Discounting: No Longer a Dirty Word
With the appropriate discounting pricing strategy, golf course operators can drastically improve golf course rounds & revenue.
By Bill Bryant. An exert from Connect, a supplement to Golf Business Magazine.
Many Operators Today Have a New Take on the Once Controversial Pricing Strategy
There was a time not too long ago when the mere mention of the word “discounting” was sure to raise the hair on the back of the necks of many golf course owners and operators. Asked how they felt about lowering the price of a round of golf at their facility, their responses often were laced with words like “price war” and “diluting our product” and “cannibalizing.”
Fast forward to 2008 and those words seem to have been replaced by two others: “market reality.” And, frankly, a lot of operators just don’t understand the controversy or simply choose to ignore it.
“I look at it no differently than an airline or a hotel using an Internet-based marketing tool to increase
usage,” says Tom Prince, chief marketing officer of Pacific Golf Enterprises in San Clemente, Calif. “We’re trying to motivate people to come to our course versus our neighbor’s. From a marketing standpoint, discounted rounds can be an attractive lure.”
Asked about the need for some form of discounting in today’s market, Ron Lambert, the general manager at Mill Creek Golf Club in Mebane, N.C., says, “Back in 2001, you built places like this and any knucklehead could run them. Now you better have an idea of how to generate business and compete.”
The Added-Value Approach
Of course, if you ask Lambert if he discounts, he’ll say no. “We don’t use the word ‘discounting,’ and we don’t run specials,” he says. “What we do is add value.”
Lambert’s added value comes in the form of things like a free lunch at the turn or a post-round beer, extras he contends make the round and the experience more valuable to the golfer.
“Say my rate is $58 in the morning on the weekend. What we do (to add value) is buy (the golfer) lunch and throw in range balls. He may also get $5 off his next visit by being part of our frequent-player program. But if I just discount that same round by $10, he’ll never pay me more than $48 again because that’s what that round is now worth to him.”
Lambert doesn’t believe in getting into a price war with his competitors along Tobacco Road in North Carolina.
“Unless you’re going to be the guy with the cheapest round, you’re not going to win. Only one person can win in that game,” he says.
And even the low-price operator doesn’t always win, adds Jim Koppenhaver, president of Pellucid Corp., a Buffalo, Ill.-based research and marketing firm. “The low-price guy only wins if he gets enough volume over time to make up for what he took in the shorts.”
Some would say operators utilizing the value-add strategy are deluding themselves if they don’t equate
the offer of a free lunch with discounting. Is there really no such thing as a free lunch? Is it just semantics? Koppenhaver doesn’t think so.
“We’ve always been advocates of holding the price but adding value through services that have a higher retail value and a lower cost value,” says Koppenhaver, a former marketing exec at Kraft Foods whose frank observations of the golf industry have caused many to re-examine their business practices. “We think it’s a much smarter way to go about it. We’ve never been advocates of the drop your pants to get them in the door strategy.”
Good Way And a Bad Way?
Koppenhaver and Lambert are among those who subscribe to the school of thought that says there’s a “good way and bad way” to discount. Lambert has seen what he considers the bad way from an up-close-and personal vantage point.
“Before I moved into this position, management here sold discount cards, which offered rounds for a
cart fee only,” Lambert remembers. “I was standing behind the counter in those days and I knew that
we would never see those people again. After I took over as GM, one of the first things I did was
tell our owners that I thought we were selling steak at hamburger prices. So we made a decision to
eliminate that kind of business in favor of the value add approach.”
Prince, whose Pacific Golf Enterprises firm manages four daily fee courses in southern California, isn’t sold on the added-value strategy. He thinks golfers shopping for an inexpensive round of golf respond better to an attractive green fee than a freebie tossed into the deal.
“We think it’s more of a bottom-line dollars-and-cents issue for those guys. Anything (on top of) an attractive green fee is fine, but it’s not going to take the place of the price,” Prince says. “They usually know the value of the place they want to go play, and if they can get it for that price, they act on it. They’re saying to themselves: ‘I want to go play golf with my buddies, pay the least amount I can to play the best course I can and have the most fun.’ It’s no different than when I shop for the best price for an airline or hotel.”
Competitive Landscape Calls For Teamwork
There’s also a potential problem, Koppenhaver points out, when all the key players in a market decide to employ the value-added plan. “When everyone goes from one low price to an even lower price, it makes it very hard to compete on a value-add basis. So we think you should always try to add value, but also recognize and capitulate over time to situations where the marketplace has set a ceiling for this type of experience,” Koppenhaver says.
Semantics and strategies aside, more and more operators are concluding that in a competitive landscape, where participation remains flat in many markets, it’s time to do something different. For these operators, teaming up with an online golf marketing partner that helps them build their loyal customer base while filling their tee sheets is an appealing proposition. Third parties, such as San Diego, Calif.-based Active Network, post tee times on their Web sites that client courses have turned over to them to market at discounted rates. Value-conscious golfers bookmark the Active Network’s site – or are taken there from other sites such as ESPN.com – to shop for golf bargains. In facilitating this form of e-commerce, the third parties also help courses build and communicate with online communities.
Despite their differences on how best to attract value-conscious golfers to their courses, Prince and Lambert agree that a third-party provider is a valuable resource in helping them market their courses.
Third Parties Extend Marketing Reach
Third-party tee time providers like to point out the accretive value of their service, noting that the value sensitive player may be enticed into paying a little more than his normal rate if he sees a discount on a better course that he would not consider if he had to pay rack rate. In that instance, the discount is “adding revenue to the local golf community rather than extracting it,” says Mike Carran, general manager of Active Network, and one of the pioneers of online tee time services.
“You can use third parties to help you get that market that is not going to come to your course unless they get that special offer,” Lambert says. “They’re willing to come at times when your course isn’t busy. So that’s what I use them for – to plug in those times when I’m willing to give them
an attractive rate.”
Those are also times when services are at a minimum at some courses. There may or may not be a beverage cart making the rounds, for example. But as Lambert notes, the value shopper is willing to sacrifice service for the right price. ”It’s a win-win for the course and the golfer. We’re plugging him into times that are good for us. He’s going to have a great time because he played a great golf course that he wouldn’t have played if he hadn’t gotten the price he wanted,” Lambert says.
Prince sees his relationship with Active Network as an extension of his marketing philosophy and part of a strategic approach to maximizing play at each of his daily-fee courses. “We don’t like unutilized tee times. As we see those, we target those times and reduce rates to attract people to play at the times that are slowest for us. We can notify Active via e-mail and ask them to post certain times.”
The biggest benefit, Prince says, is being able to take a preemptive approach based on participation trends.
“We know what the trends are, and those are going to stay pretty consistent unless we do something about it. By addressing those days and times aggressively – and one of the ways is with a service like Active’s – we can make a dramatic impact in that segment. We can essentially turn a really slow period into a much steadier period on a consistent basis.”
Key To Third-Party Success: Maintaining Control
Moreover, you can’t argue with the numbers, Mill Creek’s Lambert says, noting that his course’s database of golfers is dwarfed by the 18 million sports enthusiasts to whom Active Network has access. “These days, he with the biggest database wins.”
When the discounting debate was at its height, third-party discounters were pulled into the fray and
labeled guilty by association. In addition to flooding a market with cheap tee times, some argued they
were lessening the value of memberships at some semi-private courses. Koppenhaver thinks third parties may have gotten a bad rap. “People kind of tossed that model under the bus and labeled it bad for business and bad for golf,” he said. “But we don’t think it has to be bad at all.”
The key for the golf facility, Koppenhaver says, is for the course to continue to control its inventory
and its pricing structure. “What that means is that you don’t give the rounds away and allow the third party provider to put them out there at any price at any time.”
Brett Stromberg, an account executive for ActiveGolf, part of Active Network, agrees. He says the course should always have the last word when it comes to controlling its inventory of tee times.
“If we’re not selling too many times at a certain price, I may go back to them and suggest that we could sell more if we increased the discount,” he says. “But at the end of the day, if they’re happy
with the number of rounds they’re selling through us, that’s fine. We’re very course friendly when it comes to that.”
