Performance Indicator Strategy Case Analysis

Assignment – Performance Indicator Case

Performance Indicator has acquired exclusive rights from Batelle Memorial Institute (BMI) to a technology/ manufacturing process for use in golf balls that would change the color or appearance of balls when they had been submerged in water for an extended period of time. The benefit of this technology is the ability to assess the diminished performance of used balls, whether purchased or found on a golf course.

Performance Indicator would generate revenues by licensing this technology to golf ball manufacturers. The demand would be driven by golfers understanding the benefit of being able to know that a used ball does not face the negative impact of water submersion.

Given this unique situation, PI faces a number of specific market dynamics:

• There is no benefit of the technology to customers with respect to the purchase of a new ball. The only realized benefit comes from the added confidence of knowing that a used ball bought or found from the golf course still retains high quality.
• While it appears that used balls comprised 75-80% of the total golf balls in use, the new balls logically are purchased by customers who are price insensitive whereas used balls are usually purchased by customers who are price sensitive. As a result, the cost of introducing the technology is more heavily borne by the customers who do realize the benefit of the technology.
• The benefit to customers of technology is only realized if it is universally adopted.
• The case describes that divers can recover a 100,000 balls per golf course each year. However, if the technology is universally adopted, balls found will have turned gray in four days of being submerged in water. This takes away the economic incentive of recovering the ball. As a result, the supply of used balls will essentially dry out both by gray balls being removed and by reduced incentives for divers to retrieve them.

Their willingness to pay comes from the benefit that they have from the use of new technology, which comes from either the ability to increase the prince or a resulting transfer of volume from used balls usage to new balls usage.

As PI is talking to individual manufacturer of new balls, there perspective is shaped by a couple of considerations:

• There customers have to be sufficiently brand loyal to buy their new balls when there used balls become less available, as opposed to buying another manufacturer’s new balls
• If that happens to be true, does the quantity benefit outweigh the incremental cost?

Coopetition

• It only works if it is universally adopted.
• A possible path to do so is to convince the US Golf Association (USGA) as the benefit of the technology to the golfers and manufacturers alike would be optimal if it is universally adopted. This would require a regulatory body like USGA to ensure the inclusion of this technology in the manufacturing process of new balls.
• Another consideration is that will there be a benefit if the technology is universally adopted.

Used ball market might disappear, forcing the market to completely switch to using new balls.