GolfLogix has developed a small, GPS-based device to help golfers track their play. With the fact that GolfLogix has two devices it is trying to sell: a distance-only device and a complete device, currently the company meets a problem that how best to distribute their devices: under the current leasing relationship with golf courses, whether should the company still need to market a direct-to-consumer version of the Distance Only xCaddie?Analysis:Retail channel: Advantages: 1)To increase adoption by individual consumers thus putting pressure on the courses to buy into the complete system. 2) To provide a complementary source of revenue.
1)The personal xCaddies would be useless on courses which were not already mapped out. Newly mapped courses could not automatically be added to the library of courses on existing devices. 2)A rising personal ownership of xCaddies may discourage courses from leasing their own devices. This means that the continual revenue from leasing would disappear and only an one time revenue for selling the xCaddie would remain. If the retail channel is pursued, customers would expect all courses they frequent to be mapped involving a large incremental cost for each golf course.(see exhibit 1) On the other hand, individual xCaddie owners may demand that their own favorite golf courses be mapped even if it does not make economic sense for GolfLogix to do so.
The xCaddieæŠ¯ main competitors are Cart-mounted and PDA system targeting the same niche market. the PDA-based system has advantages in price point and various features, especially the ability to upload and download user-calibrated course mappings. The cart-mounted system has a competitive advantage in GPS-based video.The need for these products can be considered a barrier to enter for xCaddie owners.
For golf courses, the main benefit in leasing the xCaddies is an improved pace of play. For golfers, the xCaddie is particularly helpful to golfers on the high-end courses that are more challenging. Golfers tend to play different courses as they progress. However golfers that play on private courses are more likely to play on the same course and may not find the xCaddie valuable as they become familiar with the course. Avid and core golfers will be more willing to pay for the xCaddie since they play more games per year and are eager to improve their game. Hence If GolfLogix decides to enter the retail market, it should target the avid and core golfers.
This is because avid golfers buy 50% of all golf related items with core golfers forming the largest segment. If retail distribution is feasible, the most effective means of distribution for the target market of avid and core golfers would be golf course Pro shops, golf specialty and golf discount stores.(exhibit 9, in case) These three merchandisers cover almost 70% of the target market Golf specialty and may have less credibility than golf professionals in the pro shops and would hurt the xCaddieæŠ¯ image of being a high-value, specialty product.
A personal xCaddie owner would be at a disadvantage if he regularly plays on GolfLogix-enabled courses that already lease xCaddies. Courses usually charge between $0 to $3 to use the xCaddie. The golfer would have needlessly paid the full price of $300. In short, the consumer would be better in leasing the xCaddie than buying his own.(exhibit 2)Consequently, even though the direct-to-user plan sounds attractive, we feel that GolfLogix should not adopt it. It should focus on the lease revenue by encouraging courses to be mapped under a risk-free trial offer.
Target market: Golflogix can focus on the B2B section by leasing its devices to golf courses. The high-end public and private courses will be the main target because they have higher revenues and would be more willing to invest in the GolfLogix system.
GolfLogix may offer courses both the Distance Only and Complete System. This would make these courses more attractive to a wide range of golfers from novices to pros. The more value GolfLogix provides for the customer, the more we can charge for it. Hence in the future, the functionality of the xCaddie could be extended to being able to upload and download mappings and course-specific tips from the Internet to make it a complete golfing companion.
Golf courses will be offered a choice of leasing sets of 40, 60 or 80 xCaddies. The more units a golf course leases, the larger the discount. This structure is created to cater to both smaller and larger golf courses.
The best type of promotion for the GolfLogix system is a free trial so the golf course can experience the system at no risk to them. When a golf course signs up for the system, the course is mapped and it signs a three year contract which can be terminated at any time in the 30 day trial period.
Placement: Two distribution channels to the golf courses: The first is via distributors in every state/zone who use their network of contacts to meet with golf course owners and encourage them to try the system at no risk. The second is via the Internet where the golf course can find out more about the benefits and advantages of being GolfLogix-enabled.
Exhibit 1:Sale price : 300Cost price from the manufacturer: -200Distributor makeup ( 20-30% ): -75 (25%)Contribution: 25Because mapping cost of distance only xcaddie is 500 for each course, the breakeven poiont will vary with the number of courses mapped.
Exhibit 2:Leasing charge to golfer: $ 1.5 ($ 0ï¿½ per roundFull price: $ 300Times: 16 rounds/yr ( 8ï¿½ rounds/yr)Time: 12.5 yearNormally a regular consumer needs 12.5 year of leasing to cover the full price. Hence, leasing will be better for a regular consumer than buying.
Gourville, John T., and Youngme Moon. Managing Price Expectations through Product Overlap. Journal of Retailing 80, no. 1 (January 2004): 23-34.
Gourville, John T., and Professor Jerry N. Conover. GolfLogix: Measuring the Game of Golf. Harvard Business School Case 503-004.
Gourville, John T. GolfLogix: Measuring the Game of Golf (TN). Harvard Business School Teaching Note 503-099.