Thursday, November 9, 2017

Law of diminishing returns

Every once and a while i get thinking about golf club pricing again. I see new things coming out, i see the products come and go, and watch them get bought and sold daily. I wonder what goes through the mind of some manufacturers when they go to price a product. Do they really think a towel is worth $40? A hat is worth $50?  If you're unfamiliar with the phrase, Law of diminishing returns, the definition is as follows: 1. used to refer to a point at which the level of profits or benefits gained is less than the amount of money or energy invested.  I'm sure the manufacturers look at this from their perspective all the time - afterall, it's what keeps a product going BUT i'm willing to bet they rarely look at it from the consumer's end.... and I think it's time they did. 

This is not just money, but time - energy - and performance.  Recent newcomer to the golf club industry, PXG, has a saying "nobody makes golf clubs like we do.. period".  Certain lawsuits may shed light on how true or untrue that is, but the question posed is:  Is that a good thing? Are they efficient enough? is their special elastopolymer really THAT much better than something that's a fraction of the cost to use?
Law of diminishing returns applies to consumers in this way - At what point do you stop paying for a product and start paying excess. THAT is the diminishing return.  In golf you have a club, call it a 4 iron.  That 4 iron is made of some sort of metal, or a composite. It has a job to do. There are non-quantifiable variables like feel, look, finish, and desirability that are based on what the person using the club thinks about that club and that can move the point of diminishing returns (PDM) one way or the other.  Marketing speak and industry claims aren't helping the matters either. 

The chart above can always hinge at the first point. Some technology is really good, some, not so much. It depends what the technology does to the playability of the club, the looks of the club, and the feel of the club. Take these three players as an example.  

Player A only looks at performance. He/She doesn't care about the name on the club, where it's made, or that it might look campy or weird. They test out clubs for themselves and may look online for reviews from noted sources on the subject.  When two products meet the same requirements, they will likely choose the less expensive product. They would look at the chart below and say  "I'd definitely take the pink product. There's not enough difference in performance to justify that kind of cost"

Player B is interested in status and performance. As with Player A, they care about how the club performs BUT it also needs to be something well-known and not something from the local Wal-mart bargain bin.  They will do their research and testing and normally come out with something that's in the mid to high price range. Very much where OEMs price the "off the rack" selection of clubs.  Occasionally they will upgrade a component and spend a little more - because you know, tour players do it.  Player B would look at the chart and say "There's room for improvement, i wonder if there's another name brand in between that offers something as good or better.

Player C gives affluent a new meaning.  They might be playing great but something new or better came out and they've gotta have it.  The best of it too - upgrades, special finishes, everything extra that you can imagine.  To them, it's worth it to spend $3500 on a set of $1500 irons because it's a "limited edition black set" even though there's no difference in the performance of the club.  Player C wouldn't care if the blue club was better or worse than the pink club. It's name brand and it's expensive. Sign me up. x

There's all sorts of mashups between these players, but they represent the beginning middle and end of the spectrum pretty well. I'm sure we can all see a little bit of each of these in our own selves and figure out where we land. I'm sure we've all been guilty of Player C once or twice. Damn that special edition looks awesome - i'm gonna get it. Still - the only thing in my mind that's WORTH paying for is technology.  The club HAS to do what the technology is meant to do and it has to help in some appreciable way - not just be different. Likewise that cost has to match the performance enhancement over the next competitor.  I talk about wedges a lot because i have some of my own. The reason they're priced the way they are is based on this system.  The materials, the time, and the base cost lends itself to that price in an effort to keep the product going.  The performance against other wedges speaks for itself and justifies that price. 

In putters we can see the same story play out - There are many different brands of putters - all have the same sort of styles but they range from $90 up to $350 for the same type.  Is a $350 blade putter REALLY nearly 4X better than a $90 one? Depending what's going through your head maybe, maybe not. It's hard to believe it's made of that much better quality steel.  In my days of playing blades and mid mallets, i rolled a few "Scotties".  I didn't like them, personally. I found much better feel and control in an Odyssey than I did with the SC.  Saving almost $150 was a bonus on that.  I've since moved on to what will be the last putter in my bag (unless they come out with something better) because it actually marks a difference from anything out there. I paid more than a SC would have cost, but it's worth it for the performance and the noted difference in improvement.  The same between OEM adjustable drivers and "epoxy hosel" drivers.  An M1 is justified to be more expensive than say, a Top Flite driver due to the actual technology in it - but that's where it starts to get hairy, how much more?  If you play the driver on standard - you're paying a premium for a certain look.  For irons... if you can't tell the difference between the feel of cast and forged - play cast, they're cheaper.

For me, a club has to really offer an improvement for me to spend the money.  My clubs are set up the way they are because they've hit a balance of playability, look, and performance that gives me confidence when i put them down behind the ball. There's nothing in my bag that i say "ugh, i don't hit this well" yet i will keep because of name brand, and likewise, there's nothing that i hide because it's not mainstream and i think people will make fun of it.

You've gotta do what you think is best for your game AND your wallet. NEVER buy a club because of what you think you can resell it for when you're "done with it".  Thats' the wrong reason and you're going to end up spending a lot more than you have to, thanks to depreciation and the speed at which clubs are released.

Wether it's "blue collar" brands like Bombtech, Maltby, Acer or Kirkland..... or OEM brands like Air Force One, Tour Edge, or Wilson.... even the expensive brands like PXG, Honma, Itobori and Renegar. You have to find the price point you're comfortable paying for the performance you're getting.