5 Minutes-Importance of Issues Ruffin Beckwith - Golf 20/20 10 Minutes-Retention Data Ben Blake - Links Corp 15 Minutes -Frequency Programs Mike Capizzi - Frequency Marketing Group 35 Minutes-Group Discussion/Ideas 10 Minutes-Develop Recommendations TODAY’S AGENDA

VISION: ATTRACTION & RETENTION 3.0 Million2.5 Million 3.0 Million3.5 Million

WHY PEOPLE LEAVE Time62%Time62% Family38%Family38% Cost29%Cost29% Health18%Health18% No one to16% play withNo one to16% play with Too difficult12%Too difficult12% Source: 2001, Golf 20/20 Segmentation Study

INDUSTRY REPORT-FREQUENCY Source: 2002, National Golf Foundation

ANNUAL CONTRIBUTION TO THE GOLF ECONOMY, BY SEGMENT Source: 2002, SRI International

RETENTION AND FREQUENCY Ben Blake President and CEO LinksCorp

Supply and demand imbalanceSupply and demand imbalance –More courses –No growth in the number of rounds and players More recreation/entertainment choicesMore recreation/entertainment choices Slowing economy/less spendingSlowing economy/less spending WHY IS RETENTION IMPORTANT? The Environment Today - What Has Changed?

WHILE ATTRACTION IS IMPORTANT… Retention is Key! It costs up to five times as much to attract a new customer as it does to keep oneIt costs up to five times as much to attract a new customer as it does to keep one A dissatisfied customer will tell 8 to 16 people about the bad experienceA dissatisfied customer will tell 8 to 16 people about the bad experience A satisfied customer will stay loyal if you build a relationshipA satisfied customer will stay loyal if you build a relationship The real value of a satisfied customer is how much that customer spends over a lifetimeThe real value of a satisfied customer is how much that customer spends over a lifetime

15% OF ALL GOLFERS ARE “BEST” CUSTOMERS 6.6 million Avid Golfers (25+) 7.6 Million Best Spenders ($1,000+) 2.5 Mil3.5 Mil4.1 Mil 10+ Million (40%) are “Important” Customers 4 Million (15%) are “Best” Customers Source:Golf 20/20

LinksClub 2001 RESULTS %Rds/Spending/% MembersMembersRdsMem%RdsSpending A - Medallist4,7425%15.5$54928%29% B - Reward6,6927%7.2$24318%18% C - No Reward 2+ Rds35,28836%2.8$9438%36% D - No Reward 1 Rd43,10944%1.0$3516%17% E - No Rds8,5619%0$50%0% Total98,392100%2.7$93100%100% LinksClub Highlights 267K LinksClub Rounds Played at 17 LC Public Courses LinksClub Rds were almost 50% all Public Rds at 17 courses $34.08 per round per member spending

“BEST” CUSTOMERS DRIVE ROUNDS & REVENUES The top 19% of members (A & B) represent 54% of rounds and 56% of revenuesThe top 19% of members (A & B) represent 54% of rounds and 56% of revenues Segmentation shows that the top 6% of members are extremely valuable to LinksCorpSegmentation shows that the top 6% of members are extremely valuable to LinksCorp % OF MEMBERS % OF ROUNDS % OF REVENUE Segment Medallist (A) Reward (B) No Reward 2+ Rounds (C) No Reward 1 Round (D)

RETENTION BY SEGMENT Medallist members maintaining a high year-1 retention and 2-year retention rateMedallist members maintaining a high year-1 retention and 2-year retention rate TOTAL MEMBERSHIP RETENTION Segment Medallist (A) Reward (B) No Reward 2+ Rounds (C) No Reward 1 Round (D)

REWARDS PROGRAMS WORK 2001 Segment Medallist (A) Reward (B) No Reward 2+ Rounds (C) No Reward 1 Round (D) Total 2002 Positive Segment Migration in 2002

LinksClub… WHAT HAVE WE LEARNED? You can influence customer behavior and retain your best customers!You can influence customer behavior and retain your best customers! If we can get a LinksClub member to play his/her 2nd round in 30 days or less, they will likely play 3 more rounds. If not, we may lose them.If we can get a LinksClub member to play his/her 2nd round in 30 days or less, they will likely play 3 more rounds. If not, we may lose them. Highly efficient - marketing costs have gone down 25% (2001 vs. 2000) while revenues have gone up.Highly efficient - marketing costs have gone down 25% (2001 vs. 2000) while revenues have gone up.

SUCCESSES IN FREQUENCY MARKETING Mike Capizzi, Vice President Frequency Marketing Group

GLOBAL QUESTIONS We have national programs to promote “Trial”, do we need a national program to promote “Retention”?We have national programs to promote “Trial”, do we need a national program to promote “Retention”? Should one organization have “Retention” as an objective?Should one organization have “Retention” as an objective? –NewCo (a new organization similar to The First Tee –Existing organization (PGA of America, for example) Can we indentify and track our “best customers” on a national basis?Can we indentify and track our “best customers” on a national basis?

Would you be willing to help fund a national “Retention” programWould you be willing to help fund a national “Retention” program –Fee added to each paid round –Flat fee per course –Ideas? If funding is an issue, would you be willing to “sell” the “rights” to a for-profit company to promote retention at your facility?If funding is an issue, would you be willing to “sell” the “rights” to a for-profit company to promote retention at your facility? –Nike Golf Schools (for example) –National Customer Loyalty Program (for example) –Other ideas GLOBAL QUESTIONS

What are the things we can do as an industry to impact frequency?What are the things we can do as an industry to impact frequency? Is it feasible to consider national frequency programs? State-wide?Is it feasible to consider national frequency programs? State-wide?

MICHAEL T. CAPIZZI Loyalty Marketing Programs: Key Considerations for the Golfing Industry November 15, 2002 CO LL OOUY Presents

A Lot of Jargon Frequency MarketingFrequency Marketing Relationship MarketingRelationship Marketing Loyalty MarketingLoyalty Marketing One-to-One MarketingOne-to-One Marketing Customer Relationship Management (CRM)Customer Relationship Management (CRM) CO LL OOUY

“The voluntary exchange of information and value between the brand and the customer with the mutual expectation of gain.” Definition of Relationship: CO LL OOUY

Loyalty Marketing is the effort to identify, maintain, and increase the yield from Best Customers through, long-term, interactive, value-added relationships. ® What is Loyalty Marketing? CO LL OOUY

Why Bother? To identifyTo identify –In order to increase marketing effectiveness –In order to re-allocate marketing expenses to improve efficiencies –In order to learn who your customers are, what they want from you, what other courses to play –To leverage the resulting database in partnership marketing agreements CO LL OOUY

Why Bother? To maintainTo maintain –It is cheaper to retain than it is to acquire –New growth without retention is no growth –The cumulative effect on profitability is proven CO LL OOUY

Why Bother? To increase the yieldTo increase the yield –By adding frequency of play to your course vis-à- vis other alternatives –By adding incremental spend to each visit –By adding “derived” yield from guests who play at the invitation of your customers –All of the above CO LL OOUY

Loyalty Marketing Can … Improve customer retention (LTV)Improve customer retention (LTV) Increase share-of customerIncrease share-of customer –from competitors –via cross- / up-sell Provide a framework for relevant dialogueProvide a framework for relevant dialogue CO LL OOUY

Loyalty Marketing Can’t … Fix a fundamental problemFix a fundamental problem Generate quick profitsGenerate quick profits Bring in lots on new customers fastBring in lots on new customers fast CO LL OOUY

Where Does it Work? Highly competitive marketsHighly competitive markets Parity is perceived to be highParity is perceived to be high High fixed, low variable costHigh fixed, low variable cost Perishable inventoryPerishable inventory Purchase behavior can be trackedPurchase behavior can be tracked Purchase (payment) cycles are frequentPurchase (payment) cycles are frequent Management doesn’t want to compete on priceManagement doesn’t want to compete on price CO LL OOUY

Why Loyalty Marketing Works: All customers are not created equalAll customers are not created equal Share-of-customer is a more profitable pursuit than share-of-marketShare-of-customer is a more profitable pursuit than share-of-market Improve earnings by shifting resourcesImprove earnings by shifting resources Proactively manage relationshipsProactively manage relationships Relevant dialogue creates competitive advantageRelevant dialogue creates competitive advantage It builds brand loyalty, not “sale” loyaltyIt builds brand loyalty, not “sale” loyalty It breaks the tie when all other things are equal or closes the gap when the difference is smallIt breaks the tie when all other things are equal or closes the gap when the difference is small

Marketing programs that recognize and reward customers based on tracking their individual purchase behavior. Loyalty Marketing Programs CO LL OOUY

“Man is an economic animal in search of self-importance…” “Man is an economic animal in search of self-importance…” Brian Woolf Customer Specific Marketing Benefits CO LL OOUY

Benefits – Soft vs. Hard Recognition (Soft)Recognition (Soft) –Emotional –Intangible –Exclusive Reward (Hard)Reward (Hard) –Rational –Tangible –Free CO LL OOUY

The Perfect Blend of Incentives CO LL OOUY Compelling Hard Benefits Promotional Currencies Tangible Rewards “I get my money’s worth”Defining Soft Benefits Recognition Personalization “They know I’m important” The Value Proposition 5% Factor

Why Use Promotional Currency? To create the perception of value and take the focus off priceTo create the perception of value and take the focus off price To create a sense of “equity” and a barrier to exitTo create a sense of “equity” and a barrier to exit To establish a relevant dialogueTo establish a relevant dialogue To provide funding flexibilityTo provide funding flexibility Because they “break”Because they “break” CO LL OOUY

Points vs. Discounts CO LL OOUY $1 Discount $1 Points

Pursuing the “Perfect” Blend CO LL OOUY Perceived Value Actual Cost Marginal Good Ideal

Closing Thoughts Loyalty programs will work in the golfing industryLoyalty programs will work in the golfing industry A shared cost approach is the best way to goA shared cost approach is the best way to go Track and reward all behaviors across all payment methodsTrack and reward all behaviors across all payment methods Offer a strong value proposition for the golferOffer a strong value proposition for the golfer Some technology investments will be requiredSome technology investments will be required Rapidly evolve to “other peoples money” via partnership marketingRapidly evolve to “other peoples money” via partnership marketing Measure, measure, measure and stay focused on the ROIMeasure, measure, measure and stay focused on the ROI CO LL OOUY

CO LL OOUY CO LL OOUY For more information contact: Michael T. Capizzi