Marketing Case Study for Callaway Golf Company

Key Issues the Company was Facing

Ely Callaway started the company in 1982, although the original name of the company was Hickory Stick U.S.A Inc. (Perry, 1992). The company then grew by great strides through diversifying its range of products and improving their designs. However, the sales dropped in 1998 by 17%, translating into a $27 million loss despite the company coming up with innovative products such as the Big Berthas (Callaway Golf Company).  The consumers did indeed prefer the Big Berthas as they were easier to work with competitors soon started producing similar products giving consumers a range of brands to choose from (Perry, 1992).

In 1996, the Biggest Big Bertha Titanium Driver and the Great Big Bertha Tungsten Titanium Iron were introduced for $500 and $600, respectively. Considering that the target market was the average player, these prices were quite high. Consumers failed to perceive the advantages of higher-priced products. Some salespeople in retail stores did not have information concerning the benefits of the pricy CGC over other products in the store. As a result, the salesperson would guide the customers to a different product, which made more sense to them. CGC also kept producing new designs making the old models outdated, losses occurred because their prices were now set low (Rasv L., 2005).

The success of CGC encouraged more manufacturers to invest in the industry; this meant that many products filled the market (Strauss, 2004). Moreover, foreign Japanese companies also aimed to get to the U.S market. In 1998 the United States Golf Association (USGA), which acted as the regulatory body for the golfing industry, put pressure on manufacturers, almost banning the Big Berthas. The move hindered CGC from producing new designs in the market as there arose fear that USGA would reject the designs. Additionally, many golf players more so beginners quit the sport because the cost of playing kept increasing by 5% each year. Golf courses were also unavailable. There lacked incentives for beginners to join and continue playing the game. Meanwhile, there was an increase of on-course and off-course retail stores; the increase in supply and decrease in demand brought about excess equipment in stores (Rasv L., 2005).

CGC products were last in margins because they offered no volume discounts for their products. Company credit terms were also strict as customers were expected to pay within 30 days for their goods to get a 2% discount failure to which, after 60 days, the full amount would be paid. The company also did not believe in online retail shops, and the Asian financial crisis also led to a drop in sales in the worldwide market (Rasv L., 2005).

The Competitive Edge of CGC

CGS’s competitive advantage was their innovation, their team of engineers, scientists, and golfers steadily looked for ways of improving the products. Innovative products that were launched include S2H2 (short, straight, hollow, hosel) clubs and the Big Bertha line of clubs, which revolutionized golfing. CGC products were widely accepted as a quality brand among golf players and retail store owners such that people who had them were seen as true golfers. Stores were also rated by customers according to the pricing of the products. The company also manufactured a variety of clubs useful for various niches, for example, the Big Bertha metal woods and the Big Bertha irons were for those with few skills in golfing and the Little Bertha golf clubs for children. The company also diversified its range of products to include golf balls, golf clubs, golf bags, accessories, and balls (Callaway Golf Company 1998 Annual Report, 1998).

GCC’s Relationship with Retailers

CGS’s terms of credit were strict, and they offered no volume discounts. Many retailers were disappointed by this. However, they were proactive in making sure their products were sold. The company would send out outside salespeople to help retailers manage their inventory and educate salespeople about CGC products to enable them to sell. Such visits were done weekly, monthly, or four times in a year, depending on the importance of the customers’ accounts. During these visits, they engaged in activities like running demo days, adjusting displays, taking customer orders, and getting to know store salespeople.  Good relationships with retailers were maintained by warranty programs, closeouts, endorsements, advertisements, endorsements, terms of payment, and 800 numbers. (Rasv L., 2005)

How to Turn CGS’s Issues Around

Some solutions are;

1. Ensuring that short time is taken to educate salespeople at retail stores about the advantages of the products because some stores complained that during the visits, no education was done.
2. CGC should also consider introducing volume discounts and become more flexible with their credit policy to retail stores as the move will promote their commitment.

References

Callaway Golf Company. (n.d.). Retrieved February 9, 2020, from https://www.encyclopedia.com/social-sciences-and-law/economics-business-and-labor/busines-and-occupations/callaway-golf-company

(1998). Callaway Golf Company 1998 Annual Report. Retrieved February 9, 2020, from www.annualreports.com/HostedData/AnnualReportArchive/c/NYSE_ELY_1998pdf

Perry, N. (1992). How Golfs” Big Bertha Grew. Fortune. Retrieved January 9, 2020, from https://archivefortune.com/magazines/fortune/fortune_arcive/1992/05/18/76419/index.htm

Rasv, L., E. D. (2005). Callaway Golf Company. Havard University. Retrieved February 9, 2020, from caputconsoltoria. com.br/2016/wp-content/uploads/2016/05/case-Havard-ABE36_MKT_Callaway_Golf_Company.pdf

Strauss, L. (2004). Big Bertha for the Average Golfer. Wall Street Journal. Retrieved February 9, 2020, from https://www.wsj.com/articles/SB1102125734119190997