Advanced Marketing Management

Assignment-1: Altuis Case

Submitted by: Shailee Desai

1. In your own words, briefly state the problem/challenge facing Altuis in this case.

Altius Golf is a premium golf ball manufacturer in the US. Recession in 2008-2010 affected the whole
economy of the US. As Golf is considered to be an expensive sport, it suffered a major downfall as
the participation of the players decreased 1/6th time from 31 million to below 26 million players over
the last decade. Moreover, due to lack of affordability, according to USGA (United States Golf
Association), 23% women and 36% children had quit the sport in last five years. This resulted in
decreased number of serious golfers left in the market who would invest in expensive golf equipments
and premium range ($48/dozen) golf balls like Victor-TX by Altius. Moreover, casual golfers
preferred to buy off-course low range balls sold by Primiera for as low as $18/dozen golf balls and
newly-marketed non-conforming balls introduced by Meridian. These two companies were tough
competitors for Altius after the recession. This had lead to decline in sales of Altiuss balls in off-
course market as they had no market share in value range and economy range categories. The
customer survey also revealed that 35% of non-Altius customers were not buying their balls mainly
because of high-price and 20% of its customers were willing to try non-conforming balls. All the
above factors caused Altiuss market to decline and made it difficult for them to survive in golf
industry just with premium golf balls.

2. Briefly state your assessment of the strengths and weaknesses of Altius at the time of this
decision

Strengths: Altius was the leading brand in premium golf balls category and was famous for their
super-premium Victor TX golf balls. Prior to 2008, two out of five golf balls sold in US were an
Altius ball and accounted for nearly 60% of industry revenues. More professionals on the PGA,
LPGA and European tours played with Victor TX balls than any other ball. Altius gross margins were
about 70% which is much higher than their competitors (55-60%). Overall Altius enjoyed the preside
status and gained unmatched prestige.After the recession, its position in the on-course market had
been steady with nearly 100% penetration of the outlets with no other competitors past 80% mark.

Weaknesses: Altius were limited in their offering and customer base for not being part of lower
economy range golf balls for generations and for not showing any interest in non-conforming golf
balls. After the recession, Altiuss competitors, Primiera and Meridian, introduced low range balls and
non-conforming balls in the off-course market. Because of cheap price and heavily-marketed fun
element especially of non-conforming balls, a major shift in people interested in playing golf again or
to start playing all together was realized. On the other hand, Altius golf balls were heavily targeted
towards serious golfers who truly enjoyed the game for its technicality. The competition also offered
20% gross margin to retailers compared to industry low 15% from Altius. All these factors, put
together, allowed major competitors to gain market share in golf ball sales which historically was
dominated by Altius. Even though,Altius was still the leader, its position had weakened in last five
years.

3. Briefly state your assessment of the primary opportunities and threats in the marketplace for
Altius at the time of this decision

Opportunity: Altiuss prestigious status and higher profit margins could serve as primary benefits in
shaping the next generation of Altiuss golf balls. After the recession, the golf industry showed a
major declined and USGA was aware of this negative trend. It made efforts to make golf more
accessible to general people by theinitiative of Tee it Forward to make this sport more fun and easy.
And by also introducing Golf 2.0. This was targeted towards increasing number of golf players from
26 million to 40 million by 2020. Altius realized an opportunity to introduce their new product line
named Elevate to increase their sales in off-course market by penetrating in to economy and value
category markets. In this way, they were attracting golfers to use their brand at an affordable rate with
Elevate product-line and also paving a path for graduating golfers to use their Victor and Victor TX
brand once they advanced to next level of play.

Threat: 45% of lapsed golfers and 53% of non-golfers cited high cost as the top reason for not playing
golf (Exhibit 4). Other factors were lack of time and belief that the sport is difficult to play. Realizing
these factors not being in favour of industry leader, Altius, Primiera started Play Your Way
campaign which featured a customized ball approach for each golfer based on their own skills set and
not following the trend set by Altius about everyone should use what professional golfers used. This
encouraged casual golfers to play golf in their style and saw them preferring Primiera golf balls over
industry leader at affordable price. On the other hand, Meridian started smartly-marketing non-
conforming balls with asymmetric dimple patterns in a favourable way which made recreational
golfers get better control of the game and allowed all acrossgolf communities to enjoy the fun
element of playing golf without being scared of the sport. This led to another blow for Altius who had
never introduced any products in value and economy range which was a sweet-spot for golfers to
invest on golf balls. The ever-aggressive competition and worrisome change in market trends were
biggest threats to Altiuss survival at the top of golf balls industry.

4. Briefly state the alternatives among which Altius needs to choose along with, briefly, the pros
and cons of each decision to Altius

Due to changing market trends, Altius was planning to bring Elevate product-line to market to
target more casual golfers. This was totally different from their primary offering in premium category
market in the sense that these would have fast, medium and slow swing balls and also non-conforming
balls and at 40% cheaper price. By going with this approach, Altius could really attract all recreational
golfers who preferred competitors over Altius for their pocket size. Because of previous brand
prestige, it would guaranteed attract a lot more customers in lower price ranges as well. The downside
of this approach can be that Altius would lose its premium status which it had been known for and
would become just any other brand in coming years which could impact its profitability and might
end up damaging core philosophy of the way the brand had run so far.

Also, to attract more casual and lower economy market, Altius was required to gain more credibility
amongst retailers in off-course market. They would need to increase retailers gross margin to 20%
from 15% which in fact would lead to decreased gross margin for the brand itself. If the Elevate
program failed in the market, it would end up damaging historically high margin for the brand.

5. Given all that you have written above, briefly state your recommendation for Altius, along
with the reasons for your choice

My recommendation for Altius is that they should introduce the Elevate product line. The primary
reason for this recommendation is to adapt to changing the market conditions. A number of
professional golfers had declined over the last decade and a way to survive in changing market trend
is to attract more of recreational and new golfers. New golfers would tend to just enjoy the golf
without spending much on it while they get used to playing at higher level. These golfers are not
willing to buy high-end Victor-TX ball by Altius but would welcome if Altius offered low range golf
balls. As per the customer survey, 35% of non- Altius customers didnt buy Altius ball because of its
high price. 20% of Altiuss customers and 26% of all golfers were willing to try non-conforming ball
(Exhibit 4). Primeria and Meridian have already introduced low range golf balls and non-conforming
balls which made a good come back of golf players. Taking this in mind, if Altius introduces
Elevate product line, people will buy it over other brands as they respect Altius for its prestige and
leadership. Gradually, Altius can elevate casual golfers to become serious golfers and become their
loyal customers. And then, theycan sell their mid-range and premium range balls to them as their
game matures. This will help Altius maintain its prestige and make sustainable profit and growth for
coming years.

6. Finally, briefly state the metrics or calculations (the data) that you think would be necessary
or helpful in making a final recommendation for Altius

I think following data should be helpful in making final recommendation:

 Golf balls sales had decreased from 536 to 464 (million USD) from 2008 to 2011. In 2012, it
increased to 483 (million USD) indicating 4.1% recovery in golf balls sales (Exhibit 1) from
prior year. This trend showed people willing to get back to golf and thats a good indicator for
Altius to introduce Elevate product line for this new generation of golfers who would prefer
this product-line over Victor or Victor TX to begin playing golf with.
Altius is known for its high-end Victor-TX balls which saw its sales declined in recent years.
Altiuss U.S unit sales declined from 38% in 2008 to 35.1% in 2012 while its competitors
Primeiras sales increased from 14.2% in 2008 to 17.1% in 2012 (Exhibit 2) since they
introduced low range golf balls giving rise to recreational golfers.
On-course dollar sales by channel decreased from 45.9% in 2008 to 44.2% in 2012 and off
course dollar sales by channel increased from 54.1% in 2008 to 55.8% in 2012 (Exhibit 2)
which meant that people preferred buying from off-course retailers and did not prefer high-
end on-course purchases. This can helpAltius to understand high demand in off-course market
for low-range golf balls which they have not entered yet.
Altiuss retailer gross margin was only 15% while its own manufacturing margin was 70%
while Altiuss competitor had 20% retail gross margin and 55%-60% manufacturing margin
(Exhibit 3). Because of this, retailers preferred other manufacturers more over Altius. If
Altius offers higher retailer gross margin (20%) while lowering its own margin a little, the
brand will be able to earn more favourability and shelf-space for its product lines at retailers
Altius should consider its refreshed brand and price architecture which includes high-range
Victor-TX ball for $48/dozen, mid-range Victor ball for $39/dozen and the new value line
Elevate which comes in four different versions including non-conforming one for $27/dozen.
Elevate is considered to be in the sweet-spot price range and usually affordable by causal
golfers. Elevate balls would have manufacturing cost of $7.75/dozen giving good profit share
to Altius.

By means of above statistical and logical analysis, I would recommend Altius Golf to
introduce Elevate product line and maintain their prestige and leadership in golf industry
while making profits for years to come.