GO
Loading...

How Golfsmith Pays Off Its Bet On Mickelson

Angel Cabrera of Argentina presents Phil Mickelson with the green jacket during the green jacket presentation after the final round of the 2010 Masters Tournament at Augusta National Golf Club in Augusta, Georgia.
Getty Images
Angel Cabrera of Argentina presents Phil Mickelson with the green jacket during the green jacket presentation after the final round of the 2010 Masters Tournament at Augusta National Golf Club in Augusta, Georgia.

You've probably heard about it by now. By virtue of Phil Mickelson winning the Masters, golf retailer Golfsmith will be giving away $1 million in new Callaway drivers.

Anyone who either walked into a Golfsmith store and registered for the promotion or bought a new Callaway driver between March 10 and April 7, which turned out to be thousands, will now get their driver for free.

It sounds outrageous, but it's actually good business.

Why?

Because it's insured. Golfsmith won't say how much they paid for the premium, but it's not based on the retail cost. It's based on how much it costs to make the clubs.

At most, it's $500,000 in clubs in gross value and the premium is based on the odds. Golfsmith CEO Marty Hanaka told me that, based on the odds for Mickelson to win, the premium paid was less than 10 percent of the total exposure.

So for what likely amounts to less than $50,000, Golfsmith got what is now incredible publicity for its 74 retail stores.

Previous promotions that involve redeeming goods have been fairly complicated and include having to produce a receipt.

Hanaka says that's not the case with this promotion. Those who bought drivers will automatically be sent a check in the mail. Those who put their name in the sweepstakes will either receive a Golfsmith certificate or be mailed an actual Callaway driver.

"Something like this helps differentiate us from the competition," Hanaka said. "It has certainly generated a whole bunch of excitement."

Hanaka said the company is working on a similar promotion for the U.S. Open. With Mickelson coming through, they might have to use a new insurance company or pay higher premiums.

  • Read Golfsmith's Release Here
  • Emotions run high as Mickelson wins Masters

Questions? Comments? SportsBiz@cnbc.com

Featured