Global Edition

The price of technology

9.10am 7th February 2000 - Corporate

A bad swing which sends a ball deep into the woods or water always costs a stroke or two. But it’s becoming costly financially too now that many of the top balls are selling for more than £40 a dozen.

The top end of the golf ball market is considered to be the fastest-growing segment of the overall industry. So it was no surprise that the major ball announcements at the PGA Merchandise Show in Orlando reflected corporate strategies to gain or increase shares in that segment.

The most anticipated ball announcement came from Callaway Golf, which brought their new Rule 35 balls in sleeves of 10 and five. Product introductions by several other companies will generally be in the same price range and are unlikely to come down soon.

“The premium segment’s doing very well,” said Guy Peters, senior marketing manager for Maxfli, which introduced their Elite balls.

Ric Long, director of the ball division at Taylor Made said industry statistics confirm that the premium market is the fastest-growing segment. “Why is that? I think that golf ball awareness in the last two to two and a half years has been a focus in the industry. Better players and mid-handicap players are becoming more aware of the technology in the balls and how it can really help them,” Long said.

But that technology does not come cheap. Companies spend millions of dollars in developing new lines or tweaking existing ones. Those costs have to be recouped somehow.

“I think when you’re looking at some of the new advanced constructions in the industry and what people have been able to attain, moving golf balls to the next level is really trying to combine those optimum performance attributes,” said Jeff Christensen, business director for golf balls at Wilson, who unveiled their new Smart Core Balata Distance model in Orlando. “You want all the distance that distance balls have been able to deliver but everyone wants those great soft feel spin characteristics.

“So you’re seeing unique materials and constructions with double-cover balls – new types of core materials, new types of cover materials. All of these things are quite expensive and the processes to make them are very expensive too. That’s really what’s driving it up. Basically you’re paying for what you get.”

It is the keen golfer who the ball manufacturers are targeting with their highest priced balls. Of the 25 million or so Americans who play golf often enough to be considered golfers, only 10 per cent of that number accounts for about 75 per cent of rounds played. And golf ball sales depend almost totally on rounds played.

“The only real true correlation to golf ball sales is rounds played,” said Michael Pai, marketing manager of Callaway Golf Ball Company. “If you look at all the trends and data, you would see an almost exact correlation. The avid or core golfers are buying the majority of the product,” said Mike McAuliffe, category manager for golf balls at Spalding Sports World-wide, who make Strata balls.

The companies feel that the ball market is increasingly segmenting between high-end and low-end, with prices reflecting that split. The middle segment used to be primarily two-pieced distance products, which are now seen as too expensive for price-conscious players and unable to deliver the performance demanded by keen players. The mid-handicapper, who a few years ago would have played a mid-priced ball, is migrating toward the lower end of the premium category.

But the emphasis clearly is on the upper-end ball for the upper-end player – at an upper-end price. Still, the question remains: will consumers resist paying up to £4 for an item that can be lost forever in the blink of an eye?

“No, I don’t think so,” Maxfli’s Peters said. “Basically what we’re seeing with the premium segment is that golfers who really know about balls, their construction and what they can do for their games are definitely willing to pay the price for a well-made ball.”

None the less, manufacturers do believe there is a limit to how much anyone, no matter how avid a player and how much they like the ball, will pay for one.

“I certainly don’t think you’re going to see the US or European markets turn into an example of what Japan has done, where you see £50 and £60 price points for a dozen balls over there. We won’t see that over here I’m sure,” said Christensen. “The other side of it is what will happen in the marketplace. The number of rounds played is flat and has been for several years, yet we have more and more golf ball manufacturers. Well, in the standard supply and demand equation, if there’s more supply than demand, that puts pressure on the price.”

For now, at least, the prices are holding up. For example, Titleist’s highest-priced balls are the Professional and Tour Prestige. “The price has been sustained there for about four years now,” said George Sine Jnr, director of marketing for golf balls at Titleist and Footjoy World-wide who have introduced the new DT Spin and DT Distance series. “Our No 1 selling golf ball is the Professional. That’s a pretty good indication that we’ve met our expectation for that product.

“Certainly as you bring new technology to the market and the investment that brings that technology there is a price tag that goes along with that. But we’ve been very consistent with holding pricing. We don’t feel that golfers should necessarily have to pay for new technology. We feel that should be part of our obligation to provide them the best technology but also provide them the value that they receive for that technology.

“We consider the cost versus performance value for consumers. While their initial investment in the product might be greater, the return on that investment, in terms of performance, durability and improvement to their game is really the ultimate formula.”

Taylor Made raised a few eyebrows at Orlando by not introducing a new ball, but their representatives were hard at work trying to prove that their one-year-old InerGel can out-perform Callaway’s newcomer. The difference was small, noted Dick Rugge, vice-president of product creation for Taylor Made-adidas Golf, but showed that InerGel flew about four yards longer and had greater spin.

“We plan to sell a hell of a lot more of them,” Rugge said when asked what was new about the InerGel line. Taylor Made currently command a five per cent market share despite problems the company had meeting demand in 1999.

Meanwhile, a lesser-known ball made a more explosive appearance in Orlando. The makers of the Gamma TNT Extra Distance claim their product is the longest legal ball on the market.

The secret behind the ball is an irradiation process that hits the core of the ball with high-energy gamma rays, creating intermolecular bonds which increase the maximum velocity of the ball. With such a build up, golfers obsessed with distance are bound to want to try it out.

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