The hottest market to be in right now is deals. From Living Social to Groupon, finding a deal in your city is easier than ever. With big brands like Gap, Barnes & Noble, and Amazon already having joined in on the party, the sports world is starting to turn their attention toward this rapidly growing market.
While there have been a few sports teams who have experimented with offering discounted ticket deals through deal sites (see New Jersey Nets), sports teams need to consider the financial and brand ramifications that come from slashing ticket prices in the exchange of selling off inventory.
Speaking with other sports professionals, the biggest reason why they would consider working with a Groupon or Living Social is to help them move inventory that they wouldn’t normally be able to sell in a limited amount of time. Typically, this would mean tickets for a game less than a few days away.
At first glance, this would seem like a win-win situation: Fans get a great deal and the team sells off inventory that would have otherwise been considered a loss. Still, if we dig closer we will see that is not always the case.
Things To Consider
While we’ve all heard about the success stories of deal sites helping businesses grow their customer base, what rarely makes the headlines are the stories of how deal sites hurt them.
For example, profitability should be a huge red flag for any sports team looking to sell off tickets and inventory quick. In most cases, not only would a team have to offer a deal at 50% or more, they would also need to split revenue of those sold with the deal site. Groupon which can take anywhere from a small amount to 100% of the revenue depending on how much the deal price is set at (see Posies Restaurant), can make covering basic overhead costs near impossible.
Further, Utpal Dkolakia, associate professor of marketing at the Jones Graduate School of Business at Rice University, recently published an in-depth review of one-a-day deal site Groupon and reported that 32% of companies said that the Groupon campaign was unprofitable with only 25% of redeemers buying additional products beyond the ones offered through the coupon and only 15% of coupon users coming back.
Another important factor to consider is who the deal is being targeted toward: Is it being marketed toward your fans or is it being marketed toward deal seekers and one-time shoppers? For sports teams especially, they need to remember that coupons make customer loyalty go out the window. As stated before, only 15% of Groupon users are coming back, which means that for a sports organization they would lose money in the long-run since their is no customer retention.
Lastly, sports teams need to consider not only the financial aspect of working with a one-a-day deal site, but also need to consider the following:
- Are we able to gather and own any of the data of the individual buying a ticket? Ex: Age, Interests, Area Code, Email. — Answer: Sometimes. Refer to Groupon example of “Release of Personally Identifiable Information.”
- Sponsorship – Getting a sponsor to take part in a one-day-deal is difficult (maybe impossible), because of the numerous league rules that govern promotions and sponsorships. No sponsorship means that a team must rely strictly on the ticket revenue that is shared with them and the in-stadium up-sell.
Alternatives to Deal-A-Day Sites
While the appeal of deal-a-day sites may seem too good to pass up, there are other alternatives for sports teams looking to sell extra tickets and future inventory. Here are a few of them:
1. Create your own deal-a-day. Sports teams don’t need to necessarily work with a deal site to offer great packages and tickets to fans. The Los Angeles Clippers are a great example. Through their official fan engagement site, myClipper NATION, they were able to create “Fastbreak Friday” which offered registered user (Clippers able to capture and own user data) exclusive offers. The Clippers were able to set their own prices and keep 100% of their revenue.
2. Consider creating a loyalty program. While many focus on the immediate goals of selling inventory fast, why not create a loyalty program that gets fans to come back? Loyalty programs are great because they encourage fans to come back and are also great for building up a fan base by offering them incentives (that the team controls and creates).