Perfect Pricing – How to Price at Your Golf Club
Few golf clubs take the time to determining exactly what their products and services are, what they could be, and what they intend to charge for them. Yet pricing is the area of marketing that offers the quickest and easiest way to dramatically increase your income in a very short period of time; therefore, it’s one of the most exciting concepts.
There are only three ways to make more money, assuming your overhead is fixed.
- Attract a more new business
- Charge higher prices
- Get existing customers to buy more often
Many in the golf business look to others, their competitors, members, or boards to dictate pricing policy with little thought as to the long-term effect of these decisions. Perfect pricing is all about maximizing revenue. It’s about making your product appealing to the largest segment of your particular market while leaving little or no money on the table. It is about creating a value proposition in your customer’s mind.
The biggest mistake most clubs make is to underprice their green fees, joining fees, or membership dues. With excess capacity and competition in many areas, the temptation is to discount your fees. Don’t get caught in that trap! By using the material in this book on setting yourself apart (your USP), and by adding value and service, you won’t have to discount. Your goal should be to differentiate, not discount! That said, there will be times when special pricing is useful in order to maximize response to your marketing effort or to take into account different seasons and changes in your local market conditions.
In this article, you will discover:
- Why discounting is dangerous for all but one type of course
- When it’s okay to discount
- How to discount without destroying your price point
- The most logical way to set your prices
- How to increase transactional business
- How to package for greater profits
THE DISCOUNT GREEN FEE GAME!
Too many golf clubs think that the only way to react to their competitors is to cut prices. In the low-price game, there is only one winner — the company that can sell at the lowest possible price. People who shop only by price have no loyalty. As soon as another course in town lowers prices, they switch and play somewhere else! In the retail business, low-cost stores like Woolworth’s, Ridgeway, and Montgomery Ward are already gone even though their prices were low! Many of the rest are dying a long, slow death.
In the car business, Kia has won the low-price game at the expense of Yugo, Lada, Daewoo, and a host of other car companies you already don’t remember! (Even Kia had problems and was bailed out of bankruptcy by Hyundai purchasing it.) You only have to look at the jokes about low price to know that’s not where you want to be:
How do you double the price of a used Yugo?
Fill it with gas!
Now let’s look at the top end of the car market: Ferrari, Mercedes, Aston Martin, Maserati, Lamborghini, Rolls, Bentley, and the list goes on and on. Porsche’s average profit per car is $17,250! Lots and lots of companies are not only surviving but, even in bad economies, enjoying some of their best years ever!
How can this be?
Because they are not selling on price! They are selling luxury, speed, sex, dependability, prestige, and other tangible and intangible concepts.
Now, back to golf…
Think about why you are in business. You shouldn’t operate as an assembly line, pushing as many golfers through your course (or lessons) as possible. Instead, develop a value philosophy. How much is it worth to a golfer to be greeted by name? For staff to be sincerely happy to see him? Think of the service you receive at a fine restaurant. People can buy food in thousands of places but are willing to pay more for great ambiance and service. Everyone wants to feel special. If you can do that for your customers, you can be their favorite upscale course.
In any discount war there can only be one winner, usually the business with the deepest pockets. When you’re competing by discounting, you are overemphasizing price. Other intangibles like service and building relationships with customers are ignored. The more price becomes the focus of your club’s marketing efforts, the less attention any other factor gets and price soon becomes the only dimension on which you are judged. Instead, look for other ways to get an edge over your discounting competitors — like service, ambiance, tournament history, great greens, food, follow up, quality, design, and fun.
By not focusing on factors that would differentiate you in your marketplace, you become a commodity judged solely on price. Discounting is easy! Being creative, REALLY increasing service, and building relationships is not! It takes time, it takes effort, it takes work! (A great deal of relationship building can be automated nowadays with a website from Legendary Marketing.)
Discounting works fine; in fact, it is a great strategy if…
- You have a team of revenue management experts like the team at Dynamic Revenue Services. They actually KNOW when to discount or RAISE your prices using dynamic pricing, and they have a proven track record of doing this at golf courses all over the country.
- You have lower costs than all of your competitors. Is your club is paid for?
- You are willing/able to raise rates in your times of high demand.
- You have a much larger database of customers than your competitors.
- You have some kind of back-end strategy that will allow you to up-sell something else to your golfers once they’ve been to your course. A resort might give away golf to sell rooms. Myrtle Beach has been doing this for years! A real estate development may give away golf to sell lots or homes.
- You have much deeper pockets than your competitors and can wait a few years before you need to see a profit.
Obviously, I don’t recommend discounting unless you’re doing it strategically!
Before considering jumping into the discount game, do the math
First of all, your odds of long-term success are low. For instance, in the Orlando and West Palm Beach markets, several clubs have closed in the past year and several more are about to. All were discounting heavily. Most were the lowest price in town.
There is usually only one winner in a discount war! If you are not absolutely certain it will be you, forget it!
Second, consider this, 100 clients at $25 is the same as 50 clients at $50, or 25 clients at $100. It’s a lot easier to give great service to 25 golfers than to 100 and you make the same money with less wear and tear on the course. Is there another option that might net you the same profit other than discounting?
Third, have you exhausted all the possible positions and marketing strategies that would give you an edge in your marketplace without discounting? Like adding service, value, ambiance, and follow up! (See the article I did on Unique Selling Propositions)
When is it okay to discount?
You can sometimes use cunning and guile to make your offer appear at least as good, albeit different, without discounting. For example, offer a two-for-one green fee at your regular rate but make the second round only usable in less popular time slots. You keep your price integrity in that the customer still paid the same 50 bucks like he always did. You may think I am splitting hairs but I assure you there is a significant psychological difference between paying $50 and getting a second round free or paying $25 twice. It’s a difference that can have a huge effect on your club’s future.
As you can tell, I’m against the growing practice in the golf industry of discounting yourself out of business, i.e., you log 40,000 rounds and lose $200,000 in the process. Discounting frequently destroys your club’s price integrity in the marketplace. The $100 club only has to offer a $50 rate a few times before it’s not regarded by the golfing public as a $100 club anymore.
Here are a few additional times when discounting is acceptable:
- You have a team like Dynamic Revenue Services monitoring your demand and will lower or raise your rates based off of it.
- Off-season you can discount without fear of destroying your price integrity. Everyone knows that golf in Florida and Arizona is cheap in July and August.
- You can discount when you have a legitimate reason for offering lower prices that is credible to your customer — like the greens have just been punched or it’s cart path only!
- You can discount all you like if your positioning is to be the lowest price, highest volume club in town. Someone has to be the cheapest and as long as you can survive and make a profit taking this stand, so be it!
- You can discount anytime if you are making the money up-selling something else like rooms or real estate! But remember, one day the real estate will run out!
Do NOT get caught in the vicious circle of discounting just because the course down the street dropped their rate ten bucks! It’s a suckers’ game and one you cannot win unless being a low-priced course is your positioning — and even then you need low debt, low overhead, and deep pockets just to play the discounting game!
HOW TO COMPETE WITH DISCOUNTERS THROUGH
VALUE-ADDED PRICING & PACKAGING
Before you even consider resorting to discounting, work on as many combinations of value-added pricing as possible.
The best way to compete with cheaper clubs is to offer clearly superior value. You charge more, but you’re worth it for your kind of golfers. Note that you’re not trying to appeal to everyone. You must have a clear position and communicate your advantages to your segment of the marketplace (for more, see the article on USPs).
Offer premiums rather than discounting
It is far better to hold your price integrity and “bribe” your customers with a free gift than to get caught in the downward spiral of discounting. Depending on your area and price point, some offers will undoubtedly work better than others. Track them all and see what works best.
Before jumping on eBay to sell your tee times to the “lowest bidder” consider your options. Get your staff involved; brainstorm for ideas.
The millionaire and the plumber
There is an old story about a millionaire who wakes up in the middle of the night to find his toilet overflowing and water seeping down the hallway. He goes to the phone and calls the first plumber in the book who offers 24-hour service. Fifteen minutes later the plumber arrives and is escorted straight to the offending bathroom. After quickly surveying the scene, he grabs a large wrench from his toolkit and slams it down on top of the pipe just behind the overflowing unit. With that, a loud gurgling sound is emitted and the water quickly disappears down the pipe and returns to its original level. The millionaire, amazed, thanks the man and asks for the bill. At once, the plumber says $500.
“That’s outrageous,” says the millionaire, “you just pulled that out of the air. All you did was hit that pipe with a wrench, it only took two minutes. I want an itemized bill.”
“Certainly,” says the plumber, reaching into his overalls for a pen and scribbling on a tattered invoice. Emergency plumbing service itemized bill: “$5 for hitting the pipe with the wrench. $495 for the 20 years of training and experience that taught me where to hit it! Total $500.”
The moral of the story, of course, is that you are selling value. If you market correctly, you can reap the type of rewards you truly deserve. Maybe you can raise your green fees and offer a bad weather discount. That way, people pay more for a great day. Or if you’re selling lessons you could offer a handicap reduction package for a fixed price. Wouldn’t some people pay $1000 to cut five strokes off their game? Or a club can offer a “lesson” round with the pro for three times the green fee and split with the pro.
PRICING YOUR PRODUCTS AND SERVICES
In order to run a successful business, you must be able to price your products or service so that you can make a fair profit after expenses. There are a lot of different ways to do this. At my seminars, I am amazed that when I ask attendees why their courses charge the green fees they do, nobody ever seems to come up with what I would consider the right answer. I usually get answers like “That’s what my market will bear” or, “That’s what everybody else is charging.” These answers are the way most courses (or pros) set their prices, but they are not the best way. You cannot ignore the fact of what your market will bear, or what other people may be doing in your market. But you should not let these considerations be the deciding factors in determining your prices.
How much do you want to make?
Most course owners are so focused on what everyone else is doing that they never stop to think what they should be doing to run their own businesses the way they prefer. They are letting others dictate their terms for them.
The first thing you should determine before asking the question, “How much should I charge for my product or service?” is, “How much money do I want to make?” Now, this is an interesting question. Instead of focusing the discussion on what everyone else in town is doing, let’s start at the most important place, your place! What do you want to have happen? What do you want to earn?
Let’s suppose, just for argument’s sake, that you want to gross $2,000,000 a year. There are lots of different ways you can arrive at making that income. For instance, that’s 100 rounds a day at $100 a round for 200 days a year. And that doesn’t count banquets, food, and other income.
You should also consider the stress and hassle factors of dealing with an increasing number of employees and golfers. The lower your price, theoretically the higher your volume, but also the more maintenance and the employees you need. The higher your price, the more limited your market, but also the fewer employees you will need to offer superior service.
You set your own prices
Why do some golf pros charge $200 an hour and others $30? Why do some attorneys charge $100 an hour and others $500? Why do some accountants charge $40 an hour and others $200? Why do some stores sell a cotton dress at $40 and others at $400? In my seminars, whether the group is club owners or golf pros, I often make a point of asking what three or four of my audience charge. Let’s say that a group of golf pros answered that they charge 40, 50, and 80 dollars an hour for lessons. My next question goes to the low man on the totem pole.
“Are you good at teaching?” I will ask.
“Yes,” he will reply.
“Do you think then that Mr. Golf Pro over here charging $80 an hour is twice as good a teacher as you are?” I will ask.
“No, I don’t,” he will reply.
“Then why is he making twice as much money as you?”
Sometimes he will answer that it’s the club, the area or some other factor, but for the most part, regardless of industry or profession, the dominant reason why one professional can charge more than another boils down to this: That’s what they decide to charge!
WHEN TO RAISE PRICES
Raise your prices!
Through proper service, pricing and packaging, it’s possible to significantly increase your income in a very short period of time by raising prices and offering extra value. This situation is made all the easier by the fact that most courses, golf schools, and resorts charge far less than they are really worth! After all, how long did it take you to gain the knowledge you now have? To build your course? To maintain it? Now spend some time to find the golfers who will appreciate what you offer — and will pay for it! (Part of the secret is to target the right type of players for your club, not just anyone who swings!)
There are two times to raise your prices. The first and most obvious time is when you are too busy or approaching capacity at your present price. This is the good old law of supply and demand. If you are at capacity and don’t get too greedy, it surely will work. And it will give you more money and more time to plan your expansion. Call Aaron Gleason at Dynamic Revenue Services, 314-550-9544, and find out about the amazing results they have with raising prices based off demand.
The second time is when you want to differentiate yourself from others in your area or industry. The prices you charge relate to your quality and status in most golfers’ minds. Find out what perceptions exist in your area for golf. Where are the price breaks in the minds of your prospects and clients? At what point does a high-end value become expensive? At what point does a low price encourage a perception of low quality? Where is the middle ground and what can you do to move to one end or the other?
How to raise dues
Many golf clubs are deathly afraid of raising prices for fear of losing what they already have but rarely does this fear translate into a mass exodus, unless there are other problems. Members may bitch and complain, but few who were not going to leave anyway will quit if the cost of dues goes up 5 or 10 percent. (My club doubled it’s dues last year and hardly anyone blinked!) Most people will simply accept price increases and after a couple of weeks of discussing the club’s shortcomings around the bar will go back to daily life. Even if a dozen people leave, the extra fees will still reap greater rewards, but let’s look at how to soften the blow.
One way is a letter simply outlining where the operating costs have increased, or the proposed improvements you plan to make with the additional revenue. When people think they understand your motives, they tend to be more accepting of increases.
Another way I have used successfully is to invite members to pay their current rate for a year or in some cases more as long at they pay in full before a certain date, that is, lock in last year’s rate by paying for next year in full by November 30th. Or take double advantage and pay for two years now!
There are of course more creative ways like this one from Todd Smith of Lynwood Lynks (no—that’s not my spelling again!) One of the great rewards of dealing with 300 different clubs on a daily basis is the feedback and ideas that you get from clients. Todd’s creative letter to sell annual memberships not only grabbed my attention but also delighted everyone at my office.
He sent a letter to his annual pass holders, as usual, asking them to renew but instead of the usual 10 percent discount for acting before November 30th, he came up with a much more clever idea. The headline says it all.
Join Before November 30th And If It Snows On
Christmas Day, Your Membership Is Free!
Now here is the clever bit; he took out insurance against it snowing which cost him just 8 percent of the annual membership! (To avoid all controversy, it had to snow a certain amount and be documented by the National Weather Center at the Moline, Illinois facility!) BRILLIANT!
INCREASING THE SIZE OF THE AVERAGE TRANSACTION
It’s not even necessary to raise prices in order to make far greater profits. In some cases, it’s just about increasing the average sale. Your player pays a $65 green fee. You hand him back a ONE-DAY-ONLY gift certificate worth $10 off any shirt in the shop. For convenience, let’s say the average shirt is marked $40 and you paid $20 for it. If you sell four shirts typically on a Saturday, you make $80 profit. With the gift certificate, you sell 15 and make $150 profit.
How to raise big money instantly
Do you have a low-end course and need $100,000 for course improvements? Simply offer ten-lifetime memberships at $15,000 instead of your yearly $1800. Have a higher-end course? Sell five-lifetime membership at $50,000 and you just raised $250,000 without going to the bank! It sounds simplistic because it is, but it works if you package the deal right.
GETTING CUSTOMERS TO BUY MORE OFTEN
Let’s say your most profitable source of business is daily fee players. If you had good data, you would know how many rounds each player at your club played last year. This data is a very important tool in helping you price your rounds. Surveys like the ones included on our Legendary Marketing websites also help you by telling you how many rounds a player plays and at what other courses.
Let’s say I played 15 times at $50 per round. The first time I stand in front of you at your golf shop counter this year, you sell me a $1,000 pass to play 20 times or even 30 times. Your income from me has increased at the very least by 25 percent and that’s without counting carts, beer, and balls! A single sale to me could easily result in 50 percent greater revenue on the first day of the season if it is a custom package that appeals to my needs — my needs as an individual player. And therein lies another great and often overlooked truth — you build a successful business one sale at a time.
MEMBERSHIP FEES — TO BE OR NOT TO BE?
Another common practice among clubs trying to sell memberships is to discontinue the joining fee! In the majority of cases, this is a big mistake! Instead of doing away with the $5000 joining fee they should instead send out a mailing with a $5,000 check towards joining enclosed. You may think I’m splitting hairs but the difference between the two strategies in customer perception is often staggering.
REFER FOR A FEE
If you are constantly asked for a service you cannot or don’t want to provide, set up a network of other clubs in your area and charge a referral fee or a booking fee of 10 or 15 percent for sending the business to them. This works very well when you are doing a good job of booking outside events, wedding, and banquets. Why not develop a relationship with a competitor and hand your extra business off to them for a 15% booking fee instead of just telling the customer you are booked? I have one client that made an extra $20,000 last year by doing exactly this, booking events at other courses on days where his was already booked!
KEEP TESTING PRICES AND PACKAGING
Test, test, test, and keep testing offers, bonuses, and value-added promotions to increase the number of players who come and the average spent by your players. If you do 40,000 rounds, and the average spend is $6, an increase of just 10 percent will result in $24,000 more in income. And remember — golfers are already your customers. It costs you nothing to collect the extra revenue.
A NOTE ON PRICING PHILOSOPHY
When running price promotions, you must sit down and consider how you can use the promotion to make more money, not just increase traffic. If you discount, how will you make a fair profit margin back? Can you expect to make it up by selling additional full-priced items? Will you lower the perceived value of your memberships, rounds, and so on?
When it comes to packaging and pricing, it’s very, very important that you don’t get caught up in the trap of doing what you’ve always done. Because if you do what you’ve always done, you’ll get what you always got. Don’t follow the herd in your industry. Set prices based on what you want to make and the value you are willing to offer. Consider the multitude of different packages and prices you could offer to get where you want to go. Then narrow your offerings down to no more than three clear options at one time.
In general, I recommend that you not price discount except in very controlled circumstances. For instance, in the offseason. Or offering free weekday rounds with weekend promotions. An ideal promotion will increase your income without cheapening you in the long term. Look for ways to add value to your memberships, daily play, and outings, so that you are not reducing the dollars you take in. Involve your vendors in special events and discounts. Create so many interesting goings on at your club that people always feel they received more value and entertainment than they paid for.
If you have any questions about a pricing strategy for your property or want to talk about how Legendary Marketing can help your golf course, call me at 352-266-2099.
All The Best,
PS: Read The Golf Marketing Bible 2017 Edition With Over 250 Totally New Pages of Cutting-Edge Golf Marketing Information!