The Pellucid Perspective - June 2013 - (Page 2)

GOLF PARTICIPATION Golf ’s Consumer “Leaky Bucket” Challenge By Jim Koppenhaver R ecently Pellucid released the results of the 2012 Golf Consumer Franchise survey which showed that in the most recent year we once again had a net loss in our consumer base. The glass-half-full interpretation is that the loss was much shallower than the 2011 survey which showed we had shed nearly 2M golfers in a single year. The glass-half-empty story is that 2012 marked the 9th year of decline in our golfer base over a 10-year period since the high water mark in 2002. Underpinning this unfortunate trend is the fact that this same period also represents the highest level of industry activity and grow-the-game program investment since as far back as 1985, according to the public domain records to which I have access. Back at the turn of the century, the National Golf Foundation was the lone voice on golf consumer “churn,” proclaiming that golf was growing due to healthy attraction offset by minor attrition. In the early 2000s, the story changed to one of neutral churn, which proposed that every golfer we lost annually was being replaced by a new (or returning lapsed) golfer (a representative reference was the NGF claim that golf was annually attracting roughly 4M new players and shedding an equal amount). As Pellucid got into the validation of those statistics by fielding our own annual consumer survey, we found that in fact the churn ratio was negative, with roughly 1.5 golfers departing each year for each new golfer acquired (2M new golfers offset by 3M departing). These findings have since been corroborated and adopted by the NGF in post-2005 analyses (4M gained, 5M lost or a 1.25 churn ratio to the negative) as they now confirm that golf has a “leaky bucket” challenge in our consumer base. What is the cost of our leaky bucket challenge? Well, if you annualize our rate of decline in the consumer base over the past 9 years since the apex, we’re losing, on average, a net 1M golfers/yr. Multiple Pellucid studies and work by the NGF have produced an estimate that the average frequency of departing golfers is, not surprisingly, on the lower side of the median frequency of 9 rds/golfer/yr. Placing a conservative marker on the lost rounds due to our departing golfers of 4 rds/yr, that means we “leak” roughly 4M rounds each year due to this loss (that’s just under 1% of national annual rounds for perspective). Upon deeper thought, we also potentially have a further downside in the differential between the frequency of the departing and acquired golfers. For example, in one recent year the NGF reported that we had 4M new golfers and 5M lost golfers. For the “offsetting” group of 4M golfers, it’s also quite likely that we lost at least 1-2 rds each due to the dynamics of new golfers coming on at relatively low frequencies (say 2 rds/yr) compared to those leaving the sport (which we had estimated above at 4 rds/yr). Since we can’t really quantify this component, I’m not going to go out on a limb and put it in the “rounds loss” column, but it is possible that we’re losing up to an additional 8M rounds annually if this scenario is in fact playing out. This churn issue therefore has a meaningful contribution to the industry’s inability to produce repeatable, non-weather-related increases in rounds demand since the early 2000s. What’s interesting is that this churn situation has different ramifications for the equipment manufacturing segment of our industry. On the hard goods side (clubs, bags), the churn is actually a positive factor in that the large number of new players require incremental equipment and there’s no loss from the golfers abandoning the sport. The internet and its ability to connect disparate buyers and sellers has altered this dynamic no doubt, (think eBay and the volume of used equipment that goes across all the various reseller sites whereas pre-internet all that equipment just sat in garages or was traded across multiple rummage sales), but the units and dollar sales of the new golfer upside significantly outweigh any lost golfer downside. On the consumables side (balls, gloves, shoes), the churn factor has a negative impact similar to the plight of the average facility operator; fewer rounds being played translates into fewer units being demanded and, hence, lower unit sales. While the industry flails around looking for a workable and scalable solution to the leaky bucket, we’re going to be subject to an annual rounds demand “headwind”. There’s a silver lining, however, for the average facility operator. Many of you have the capability to address your leaky bucket at the facility level by tracking the number of acquired customers and defectors which comprise your churn rate. If your staff is doing their job correctly and is armed with reasonable tools to capture customer contact information for every transaction, then you also know the iden- What is the cost of our leaky bucket challenge? Well, if you annualize our rate of decline in the consumer base over the past 9 years since the apex, we’re losing, on average, a net 1M golfers/yr. 2 The Pellucid Perspective June 2013

Table of Contents for the Digital Edition of The Pellucid Perspective - June 2013

The Pellucid Perspective - June 2013
Contents
Golf ’s Consumer “Leaky Bucket” Challenge
So you want to buy a golf course?
Are you on the clock?
IRI, R.I.P.
May golf weather impact: Down, but pace of decline slowed
In theory, operators sing “I Love LA”
ClubCorp buys Oak Tree CC in Oklahoma
Shock waves from the home of the Magic Kingdom

The Pellucid Perspective - June 2013

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