Soccer is my weekly outlet. Every Wednesday night you’ll find me up at Silverbacks Park in Atlanta pretending that I’m a tenth of the player I once was. It can be painful – to both my body and my ego – when my mind tries to cash checks my body can’t cash anymore.
Doesn’t matter though – it’s a great workout, tremendously fun and the competitiveness is exactly what I’m looking for.
Build More Fields, Make More $$, Right?!?
A few seasons back the park owners made what seems to be a straightforward business decision to increase revenue – they built two new fields.
It makes sense – a soccer park is restricted to a small amount of hours it can have players since you’re not likely to find too many Monday morning leagues. Since demand is high but only in limited time slots one of the best ways to increase volume is to add more fields.
The problem though, is that the two new fields were built over part of the available parking lot. So an already bad parking situation went from poor to…holy crap the 1/2 mile walk the field is my new warmup!!
Is There A Better Way to Increase Revenue?
This got me thinking whether there’s a better way to increase revenue while not taking a customer satisfaction hit. More specifically, what if you could get the same revenue increase by offering a premium option? I’ve never seen a sports league that offers a premium option but off the bat I can think of a number of pain points that I’d pay good money to avoid:
- Front row parking
- Better game times (11pm weeknight games wreck havoc to sleep schedules, and good luck getting to an early afternoon game on time in Atlanta rush hour)
- Free tickets to the professional team’s games
To find out let’s first look at the $$ equation…
Option A – Adding New Fields
For simplicity let’s assume the league can use the fields 5 nights a week. Also, each division in a league has ~10 teams and each division needs its own field. Last, the typical price is $750 per team per season. So that’s $75,000 more revenue per season. Not bad.
2 new fields --> 2 more divisions 10 teams/div --> 20 more teams/night 5 nights/week --> 100 more teams/season $750/team --> $75,000 more revenue
Let’s say your operating expenses for these fields are small…inexpensive referees, lighting, easy maintenance (since the fields are synthetic), and league setup. All of these are small in comparison, so let’s say margin is 80%, so $60,000 more per season in revenue.
A. Building Costs
I’m really not sure what the field costs, but based on simple googling let’s ballpark it at $1.15M for two fields.
Assuming a lifespan of 10 years from the link above, and that Silverbacks can run 5 seasons per year, that’s 50 seasons lifetime. Ignoring time value of money and any fancy depreciation, that puts our per season cost of building the fields at $23,000. Deducting from the initial $60k in revenue, that’s $37,000 in profit per season.
Revenue per season = $60,000 Cost per season = $23,000 Profit per season = $37,000
Option B – Premium Tier
B. Revenue Option 1 – All Players
What if instead of growing our customer base, we improved the yield from the existing base?
Prior to the addition there were six fields. At 1 division per field, 10 teams per division, and 5 nights of divisions, that’s 300 existing teams.
6 fields * 10 teams * 5 nights = 300 teams/week
There are ~14 players per team, so 4,200 total players per season. To achieve the same $37,000 in profit by adding 2 new fields, that means you need to raise the price ~$9 for each existing player.
$37,000 / 4200 players = $8.81/player
Obviously this isn’t realistic though. What good is a “premium” option if everyone has access to it?!?
B. Revenue Option 2 – Some Players
Let’s say our premium target is 25% of players. So, math…math…math…we’d need ~$35 more per player.
25% of 4200 = 1050 players $37,000 / 1050 players = $35.24/player
To put this in perspective, the current cost (assuming $750/season & 14 players/team) is ~$54, so the new price of $89 represents an almost 65% increase for the premium option!
Is It Worth It?
Here’s the deal – right now the numbers alone seem to lean slightly toward adding two new fields. BUT, this is the beauty of lean. All we need to know now is whether our crazy idea – our leap of faith hypothesis – is worth building an MVP for and testing. And the answer is yes.
Hypothesis – We can sufficiently increase our revenue while not decreasing customer satisfaction by offering a new “premium” option.
Measurement – Plenty of things to check:
- How many players opt for the premium option?
- Do they ask for other premium benefits?
- What price point can we charge up to?
- Are there any associated costs for this “premium” option?
- Can we net $37,000/season from our premium players?
MVP – First, do some much needed customer research (I’m waiting Silverbacks!) and identify your customers’ true pain points. If enough players agree on a pain point, let’s offer it. Tell the coaches, market it to the players, etc. All this takes is some planned marketing & promotion. If only 5 players sign up, scrap it and pivot. If a moderate amount do but not enough to cover the $37k, iterate and improve for the following season.