Football’s approach to “knowing your customer” lives in the dark ages. Generally, most clubs have no basis for optimising revenues from across their customer and fan base.
I’ll argue some clubs, Everton included, could be accused of not knowing their product either.
Football is almost unique in business in that each club is almost entirely a monopoly supplier to a group that is perhaps the most loyal in terms of retention, and predictable in terms of base spending of all customer groups. I’ll explain more as the article develops.
Looking in from the outside that means clubs are losing out on multiple revenue sources, and most importantly failing to engage and enrich the experiences of their fan and customer base.
It is as if the football industry, certainly at club level, has never heard of many of the business processes that other industries have used for decades in their interactions with consumers.
This affects every aspect of each club’s commercial relationship.
Whilst there’s many areas to consider, for the purposes of this article, I’m going to look at ticketing and match day revenues.
The parallels between airlines & football clubs
There’s enormous parallels between airlines and football clubs. Don’t worry I’ve not lost it, I’ll explain. Both businesses use very capital-intensive assets, planes and in the case of football clubs, stadia. Each asset has a fixed capacity, there’s only so many people who will fit on a plane, there’s only so many people who will fit into a stadium, although both can be configured to meet the needs of different types of customers. Each sell time sensitive, perishable goods – once a match is played its gone, once a plane takes off that’s gone too. Each attracts customers who dependent upon their budgets, whether they’re on business or leisure, are looking for different experiences, have different expectations and are prepared to pay different prices for the same core product albeit with variations in the levels of service offered.
Nearly 40 years ago American Airlines introduced a system which ultimately was copied across the travel and hotel/leisure industries. It was known as yield management, and was focused on two points, (i) airline seats are perishable and (ii) that not all their customers were identical, people wanted different experiences, had different pricing points, some planned way in advance, others driven by need less so. All of these factors (and many more) allowed airlines to maximise revenues and maintain the highest load levels (i.e. sell the greatest numbers of seats).
Not everyone who was a customer of the airline had to pay more than previously but the airline was able to significantly increase the overall revenue per any given flight.
It also allowed airlines to more profitably differentiate the different classes of travel, economy, business, first class. It allowed them to configure planes and pricing of routes based on enormous amounts of real data, data that constantly evolved in real time. Whilst football is not such a complex pricing product and has fewer variants there are lessons to be learned.
So, what’s that got to do with football, and specifically Everton?
Everton have been lauded in recent years, and quite rightly so, for innovative pricing strategies and excellent season ticket marketing campaigns. The campaigns have been so successful in terms of numbers taken up that we reached the upper limit of season tickets that can be sold at Goodison. Many of the tickets are sold to young spectators below the age of 24 which is a welcome switch of demographic from most other Premier clubs. Season tickets were sold out in the first week of June, two months before the Premier League season start.
However, all that comes at a significant cost to the overall match day revenues of the club, and whilst it may appear insignificant in the context of overall turnover, it is important from a regulatory STCC point of view and therefore player wages.
Corporate and hospitality seating sold out even sooner, the sold out signs going up on 30 May. Bafflingly with so much demand for our hospitality areas, the club had announced a price freeze for a second season running.
What is the commercial sense in that? Hospitality is surely more price elastic than non-premium ordinary seating. Surely there was an opportunity to generate additional revenue in the face of unprecedented and significant demand?
Again, it might not seem particularly important versus the overall turnover, but consider this – we’re moving to a new stadium with likely, at least 3 times the number of executive/hospitality seats available. Shouldn’t we be preparing the way for the new stadium by testing the price sensitivity whilst at Goodison? Regardless it is a missed opportunity to increase revenues from what is considered by everyone who uses the facilities as an exceptional product that most (privately) would admit is cheap. Certainly, it is cheap relative to our competitors.
Not only is the pricing level potentially questionable, but perhaps the pricing policy, the number of season tickets sold, the size of concessionary discounting and the rather blunt pricing methodology needs reconsideration, particularly in the light of a stadium move. For example, all the regular seats in the Park End are equally priced (ignoring the classification of season ticket holder, senior adult, young adult etc). Why should a seat in the top row far left corner be equally priced to a seat 15 rows back and in line with the penalty spot?
The same argument could be used all around the ground. With the exception of a minimal discount for an obstructed view there’s no differential pricing for each part of the ground based on quality of view and one assumes therefore demand. The question is why not? The technology exists, just look at my airline example above.
All of this is important – it’s important because the average revenues we generate from each spectator per match are pitifully low. I stress I’m not saying hit those that can only go to the game because of these pricing policies, but let’s be cleverer with those that can and perhaps would happily spend more, especially if they received an improved viewing for example.
Match day revenue gap
How can we compete if we generate less than £17 per spectator per game? Southampton manage nearly £25, Liverpool £48 and admittedly with the London effect, Chelsea £69 and Arsenal £65
It’s also important in the context of the new stadium. I’ve written on several occasions ordinary fans should be able to move to the new stadium and watch the game in much better facilities at the same price. This is made even more possible if yield management techniques are used on less price sensitive fans or customers.
Know your product
I mentioned at the beginning of the article perhaps the club doesn’t know its own product. What do I mean by that?
We are a premium product!
Perhaps they don’t have the confidence to price parts of the product more appropriately thereby increasing the yield per spectator, something which if added to other commercial improvements elsewhere makes us more competitive on the pitch through greater resources.
When a business sells all of its products in record time, there’s only two solutions to growing the business. Increase production or increase the average price across the product range. Football cannot easily increase production, although regular qualification for Europe and consistent progress in domestic cup competitions is one way of increasing revenues. Equally moving to a new stadium has been for many clubs the passport to greater resources, something we will enjoy in the near future.
Good businesses have the confidence to find ways of increasing income per customer without losing their customer base, to explain the reason for increasing revenues either because of over demand, or the product is superior and therefore represents value.
Whilst it’s difficult to perhaps argue the quality point with what we’ve seen on the pitch this year, that’s only part of the purchase made by a fan. To many it is the experience, the pilgrimage and all that goes with returning to a footballing cathedral with family and friends that is equally important.
I’ll finish by saying we need to move our thinking away from old, old business practices. We need the confidence in our product, and the relationship and loyalty of the fan base, to explore innovative ways of increasing income to assist the team, whilst not forgetting our base and the economic realities of many of our fans whose custom should be valued equally regardless of the pricing point that they engage the club on.
The club needs to learn to sell its core product more intelligently and with more confidence, but it also needs to value fans more, learn more about their individual needs and as a result generate more income, but crucially more fan satisfaction and engagement.
It’s time to come out of the dark ages and become a 21st century business.
By the way, I’d welcome feedback on any of the ideas, whether you think they’re useful, interesting or nonsense…..
Categories: Everton finances