Two PGA professionals created Bear Creek Golf Range as a golf range that caters to serious golfers around the Dallas/Ft. Worth area. Dan Shay is a retired golf professional with a fairly successful career and a growing reputation as a knowledgeable PGA Class A golf instructor. George Patton, Dan’s business partner is a reputed golfer who is still actively on PGA tour. Both of them wanted to invest part of their career savings in a business venture.
They choose to start the Bear Creek Golf Range, over settling as golf pros in private clubs because of the high earning potentials of owning a business. Their background in golf, the growth of the Dallas/Ft. Worth golfing community and the excellent weather conditions for golf in that area helped the partners make their decision to start this business venture.The Bear Creek Golf Range was envisioned to be “the professional golfing center run by professionals”. The $40 billion national golfing market was growing at 5% a year. The Dallas/Fort Worth area had a higher growth than the national rate due to the growing metropolis and favorable weather. There was a 15% increase in the number of beginner golfers (since 1980).
A twenty-two acre and was purchased adjacent to Route 183, the connecting highway between Dallas and Fort Worth. The land for Bear Creek Golf Range was located in an area that will include the larger suburbs of the metropolitan Dallas/Fort Worth. The estimated range for customers was ten-mile radius, which had a population of 777,082 and already had fifteen golf courses, and four golf ranges.The plan for Bear Creek Golf Range was created with the vision of attracting serious professional golfers. The facilities included a first-class driving area, twenty-nine hitting areas, six hitting areas especially for teaching, other top-quality facilities and equipments for teaching, permanent clubhouse-style building with many amenities and features, paved parking, decorative landscaping, night lighting and highly visible, lighted sign.
Bear Creek Golf Range would also offer PGA instructions, Custom club fitting and repair, advice and ordering of merchandise.The competition would be coming from the four driving ranges which are within a ten-mile radius from Bear Creek Golf Range. Two of these, Greenbrier Golf Range and Golfarama Golfing center are full service golf ranges. The Other two are limited-service golf ranges. Among these competitions, Greenbrier Golf range was well-constructed high quality golf range. It is a popular destination and usually has long waiting lines during peak hours. Golfarama was more of an entertainment oriented facility that catered to less serious golfers in the area. The other two were crude, minimal operational facilities.
These two facilities are operating at a 25% usage rate, while Greenbrier is at 35% and Golfarama is at 33%.Analysis of First Year OperationsFacilitiesBear Creek Golf Range was expected to be fully operational on March 1st, 1993 in time for the golf season. Due to unexpected delays and complication, the range did not open till May 1st of that year.
Even at that time, most of the planned features were not completed as scheduled. On the opening day, Bear Creek Golf Range had a first-class driving area, hitting area and teaching area. The clubhouse was constructed by getting a class room building and refurbishing it. The putting green and awning for the hitting area was put on hold. The proposed services that were to be offered through the clubhouse such as a snack bar and lounge were not undertaken either. A gravel parking lot, and portable toilets were used in place of the planned higher quality facilities. Overall, other than the putting green, all the playing related features were built as planned. No additional improvements were made during the year.
CustomersAs the partners projected, they were able to attract customers for the range as well as for the lessons due to their reputation even without the facility being fully operational. They averaged 75 customers per day during the season and 10 per day during the off-season. Customers choose Bear Creek based on its convenient location, owners reputation for the golf know-how ; their excellent instructional abilities, privacy and first-class hitting areas ; fairways. This gave them a 20% usage rate according to the measurement method devised by Dan shay and Martha Rawls. It was well below the 33% usage rate projected in the business plan.
It should be noted that the main competition was able to maintain more that 30% usage rate.MarketingBear Creek was planning on advertising in local newspapers and golf magazines. Due to financial constraints they ended up advertising in the yellow pages instead. Dan was expecting strong word of mouth advertising. But during the course of the year it was obvious that even though there was word of mouth advertising taking place, it was not sufficient enough to generate sustainable customer base.Projected and Actual Income statementBear Creek ended the year with a loss of almost $25,000, while they had projected to earn a net income of around $50,000. The noticeable fact about the pro-forma projections is that, the income is projected aggressively, while expenses were projected conservatively.
The norm on business plans is to project the income conservatively and expenses aggressively. Most of the actual expenses were equal or over the projected amount. Especially with a range not fully operational this indicates that the partners heavily underestimated the cost of their expenses. Another noticeable aspect is the underestimation of cost of sales for merchandise. The projected profit margin for merchandise was 58%, but it turned out to be 4.9%. This again shows that the initial expectations were not set realistically. They should consider ways to reduce the cost of merchandise, increase the profit margin and forecast conservatively.
Issues faced for the continuing operations into 2nd yearWith only a few months before the busy golf season starts, Bear Creek is placed in a tough situation. The range is operating at a loss, there is little or no marketing effort and no improvements have been made to the range nor have any additions been made to reach the standards set in the business plan. In a nutshell, the following issues needed to be addressed for the future success of Bear Creek Golf Range.
* Capital for day to day operations and short term improvements* Capital for facility improvement and long term planning* Marketing Strategy* Future expansion options (including the currently available 10 acre land)* Re-Forecast earning and performance expectations (For each products)Financial calculations and Break Even analysis see attached spreadsheetTarget Market AnalysisThe national golf market is $40 billion and has an annual growth rate of 5%. Interest and awareness of golf is rapidly expanding. There are around 25 million golfers in the country and it is growing at a 3% rate. The biggest growth in golfing is coming from the beginners and the female segments of the market.
Overall the golfing population of Dallas/Fort Worth area is very healthy and growing at a faster pace than the national average, there has been a 15% increase in the beginner golfers since 1980.Even though, Bear Creek is located in-between the metro Dallas and Fort Worth, its effective target area is within a ten-mile radius surrounding the golf range. The total population of the target area is 777,082, out of which 543,957 are adults. The golf playing population makes 25 % of that, which turns out to be 135,989. Within that 136,000 strong golfing community serious golfers constitute a 9% (12,239), Frequent golfers constitute a 39% share (39,437) and the Occasional golfers, by far the largest, make 62% (84,313). Serious golfers normally belong to private clubs, generally took lessons and are not price sensitive. They look for quality service, convenience and privacy are their main criteria for choosing a golf range. Frequent golfers might belong to private clubs or played at public courses.
They also take lessons but are somewhat sensitive to price, but generally willing to pay for good quality hitting areas and services. The vast majority of the golfing population falls in to the occasional golfers category. These occasional golfers will play given an opportunity, but generally would not play regularly or take classes and are price sensitive. They play golf as a recreational activity more than undertaking it as a regular sporting activity.In a different set of classifications women and new golfers show a very high rate of growth in the golf market. Women, who constitute of 5.4 million of the total population, account for 37% of the beginners. Both of these segments are inclined to spend more on golf related activities including lessons and equipment.
Both of these groups represent a high potential in growth and future high per customer sales/revenue.Recommendations for Bear Creek Golf RangeTarget Market RecommendationsCurrently, Bear creek is focusing on the upper segment of the golfing population. But growth in that segment is low. Given that they hold only 9% of the total market, Bear creek should concentrate on other segments as well. Bear Creek should focus on the following segments: the frequent golfers, and the growing segments of female and beginner golfers. While focusing on this market they should also continue to attract the serious golfers. With the interest in golf surging, these three categories will be positioned to sustain the highest growth within the industry.Frequent golfers are an attractive market because they play golf regularly and at a higher frequency than the occasional golfers.
They are looking to improve their skills and are willing ; able to pay to achieve those improvements. It can also be expected that a large portion of the other growing segments will eventually fall into this category. Therefore it is empirical that Bear Creak taps into this segment. The growing segments are also very good target areas because of their potential to use all the services provided by Bear Creek. These segments (women and beginners) incline towards using golfing lessons and purchasing merchandise ; other services offered. This potential customer base will bring a high lifetime value to the range, for example, if Bear Creek chose to expand into a full service golf course in the future, this customer based can be easily converted to become members of the golf course. By tapping into and encouraging the beginner golfers at their entry point into the game, Bear Creek is also in a position to influence their maturity in to the frequent golfer category at a quicker pace.
While focusing on these groups, Bear Creek should not loose its focus on the serious golfers. Currently they are the biggest customer bases for the Bear Creek Golf Range. (Concluded from the fact that they choose Bear creek with minimum promotions and a lesser facility compared to the competitors. Higher usage of lessons also suggests that the current customer base is mainly the upper echelons of the golfing population.) Bear Creek’s managers need to balance their market positioning very well in order to bring in the new target customers while hanging on to their current customers. High quality in services and facilities along with a well designed marketing program and positioning will be required to attain this balance.
Market PositioningBear Creek should continue to expand its images as the professional golfing center run by professionals. While it has been a fairly positive image, it still needs to be improved upon. The current image/identity was designed to attract serious golfers. So far this image has been successful in delivering a good number of customers from the target base. With the expansion of the target market, the positioning should be changed towards an image of high-quality golfing center, with excellent facilities and amenities.
It should also promote the excellent servicing features of the range.Facility RecommendationBear Creek was operating in its inaugural year without most of the facilities which were planned. The immediate step would be to complete the proposed facilities. The estimated expenses to complete the original proposal range from $150,000 to $190,000. This estimate includes the putting green, the clubhouse, awning for the hitting area, indoor pluming and toilet, and decorative landscaping.
With the new market positioning as a quality golf range, and the wider target of golfing customers, these constructions or “cosmetic” features would be required in addition to the first-class hitting areas. It is also recommended that Bear Creek should build some extra features like small putting greens that can be used as an entertainment/practicing area during the peak or busy business period. They can make use of a portion of the 10-acre plot for this project.
Another long-term recommendation is to convert the 10-acre land into high-class, exclusive hitting areas (6-10 tees) for the use of higher fee paying customers. This facility would help to retain and increase the number of serious and professional golfers using Bear Creek. If possible, an 18-hole miniature golf area or a 6-hold golf course would be a good use of the land as well.Marketing Mix RecommendationsBear Creek should organize its products/services into the following categories: Golf Range, Golf Lessons, Golf Merchandise, Golf Services and Golf Course (future products/services).
The BCG matrix shown below is a suggestion for Bear Creek’s marketing mix in the immediate and long-term future. It shows that the Golf range would be the biggest component and golf lessons should be expanding into a more mature state. It is also recommended that opening a Golf course should be considered as a future expansion option.(1994-1995) (1996-1998)Range Lesson Service Course MerchandiseThe current revenue structure is as follows, Range ball revenue 61%, Lessons 26%, Merchandise 9% and Services 4%. As shown in the BCG matrix, the bulk of the revenue is expected to come from the two larger product categories, the range and the lessons. The projection for 1996 (from the financial calculations) calls for a substantial increase in the Lessons revenue.
It is assumed that by 1996, Bear Creek would have added another golf instructor. This assumption justifies the projected hike in revenue from Lessons. Revenue and cost projections for the other categories are conservatively calculated. The shortened season and lack of facilities during the first year caused the undependable numbers for these products. These projections should be recalculated on the basis of the figures from the second year operations.Marketing StrategyA sound marketing program will be required for the future success of the golf range. The marketing program should have a wide reach and should cover at least 95% of the potential customer base.
The following 4-point strategy is recommended.1. Program to build the market/brand identity of the Bear Creak Golf Range.2. Program oriented towards the emerging markets (women and beginners).3.
Program focus towards serious and frequent golfers.4. Program designed to balance the peak and off-peak hour traffic.The first component of this plan is to build the general image of Bear Creek GolfRange. This would promote the range as a first-class golf facility that offers, a quality golf range, PGA class instruction and other golf related services. The other two programs will focus on penetrating target market segments.
The fourth program of customer traffic management will be an integral part of the marketing efforts for each of the target segments. This effort would maximize the usage/utility rate of the range. The marketing media, which has the highest reach into these areas, should be chosen for promotion. While continuing to advertise in the yellow pages, advertisements should be placed on local golf magazines, women’s magazines and business magazines as well as in local newspapers.Marketing plan suggestions for each segment: Offer Introductory prices, discount packages that include lessons, time at the range and other customer services to the learners/beginners/women segment.
Special off peak rates combined with a package offer should be promoted to High school & College golf teams. These groups should also be provided with the opportunity to utilize the range during the slow off peak hours. Local and regional businesses should be contacted and offered special rates to encourage employees to take advantage of these offers.
Offers for frequent golfers should provide incentives to introduce friends and family. The efforts to attract the serious and frequent golfers should emphasize the fact that the quality and availability of the range and services would not be reduced because of the wider target audience. These products should be packaged in varying combinations to maximize the per person sales revenue.