The Growing Role of Loyalty in Sports Franchises
Two months ago marked the start of the 97th NFL season and it promises to be an eventful season. As many teams have witnessed, success this season is a function of team performance and fan growth, which all lead to greater levels of engagement in the stadium and beyond. Loyalty initiatives are certainly not new in the sports industry, but there are a number of reasons why sports brands will decide to invest further in connecting with fans. For example, each season, fan preferences provide an ever richer source of information on how to connect with them, and recent technological advancements allow expanded fan access both inside and outside of the stadium. This facilitates teams keeping fans excited about their team, even when their performance is not ideal and a fan is thousands of miles away from the team. In this post, we’ll dig into the drivers of loyalty in the sports industry and provide you with some possible next steps to bring loyalty to your sports brand.
Is loyalty new to the sports industry?
Loyalty has for many years been serviced as the mechanism for allocating season tickets and other prized giveaways for sports teams. When I was younger, I remember the Chelsea Football Club season tickets being allocated on “Loyalty Points”; a dynamic amount that was based upon the number of games attended a year and the type of game. It was one of the reasons why I am passionate about loyalty as an industry and was my path to a season ticket. Today, the Premier League has strong penetration with 12 of the 20 teams with an active program. Even as we cross the pond, a scan of U.S. sports shows 23 of the 32 MLB teams and 20 of the 26 NBA teams with loyalty programs, and the NFL has established a centralized loyalty program (in addition to specific programs) for season ticket holders and select others.
Why are we seeing increased franchise interest in loyalty programs?
One of our sports clients recently launched a number of exciting changes to their program with a simplified earning structure inclusive of new tier benefits and rewards. They are joined by a number of other teams across the MLB, NFL, and NBA that will make both minor and major changes to their programs. For many, the reason for the refreshes is due to the increased reach and relevancy of loyalty in the sports industry. This is due to:
- The option to collect personalized fan information and preferences: As with loyalty programs across a number of industries, there is an opportunity to use the program to collect data on your fans that is demographic (e.g. age range or geography), behavioural (e.g. check-ins at the stadium or social posts), or preference-related (e.g. reason why they like their seat location or preferred communication method). The use of an incentivised loyalty questionnaire is a simple tool for doing so, and the resultant information then allows you to better understand the types of rewards, benefits, and offers to target and communicate to each segment of members.
- The ability to reach your fans at the game and beyond: Once we have collected the necessary information on members, the power of a franchise to connect with fans over Wi-Fi live at a stadium, via an app at their local bar, or even online when purchasing tickets, is an invaluable tool in driving stronger engagement throughout a fans life cycle. During a recent conversation, a CIO of a world-series winning MLB team told me:
“Wi-Fi at the stadium took a very significant budget, but it allowed fans the greatest opportunity to share their excitement with the world and that is too valuable to ignore.”
Access to fans offers further opportunities to amplify the impact of a loyalty initiative during and after the time spent watching a game. It may even facilitate preference collection, encourage engagement with fans, and cross the chasm of the off-season to retain excitement levels between seasons.
- The rise of the out-of-market fans: Despite census data that geographical mobility is on the decline, mobility is cumulative and each year the out-of-market fan size increases for many leading teams. The loyalty data collected can help identify these out-of-market fans within your member base. A 2010 study showed that 27% of Americans now live outside the state to which they were born.Taylor Boldt, a professional on our financial modelling team who grew up in Denver and moved to New York, is a loyal Broncos fan but struggles to sustain his engagement while living thousands of miles away. The right loyalty initiative can help him feel like a part of the Broncos community and give him a chance to showcase his pride for the team, even if he lives amongst bitter rivals.
For less enamored fans, loyalty initiatives remain a critical tool sustaining fan engagement from numerous distractions. For example, we see TV scheduling conflicts, the proximity of other successful teams (in other sports), and the off-season as additional drivers of apathy. Imagine for an NFL team, struggling with engagement during the off-season, the value of capitalising on pre-season activities such as a new merchandise purchasing. Such activities could be incentivised by the brand with bonuses or benefits to guarantee investment in the team that could pay dividends throughout the season.
So what should you do to drive engagement in a leading sports franchise?
For those with a complete sports loyalty program, you need to conduct a program audit that looks at enrollment across different personas of fans, and goes one step deeper to understand program engagement by these groups to understand what is resonating with fans. If you are unable to build personas, you should rely on other segmentation methods such as deciles or behavioural segments. If you find deficiencies in the engagement in a segment, we’d recommend looking into a few suggested financial analyses that assess interactions before and after reward and enrollment triggers.
If your loyalty initiative consists only of a Private-Label Credit Card (PLCC), you are probably pleased with the unit economics, but curious about how to include your less die-hard fans. The answer here is to utilize the engagement rates of your PLCC customers and understand the impact of moving to a holistic program.
Now, for those without a program, designing the right type of loyalty program remains the primary determinant of success. You’ll likely have some existing fan engagement and background data that provides a benchmark and can be married with spend levels. If you invest into the design and modelling stage, you’ll be able to disprove fears of loyalty being an expensive cost center, and prove that it is a revenue generator able to break even in a year with a positive ROI. Just remember, as loyalty becomes more critical for sports franchises, make sure your team doesn’t fall behind.
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