Where are we in the macro-cycle?
Add movie theaters and bowling alleys to the growing list of industries that have adopted dynamic pricing recently and one has to conclude that, in some part, the current inflationary economic cycle played a role. While golf has historically been a laggard in adopting business practices from other, more progressive (and analytical) industries, the move to dynamic pricing across US golf courses (based in part on the Internet Golf Course Database (IGDB’s) annual pass across all US golf course websites and collection of various greens fee prices) has probably put us in the midstage group of adopters on this trend. We’ll discuss this in more detail in the full article.
Back to the headline, I’m going to posit that pricing is always and everywhere a tug-of-war between businesses and consumers. Most of you likely picked up on the channeling of Milton Friedman’s famous quote that “Inflation is always and everywhere a monetary phenomenon” which is being played out and proven (once again) in our current macro-economic picture. While most consumers aren’t students of macro-economic policy (I’m not either, by the way), it surprises me how few seem to understand this tug-of-war exercise that happens in both inflationary and recessionary times. In this issue I’ll draw on my 30+ years experience in the Consumer Package Goods industry (think of products you buy in the grocery store, soda, chips, meat, cereal, produce etc.) having seen how this plays out, it’s fairly predictable pattern and try to apply some of those learnings to outline the potential road ahead for golf relating to pricing:
- Pricing is a constant tug-of-war between suppliers/supply, manufacturers, retailers and consumers (kind of hard to imagine a 4-way (square?) tug competition; in golf operations it’s slightly simpler because you’re both the manufacturer and retailer of the round of golf so think of a “triangular tug”)
- Why are an increasing number of industries adopting either yield management or dynamic pricing (and what’s the difference)?
- Is dynamic pricing here to stay in golf and, if so, what’s the likely adoption rate across ~8,000 US facilities? (excluding Private Clubs and Learning & Practice facilities in Pellucid’s classifications)
The gold star for managing margin during meaningful moves in costs, in my opinion, has to go to the banking sector. As any of us know, when interest rates rise, banks are the absolute last and most reticent institutions to raise savings rates and yet, when the cost of money declines, they are almost always and absolutely the first and fastest to follow them down in APR and APY. We won’t get into the fact that they’re selling a commodity that’s very difficult to differentiate on value but, in a perfect manufacturer’s world, one would emulate banking and make money in both the downward and upward pricing environments.
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