The All-New… “Golf Tax”

If You Purchased Golf Equipment Recently Then Most Likely You Already Paid the Golf Tax

Golfers spent and extra $100 million dollars last year because of Tiger Woods. Phil Mickelson cost you $47 Million, VJ another $20 million, and Michele Wie who didn’t win a single tournament, made us spend an extra $19.5 million dollars. And as much as I love Arnold Palmer, I don’t love him nearly enough to have him cost me and others more then $17 million in golf equipment costs. These 5 golfers alone added over $204 Million dollars to what I call the “Golf Tax”. (Amounts represented by Forbes.com)

Independent surveys show that up to 70% of the retail price of name brand golf clubs go to support more then just the cost of producing the club itself. And the increased level of competition and pressure to produce the next Nike Sumo or TaylorMade R7 keeps these numbers on the rise. Below you will see what it actually costs to produce the equipment you purchase:
(Warning: These numbers might shock you!)

1. Titanium Driver = $27-$65 (Depends on type of titanium and processes {ex: Welds, Forging, Paint, etc}
2. Iron Sets = $40-$95 (Depends on type of materials and processes ex: Cast or Forged)
3. Hybrids = $6-$9
4. Wedges = $4.50-$8 (The popular CNC milled face wedges are only around $10 to produce!)
5. Putters = $7-$65 (Varies widely because Cast vs. Milled cost differences.
6. Graphite Shafts = $6-$13 (The Popular Nano Technology only adds about $7)
7. Golf Bags = $18-$35 ($55 for Staff Bag)
8. Headcovers = $3-$5 (Depending on material and thread counts)
9. Golf Towels = $2.50-$2.80
10. Golf Gloves = $2.50-$3.00
11. Golf Balls = $4-$8 (Titleist Pro V1about $8!)

* Additional processess and features can add minimal amounts to the cost of a club, but the amounts are negligible compared to what people are paying at the registers.

 

Why Do They Charge $400 for a Driver?

So where do they come up with these ridicoulous price tags, like $400 drivers? Well they have to cover their cost or otherwise none of them would be in business. But why are their costs so big? I stated earlier that increased levels of competition in the industry have lead to big spending in many areas. Two of the areas most effected are (Overhead and Endorsement Spending). You might not have noticed, but companies are launching new models much more frequently then in the past. In the past, a newly released model would last for 2 seasons sometimes even more. It wasn’t until the past decade that almost all companies were releasing new models annually. And in the last couple years companies like TaylorMade and Cobra have decided to release up to 5 or 6 models a year! All in the effort to catch whatever market share they can. The old adage “Throw it up against the wall and see what sticks” seems to be all the rave in the golf industry.

The other area effecting price tags, is Tour and Celebrity Product Endorsements, which I touched on in the beginning of this post. This is costing you and other golfers astronomical amounts to the bottom line of the equipment you are paying for. Golf companies are sponsoring anyone and everyone that has a pretty smile and is seen on TV on a regular basis. You don’t even have to be a golfer anymore to get an endorsement deal. You might remember when Callaway endorsed Alice Cooper (famous Rock Star). Bill Gates has even received some scratch from a golf company in past years. Other areas that effect the final cost of your new golf club are listed below:

1. Research & Development
2. Company Overhead
3. Middlemen (Proshops)
4. Advertising
5. Player Endorsements
6. Legal Fees

 

The Manufacturers Argument

They might say that these advertising and brand development costs are legitimate — they would say that they provide advertising revenue to the major golf magazines, they provide many millions of dollars of licensing revenue to PGA Tour professionals, they provide even more millions of dollars to the major television networks.

 

I Agree But I Also Disagree

I think many of these points are valid…but I think similar to the Real Estate crash that is occuring right now we might be in store for a similar crash and in the golf industry sooner then some may expect. The race for golf club sale suprememcy will be at a very steep cost for some of the biggest brands in the industry.

The money spent in advertising is only spent because they want to build a feeling of status and peer pressure to buy a name brand. It is not because their product is better then the other. And also you have to remember that if they are developing more products they have to come up with more ways to convince you to buy them…which costs big money. And in the end every advertising dollar spent by the name brand club is targeted to make you feel better (or justified) in paying more money for the brand. Some people raise their self-esteem by buying a name brand club for more money (it is a fact unfortunately). However I think that during this time in the economy golfers might begin to consider raising their self-esteem by getting the best performance for the best value and knowing their name brand buddies got a worse deal.