track-sending-trade-bill-to-white-house New Overtime Rules The Department of Labor issued a Notice of Proposed Rulemaking (NPRM) on July 6, 2015 in the Federal Register (80 FR 38515) and invited interested parties to submit written comments on the proposed rule at www.regulations.gov on or before September 4, 2015. The proposed rule would more than double the salary threshold under which workers qualify for overtime pay whenever they work more than 40 hours per week. That threshold, now $23,660, would rise to $50,440, resulting in raises for about 5 million workers, according to Administration estimates. Hourly workers would generally continue to receive overtime pay as they do under current rules, but the regulations would be updated for salaried workers to guarantee them overtime pay if they earn less than the new salary threshold. The Department of Labor’s proposal, “will increase costs on small businesses, make it harder for workers to advance up the economic ladder, and do nothing to address the complexity of the regulations or reduce unnecessary litigation,” said House Education and the Workforce Committee Chairman John Kline (R-MN) and Workforce Protections Subcommittee Chairman Tim Walberg (R-MI). “The administration has crafted a regulatory proposal that will stifle productivity and personal opportunity.” Importantly, the proposal does not include specific regulatory changes to the so-called “duties test” that determines whether salaried workers earning more than the threshold are entitled to an exemption from overtime rules. Under the current rules, salaried workers performing executive, administrative and professional office work are not eligible for overtime pay. Many employers commented on specific changes to the duties test when the Labor Department’s notice of proposed rulemaking was published. The Department will consider all comments before issuing a final rule in 2016. The proposed rules can be found here: http://www.dol.gov/whd/overtime/NPRM2015/OT-NPRM.pdf DEMA’s comments in opposition to these rules can be found here: http://www.dema.org/news/250526/DEMA-Submits-Comments-Opposing-US-Department-of-Labors-Notice-of-Proposed-Rulemaking-to-Amend-FLSA.htm State Laws – CA Senate Bill 350 In September DEMA became aware of a Senate Bill in California which, if passed as written, could have had a direct and detrimental impact on the diving industry, many small businesses, and diving consumers. SB350 purported to reduce hydrocarbon emissions, and while DEMA and the dive industry generally support viable efforts to reduce pollution affecting the environment, especially as it may affect global warming, with its related impact on coral reefs and dive sites around the world, SB 350 attempted to mandate too much, too soon, without the completion of the sorts of scientific and engineering study, and public and industry input and evaluation, that the bill’s own language mandated. SB 350 can be seen here: http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201520160SB350 SB 350 would have required standards in California to be set in furtherance of achieving a reduction in petroleum use in motor vehicles by 50% by January 1, 2030. The bill, as originally written, would have required the state board to prepare a strategy and implementation plan to achieve this reduction by January 1, 2017. The requirements contained in this bill would have applied to cars, marine vessels (to

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the extent permitted by federal law) off-road or nonvehicle engine categories, highway motorcycles, off-highway vehicles, construction, farm equipment, utility engines and locomotives. The bill was opposed by many groups, among them the California Chamber of Commerce, who indicated that SB 350, “Potentially increases costs and burdens on all Californians by mandating an arbitrary and unrealistic reduction of petroleum use by 50%, increasing the current Renewable Portfolio Standard to 50% and increasing energy efficiency in buildings by 50% — all by 2030 without regard to the impact on individuals, jobs and the economy.” The bill also gave the California Air Resources Board (CARB) free rein to enact a mandatory 50% gasoline and diesel fuel restriction (8 billion gallons annually) by the year 2030, without legislative oversight or approval (see: http://www.ocregister.com/articles/sb350-665650-carb-california.html). To meet the mandate, CARB would have been granted the authority to ration gas and diesel fuel, place mobility restrictions on state residents, place surcharges on family mini-vans, trucks and SUVs, and even monitor individuals’ fuel consumption records. SB 350 could possibly have limited how far a person can drive through gas price increases and surcharges on their older vehicles. DEMA felt strongly that SB 350 would have had a damaging impact on all diving businesses. This legislation could have created a detrimental impact on the household budgets of individuals and families who travel within the state to dive, those who plan to purchase dive equipment and on those who dive using a personal marine vessel. Household budgets would have been strained and travel would of necessity been restricted, making it more difficult for divers to make dive trips, purchase certifications and buy equipment. According to Retailer Rusty Berry of Scuba Schools of America (www.scubaschoolsofAmerica.com) in Montclair, CA, “this bill had the potential to be devastating to my business. It could have made it difficult or impossible for divers to get to local dive sites, and could have disrupted family budgets to the point that they’ll have to choose between getting to work, and going diving.” DEMA opposed this bill and strongly recommended that all diving industry interests in California contact their legislators and voice their opposition as well. Ultimately, the bill passed but WITHOUT the petroleum products reduction provision, effectively preventing the kind of impacts that would have been immediately detrimental to the California Diving Industry. 2015 has been a busy legislative year and the trend for active legislation of this sort promises to continue into 2016. DEMA and the Public Policy Committee recommend that all diving businesses become involved with these important issues.

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Research Committee Update William Cline, Chair

DEMA’s research role includes providing Members with pertinent industry data that helps their businesses. Providing market and Industry research is critical for all trade associations, and DEMA views this responsibility as a central part of the association’s activities. The DEMA Research Committee consists of individuals both from the DEMA Board of Directors and from the DEMA membership. For 2015 the DEMA Research Committee included, William Cline (Cline Group Advertising), Chair; Darcy Kieran (Divers Direct); Jeff Nadler (PADI); Dan Orr (Dan Orr Consulting); Ray Purkis (AQUIS Strategic Marketing); Ronny Roskosch (Active Scuba Divers.com); Tim Webb (Caradonna Dive Adventures); Mark Young (Dive Center Business Magazine/Dive Training Magazine) and Tom Ingram (DEMA Executive Director). At the heart of “marketing” is the understanding of the customer, how to communicate with them and what message will generate the greatest response in a cost-effective manner. DEMA participates in several ongoing research projects each year, but also has additional customized data available for DEMA Members to use. All members of the diving community can benefit from this type of data. Most everyone in the diving industry has some idea of their own customers; retailers see who purchases the equipment and training they sell; manufacturers have a good understanding of who purchases their products through warranty registrations and information from their retail dealers, training organizations can easily check their own certification information for demographic details, places where their customers live and more. The question for the Industry and for DEMA is how to pull all this information together to enable growth of the Industry. Having marketing data from all sources in the diving industry, including data from actual divers is critical, but only if it translates into action. For 2015 DEMA’s Research Committee had oversight on numerous research projects:

Open Water Diver Certification Census Thanks to the three participating certification organizations, data on the number of new diver certification has been readily available to the Industry each year since 2003. The Certification Census includes data on Open Water-level diver certifications only, as defined by the Recreational Scuba Training Council (RSTC). This statistic is a measure of growth for the Industry at large, and is indicative of the health of the sport. The cooperative effort between all of those certification organizations currently reporting includes providing their certification information directly to an independent, third party auditing firm. Although not all training organizations participated with this program in 2015, all are invited to participate each year.

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Open Water certification numbers are reported in aggregated total from the third party administrator (TPA) to DEMA only after the TPA does a thorough review of the data, removes any duplicated customer records that appear across or from within agencies, and receives written verification of the numbers from each reporting training organization. The process is designed to make the Certification Census totally anonymous with regard to the new diver’s training organization affiliation and to produce an accurate accounting of the total new divers from within the US and Caribbean. Neither the DEMA Office nor members of the DEMA Board receive access to individual training organization totals, only the aggregate total. Up-to-date certification census data is available at www.dema.org and important state-by-state data is available to DEMA Members.

Manufacturing Sales Index (MSI) For more than 20 years DEMA has gathered and reported data on sales at the manufacturing level. The data is reported by those manufacturers that voluntarily participate in the program and is gathered by a third party administrator on a monthly and quarterly basis. The individual manufacturer’s information is kept confidential and the aggregate is reported only to participating companies. Data from the Index is used by manufacturers to compare their own sales with those in the Industry, to help understand market share information, and to help determine trends. Such trends can be helpful as the market and consumer changes with changes in the economy.

Localized Dive Center Research For a variety of marketing programs in virtually every industry the place to begin is in understanding the current customer, their buying habits and their values. DEMA has conducted studies of these parameters at a national level in the US, but diving consumers are diverse and each geographic region is different in terms of diving season, equipment and training needs and the people that participate. Through a subscription partially funded by the DEMA Manufacturer’s Committee, DEMA Members have access to AnySite, a marketing information system providing critical customer data on the geographic location of the individual dive store and the potential customer households found in the immediate vicinity.

Location, location, location: Even with online sales in the diving industry growing in importance, a critical component of the success of any specialty retail business is where the store is located. The physical dive store remains the center of attention for components of

dive instruction and equipment purchases where proper fit is critical. In fact recent data indicate that more than 23% of all divers have NEVER made a purchase from an online dive retailer. The physical location of a brick-and-mortar dive center plays an important role in the image the dive center portrays, the type of customers attracted, and ultimately the success of the business. It is extremely helpful to know some basic details about store location in an existing store, as the economic conditions in a given geographic area can change from year to year. In fact, one recent and revealing AnySite study of changing neighborhoods conducted by DEMA indicated it was possible to track the evolution of neighborhoods from year to year, and provide information that was helpful in changing the store’s approach to local promotions as the nearby households evolved. Once there is an understanding of WHO the customer is and HOW to communicate with them, those customers must be LOCATED and there must be sufficient interaction with them to generate their interest in the store.

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WHO is the Customer? Using several more than one variable to understand customers is helpful and AnySite provides multiple variables about the customer, using these variables to identify the potential customer’s “life stage.” Including:

Income

Education

Group Quarters

Dwelling Type

Geographic Mobility

Place of Work and Commuting

Mode of Travel

Employment Industrial Classification

Occupation

Age

Race, Hispanic Origin, and Ethnicity

Immigration

Home Language

Household Structure & Family Status

WHERE is the Customer? In addition to the “WHO” the AnySite program also allows the retailer to locate WHERE these potential customers live in proximity to the store. Finding WHERE is actionable as customer households are initially identified by postal code and with additional services can also be identified by individual household addresses.

It is worth noting that AnySite is used by many companies across numerous industries, including Master Card, Sprint, Verizon, Rexall Drugs and many other specialty retail operations. DEMA has made it possible for Members to have access to marketing information which is otherwise only available to very large company users. More than 35 DEMA Member retail dive centers requested and used this neighborhood-level data and specific local customer data during 2015.

Actionable Data: The DEMA Consumer Marketing Campaign In 2015 the DEMA Research Committee was called on to provide their recommendations to implement a new consumer marketing effort. To provide these recommendations DEMA utilized information from primary and secondary sources in order to be sure that the data points DEMA’s consumer marketing efforts in the correct direction:

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Primary Research Sources 1. DEMA’s 2014 study which incorporated third-party data from more than 472,000 households and

five different diving-related activities, analyzed within the AnySite Geodemographic Information System;

2. The 2014 DEMA web-based survey which acquired more than 24,000 diver responses worldwide including more than 13,000 responses from divers in the US (only the data from divers in the US were used in these recommendations);

3. The DEMA US Certification Census; 4. The DEMA Manufacturing Sales Index

Secondary Research Sources 5. The US Census Bureau; 6. The US Bureau of Labor Statistics; 7. Independent data on Shoppers - Forrester Research; 8. The AnySite Geodemographic Information System; 9. Marketingcharts.com

In recommending potential targets, the Research Committee used an analysis performed on actual diving customers. The analysis was based on the geographic location of the consumer’s household, and is an objective, third-party look at the customers that requires no self-reporting. The data set uses sixteen variables to describe the potential target consumer household and includes additional data on purchasing behaviors and media to which the consumer responds. The data used also took into account the need to help all DEMA stakeholders, including manufacturers, training organizations, the media, retailers of all sizes and travel providers/destinations. Notably, these different stakeholders can focus on different parts of the consumer market – sales of certifications don’t necessarily translate into sales of equipment. It was therefore of importance that the Research Committee utilize data that would produce the best overall results for the Industry-wide campaign, rather than focus solely on one stakeholder or another. Some points of interest:

Consumer data indicates that hard-goods are purchased by older clients. DEMA members indicate that newly certified divers are buying fewer hard goods, and manufacturing sales data confirm this significant decline in hard goods sales.

DEMA’s data indicates the number of new divers certified in the US is declining. Whatever the profile of consumers currently being “targeted,” under the current US-based economic and demographic circumstances, the overall decline in new certification since 2005 is about 13% or an average of about 1.5% per year. This should be a concern for all diving-related companies in the US, and points to the need to better understand the consumer.

Year OW

Certifications

2005 162,729

2006 162,605

2007 160,680

2008 153,270

2009 141,280

2010 145,929

2011 148,921

2012 151,736

2013 146,052

2014 141,443 Source: DEMA Certification Census

130,000

140,000

150,000

160,000

170,000

20

05

20

07

20

09

20

11

20

13

Entr

y-Le

vel C

ert

ific

atio

ns

Open Water Certifications (US Only) 2005 - 2014

OWCertifications

Linear (OWCertifications)

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Looking Deeper – Using Generational Data to Define a Target Audience Several data sets were considered prior to making target market recommendations to the Consumer Marketing Committee:

Data Set 1: Age-Based generational breaks (e.g.: Millennials, Gen Xers and Boomers/Post Boomers)

Data Set 2: Recommendations based on length of time certified as a diver with a break at 10 years prior

Data Set 3: Multivariate data points and household-based data The variety of life stages within the listed age breaks of Millennials, Gen-Xers and Boomers/Post Boomers indicate that using generational breaks may be helpful in some ways, but should only be used in conjunction with other data. Doing otherwise may unnecessarily eliminate age categories from consideration as a potential target market. For example, based on the age category of “Millennials,” much data suggests that this group has little disposable income (and perhaps little time) to participate in an activity such as recreational diving. As a point of reference, the following are estimates of the number and percentage of the various US population age ranges:

Age Range Quantity Percent of Population

12 to 17 25 million 7.8%

18 to 24 31.5 million 9.9%

18 to 29 53.5 million 16.8%

18 to 34 75.0 million 23.5%

18 to 49 136.4 million 42.8%

25 to 34 43.5 million 13.6%

35 to 44 40.5 million 12.7%

35 to 49 61.4 million 19.3%

45 to 54 43.5 million 13.6%

50 to 64 62.6 million 19.6%

55 to 64 40.1 million 12.6%

55 + 86.3 million 27.1%

65 to 74 26.4 million 8.3%

65 + 46.2 million 14.5%

75 + 19.8 million 6.2% Source: Marketingcharts.com, April, 2015

According to the US Bureau of Labor Statistics and Forrester Research: “Overall, all shoppers are spending less on discretionary items than they did 30 years ago, while a greater percentage of their ‘spend’ is going to essentials. This is most pronounced in households headed by those under the age of 25, where there has been a decline by 19% in discretionary spending since 1973.” “Young consumers under age 25 today are also hindered by unique economic circumstances that make them less attractive shoppers. Longer life expectancies, expensive customer reactivation programs, and vibrant older shoppers suggest that young shoppers may NOT have the greatest lifetime value.” “Demographic data about older populations, specifically Boomers and Post Boomers indicate that they are a much more attractive ‘shopping’ (disposable income) target.”

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Shopping spend includes food (at home and away from home), apparel, entertainment, leisure, and personal care. Essential spend includes housing, transportation, healthcare, education, phone, and mobile expenses. (Note: Percentages may not equal 100 due to rounding). Source: “Consumer Expenditure Survey,” US Bureau of Labor Statistics

“Older shoppers have experienced the greatest growth in real income. Older consumers

have significantly greater financial power and, in aggregate, spend significantly more than consumers under 35. Following decades of savings and building equity in homes, older consumers have made significant financial gains. The oldest consumer groups are the only segments that have made any gains in real income: Households over 65 have experienced a 30% gain in purchasing power since 1973. Even the next younger cohort, households ages 55 to 64, has gained 11% more. As a result, older consumers are now enormous drivers of discretionary spend: In 1973, households over 55 comprised 25% of shopping spend and by 2013 drove 35% of that spend.”

“The young consumer segment has contracted in spending power and size. When retailers see lower sales figures from these demographics, they worry that they have failed to address that shopper’s needs or that social media channels may change how people consume. Declines in real income appear to be real reason shoppers spend less. Such drops in real income have affected young consumers more than any other group.”

“In 2013, households under 25 had only 82% of the purchasing power that they did in 1973. Of total shopping spend in the US, households under the age of 34 comprised 21% in 2013, down from 28% in 1973. Plus retailers face another challenge: a smaller percentage of homes occupied by a younger population. Households under 25 comprised 9% of total US households in 1973 but only 7% of the households by 2013.” Source: The Future of Shopping, April 2015 (Forrester Research).

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Share of Income and Percent of Shopping Spend by Age of Household

Source: “Consumer Expenditure Survey,” US Bureau of Labor Statistics

DEMA’s own Manufacturing Sales Index (MSI) indicates a significant downward shift in equipment sales between 2012 and 2014. This downward shift is in terms of both units and dollars, and impacts soft goods and hard goods, but especially hard goods. As the number of new divers entering the sport has declined, it appears that the sales of diving equipment have also declined, along with the drop in disposable income. Using equipment and travel sales data alone could make it appealing to target only those with higher disposable incomes, which could lead to exclusively targeting an older population (age 45+). Likewise, using age data alone could also lead to targeting a younger age cohort because this seems to be such a large potential audience (e.g.: population in the age range of 18 to 34 is currently about 75.0 million people) and because of the perception that this group will be the “future of diving,” theoretically evolving into heavy spenders over time. The Research Committee determined that using either of these ALONE could lead to a wrong solution to the issue of a proper marketing target. In particular, aggressively pursuing Millennials without considering the need for additional data may be putting the overall Industry at risk. These younger divers may, in 10 or 15 years, purchase dive equipment and travel to dive, but the data indicate that in the intervening time, while they are raising families and building careers, this age cohort is less active in diving and effectively “drops out” for a prolonged period of time. In summary, targeting based on age alone is not the best approach for the recreational diving industry as a whole, even though targeting in this manner may generate a customer that obtains one or more certifications. A targeting strategy that uses additional data is needed. Data Set 2: Using DEMA primary research, pull data representing 10 years of certifications:

• Those certified within the last 10 years • Those certified longer than 10 years ago

It is known that the number of new entry-level diving certifications has declined (with small year-to-year variations) by about 13% since 2005. The data points found in the DEMA diver survey may reveal more

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information about this 10-year period, but for this data to be useful in understanding any difference in diving activity and purchasing behaviors of the customer more study is required. The Research Committee is interested in ascertaining more information about this data set and this period of time. However, in order to make a reasonable inference, the Committee must also consider that there have been some significant changes within the diving industry and in the US economy in the last few years. For example, the US has experienced a significant recession and anemic economic recovery, there have been increases in airline fees – especially baggage fees – and even a change in the delivery methods of diver education (e.g.: an increased emphasis in eLearning and tablet-based methodology). Additional study will be required on the impact these changes have made to the diving industry, and the Research Committee has already begun the process of studying these phenomena. Some interesting points include:

International dive travel is down 12.8% from 2009.

Divers certified in 2009 have an average of 56% more diving friends than those certified five years earlier.

Divers certified in 2009 are 7% more likely to have been certified at a local dive store than divers five years later.

Divers certified in 2009 are 17% more likely to stay in the sport than divers certified five years previously.

Divers certified in 2009 are 22% more likely to call themselves ‘Active Divers’ than those certified five years later.

In 2009, almost 50% more divers bought a regulator before or during their first certification course than did divers certified five years later.

The highest percentage of women divers are those certified between the ages of 25 to 33. The percentage drops as age of certification increases.

While the Research Committee will continue studying this data set it did not impact the Committee’s target market/data set recommendations. Data Set 3: Multivariate Data Points Using Household-based Geodemographic Data DEMA has access to geodemographic data from a third-party marketing information system. The data from this system provides an objective description of actual diving customers based on geographic location of their household, using multiple household variables to describe the potential target consumer:

Household income

Marital status

Highest education

Market value of home

Length of residence

Single family dwelling vs multiple family dwelling

Home owner vs renter

Neighborhood households per square mile

Estimated household net worth

Presence and age of children in the household

Household size (number of persons residing in the household)

Ethnicity

Preferred means of purchase – mail and internet

Age of the head of household A summary of the data from various DEMA studies indicating the topline data point variables contained in the information system is available to DEMA Members at no charge and can be found here: https://dema.site-ym.com/store/ListProducts.aspx?catid=398241.

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On comparison of the data points among the diving activities shown in the research it can be readily seen that most households of current diving consumers have high income and high net worth, especially as compared to the US national averages. The households are dominated by Caucasian ethnicity. Most are high level users of the internet, etc. Additional data available to the Research and Consumer Marketing Committees also made it possible to target consumers using the specific media to which they are attracted. Not only does this help provide the Committees with an overall understanding of these consumers but it can also become critical in advising how members can correctly place marketing/advertising materials created by the Consumer Marketing Committee, to help these members promote their own businesses. Perhaps most importantly, using a multivariate system makes it possible to incorporate additional information on consumer age, household composition (e.g.: presence and age of children and presence of adults over 18 years), and other variables critical to each diving industry stakeholders’ success. Thus, pursuing “Millennials,” Gen-Xers or Boomers is possible (as suggested in Data Set 1), while holding to households that have sufficient net worth, income, and other life stage characteristics that correspond to dominant diving consumers. It is also possible to target new (untapped) groups by selecting targets based on other criteria that may include multiple variables. The key is to target those households (and persons in the households) that are at a stage in life where recreational diving is possible and even likely. The three top “Life Stage” Groups into which all of the diving activities DEMA evaluated fall are:

Affluent Households: Life Stage Group 11B (AnySite Clusters 1, 4, 7)

Comfortable Households: Life Stage Group 12B (AnySite Clusters 13, 17)

Top Wealth: Life Stage Group 15M (AnySite Clusters 2, 3) The data points from these Life Stage Groups are remarkably similar to each other and very similar to the composite data for the five different activities that were evaluated as part of DEMA’s previous analysis. A brief narrative description of the top 3 Clusters associated with these Life Stage groups is presented.

Group Cluster Cluster Name

Description

15M 02 Established Elite

Established Elite is among America’s most wealthy and well-educated couples, enjoying high rankings for almost everything. Ages vary, with most being 45 or above, and they are primarily married with no children under the age of 18 in the home. They are mostly in managerial positions or professional occupations, with some entrepreneurs, as noted by a slightly higher incidence of self-employment. Established Elite’s activities are dominated by public and volunteer service. They are consistently very active in their communities and in the arts, enjoying art galleries, museums and live theater. NOTE PEAK AGE GROUPING IS 56 to 65. Key Factors: Couples and Singles, No kids

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Group Cluster Cluster Name

Description

12B 17 Firmly Established

Firmly Established contains members of America’s smaller cities and surrounding areas. Virtually all are married (99%), and these families are firmly in the upper-middle class. In their mid-40s to 60s, they are employed in jobs ranging from blue collar to professional, with the majority supporting households of five or more. They are often engaged in home maintenance activities. Their finances are stable and tend toward the conservative. Families enjoy travel, activities and outdoor fun together, but older children are driving, too, giving parents the chance to pursue their own interests. NOTE PEAK AGE GROUPING IS 46 to 55. Key Factors: Extremely likely to have teens still at home and can afford to travel once per year

Group Cluster Cluster Name

Description

11B 07 Active Lifestyles

Active Lifestyles is made up of wealthy couples with older children and teens, driving the SUVs needed to move them and their gear. Their kids are driving now, too, which means additional vehicles at home. These parents are planning for the future, saving money for college expenses and taking out disability insurance. Before the kids head off to college, though, they enjoy the here and now with casual, family-friendly activities like cooking out, watching movies and playing outdoor games. They also stay active with deliberate exercise and high-energy recreation. NOTE PEAK AGE GROUPING IS 46 to 55. Key Factors: Extremely likely to have teens still at home and can afford to travel often.

One of the key benefits to using this multivariate analysis as contained in the AnySite database is the ability to target Life Stage Groups and Clusters based on the planned location for a marketing effort. Whether done as collaboration with a retailer and a training organization, manufacturer or travel provider, or conducted by the retailer alone, the marketing effort can be targeted through the available media data, such as radio listening or cable TV watching, and even by the websites the group frequently visits.

Additional Research Findings Diving Consumer Crossover Activities (participated in the last 12 months)

Answer Options Response % Answer Options Response %

Backpacking/Hiking 52.2% Bicycling-Mountain 17.9%

Jogging/Running 49.4% Stand-Up Paddle Boarding 17.2%

Weight Lifting-Gym 39.1% Salt Water/Big Game Fishing 14.6%

Bicycling-Road 35.2% Sailing 13.9%

Kayaking 32.2% Tennis 11.7%

Yoga 26.6% Water Skiing 10.3%

Bowling 25.6% Surfing 8.5%

Power Boating 24.4% Freshwater Fly Fishing 5.8%

Freshwater Bass/Other Fishing 22.5% None of these 5.8%

Golf 22.3% Racquetball 4.3%

Skiing Downhill 21.0%

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Number of Diving Friends Compared to Certification Process It is well-known that divers stay more active when they have family or friends who are also divers. One of the more interesting findings in the research is that the number of diving friends seems to vary with the process by which a diver became certified. When divers became certified through a dive center, where

they had a chance to meet others going through similar or identical training, they tended to have a

greater number of diving friends. They had fewer friends when they completed their confined

water and particularly their open water training in a different (usually warm water) location:

Number of Dives Last Year Compared to Certification Process Yet another interesting phenomenon from the recent study is the comparison of the number of dives the diver completed (anywhere) compared to the process by which they were certified. Looking at the large sample size it appears that again, when all training is completed in the local store with confined and open water training being completed locally, divers had a greater level number of dives during the year.

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Ethnicity and Population Dynamics Research on open water divers indicates that the diving industry is made up largely of Caucasian-dominated households, with that segment of the population ranking higher than the US national percentage:

OW Divers Group %

Continuing Ed Divers: Group %

Land-Based Resort Divers

Group %

Equipment Purchasers

Group %

Liveaboard Boat

Divers Group %

National %

Ethnicity

Caucasian 82.2 81.6 81.4 82.2 83.8 73.9

African American 4.1 4.0 4.1 4.1 3.6 11.0

Hispanic 7.2 7.5 7.2 7.2 6.5 11.5

Asian 5.2 5.4 5.4 5.1 4.8 3.6

Source: 2013 DEMA Studies: Open Water, Continuing Ed, Resort, Equipment Purchasers, Liveaboard Divers

0

50

100

Caucasian African American Hispanic Asian

Group: Open Water Divers: Household Ethnicity

Group %

National %

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This data also indicates that several multicultural groups (African-American and Hispanic) are underrepresented in the open water diver population when compared to the national percent of the population of these same groups. The Caucasian and Asian populations are, by comparison to national percentages, overrepresented, with Caucasian substantially so. Interestingly, in reviewing the latest US Census data projections, it appears that this same Caucasian population is, relatively speaking, in overall decline, while the percentage of multicultural components of the US population is growing:

Source: US Census Bureau Population Projections

For the Diving Industry a Critical Segment: Ages 18 – 34; Market Outlook: According to the US Census Bureau, within the 18 to 34 year old segment of the US population (the segment containing the median and mean of the population currently attracted to recreational diving), the single fastest growing individual population segment is Hispanic, followed by the Asian and African-American segments. The Caucasian/Non-Hispanic Population in this age range is projected to decline significantly by 2020.

Projection of 18-34 year olds in the US by Segment 2015-2020 (Source: US Census)

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In addition to the relative growth of the multicultural population in the 18 to 34 year old segment, within the age group younger than 18, the multicultural population (referred to in the graph as the “minority”) is projected to become the numerical majority by 2018. Longer term, the overall multicultural population is projected to become the numerical majority by 2043:

Source: US Census Bureau

Given the industry’s need to find new markets, and the desire to bring a younger population into the diving industry, from the standpoint of population dynamics, there appears to be an opportunity for the recreational diving industry to target a younger, multicultural audience, especially the 18 – 34 year old Hispanic segment of the population. Doing so opens the door to largely untapped segments, and in the long term, may have an overall positive impact on the diversity within the demographic makeup of the recreational diving and recreational diving professional populations. The DEMA Research Committee will continue to pursue information on behalf of the Diving Industry, including an annual data collection effort in 2016 to make sure the available data is as up-to-date as possible.

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Retailer Resource Committee Update Scott Taylor, Chair

DEMA established the Retailer Resource Committee beginning in late 2014, continuing into 2015, with the goal of focusing on developing retailer resources and supporting education, access to pertinent and actionable data, and, ultimately, business growth. The inaugural Retailer Resource Committee consisted of eleven retailers of varying sizes and training organizations, all from different regions, with each bringing their expertise to the group:

Retailer Resource Committee Skip Commagere – Force E, Florida Patrick Hammer – Scuba Emporium, Illinois Floyd Holcom – Astoria Scuba, Oregon Darcy Kieran – DEMA Board Member, Total Diving, Canada/Divers Direct, Florida Werner Kurn – DEMA Board Member, Ocean Enterprises, California Tamara Leaird-Connelly – Leaird’s Underwater Services, Indiana James Murray – Coral Edge Adventures, Virginia David Riscinti – Blue Water Divers, New Jersey Sid Stovall – Ascuba Venture, Texas Scott Taylor (Chair) – A1 Scuba, Colorado Paul Wagenseller – Scuba Professionals of Arizona, Arizona During the initial phases of the Committee’s work several topics were raised as being of value to the Retail Community. Among these were: Advertising Stores need to understand they must do some local advertising and the Phone book is not where to go. They need to know if they do paper it must runs 5 or 6 times. An ad on a weekend will never pay off.

Where to advertise

When to advertise

What media should be used (newspaper, TV, Radio, Direct Mail, word of mouth, social media, Constant Contact/CHIMP, other)

How to budget

Use Marketing tools from DEMA and elsewhere

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Use of Tent Sales

Tactics that work in different parts of the country. Since Committee members are all from different regions, each can supplement the list of ideas with tactics that work in their areas.

How to measure effectiveness Loyalty Programs

Frequent purchase (retail, travel) program

Referral credit Local Promotions and Networking

Joining the Chamber of Commerce and BBB

Getting involved with DEMA and local business associations

Fund raisers at schools and other events

Offer FREE DSD at local schools and park districts

Be A Diver Pool event

Work with the local media (AQ programs: weddings, reenlistment, YPO group)

Rehab Centers

Scouting groups

Supporting the many 501c donation requests (provide certificates for free DSD)

Diversifying (education, pool, repair, rental, retail, aquarium) Time Management

Including: planning the week out and focusing on that plan; making office time; teaching time and floor time; developing a mindset that (for example) two mornings are office time, three nights are class time and the rest is floor time; getting local school kids to help with social media; college mentor programs, and more.

Create a management team (e.g.: GM, Operations, Training and Aquatics).

Monthly manager and staff meetings (limit time and scope).

Hire, train and pay good people.

Project One: An Advertising eBook The Committee made the decision to obtain and publish operational data on advertising as a starting point. Working with the Research Committee, a survey was developed, with the aim of collecting information on advertising benchmarks by size and location of store, and making the data available to Retailers. DEMA Member Manufacturers, Training Organizations and Travel Providers assisted by distributing the web-based survey links to their retail customers. Each Member company was provided with a unique survey link, the results of which were sent to a third-party administrator to maintain confidentiality. The results will be published by DEMA in eBook format, making it possible for all Retailers to compare their own advertising efforts with their region and store size.

Project Two: DEMA-Sponsored Seminars Seminars sponsored and produced by DEMA during the annual DEMA Show are staples of education for members of the Industry. In 2015 the topics and speakers for these DEMA-sponsored seminars were selected by members of the Retailer Resource Committee. In order to develop the 2015 seminars and speakers, a rating system was developed and a call for papers was announced. Speakers who submitted proposals were rated on past DEMA Show performance or on videos they submitted, as well as on the topic, topic outline and description, and the needs of the DEMA Show Attendees.

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Ultimately 29 seminars were selected by the Retailer Resource Committee for sponsorship by DEMA:

Session Title Speaker Company

Email Marketing: Step-by-Step Best Practices Ken Countess The Countess Group - Marketing &

Communications

What If I Train People and They Leave? What If You Don’t Train Them and They Stay?!

Wendi Swanson The Friedman Group

Retail Sales Academy: Creating a Culture That Sells

Bob Negen WhizBang! Training

Gone in a Click: The Day the Traffic Dies Rick Segel Rick Segel & Associates, LLC

Social Media 101: Why Use It, Which Channels and What to Say

Ken Countess The Countess Group - Marketing &

Communications

Super-Size It! Building a Bigger Basket Wendi Swanson The Friedman Group

Keynote Session: Tapping into the New Power of Today’s Mobile Consumer

Chuck Martin

Double Your Breath-hold in 30 Minutes

Power Promotions Bob Negen WhizBang! Training

Good Management/Bad Management Rick Segel Rick Segel & Associates, LLC

Are You Being Held Hostage by Your Salespeople? How to Escape without Paying a

Ransom Wendi Swanson The Friedman Group

Social Media 102 – You're Social, Now What? Making Social Media Work for You

Ken Countess The Countess Group - Marketing &

Communications

Customer Love: Creating Testimonials and Rave Reviews for Your Dive Business

Lynn Switanowski Creative Business Consulting Group

How to Make Your Website Sell Better Steve Huskey High 5 Promotions

How Much Is Too Much? - Overcoming Price Objections

Wendi Swanson The Friedman Group

How to Develop a WhizBang! Staff Bob Negen WhizBang! Training

How Do We Attract Young Diving Professionals? Panel

Facebook Advertising: Learn How to Make Money Now!

Lynn Switanowski Creative Business Consulting Group

Using Marketing Analytics to Drive More Sales Steve Huskey High 5 Promotions

Invasive Lionfish Update and Panel Discussion — Research, Regulation, and Control

Panel

Retail Sales in a Mobile World: Is Your Dive Store Ready?

Lynn Switanowski Creative Business Consulting Group

Black Ink: Cashflow Management Secrets Your Accountant Never Shared

Tom Shay Profits Plus Solutions

Business Valuation and the Exit/Succession Planning Process

Allen Oppenheimer A. M. Oppenheimer, Inc.

Five Tips to Generate and Respond to Online Reviews

Steve Huskey High 5 Promotions

Customer Loyalty: Priceless — Creating a Customer Loyalty Program on Your Own Scale

Larry Mersereau PromoPower

Old Inventory Is Sinking Your Profits Tom Shay Profits Plus Solutions

Complying With NEW Wage-Hour Regulations Bill Ford SESCO Management Consultants

The Moment of Truth — The Art of Making the Retail Sale

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For 2016 additional tasks will be undertaken and new members of the Retailer Resource Committee will have the opportunity to assist in supporting education, providing access to pertinent and actionable data, and, ultimately, business growth.

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DEMA Member Benefits and Overview

GROW YOUR BUSINESS

Consumer Demographic & Analysis SupportMembers have access to FREE potential customer location intelligence and demographic support. Find new customers and ways to reach them e�ectively and inexpensively:

• 15-Minute Drive-Time Map With 85% of your customers coming from within a 15-minute drive-time, promoting your store outside of this map should be carefully considered prior to making an advertising investment. This information can also help you review your competition and understand how other local businesses may a�ect potential customer tra�c.

• Demographic Overview

This is a “snapshot” of the population and households within your 15-minute drive-time area. This information can help with projected growth potential, growth trends, and the presence of a targeted population, as well as give a long term view of your business and provide insight into the potential shifts needed in marketing and strategic planning to accommodate these changes.

• Zip Code, Population and Per Capita Income

Zip codes can be a convenient way of understanding the location of target households. In addition to providing population and per capita income data, this information can also be the most e�cient and e�ective information for direct postal mailings.

• Household Expenditures and Discretionary Income Expenditures on entertainment are indicative of the discretionary income available in households within the 15-minute drive-time to your dive center location. The larger the percentage spent on entertainment, the more likely you are to reach persons in these households.

• Marketing Cluster Identi�cation

The term “clusters” is used to identify groups of individuals and households with common characteristics. Cluster information makes it possible to search for additional similar custom-ers (or avoid unlikely customers). Using clusters helps you tailor your marketing strategies with a level of precision only o�ered by a household-level segmentation system and the most accurate, up-to-date data source on the market.

SAVE MONEY

Health & Business InsuranceDEMA is excited to o�er access to exclusive insurance rates for US Members. A variety of insurance options are available, including:

• Group employee and individual health insurance• Business insurance• Workers compensation, and more!

In addition to these insurance options, Members can take advantage of the Pharmacy bene�ts program, covering over 12,000 prescription drugs and available through 42,000 retail pharmacies nationwide. Freight Savings ProgramDEMA Members can signi�cantly reduce costs when they ship packages or freight inbound to their business or outbound to their customers by taking advantage of DEMA's Freight Savings Program. Save with a variety of vendors and services that you're likely already using!!

Rental Car SavingsMembers save up to 25% whenever they rent. Receive special o�ers that can be used in ADDITION to your 25% o�, such as $20 o� a weekly rental and a free weekend day. Email Marketing ServicesDEMA Members can save 20% o� six months prepaid email marketing services or 25% o� full year prepaid email marketing services through DEMA’s Association Program partnership with Constant Contact. Payments Analysis & Processing with Desormais ManagementYour business could be paying thousands per year to process credit and debit card transactions. Members bene�t from discounted rates and special pricing on up-to-date equipment from DEMA's Member credit card processing provider. It starts with a complementary payments e�ciency analysis, giving you a clear view of what you’re REALLY paying, and how much you can save.

Global Payment and Risk Management Solutions AFEX o�ers DEMA members a comprehensive range of global payment and risk management solutions to help protect against volatility. Whether your goal is reducing costs, minimizing your FX risk or managing your international payments, their foreign exchange specialists will gain a solid understanding of your risk factors and objectives, and create a strategy tailored to your exact requirements. They can handle every aspect of a client's foreign payment needs, from risk consultation to transaction execution. In�atable Signage: BUD the Blow Up DiverDEMA Member's have exclusive access to reserve B.U.D. for use as an eye-catching promotional tool for their next event!

COLLABORATE

Legislative & Environmental AdvocacyDEMA monitors legislative activity around the country via member representation in California, Florida and Hawaii and through local associations of dive operators. DEMA lends assistance where needed, especially when legislation could set precedents that impact the overall industry.

Disaster AssistanceDEMA will provide assistance to the victims of catastrophic storms and other occurrences when DEMA's Members Helping Members Disaster Assistance Program is activated. The Program helps build a bridge of assistance during critical times for those a�ected by disasters while perma-nent aid is being requested from the appropriate government, private or public agencies.

DEMA Show: The Annual Trade-Only Event for the Diving IndustryThe only international trade-only event for the diving, action water sports and travel industries. Join the thousands of dive industry professionals who gather for DEMA Show each year to buy and demo products and services, learn important business skills and tips, get industry-speci�c training necessary for the job and network with fellow Industry professionals. DEMA Members have access to exclusive Show bene�ts including savings on exhibiting and attending, as well as access to exclusive Member lounges.

Industry & Networking EventsStay updated and connected with the Industry with the latest meetings and events from DEMA, including:

• 2020 Vision Sessions• Be A Diver Pool Tour Stops• Board of Directors Meetings• DEMA Show Dates and Locations• Annual Membership Meeting and Update and more!

DEMA Member ForumThis online forum provides Industry stakeholders a year-round method to provide feedback and engage with DEMA and fellow Members in dialogue about the Association and Industry-related issues. The forum hosts a number of discussion categories including: Association News, DEMA Show News, Retailer Resources, Support & Education, Industry Research, and Legislative News.

The Diving Equipment & Marketing Association (DEMA) 3750 Convoy Street

Suite 310 San Diego, CA 92111

858-616-6408 www.dema.org