Altius Golf Case Study
Altruist Golf’s choice of channels of distributions played in its loss of market share? What other factors have contributed to its loss of market share? What Nil happen if Altruist maintains the status quo? Altruist Golf’s choices in its channels of distribution have played a major role in its loss of market share. There are two distribution channels when it comes to the golf market, on-course and off-course, Inch account for 40% and 60% of unit sales respectively which result in 45% and 55% in dollar sales respectively.
Altruist’ number one selling product the Victor TX retailing at nearly $50 per pack accounts for 70% of its total golf ball sales. Altruist sells the Victor TX in both on-course and off-course retailers, however the majority of the sales for the product come from on-course retailers. Here inlays the problem, after 2008 the number of course openings has always been less than the number of course closing. These on-course retailers are closing fast 25% closed in the years immediately following the recession. Altruist is losing the main sales channel of on- course retailers.
One may think that the off-course retailers would simply pick up this slack, however this is not the case. The reason that the on-course retailers and golf courses are closing faster than they are opening is because of the rescission. People have less money to spend and therefore cut spending on certain things golf being one of them. Off-course retailers attract the recreational golfer who is not willing to spend massive amounts of money on the sport; at $50 a pack Victor TX balls are out of most recreational golfer’s price range.
Other factors that have had a negative impact on Altruist’ sales is the fact that there are less golfers in the U.S. In 2003 the number of golfers in the U.S.
Was around 31 million in the past 10 years that number has dropped to 26 million. Simply put when less people are play a sport you sell equipment for the less equipment you sell. Not only have the number of golfers decreased over the years, the remaining golfers dedication and opinion to the sport have been changing. The trend that Altruist’ consumer research shows that golfers are becoming less loyal to the sport.
Golfers becoming less loyal to the sport are playing ewer games, paying less for equipment, and exploring new less expensive brands. All of these trends are bad news for Altruist’ Victor TX that targets avid serious golfers, “ho are experienced and are willing to pay premium prices for equipment.
Altruist’ lopsided marketing budget is also to blame for its decrease in sales. In 2012 Altruist spent $35 million on advertising, most of this budget went towards budgeting the victor TX.
This proved lucrative for a period of time, however as the Victor TX buyers started turning to lower priced competitors Altruist failed to focus on marketing its ewer priced ball the Victor. The majority of the customers that Altruist is losing are buying balls from off-course retailers and Altruist was not even marketing to them. If Altruist does not change anything it will result in them losing even more market and eventually they could see their number one selling product fall.
B. Value of Market Share Neat are the 2012 revenue and gross profit for Altruist Golf and its competitors?
What IS the value off point of market share for Altruist and for its competitors? What are the implications tort the launch to Elevate? Implications for the launch of Elevate are centralization of the sales of Altruist’ other products. Elevate has lower margin and will take away a certain amount of sales from Victor and Victor TX if the centralization of the other two products are large enough Elevate could end up losing Altruist money. C. Centralization Neat are the unit contribution and the gross margin percentage for Victor TX, Victor, and Elevate?
What is the break even centralization rate for Elevate? What are the Implications for the launch of Elevate? Ere implications of the launch of Elevate is that it will eat away at the sales of Altruist’ rent products.
With only a 64% gross margin Elevate is a less profitable product. D. Competitive Reaction Neat are the risks to the Victor brand that could be bought about by the launch of Elevate? How can Altruist Golf use channels of distribution to help manage these risks? How else can it do to manage these risks?
There are a significant amount of risks associated with launching Elevate. It is very important to take all of these risks into account before making a final decision. A risk that every company faces when Introducing a new product into a preexisting product line is centralization. By introducing Elevate Altruist may in fact cannibalize the sales of its other golf balls.
If the amount of lost profit from Victor and Victor TX are higher than the profit gained from the introduction of Elevate than Altruist is losing money and introducing Elevate Nas a mistake.
Other risks include damaging their brand. Ferreira an Italian luxury sports car manufacturer for the rich and famous. If Ferreira started coming out with economy cars for the general public its current customer base would evaporate how can you claim to be a luxury brand and then start producing non luxury products. This is the concern of Altruist executives, some believe that as they are an expensive golf ball brand that they are a luxury brand of sorts whose brand image could be damaged by introducing a non luxury product in terms of the Elevate golf ball.
This however in my opinion this is a delusion Altruist is not a luxury brand of golf balls and their brand will not be harmed by adding a new economy product. Altruist is not Ferreira they are instead Kodak looking at the digital camera. Altruist needs to learn from other companies mistakes the market for expensive golf balls is getting smaller s less and less people are golfing and willing to spend large amounts of money on the sport. Altruist needs to target growing market of causal golfers who are willing to spend a little money to play golf.
By introducing Elevate into off course retailers it will open up a market that its competitors are currently successfully exploiting.
Altruist needs to be like GM having different levels of cars the low end GUM middle of the road Chevrolet and top shelf Cadillac. By selling the lower priced balls Victor and Elevate in off-course retailers they get to keep their high quality brand image in the or shops that stock the Victor TX. It is very simple Just like car dealerships you do not place a Cadillac dealership in Bridgeport because that is not where your customers are.
Altruist has low budget customers purchasing balls in off-course retailers not in the on-course shops therefore Altruist should place the products that coincide Witt the customers. E. Recommendation Should Altruist implement the Elevate strategy? Explain your rationale.
Fees Altruist should implement the Elevate strategy. It is dealing with a changing market that is seeing on-course retailers closing faster than they are opening and people aging the sport less seriously and not willing to invest in expensive equipment.
Off- course retailers and the lower priced equipment they sell are becoming more and more poplar with golfers. Altruist needs to start marketing towards this growing customer base and begin producing a ball for the beginner low budget golfer. The fact that the Elevate balls are low price and tailored for novice golfers is key because this is a growing demographic that Altruist has not tapped. Elevate is a quantity not quality product meaning that massive unit sales will make up for the smaller margins.
If Altruist markets the product effectively.