Callaway Golf Company (CGC) has maintained top market share and superior golf equipment since 1982. In 1998, sales began to fall and market saturation posed large strategy questions to the senior management of CGC. CGC is in need of a new strategic vision for the future. Smith Marketing Consulting Group is recommending that CGC develop an online marketing campaign and a new putter line to address the need for continued growth and innovation. CGC enjoyed large market share and high profits from 1982 to 1998.
Ely Callaway, CGC’s founder, accomplished this with his vision: “If we make a truly more satisfying product for the average golfer, not the professionals, and make it pleasingly different from the competition, the company will be successful. ” Callaway’s early strategy from 1988-1997 included new club designs such as S2H2, Big Bertha, and titanium shafts; high end prices; and a large budget for research and development (R&D). CGC was able to sell more units of equipment at the highest prices due to leading-edge technology. Callaway had a one price policy to all on and off course retailers.
CGC also had a marketing plan that included endorsement of pro golfers; television and magazine advertisements; and training to retailers on point of sale knowledge. In recent years, the golf equipment industry has seen an increase in competition with many new startups and saturation of products in the marketplace. The industry has also experienced a decrease in demand for high-end premium equipment and an increase in close-out programs. Product life-cycles have become very short, with most companies introducing new products on a yearly basis and sales of products declining sharply after only two years on retailer shelves.
Golf equipment consumers tend to purchase new products on word-of-mouth recommendations and the average consumer has a handicap of 18 and purchases new clubs every two to three years. Recommendations In order to compete in the golf equipment industry, CGC must develop new strategies to keep the company growing and moving forward. Smith Marketing Consulting Group is recommending that CGC establish an online alliance with consumers and retailers and develop innovative putting equipment as a new strategy going forward.
Although CGC has voiced reservation about using the Internet to sell products, the future for most retailers and manufacturers must include the Internet to stay successful. Based on short product lifecycles and high R&D budgets, CGC should capitalize on the efficiencies of the Internet to continually produce innovative products and allow consumer’s access to these products in the shortest times possible. CGC maintains excellent recognition through word-of-mouth advertising and pro golfer endorsements.
Although CGC is fearful of consumers not wanting to delay satisfaction to have products shipped, the powerful marketing tool of word-of-mouth advertisement will allow CGC to capitalize with online retailing without consumers needing to physically see the products. CGC should consider a website that would allow the consumer to purchase equipment online, but the order would be picked up at local retail store. This would maintain CGC’s relationships with on and off course retailers, yet please consumers with the ease of shopping from home.
An online retail shop will allow CGC to increase market share, maintain superior products and commitment to innovation. Secondly, CGC should focus R&D on innovative putting products to compliment the CGC woods and irons. Putting equipment currently accounts for the lowest sales percentage at CGC, but studies show consumers are much more likely to purchase putters than any other club. Therefore, strengthening the CGC line of putters will increase sales and profits. Smith Marketing Consulting Company appreciates the opportunity to work with CGC and we strongly feel these recommended strategies will greatly benefit the company.
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