Prisoner’s Dilemma And Your Green Fees or Membership Pricing!
The prisoner’s dilemma is a standard example of a game analyzed in game theory that shows why two completely “rational” individuals might not cooperate, even if it appears that it is in their best interests to do so.
- Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of communicating with the other. The prosecutors lack sufficient evidence to convict the pair on the principal charge. They hope to get both sentenced to a year in prison on a lesser charge. Simultaneously, the prosecutors offer each prisoner a bargain. Each prisoner is given the opportunity either to: betray the other by testifying that the other committed the crime, or to cooperate with the other by remaining silent. The offer is: If A and B each betray the other, each of them serves 2 years in prison
- If A betrays B but B remains silent, A will be set free and B will serve 3 years in prison (and vice versa)
- If A and B both remain silent, both of them will only serve 1 year in prison (on the lesser charge) Source
This game theory has the same effect in the business world.
Course A drops their green fees from $40 to $25 to attract more players.
Course B feels obligated to follow their lead and drops his price to $24
Course C being further away from the main population base drops his green fee to $20 usurping them both!
None can survive on the income generated at these prices. Everyone knows that they are all losing but none opts to try a different value proposition for fear of losing, even more, market share. It’s death by a thousand cuts……
The only viable option is to create a greater value proposition and therefore command a higher green fee. Either that or get all three to agree to price fix a bottom rate which depending on where you are may or may not be legal and even if it is may not be possible.
What if course B kept its rate at $40 but offered free car wash while the customer played golf? For a busy consumer like me, that would be worth it!
What if course C hired a hot female model as the ranger instead of the grumpy old nazi mention in all their negative online reviews? (Save the sexist hate mail, this works in every business on earth)
What if course A, did not drop their green fee but offered a free gift every time you played, a sleeve of balls, hat, visor, shirt, golf book, that cost less than $8.
Depending on the area, some will work, others will not, but you will never know which because NO ONE IN THE GOLF BUSINESS EVER TRIES to add value…. all they do is discount!
Adding value takes work, thinking, trial error and creativity. Discounting is just the mindless reaction to others pulling your strings! (Unless you can be the lowest and have the deepest pockets to last in which case one club wins)
Maybe it’s time to re-think your strategy?
All The Best,