Essay Preview: Cgc
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The analysis that follows is based upon the Harvard Business School Case Study “Callaway Golf Company” (9-501-019), revised September 26, 2005. Unless otherwise noted, all data referenced herein refers to HBS Case Number 9-501-019.
In the case of Callaway Golf Company (CGC), the corporation enjoyed years of success and popularity in the golfing community by understanding its consumer base: golfers believed that a more expensive golf club signified higher quality, better performance, and greater status. Although CGC targeted amateurs seeking to improve their game at nearly any cost, by 1998, 69% of professional golfers sought CGC clubs as the revolutionary tool of the trade. Despite an inevitable decline in sales as CGC neared the upper limits of its pricing range, CGC gleaned profound profits by entering a price-elastic market and offering avant-garde products. As shown in Exhibit 1, CGC can continue to increase profitability and brand awareness by adjusting production and marketing methods.
Market Mapping
In terms of market mapping and subsequent positioning, CGC did not opt to sell technologically-advanced golf clubs to those already able to afford it. Similarly, the company did not price clubs so amateurs could afford them. In the words of CGC’s Ely Callaway, the company chose to make superior clubs for amateurs and sell them at premium prices. Essentially, less-skilled players would pay dearly to have a competitive edge, but they must be skilled enough to be savvy about golf, reliant upon the advice of retailers who could recommend forgiving clubs, and willing to compete with the lifestyle status of their golfing friends by investing in CGC clubs. CGC responded to this particular segment with various, revolutionary club designs. CGC market research noted that average golfers using irons would not be a good source for residual sales, as iron purchases occurred once every decade. On the other hand, if golfers were too new to the sport, they missed CGC marketing radar: many would settle for secondhand or less expensive clubs until they determined their skill potential merited additional purchases. (See Exhibit 2.)
SWOT Analysis
CGC strengths in the areas of research and development resulted in fast progression to the position of industry leader. Three revolutionary designs made golf goals attainable for amateurs and professionals, while premium pricing created added value for golfers pursuing a status symbol from a trustworthy brand.
CGC located its target group of potential consumers; however, the company failed to price products proportionally. In other words, as CGC introduced new products to the market in the mid-1990s, CEO Don Dye operated under the assumption that consumer demand for a more expensive clubs would match those of previous versions. Yet, consumers did not deem the price increase an adequate indication of improvement,