"A Snapshot" Look at Our Industry - Strategic Partnerships and Promotions - November 2011

Strategic Partnerships and Promotions - Tracking Costs and Results 

If you run a golf course, it seems like everybody wants to be your “partner” these days. They want to help you sell vacant tee space, promote your property and use their tools to help expand your business. As we have outlined in the last two articles, many of these partnership offers involve using technology and “new media”; but in reality, many of these programs are really updated versions of “old media” ideas that have been around forever. Under the guise of terms like “yield management”, “electronic coupons”, “group buying” and others; these programs really boil down to determining when and why you should offer discounts to your customers.

The golf industry has been practicing “yield management” since before the Wright Brothers ever went to Kitty Hawk in the form of weekday rates that reflected the lower demand during the work week. Senior rates reflect the fact that senior golfers generally play more rounds annually and at off-peak times.

In theory, technology has made it easier for us to do a better job of “yield management” by giving us better and faster access to course utilization data. Supposedly, this means we can identify our weak demand times and strategically price them accordingly. Electronic communication has also made it easier and less expensive to contact customers, and in many cases, reach out to potential new customers. As the last two articles pointed out, every golf course should be using technology in the form of an electronic tee sheet to track course utilization, a website that offers integrated Internet reservations and broadcast e-mail marketing service for cost effective communication to promote your facility.

As with any other business investment and/or promotion decision; every golf course needs to evaluate the cost of the investment or program and measure the results. When measuring results you have to ask two fundamental questions:

• Are we getting our money’s worth?
• Are we using the full capability of our investment in terms of tracking and otherwise identifying the cost of a promotion against the revenue it specifically generates?

Let’s look at costs for the services that every golf course should have:

Electronic Tee Sheet and Integrated Internet Reservations – An electronic tee sheet is an absolute necessity in order to track rounds, monitor course utilization data and offer online reservations that integrate in real-time. Some vendors provide “bundled” services that require tee sheet software in order to get the integration necessary to provide you Internet reservation capability. Because of “bundling”, you have to look at these costs carefully.

For those of you that utilize the Fore! Reservations tee sheet and Fore! Internet online booking interface, you’ve made a good buying decision as I’m certain your annual $1,000 price tag (which is less than $85 per month) has brought you a great return on your investment. On a baseline basis, if you are paying more than $85/month for your tee sheet and Internet reservations, you are probably paying more than you need to.

Website Design and Hosting – On average, many of my clients have recently paid between $1,500 and $2,000 for a functional and well designed website, and paying $10 per month for hosting with adequate traffic ceilings. (Those of you with older sites may have paid more for design, but I want you to know prices have declined and functionality has improved for more recent website development).

I have also seen prices of $250 or more per month that includes design, hosting and e-mail capability. I recommend looking at what you are paying for in relationship to the contract terms. When analyzing these costs, you have to consider the contract length commitment; if the contract length is one year and the monthly charge is less than $250/month, you may be better served going that route, but if the contract length is longer than one year or more than $250/month, the system better have some significant added features that you are using that brings your facility results.

E-mail Marketing Broadcast Service – When selecting an e-mail marketing service provider, you want to make certain that the vendor provides well designed e-mails that can bring you results. If you use a service that leverages your database and integrates with your tee sheet and point of sale, enabling you to send Defector and Thank You messages to your customers, you should see a high return on your investment. From what I’ve seen in the market, the Fore! Marketing product for $500 per year is a great value.

Many of you likely use broadcast e-mail marketing services that are “bundled” with other services like website design, but I do have clients using a stand-alone e-mail platform. Some of these stand-alone applications are necessary due to other considerations and work well for my clients, but if you use a stand-alone platform make sure you add this cost into your computation of investment. More frequently I’m learning of clients that find they are actually paying for redundant e-mail services. If this is the case, make sure you are using these services properly and have a good reason for having them. There are situations where reporting is better on one platform and delivery is better on another, but by sifting through the cost/benefit analysis you might find you can cut costs.

Since 90% of my clients are getting broadcast e-mail capability “bundled” in either their web-hosting charges or other marketing platforms, I simply recommend that those of you using a redundant e-mail service make sure you both need the additional services and are using the best features available in each of them.

As I suggested last month, you should total how much your course is spending for the services outlined above. Add up the costs necessary to get the basics:

Tee Sheet and Internet Reservations - $85 (monthly) $1,000 (annual)
Website Design and Hosting - $250 (monthly) $3,000 (annual)
E-mail Marketing Broadcast Service - $42 (monthly) $500 (annual)

Tracking Costs and Results with Barter - If your course doesn’t use barter to pay for any of the above mentioned services, feel free to skip this section of the article. For those that do utilize Barter, please read on.

• The “average golf course” has operating expenses of about $780,000, $33.00 Greens Fees (incl. cart) with approximately 32,500 rounds played.
• The “average golf course” has a Weather Adjusted Capacity of about 64,000 rounds, ranging from under 50,000 in Duluth to about 90,000 in San Diego.
• This means that the “average golf course” is selling about 52% of its available rounds and that each available round has a cost of $12.20 ($780,000 divided by 64,000).
  

There are two ways to calculate the cost of “barter”. Since most of the average “barter” programs use a “one tee time a day” compensation plan, our “average golf course” is trading 1,080 rounds for services. Using my first method of cost applied to every available round, your cost of bartering one tee time a day is 1,080 X $12.20 or $13,176.

Using my second method, you can use course utilization of 52%, because you have a 52% chance of selling any available tee time without your “barter partner’s” help. Multiply 1,080 X 52% = 561.6 X your average Greens Fee of $33 and get a cost of $18,533.80.

For those of you that believe “barter” is free, you can use my third method by basing your cost of goods sold on only the number of units sold. Your cost of goods sold is actually $24 ($780,000 divided by 32,500 rounds) instead of the $12.20 when based on using our total rounds available (64,000) of the “average golf course”. When using the third method of applying cost only to rounds played (including those sold by your barter “partner”), you need to know how many “barter rounds” you redeemed at your course. Every golf course should have a separate SKU setup for barter round redemption (most do and those that don’t should). Take that number and multiply by the higher cost ($24 for our average course) and that will give you your cost of barter.

Since one of the leading barter service providers has publicly stated that they only sell about 45% of their “barter inventory” on average, the cost for our “average course” is 1,080 X 45% = 486 rounds X $24 for a cost of $11,664. Your barter “partner” will usually claim that he has to discount the “barter inventory” by 50% in order to sell it so he isn’t really making that much; he’s right, he’s only making 486 X 50% of your average Greens Fee of $33 ($16.50) or $8,019.

No matter how we look at it, you end up paying a lot more for bartered services than you can buy the basics for in cash. Even if we accept the lowest calculation of how much your barter “partner” makes from selling your inventory, you are paying over twice as much as you can buy those services for on the open market. Those of you that are using more than one barter “partner” need to multiply these costs by the actual number of barter “partners” you have.

The next big question is that these “partners” claim to bring you additional marketing and promotional opportunities that are going to build your business through unique features or their ability to drive new customers to your door. Make them prove it and setup the tracking methods necessary to verify their reports.

In order to keep this simple, if you redeem 486 barter rounds, your barter “partner” needs to generate 487 rounds of new paying customers for you to have a chance of showing a return on your “barter” investment. If you post some of your own inventory on a third-party website, you need to setup the appropriate tracking SKUs and verify that you sold 487 rounds or more.

If your barter partner does not give you the ability to post your own inventory for sale, or you do not use that service; it really boils down to whether their services really did improve your revenues or not. If they try to tell you it’s the weather or your local market conditions that caused them not to have the results they told you were possible, there are ways to check the specific weather impact on your course and the regional rounds data that is available from a variety of industry sources. (More on that in next month’s issue.)

In the end, technology provides us new methods to try to improve our businesses. Some tools must be adopted in order to provide better and more convenient service to your increasingly tech-savvy customer base. It’s also important for you to stay current and pay attention to trends, while also monitoring what is working. An example of technology implementation that comes to my mind are the stories of Sears, Kmart and Walmart. Sears was an early technology adopter and became a very successful company, putting literally thousands of mom-and-pop stores out of business on Main Street America. However, Kmart was another old line business (S.S. Kresge) that followed a complacent Sears in adopting next generation technology and kicked Sears’ butt. Kmart then got complacent, and when Walmart came along the chain adopted yet another generation of technology putting Kmart into bankruptcy and emerging as a retail giant.

Also remember that technology is just a tool and not a substitute for sound business and customer relationship management. The basic goals are the same; you just need to select technology that allows you to cost effectively achieve your three main goals:

Building your Customer Base – We all need to attract more customers, we always have.

• A good website is a proven method to help customers find you and learn more about your product.
• High performing software allows you to organize your customers into a database that more easily allows you to identify them by value and other parameters – not all software does that.
• “New Media” such as Facebook, Twitter and Mobile Apps can help you build your customer base cost effectively.

Measuring Results – How can we tell if we are successful?

• Do we setup specific SKUs to track our promotional efforts?
• Do we know if the customers our “partners” bring us are actually new, or have they cannibalized our existing customer base?
• Do we know if the “new customers” our “partners” bring us come back?

Cost/Benefit Analysis – How much does the adoption of technology really cost us?

• Are we accurately evaluating our costs versus the results?
• Do our “partners” actually help us build our database? Who gets to use the customer information obtained and how easy is it to integrate?
• How easy is it to create the right environment to evaluate our partnerships?

In most cases, it is either impossible or very difficult to get most of these answers if your tee sheet and point of sale systems are not integrated. If you are buying or bartering products that provide you with systems that preclude tying customers to transactions, you will find it tough to get the answers you need. Your “partners” count on that.

If you really want to explore “partnerships” and the power of “new media” to build your database and extend your reach, look at local partners. How many of you have hole sponsors – have you offered them a link on your website for a link on theirs? You all host events – have you offered event providers a link to their website in exchange for their participant list and/or your link on their website?