The Metrics Of Giving
As a bit of a follow up to last week's tip, this week is some food for thought on what you are giving away and what it can net you. A lot of you may be living in fear of giving away golf, and if last week's tip showed you anything, it is that you don't have to give golf away for your loyalty program to be effective. That said, let's follow along with the numbers below based on giving golf away as rewards in your loyalty program.
The following numbers are an example of what could be with a successful loyalty program.
- In June 2015 you had 10,000 rounds played and gave away ZERO of them because there was no Loyalty program involved.
- In June of 2016 you have 12,500 rounds played, and with those additional 2,500 rounds played you can attribute 70% of them to growth because of the Loyalty program, or 1,750.
- If you had 25% of your Loyalty participants earn a free round for the month, and you have 400 participants, that would mean 100 Free rounds would be owed.
- If the COGS on a round is $25, then this program for the month cost you $2,500
- The additional 1,750 rounds if you averaged only $45 in green fees on each of them would get you a gross increase in revenue of $78,750
- If you take the COGS for those 1,750 rounds out of that $78,750 and also take out the $2,500 COGS on the free rounds, you are still left with a gross profit on the rounds gained of $29,500, meaning you are basically spending $2,500 to grow gross profit by $29,500
- Further, there are intangibles that will only show over time with this kind of program---for example, developed behavior patterns of golfers ONLY choosing your courses to play at, extra revenue driven from 1,750 rounds of additional golf plus the 100 Free rounds where they will spend money while at the course also---this equates to 1,850 more opportunities to sell merchandise, food, lessons, range balls, cart fees, etc., and don't discount the amount of Goodwill this will create among your clients
- Another thing to consider with the 25% benchmark for rewards earned is the 75% or higher failure rate. Is it okay with your customer base as a whole to make efforts to win something if the feeling about the program becomes that it is something unattainable? I am not sure what the benchmark for that feeling would be, but if it was 10%, meaning 90% failed, then you potentially have 360 of 400 participants who are walking around a little discouraged with your golf course and considering your competition more than they should be.