Paying For Your Golf Management Software: Barter Or Cash Model
A complete guide to understanding the pros and cons of each of the two predominant methods of paying for your golf management software.
Under the barter method, you obtain a powerful service and in exchange, you provide the software company with some of your tee times, which they can themselves sell on a golf marketplace. Love it or hate it, the barter model — trading tee times for non-cash returns — is prevalent in today’s golf industry. Let’s see how it compares to paying for your software with cash.
Barter Model – Marketplace
No Out of Pocket Cost
Over the previous decade, golf course maintenance costs have skyrocketed, while the price of a tee time has basically stood pat. That leaves golf course operators with slim margins. In this position, the idea of spending “nothing” on an electronic management tool sounds pretty attractive. (As long as you consider unsold tee times “nothing”.) Early spring and late fall — when cash flow is especially slow — are good times to consider this “no-cash” option.
Attracting golfers to book your tee times can be tough when you don’t have an experienced marketing person or team on board permanently. For smaller courses in rural areas especially, allocating the time and money — not to mention the expertise — to efficiently convert new golfers might not be realistic. Outsourcing some of your tee time marketing efforts to a third party ensures your offering gets the right eyes on it at the right times.
Research shows that golf is a flat-demand market, meaning the amount of golf people play is not highly affected by price. Golf is inelastic; lowering the cost to play by offering discounts does not seem to stimulate the amount of rounds played per year. It just makes those rounds cheaper and thus, leads to less revenue for you. With that in mind, you might start to wonder if booking those last-minute rounds at a lower-than-normal price is such a good idea after all. The evidence suggests a course’s rounds sold at season’s end won’t change with lower prices. So what message might your constant price drops say to the golfing public about the quality of the golf your club is offering?
Can Hurt Brand Image
You’ve worked hard to build your golf club’s reputation — you have a wonderfully playable course kept in excellent condition, a friendly and helpful staff, and top of the line facilities. You’ve priced your tee times accordingly, and many golfers are happy to pay full ticket because of the value your course provides. But now golfers are getting access to your course at a cost that undermines its value. Instead of the premium offering you are, golf consumers are now starting to think of your course as a low-budget option because they see nothing but discounted rates on the third party marketplace.
Rather than giving your regular customers a price break, you might simply be attracting a new and unwanted bargain-hunting crowd. It’s also important to note that these discounted tee times can also push some of your loyal customers to become bargain-hunters themselves resulting in less recurring revenue at your course. One way to remedy this potential issue is to try and negotiate with your software provider to pay using tee times that aren’t considered “primetime”. By doing so, your bargain golfers won’t interfere with your regular business as they won’t mix with your loyal customers. It will also prevent your regulars from becoming bargain shoppers as their preferred tee times will never be discounted on marketplaces. Nonetheless, it can be difficult to negotiate terms with providers so approach this tactic carefully.
When you acquire customers through your own means — they book through your website or call your pro shop — you achieve some residual marketing success. You get their email address and, in turn, you get to continue communicating with them, helping your email marketing efforts while keeping lines of communication open. But when new customers come to you via a third party, you don’t get any of their information. To make matters worse, when your existing customers book outside your realm, they too give their information to the third party. You lose control and your marketing takes a hit. However, while you are not given golfer information, nothing is stopping you from asking for their email address when they check in – just make sure you have a process in place so your staff doesn’t forget to ask.
With all these benefits and drawbacks in mind, the numbers will best dictate whether or not bartering your tee times makes sense for you. Growing your business at no cost might sound like a dream. Allowing outsiders to tarnish your value may sound like a nightmare. However you look at it, it’s important to understand the answer to this question: What is the real cost of paying for my software with tee times?
The cost of barter is difficult to calculate and can greatly vary depending on the weather. This represents a risk for you AND your software provider as sell-through rates are mostly dictated by uncontrollable external forces. So depending on the year, paying with barter can actually benefit you as costs don’t carry over. However, this is not predictable and there are different ways to perceive the true cost of barter so the question comes back to – are you willing to take that risk?
It’s also crucial to keep in mind that while you will not make money out of these sales you will make complimentary sales at your restaurant and pro shop that will help reduce the overall cost. Also, having a strong management in place can easily streamline your operations and help reduce your overall golf course management costs.
Barter Model – Golf Club Website
In this version of the barter model, the tee times you use to pay for your software are hosted on your own website rather than on a competitive marketplace.
Less Price Competition
When you use your own website to list all your tee times you avoid the competition of the marketplace setting. Customers that come to your website are looking for your tee times, not the cheapest tee times. Conversion should be imminent. Without the need to provide heavy discounts in order to attract attention, you keep your returns high and your brand image intact.
While the marketplace fosters competition, it also provides extra visibility which you’ll be sacrificing by only posting tee times on your own website. Sticking to your own platform exposes you only to those that know about you, seek you out, or somehow land on your website. If your brand is strong enough, that won’t be a problem — but if you already have marketing issues, this might be tough to handle.
When you choose to pay for your golf management software by cash, you avoid losing control of your precious tee times. Given that third party marketplaces do not provide exclusivity, by hanging on to your slots in-house, you keep authority over the most important currency you have.
Can Be Less Expensive
While it can be tempting to opt for barter since you’re “not paying anything” for the exchange, a cash transaction may end up saving you money in the long run. First, a flat fee allows you to easily project an annual budget and determine return on your investment. (As we’ve seen, calculating the effectiveness of barter can be tricky.) And while providing unsold tee times might seem free, its side effects may end up hurting your bottom line.
Out of Pocket Costs
Yes, paying for software with cash can hurt. If, like many golf courses, your margins are slim and you simply don’t run your business with a lot of cash flow, forking over a sum of money each month (or upfront for the year) can be simply too much to handle. Of course, the operational savings afforded by the technology may be worth the investment.
Managing Your Visibility
In the Benefits section, we explained the advantages of maintaining control over your brand and authority over your tee times. On the other hand though, if your golf course simply doesn’t have the marketing resources necessary to get golfers to your course consistently, then opting for a third party may be worth the trade-off.
Selecting the Best Option for You
Analyzing Golf Course Data
You want to get more golfers playing your course, and your golf management software will help you get there. Now that you know the various payment options available to you and the implications your choice will have on all aspects of your golf course, you should look to the numbers as the last step before making a decision. Run an analysis of the following: Where golfers are booking your tee times (by phone, on your website, or from third parties); how your finances might hold up against a sudden cash outflow; your marketing resources. Answer these questions and you’ll have a better idea of which way you should turn.
Which Options to Choose
Great for: Smaller or rural golf courses, clubs with limited cash flow or small staff without extra time to devote to marketing or promotion.
With the barter model, you get access to technology that can rocket-power your golf operations without spending any resources. Plus, you benefit from increased visibility and new customers.
Great for: Larger golf courses, clubs with a strong marketing presence or surplus of cash flow.
In the long run, paying cash for your software will probably cost you less. If you can afford it upfront, you’ll enjoy the long-term benefit of cost-savings, tee time control, and brand protection.
In order to make the right financial decision for your golf course, it’s not as easy as assuming that “unused tee times cost nothing”. Paying for your golf management software is a more complex decision than you might think. At the end of the day, only you know what’s best for your golf course. Inform yourself to the best of your ability, then give the sales rep a confident answer.