I’ve gone through the comments on my previous stories, looking for topics that my readers seem to want covered. So far, I’ve focused on the nuts and bolts of the industry and stayed away from what might be considered more personal. But one comment kind of stuck with me.
What did we talk about while having a beer? This person wanted to know more about the day-to-day discussions of people in the industry.
Obviously, I can only respond from the Adams Golf viewpoint. The industry is very competitive and as such, we didn’t have industry functions where we got together and socialized. Many years ago, Golf Magazine would have an outing after the PGA Merchandise Show and invite its customers, which included equipment industry folks. I played in a couple, but we didn’t get together to discuss the industry.
At Adams, any conversation during a get-together had the same theme — how do we increase our sales so we can effectively compete with the big guys?
Let me put this in perspective. It’s post 2000, post IPO, we are the No. 1 hybrid on tour and competing daily against companies 5-to-15 times our annual volume At our peak, we did a bit more than $100 million in annual sales and, while that may sound like a lot, it’s well short of the roughly $140 million you need to do all the necessary marketing stuff and turn a profit. You are managing cash flow.
What were we doing with the money? Huge salaries, big benefits, expensive marketing? I know it doesn’t mesh with what many outsiders believe about the golf equipment industry, but we were very conservative. Since it’s public record, you can confirm that my yearly salary never exceeded $200K. Some of our key people actually did better in areas where we had to pay to get the best folks, but we were very professional with our salary structure.
There’s a saying about marketing that goes like this:
“I know 50 cents of every dollar is a waste. I just don’t know which 50 cents.”
We probably spent as much time in random discussions on this subject as anything. We would get a call saying Player X is available and we can get him for… well, more than any of us were making. Once the euphoria of being associated with a known name wears off, it’s the old question: Will the association pay off in sales?
There is no formula that applies to a company that has a tour staff of one or two players. The only thing that moves the needle is to have a large tour staff, and financially it wasn’t in the cards for Adams. It isn’t just the player; it’s how much of your advertising budget gets dedicated to promoting the relationship. Where else could the money go?
That conversation brings us around to “who are we” and “how do we capitalize on our image?” At Adams, we knew we wanted to appeal to the average golfer. Our designs were focused on making the game more enjoyable for what demographically is the largest constituency.
Now remember, in the example I’m giving, this is a bunch of us sitting around having a beer and giving opinions. There’s no formality, just ideas. When it came to the issue of helping the average player, there was one unavoidable step. You had to make excellent product that good players would use and do so knowing it would be a small percentage of total sales. Golf has a pyramid of influence, and if the better players aren’t complimentary of your products the selling effort increases significantly.
There’s an important thing to remember here. The golf equipment industry is a lot more like the fashion industry than many people are willing to admit. The actual differences between products are minor and often subjective. We don’t want to copy, but we are remiss if we don’t look at what seems to be popular and decide how to position ourselves.
Doing all of this — tour, marketing, product design — and you missed break even at $100 million in sales?
Well, cut back!
Drop the Tour staff to one or two minor (read: cheaper) players, cut back on advertising, don’t spend money designing a driver that competes favorably with the best in the market, etc. This movie has been seen, and the company slides into oblivion during the denouement.
There are other “opportunities.” A golf ball manufacturer will make a top-quality ball under our name, a shirt company will do the same. This can be done with golf shoes and virtually anything that’s sold at golf retail. Look to history. Has any smaller company ever been successful adding non-equipment products? The answer is no. So we collectively decide that our focus is on-course and we will try and do the best we can knowing we don’t have the luxury of funding.
Then the sales guy says,”I was in one of the ____ stores the other day and our [very costly] displays were in the back and some had product from other companies.” (I’m assuming everything was done to correct this!)
This is a killer. You spend the advertising dollars, the tour dollars and the R&D money just to have your product displayed where it’s hard to find. There’s a simple reason why; the big guys pay for premium space and make sure it’s properly managed. We completed our budget just getting to the store — renting premium space doesn’t fit. We have to come up with an in-store sales strategy that allows us to compete.
Get the picture? We’re still drinking beer, having a good time and we’re all passionate. And it’s good that we are; we want to put the best product in consumer hands and do so in a way that allows us to compete going forward.
That’s what we talked about.
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