Callaway Golf Case Study
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1. Callaways strategy from 1988-1997 with respect to:
A. Research and Development
From its initial existence R&D and innovative products had been the lifeline of CGC. When Callaway bought into the company his first initiative was to develop original products. Innovation and superior performing products are important in golf because equipment is thought to have a significant impact on player performance. Moreover, innovation was important because CGC had to be the technological leader to sell its products at premium price and continue to exceed customer expectations. The industry was also characterized as being driven by new product development because manufacturers were trying to bet each other to the next “best club” so CGC had to manufacture products that were differentiated from its own existing products as well as those of its competitors.
Helmstetter wanted to come up with products before consumers knew they needed them. To cultivate an environment of modernization, Helmstetter had team of scientists, engineers, and golfer working on 400 RCH Tough Questions. While trying to answer RCH questions the team was able to create the following new products :
S2H2- introduced in 1988. This club redistributed weight to the striking area of the club head by eliminating the hosel.
Big Bertha metal woods introduced in 1991. The innovative feature of Big Bertha was that it provided a larger “sweet spot”. The oversized head made it easier to make contact with the ball so in turn made drivers more widely used by average golfers and revolutionalized the way clubs were manufactured.
Great Big Bertha Titanium- launched in 1995. Titanium clubs increased the moment of inertia by moving material away from the clubhead center.
Technologically superior products reinforced CGCs high quality brand and kept customers from switching brands.
B. Advertising
CGC targeted “average golfers” defined as golfers that played a minimum of 10 rounds per year and generally had handicaps above 18. Moreover they purchased new equipment roughly every two-three years and purchased premium equipment to boost their performance. Other market segments included beginners, occasional, and experienced or avid golfers. Beginners and occasionally golfers played one-seven rounds per year and were not targeted because they were price-sensitive. Experienced golfers kept their equipment for extremely long periods of time and when they did purchase new equipment their purchase was based mostly on brand. Experienced golfers were also not targeted because they relied more on their skill then the performance of their equipment.
CGCs advertising consisted of television ads, magazines, endorsements, and word of mouth. Most average golfers made purchase decisions based on word of mouth recommendations. This worked well because golf is played in groups of four that spend several hours together playing. Also this gave players the opportunity to try out their friends clubs. CGC endorsed professional golfers in all 5 major tours. They used endorsements as a validation of their product quality so they did not spend a ton of money on prestigious golfers rather they chose board leaders. CGC used consumer print ads and trade magazines to launch Big Berthas. Television print adds during golf tournaments and on CNN and ESPN aired not during primetime were used.
Word of mouth was CGCs strongest advertising avenue so they had to make products that did seem to give players an added advantage to get people talking.
C. Distribution
CGC sold its products in both US and abroad through retail shops, Callaway Golf Sales Company, foreign subsidiaries and international golf clubs.
Off-course shops are larger, have space to offer a greater selection, and is located outside of golf courses. Off-course shops provided 65% of CGCs sales. Moreover, one-third of off-course generated two-thirds of CGCs sales.
On-course shops are located at golf courses and often small and offer on a limited selection. On-course retail shops did not produce as many sales as off-course shops. This was mostly like due to the fact that this outlet appealed mostly to experienced or avid golfers which were brand conscience, but did not depend on their equipment for performance. Also on-course salespeople had less time to sell products due to the other duties they had to perform.
Callaway Golf Sales Company, a subsidiary of CGC, sold products to customers at wholesale. Products were sold through outside sales, in-house telemarketing, and customer representatives. Outside salespeople performed many duties including physical inventory counts, running demo days, and training salespeople.
CGC used foreign subsidiaries and international golf club distributors to sale its products in more than 50 countries.
D. Price
CGC had a premium pricing strategy. It was providing a high-quality product at premium price to the average golfer who was looking for a product to five them an edge in performance.
CGC also had consistent pricing and offered all retailers the same pricing structure regardless of the volume they acquired. What is more, CGC rarely allowed retailers to advertise prices on its products.
Foreign subsidiaries and international golf club distributors did receive products at a reduced export-pricing discount to ease the effect of international distribution, advertising, and selling expenses.