Man Camp

Just returned from a golf trip to Bandon Dunes, Oregon. We played a Ryder Cup style tournament with 16 guys (the motley crew to your left) over 3 days and 72 holes, with a few drinks mixed in. Waking up Monday morning with a golf hangover, I remembered I hadn't had time to prepare for my class that afternoon. This got me thinking about the business model that Mike Keiser has built at the resort and a lecture began to form in my head.

One of the guys on the trip referred to Bandon as Man Camp. If you haven't been, it is difficult to describe the allure. The location is remote (a 3-hour drive from Eugene and over 4 from Portland, with not much in between). Mike Keiser (the founder of Recycled Paper Greetings) had a vision to create a true links experience in the US.

As described by Stepen Goodwin on the book jacket to Dream Golf, The Making of Bandon Dunes, "Bandon Dunes would be a 'pure' golf experience, pitting the golfer against the elements, allowing the land to dictate the course, banning the use of carts, making the golfer feel as one with both nature and the game. To achieve that goal would take a great amount of planning and hard work, the struggle of man against nature in shaping the land into three courses that would become the Bandon Dunes complex. Convention wisdom said it was impossible. And even if he built it, would anyone come to this remote Oregon outpost?" Well, built it he did and they have come. Less than 10 years from the opening of the first course, the $150 million investment has been recovered. And the courses are all ranked in the Top 25 courses open to the public by Golf Digest, with Pacific Dunes (#2), Bandon Dunes (#7) and Bandon Trails (#21).

So what is about the business model that is so successful:

• Focus on your core target market - The original marketing plan for Bandon Dunes is as simple as they come - "Great golf + great food + great people = marketing plan". They have done a great job of serving the market. Although I've seen a few brave women, the resort is full of middle to upper income middle aged guys who love serious golf. The offering is all about golf and camraderie - get there, stay on site, traditional golf, multiple courses, excellent pub food, and of course, the Bunker Bar (complete with poker, pool, stogies, and a bartender that will stay as long as necessary). No spa..yet, but I hear one may be in the plans. A gift shop with nice jewelry is adjacent to the front desk so you don't forget that important purchase prior to checking out, to help with the permission for the next visit. This is not surprising from a greeting card guy, who realized that $5 is expensive for a Valentine's Day card, but incredibly cheap compared to the price if not purchased...

• Manage seasonal demand through pricing - Weather on the Oregon coast can range from gorgeous to downright nasty and can change from one of the other in a matter of minutes. While pricing never approaches Pebble Beach, it can be very expensive during peak season and more difficult to justify to the spouse at home. Both trips I've made have been in early November when prices are reduced by 50%. For the true golf fanatics, the second round of the day is half-price all year and the third is free. Also, if the weather gets really bad, they offer a full refund voucher good for your next trip - all about customer retention.

• Grow organically - It took ten years of planning to get the first course open and nobody had any idea how many golfers would come. Once the first course opened, ground was broken on the second (Pacific Dunes). Several years later, Bandon Trails opened in 1995 and the fourth course (Old Macdonald) is scheduled to open by summer 2010. Certainly there must be a temptation given the success to grow faster or target other segments, but Keiser is committed to staying true to the vision, and making sure everyone can get in 36 holes in a day.I can't wait to go back, which is clearly goal #1 in the list of critical success factors if anyone is still following the business model tangent.
  

I'll leave you with the 11th hole at Pacific Dunes and a link to Dream Golf if you are interested in more of the Bandon Dunes story:

Where did Summer Go?

It's been a while since my last blog post...It happens every year, but the speed at which summer travels relative to the rest of the year catches me by surprise. I enjoy the 90 day respite from teaching that runs from late May through late August. It still feels early in the summer, but I realized that my first class of the semester is only a few weeks away and my department deadline for the syllabus is tomorrow. Time to get to work. Guess it's not only the students who procrastinate...

I actually enjoy the process of pulling together a selection of materials to create a complete course on Entrepreneurial Finance. Last year, I tried out a custom textbook through one of the major publishers, which seemed like a great way to go. I assembled textbook chapters, Harvard Business Review articles, cases, and notes to pull together my own textbook. It was kind of fun to add each case and see the price of the book adjust on the fly. I was able to come in around $100 and assumed with the bookstore mark-up, it would still be under $125, not outrageous for a text. However, the cost to the students ended up at over $140.

After apologizing at the first class of each semester, putting materials on reserve at the library and finding a more economical way to get just the cases, I vowed to find another solution for next time. This year, I'm giving University Readers a try. So far, the service seems great and the price is a lot better, in large part by cutting out the bookstore. This wasn't an option with the publisher I used last year (more about that later). Students order directly from University Readers and get access to the first 20% of materials online while waiting for the book to arrive at their door.

This whole process got me thinking about the textbook business model. A 2005 report by the Government Accountability Office indicates that textbook prices have outpaced inflation by more than 2-1 over the past two decades and account for 26% of tuition and fees at four-year public universities and nearly three-quarters of costs at community colleges. The producers of the content (professors) get very little of the price, new editions are constantly coming out with added bells and whistles that most faculty and students don't want. These new texts reduce the value of used books, while publishers and the bookstores reap the rewards, 64.3% and 22.4% of the sale price, respectively, according to the National Association of College Stores. Competition in the retail chain is limited as off campus bookstores have a difficult time accessing the required texts and don't typically have a complete selection for the students.

A bill pending in Congress would require publishers to sell "unbundled" versions of the books and disclose book prices to faculty in their marketing materials. Both good steps, but competition, more choices (including online, subscription, rental and other new models) will do more than regulation.

Of course, students could certainly take this in their own hands. Randy Stross, a colleague of mine at San Jose State, wrote an interesting piece on the textbook business in his Sunday New York Times column, "First it Was Song Downloads. Now It's Organic Chemistry." He describes college students as the "angriest group of captive customers to be found anywhere" and that "students who create and give away digital copies are motivated not by financial self-interest but by something more powerful: the sweet satisfaction of revenge".

One of the shrewdest groups in the music business and way ahead of their time was the Grateful Dead. Similar to the textbook business, the music business BN (before Napster) was controlled by the labels. The artists received very little of album sales, but kept concert and merchandise revenue. The Dead developed an avid fan base (aka Deadheads) who attended mutliple shows on each tour and traded bootleg tapes of their favorite shows. While the Dead did nothing to discourage the pirated music, they actively protected their trademarks to prevent unlicensed merchandise.

Let's hope that students, after graduation, saddled with debt from the high cost of tuition and textbooks aren't on the street reciting lyrics from the Dead's Touch of Grey

"I know the rent is in arrears, the dog has not been fed in years
It's even worse than it appears, but it's alright"