The Pellucid Perspective - June 2024 - 8

CUSTOMER RELATIONSHIP
MANAGEMENT
them to buy for their homes?
On the darker side, we grow increasingly concerned about
the " referral " relationships between credit card processors and
the vendors providing POS/Tee Sheet services along with other
technology services. Also, in light of the increases in processing
costs and increased industry-wide Course Utilization; the
metrics we use to determine the true cost of " barter " and referral
based payment options reveal much higher actual costs.
There is also an even wider disparity in the variations of what
individual courses are paying for essentially the same services.
If we revisit the way we looked at " barter " costs; we can apply
similar logic in looking at the proceeds from processing referral
costs. Bartering one tee time a day represents 1,440 rounds
per year. Due to seasonal usage, that number applies to a course
open 12 months; compared to 965 for a course open 8 months.
For two courses with the same rates but different seasons; the
barter cost for the 12 month course will be much higher for the
same service.
In the case of processing referrals, a course processing $1.5M
will generate twice as much in referral revenue as one that processes
$750K - again for the same software service. We recognize
that many of these relationships between golf courses and
their software vendors are individually negotiated; but the inherent
inequity in the above dynamics are very widespread.
As we said above, the cost calculations have changed. From
basically 2003 - 2019, Course Utilization languished in the low
50% range. Those that chose to use " barter " would often say that
barter didn't cost them anything because of the unused inventory
they had to sell. We would counter that with the fact that
they had a 50% chance of selling the inventory they bartered to
the 3rd Party. Even with 50% Utilization, the 3rd Party could
be expected to sell 50% of the bartered inventory. If you use the
common 50% discount for barter; a $50 rack rate would generate
about $12,000 in revenue for the 3rd Party (965x .50 x$25) for
the 8 month season course and about $18,000 for the 12 month
season course. So the 12 month course is paying $6,000 more for
the same software.
If we update that to reflect the fact that Course Utilization
is now pushing 70%; the cost of barter went way up. The 3rd
Party now has a 70% chance of selling their inventory and the
cost of barter goes up to about $16,900 for an 8 month course
and $25,000 for the full year course. In effect, this means the 8
month course is paying almost $5,000 more and the 12 month
course is paying $7,000 more - for the same software.
Referral processing revenues are also increasing exponentially.
Touchless and internet based charges brought on by the Pandemic
are treated as " card not present " transactions and cost 50%
more to process. Enter in the higher cost for the " mid-qualified "
cards and it is common for us to see processing fees going up accordingly
by 50%+ at our client courses. The trend toward " cashPartner
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The Pellucid Perspective - June 2024

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