Understanding the marketplace structure in which your business operates is essential to unlocking the keys to success. That’s no easy task when it comes to sport brands. Professional sports represent a unique and fascinating market structure from an economics viewpoint. The leagues are close to a monopoly from a product perspective, the teams are an oligopsony from a labor perspective, but they operate somewhat like a competitive market from a fan perspective.
What this means in practice is that sports teams operate differently than almost any other marketplace. Think about a highly competitive market like QSR (quick service restaurants, aka fast food). McDonald’s, Burger King, and Wendy’s are fighting with some smaller players for a greater share of the burger/fry market. If Wendy’s were to find some competitive advantage that allowed them to dominate the market, achieve 90% share, and drive McDonald’s out of business, their value would skyrocket. But if you look at the marketplace for professional football, if the Las Vegas Raiders were to capture 90% US market share, their value would likely collapse. Driving direct competitors out of the football market would ultimately hurt them.
But some would argue that’s taking the wrong perspective. You should look at it from a franchise perspective. After all, both the NFL and Wendy’s operate on a franchise model. In this model, franchisees aren’t competing against each other, they’re working together to make the sport more successful. In this context, the Dallas Cowboys and the San Fransico 49s aren’t like Wendys and McDonald’s, but more like two Wendy’s in differente towns. Much of that is accurate, but that analogy doesn’t entirely hold either. Chick-fil-A benefits from offering a common experience and consistent quality level across all their stores. Sports teams aggressively compete to be better than their fellow franchisees. They regularly work to take their fellow franchisees’ best employees (coaches and players) and seek to be a superior product rather than an equivalent product on the field of play. The leagues encourage this to some extent, but owners and league officials put guardrails in place (draft order, luxury tax, etc.) to avoid any franchise from being too superior for too long.
So how can a sports team understand their marketplace economics in a way that directs them to greater value? The first job of successful marketing is differentiation. You must distinguish your product from all of the competitors in your customers’ consideration set. Whether it be price, quality, convenience or any other meaningful benefit for your audience, differentiation is the fundamental objective of brand building. Step one is to identify the competitive set you must differentiate from. That may seem obvious from the standings and the sports news. Your competition is all the teams trying to outperform you on the court, pitch, field or rink. To a great extent, that holds true from the perspective of the General Manager, coach, and players.
But for Team Presidents, CFOs, CMOs, and business managers, focusing on the “obvious competition” is wrong. The team is competing for wins, but the brand is competing for fan engagement. If people don’t like engaging with Milwaukee Brewers games, only a few die-hard baseball aficionados might switch allegiances to other teams. Instead, most will direct their time, attention, and disposable income to other activities. From a long-term brand health and business value perspective, the Milwaukee Brewers compete more with Six Flags Great America than they do with the Chicago Cubs. For some portion of their audience, they may even be competing more with local golf courses than the Cubs. That competitive framework makes it easier in some ways. The Tennessee Titans, for example, don’t have to match the state-of-the-art stadium experiences in Dallas or Inglewood because that’s not a likely substitute for a greater Nashville sports fan. But it makes it harder in other ways. It won’t matter much if Nashville SC has the best experience in the MLS if they don’t offer a viable audience something unique versus a night on Broadway Street.
To bring this competitive framework to bear, team management can increase fan engagement and the financial value of the franchise by answering the following initial questions:
What is the team’s TAM (Total Addressable Market)?
- How would you describe the team’s potential fan base geographically, demographically, and psychographically?
- What is the approximate size of that defined audience?
Who are its most valuable audience segments (e.g., families, couples, corporations, etc.)?
- Using ticket sales, merchandise sales, and media-viewing data, how do these sub-groups compare in terms of revenue contribution to the team?
What are the most likely competitive entertainment substitutes for the most valuable segments?
- How does the team compare to these substitutes in terms of overall experience?
- How does the team compare to these substitutes in terms of overall value?
- How does the team compare to these substitutes in terms of engagement?
- Quality (share of mind)
- Quantity (number of engagements)
What levers can the team utilize to drive higher engagement via:
- Attendance (games and team events)
- Viewership (across all media)
- Merchandise purchases
- Other (e.g., gambling, fantasy teams)
With this framework in place, teams can develop targeted plans that succeed in the off-field competitive setting of professional sports.
The Gameplan Review 