(Thanks to Dave Cowan, Synergy Golf)
There is nothing wrong with the distribution model of selling green fees through a third party marketing or distribution company as long as you are aware of the actual costs for doing so,.
Remember that nothing is free.
These companies have massive databases that an individual course owner could never afford to acquire, so why not utilize their expertise to help place more bodies onto your property?
The problem arises when the owner, operator or course manager fails to recognize the actual/real cost of the discounts. In other words, the cost of marketing your products by paying for them with actual products comes at a cost.
Most think that cost is zero or merely calculated by the loss of revenue for that particular starting time. What they fail to realize is if the starting time eventually is sold for the maximum retail price relevant to equivalent starting times, the cost is, in fact, the retail price.
However, if the price suffers major discounting because it is sold as a last-minute option, the surrounding starting times also have a reduced perceived value. That becomes a cost that needs to be calculated as well.
That cost is in the devaluation of your primary pricing. It comes in many hidden forms or disguises.
First, when deep discount patrons arrive on the property, are they provided with the same top level service offered to your five-star players? If not, you are setting a different standard.
If the number of discounts, escalates into a significant portion of your patrons, undoubtedly your revenue will begin to fall, resulting in an increasing inability to afford a marketable product, leading to cuts in marketing, staffing, property maintenance and, of course, profits.
Over time, the discount price will become your real price, so the big question in third party bookings is can I afford it?
Use the scenario of giving the service provider one free starting time per day and through this same provider, three additional starting times are sold by them at an average discount of 25 per cent and three more are sold by them at full price.
If the retail price is $100 per player (including golf cars) you have potentially given away in revenue $400 if you consider maximum value for a foursome for the free trade time and $300.00 away for the other three discounted times.
In effect, that’s $700 per day in revenue to receive a total of $2,100 in sales from them. If this occurred on average five out of seven days per week over the entire season of 30 weeks, the hard revenue cost for purchasing the marketing service would be;
Trade Time: $400 x five days = $2000 per week x 30 weeks = $60,000.
(Plus additional softer cost of reduction in price of the other three times they sold for you).
Additional Discounted Times They Sell For the Course
$300 x five days = $1500 per week x 30 weeks = $45,000 in reduced revenue.
Additional Revenue Provided by Sales Through the 3rd Party Distributor
$2,100.00 x five days = $10,500.00 per week x 30 weeks = $315,000
Therefore, to receive sales of $315,000, your cost would be $105,000 or 33 per cent.
The problem, as I learned from David, was in giving the free round that had to be used on an agreed, specific date and time frame. This allows the seller to begin discounting that starting time at any point they wish, ending when it is sold.
Few will let something expire if they can get anything for it. The end result is that the closer to the time of play the sale occurs, the lower the price gets. In the vendor’s mind, anything is better than nothing.
From the operator’s point of view, he/she is not in control of the product and prices vary for identical starting times. The solution is to pay a fair price for the service and to know what your costs are for that service.
Remember nothing is wrong with paying for marketing with green fees, as long as you understand the real cost.
I also learned that some operators are paying for additional services/products such as websites, POS hardware and software, with green fees in the form of bartered/trade starting times. The course operator offers these times to the goods and services provider to be sold by the provider in lieu of cash.
Bartering might sound like a smart deal on the surface, but only if you trade equal value for equal value and fully understand your costs. Selling starting times at a discount costs money and eventually leads to diminished service levels and lesser quality of product due to reduced revenue.
Imagine if you opened a waterslide park tomorrow and wanted to trade passes to your park for your actual slide, would it work?
The cost of operating any business has certain capital expenses based on required products like POS, websites or even paving the parking lot. The minute you rely on trade or barter for these types of supplies, who is truly in control of your business?
Furthermore, can you truly afford to continue to be in business? The other way to look at it is that “you generally get what you pay for,” so if you pay nothing or think you pay nothing, then you will probably get the same in return and what about the possibility of defective workmanship?
As I studied various promotions I only saw one that actually benefits all three parties in a green fee love triangle.
I’ve seen one method that can work. Maybe there are other alternatives out there, but remember to understand the real cost and that nothing is free.