Professional sports teams aren’t usually automatically connected to loyalty programs, but in the past decade, more engagement strategies and loyalty programs have been created in the sports world.
Loyalty360 talked to Richard Schenker, senior loyalty consulting director at Bond Brand Loyalty, about the evolving loyalty landscape among sports franchises, what they are doing well, and where they can improve upon from some best practices used by their retail counterparts.
We’ve written extensively about loyalty programs and other initiatives that professional sports teams have started in recent years and, for the most part, they have been successful. What have you learned from your involvement with the sports industry and how do its teams’ loyalty programs compare to retail loyalty programs?
Schenker: For years now, most professional sports teams have engaged in varying levels of CRM sophistication to engage their fans through informal loyalty-like mechanics. Traditionally, professional sports franchises have trailed the retail sector in creating customer engagement strategies, as they have relied primarily on the emotional and often irrational fandom generated by their fans. Having said that, in this current decade, we have been witness to the introduction of various formal fan Loyalty programs in the professional sports industry worldwide.
Professional sports franchises realize that they are also competing with other types of local professional sports teams; their fellow league teams and other forms of entertainment entities all vying for the same fan’s share of mind and wallet. Like any other business, owners are constantly seeking ways to offset increasing costs and grow revenues in a manner that does not compromise the relationships which they have cultivated over decades with their domestic and in many instances international fans.
As such, many professional sporting franchises have created fan engagement strategies through formal fan Loyalty programs. In many cases, they have borrowed loyalty mechanics from successes in the retail loyalty sector. Bond Brand Loyalty is pleased to report that many franchises have avoided some of the costly mistakes and pitfalls that some retailers have fallen into by placing an overreliance on discounting as their core reward offering. We would surmise that this is, in part, due to learnings from retailers, but more likely precipitated by franchise owners’ reluctance to over invest in this discipline and erode their profits.
Instead, most fan loyalty programs lean heavily on acknowledging monetary and non-monetary engagement of fans by rewarding them with coveted and often scarce access to unique brand-aligned fan experiences. Professional sports teams provoke intense fan emotions, and many sports franchises have done a masterful job at satisfying their fans’ desires. This has been achieved by infusing truly exclusive and exhilarating fan experiences, in many instances, evoking far better emotional brand connections than achieved by retailers.
Fan loyalty programs fall short and are generally well behind their retail sector counterparts in the collection, use, and monetization of customer data. Retailers have been building and cultivating connected and large robust databases for decades to segment their customers and are now delivering personalized content and offers through digital channels. Much of these activities are being subsidized by their vendor communities in exchange for gated access to a common customer.
This is a totally new frontier for sports franchises and there is lots to be learned from the retail sector with respect to funding from sponsors and partners. Historically, transactional and non-transactional data in sports franchises has sat in disparate and unconnected areas with little to no tending to data governance and management. For an industry that is obsessed with game data and statistics, little analytics horse power has been devoted to unlocking fan data insights. What we can say is, sports franchises are now beginning to see the merit of leveraging the mountains of unstructured data that they are sitting on. Bond Brand Loyalty has been speaking with several franchises across various professional sports organizations and providing them with strategic counsel around loyalty design, data collection, utilization, and monetization. There are many lessons to be learned from the retail sector, however, the sports industry has many nuisances and restrictions which are not present in retail and will need to be mindful of such differences as they proceed down this strategic path. We expect to see a significant push in data monetization by sports franchises over the next few years to grow engagement and revenue.
What kind of advice do you offer sports teams from a loyalty program design perspective?
Schenker: Sports franchises are in an enviable position as they are one of the last business sectors to embrace customer loyalty programs. They have the benefit of understanding what has worked or not worked in other industries before them without having to be on the receiving end of much risk. Having said that, they do need to take into consideration the innate differences between ‘customer loyalty’ and ‘fan loyalty’ as well as the conditions and restrictions which they must abide by as part of their contractual league obligations. We would caution sports franchises to remember that an investment in a loyalty program and a data asset can be a very substantial undertaking. It requires an organizational commitment at every level to succeed.
It is critical that such an investment be leveraged across the entire sports enterprise to maximize the return on investment. A loyalty solution and specifically the data which is collected as part of such a program should be leveraged across the enterprise to deliver on the entire organization’s business priorities, not just the marketing department.
Just as retailers have invested heavily to know their customers intimately, cultivate new customer relationships, and foster emotional brand connections, sports franchises are yearning to harness and grow their fan bases domestically and internationally, and deliver consistent and exceptional fan experiences across all transactional and non-transaction fan interactions. By developing an omnichannel data capture mechanism, managing such data responsibly and intelligently utilizing data with meaningful personalization, sports franchises will be able to reap the benefits of fan data monetization.
What are sports teams doing well with customer loyalty programs/initiatives/engagement and where do the challenges lie?
Schenker: We believe that sports franchises who have engaged in formal fan loyalty programs have done a good job at captivating their audiences by creating sought after and rewarding experiences. A truly successful fan engagement strategy is one that is brand-aligned, fan relevant, operationally feasible, and financially incremental. There is little publicly available data to demonstrate what sort of return on investment these franchises are experiencing from their loyalty programs.
As with any loyalty program, it is often necessary to conduct a complete strategic and financial audit to validate that the design is supporting the franchise’s business imperatives. The linkage between the investment made in loyalty and associated returns is often murkier in sports marketing and requires both qualitative and quantitative measurement solutions. Usually, assets deployed as part of a reward structure in sports are existing assets which are being diverted or maximized as part of the loyalty offering. As such attribution of the cost of rewards need to be assessed differently. Additionally, fandom is not as easily quantifiable as there are additional benefit metrics beyond traditional lift, shift, and margin improvement.
The challenge we see in the fan Loyalty industry revolves around data collection, management, and utilization. One of the bigger hindrances is the anonymity of data in professional sports. For instance, just because a fan purchases a ticket, it does not mean that the same fan is attending the sporting event. In fact, the fan may not even be a fan of the team; they may be a fan of the opposing team.
The proliferation of ticket resellers makes it more difficult, but not impossible, to understand the end user. There are some mobile ticketing solutions which are acting to mitigate this challenge. Another challenge is the capture of fan data out of venue. With the proliferation of social media in this decade, there are means to capture such interactions, but they need to be infused into the data collection strategy in an unencumbering manner for fans and the sports franchises. We cannot underscore enough that a successful enterprise-wide monetization strategy is contingent upon capturing all fan loyalty signals; transactional and non-transactional, wherever fans interact with the sports franchise’s brand.
This in no small task for sports franchises who are facing increasing business costs and don’t necessarily have the core competencies let alone the financial desire to invest in this discipline. Having said that, we are seeing more and more sports franchises looking to experienced brand loyalty agencies such as Bond Brand Loyalty to provide them with strategic counsel in design, implementation, and execution of data monetization strategies, so as not to burden their existing business structure.