Callaway Golf Company established in 1982 and has always been the market leader in the gold clubs market. Their products are known for high performance and skill forgiveness. Their sales rise from $5 million in 1998 to $800 million by 1997. Their “lifeblood”, innovation, is the key element that makes them successful in the market. They develop products that help average golf players to improve their performance and better enjoy the game. CGC consistently be on the leading edge of technology and continually exceed customer’s expectation. Their R&D department has a continual expense growth from $16 million in 1996 to $37 million in 1998.
Golfers always blame their equipment of poor play and always want to update new clubs. Also, even though they are not experienced players, their skills could be upgraded a great deal when using premium products.
CGC is targeting average golf players who buy equipment every 2-3 years. This is a right choice because CGC’s products come out every 2-3 years which exactly meets the life cycle of average golf player’s clubs.
Customers can be separated into three segments:
This segment is very price-sensitive. They are reluctant to invest a great sum of money until they know and enjoy to play. They often purchase “starter sets” which range from $100-$250 per bag. They also tend to buy second hand premium products. Beginners rely on salespeople.
This segment is not price-sensitive. They desire the latest and greatest products. Callaway Golf Company is now targeting this segment. Average players tend to go “Brand-name” products to prove to others that they are the “players”. They shop at off-course stores and are highly effected by “word of mouth”. They spend $1152 on golf-related products every year.
This segment is not price-sensitive. They shop at on-course stores more often because they want to experience the demo clubs firsthand. They also feel loyalty to clubs and pro shops, they don’t upgrade their clubs that often compare with average players, but they spend twice the money each year on gold products than average players, which is roughly $2304 per year.
CGC have two retailer lines: on-course retailers and off-course retailers. CGC rely on off-course retailer more, 65% of their business are done off-course. Reasons why they choose off-course retailers are:
1) Off-course store are better financed than on-course stores
2) Pros in on-course stores don’t sell because they are busying with other stuffs: renting golf clubs, selling t-shirts, etc.
CGC also have their own sales force, including regional sales reps, telephone salespeople and customer service reps. Sales reps have lot of works: they do “demo days”, go to retailers to count and maintain inventory, taking customer orders, educate store salespeople, etc.
Right now, CGC do not provide volume discount to their retailers, they insist a “one price strategy” probably because they maintain the premium brand image and maximize the profit.
In the late 1980s and early 1990s, manufacturers were not well financed and were unwilling to gamble on new, radically designed clubs, which makes Callaway Golf Company stand out from their competitors. However, as the market keeps growing, CGC are facing more and more competitors that have the similar value proposition and are taking the market share of CGC.
Three major competitors are:
Taylor made golf
Taylor made golf are targeting average customers too. They also have innovative products and strong commitment to R&D.
They are targeting professional avid players and spend lots of money on endorsements. They endorse the top-class players such as Tiger and this investment is paying off. When avid players saw Tiger playing Titleist, they are willing to buy at pro shops.
Ping is another company that put strong effort on R&D. But they sell their products exclusively in on-course stores. They