The Performance Indicator Dilemma

The Performance Indicator Dilemma

Discussing the inconsistency between the PI value proposition and the lack of adoption

There is a clear inconsistency in the claim that Performance Indicator (PI) offers significant profit uplift potential for golf ball manufacturers and the fact that no single manufacturer is yet to adopt the technology. This memo discusses the key arguments on why this is the case.

There are several key factors that explain this apparent inconsistency, including: customer preferences and buying behavior; manufacturers' agendas, concerns and willingness-to-pay; and the reliability of financial forecasts proposed by PI.

Overview of Performance Indicator value proposition

PI offers an innovative, patented technology, aimed at golf ball manufacturers, which can clearly identify the degradation of golf balls after exposure to water for prolonged periods. This would effectively eliminate a significant amount of used golf balls from the market, driving increased sales of new balls.

Customer Preferences and Buying Behavior

There are several key factors regarding customer preferences and buying patterns that are likely to prevent golf ball manufacturers from widely adopting the technology.

Firstly, consumers retain tremendous confidence in their ability to visually assess a ball's quality. Given the increased durability of ball, consumers don't perceive there to be a quality issue with most used balls. Furthermore, golfers have tended not to blame balls for poor performance. Accordingly, there appears to be a significant investment in market education required to alert customers to this "inconvenient truth". On a positive note, customers do appear receptive to the benefits of the technology, once these are sufficiently well explained through PGA Magazine & Golf Digest.

Data from Harris Interactive is encouraging in that it demonstrates that 60% of golfers would buy new balls, obviously driving up overall new ball demand. However, switching to other used brands or potentially even other new brands (driven by the desired brand being out of stock - "the Pro V1 effect"), would likely concern most golf ball manufacturers.

While it would theoretically improve their individual performance, it would also limit their access to cheap balls by driving up the price for used balls, requiring them to purchase more new balls and drive an overall increase in their annual golf ball expenditure. Purchase figures show that the vast majority of balls used (171 out of 220 million dozen) are either found or bought used, meaning that the majority of golfers do not buy new balls. Accordingly, this majority would likely view the reduction in access to cheap golf balls and increase costs as an affront.

Finally, there still appears to be significant questions regarding customer perception of grey balls of their favored brand and the subsequent impact on their purchasing behavior.

Manufacturers' agendas, concerns and willingness-to-pay

Golf ball manufacturers would be looking to achieve several key strategic goals, such as increased sales, increased market share and / or increased profitability, to adopt and implement PI's technology. Accordingly, manufacturers are mainly concerned with the cost and implications on manufacturing, competitor reactions (and customer perception), the forecast growth in the new balls market, the share they could capture and the financial details of agreement.

Cost and implications on manufacturing

While yet