09 February 2011
In a 30-team league, there are bound to be franchises that find themselves on the lower end of the totem poll. In most cases, these teams fall because they cannot put a winning product on the ice. There are also other cases where a team cannot build a solid foundation in a specific city.
Without dealing with the on ice product are there ways to change things in order to help the franchise? Are there certain formulas a team could follow to experience short term relief? I believe that there are. And it could be in merchandising.
Fans love to represent their favorite teams by wearing numerous items such as jerseys, hats, shirts, socks, and sweatshirts. Fans can purchase these at almost any surrounding sports store or NHL arena. When you visit any of the arenas, you’ll notice that prices in those stores are marked up due to the fact that the sales have to cover for the costs of the employee’s wage, store space, and electricity in the store. They’re also marked up a bit probably because they’re trying to play into people’s sense of instant gratification. If fans see it and want it, they’ll most likely put out the money for it.
When you compare the NHL across the board, there are four other leagues in the United States that have the potential to take away revenue from the NHL. These leagues sway customer focus on an NHL franchise and could damage the team. Let us look at basic merchandise for all five leagues. In the list below, you’ll see the cost for a basic t-shirt with the team logo on the chest. The names and numbers on the back have been excluded. Also in this scenario, I’m examining base prices and holding off taxes.
The top four leagues against the NHL are the NFL, NBA, MLB, and MLS. I took a struggling team in each league and then found the online price for a basic team t-shirt. I used Phoenix in the NHL scenario because of stability issues (not overall record).
- NBA – Minnesota Timberwolves $25.99
- MLB – Pittsburgh Pirates $24.99
- NFL – Carolina Panthers $22.99
- MLS – D.C. United $19.99
- NHL – Phoenix Coyotes $17.99
(Lowest Price Options for the five leagues: Coyotes, Panthers, D.C. United)
As you can see, the NHL has the best price option when it comes to buying basic logo centered t-shirts. I was a little surprised that they came last but I have to praise the NHL for this. However, would the NHL examine a price change on the current standings to even further a franchise’s roots in a major city?
I’d like to introduce you to what I call CS-X, which stands for Current Slope Exchange. In the CS-X format, the prices for certain products fall due to the fact that either the team is sitting at the bottom of the league or the franchise in question cannot build a proper business foundation. The amount deducted can be adjusted but the standard should be a 10% decrease. Let us apply the CS-X format to the basic t-shirt product.
Lets say that the purchase and creation cost for each shirt is $11.00. In the current pricing they will see a $6.99 profit from each shirt ordered. If they activated the CS-X rule and dropped the shirt price to $15.99, you’d see roughly an 11% drop in profit through online sales on that specific item. However, given that the team is struggling on the ice, would the loss be worth it if you could get the fan base to buy more merchandise and wear it around in the community? Could the drop in price make up and surpass the sales goals if the price were never changed?
I believe that it would be. The ownership group not only wants to fill the seats during games but they also want their team’s merchandise ingrained into the surrounding area. Instead of over the top marketing plans, I would suggest letting the fans do the placement by giving them better opportunities to represent the team. By giving them basic logo wear, you do not sacrifice a team’s top three products (player t-shirts, jerseys and game tickets) for the betterment of the team. In fact, you can use the other main products as stepping-stones for fans. Enabling CS-X in six-month or twelve-month spans gives both loyal and new fans the opportunity to buy new merchandise at a lower cost. The overall value of the shirt compared to other local teams is high, given the fact that all social classes can meet the $15.99 price point. In the event the league cannot drop prices in the online store, enable CS-X within the official team store. Although I’d be hard pressed to say that basic logo t-shirts have prominent placement in arena stores, never mind the overhead cost that the item has to carry.
Trying to find changes to a franchise in need without dealing with the on ice product can be very difficult. When the team doesn’t win, fans fall by the wayside. If your team has never won consistently, then you really have problems. Switching up price points and marketing plans are your best bet when waiting for the tide to turn. These ideas cannot replace the excitement and energy that is created by winning but it may be considered a short-term (2-3 years) solution. If the team hasn’t made any progress on the ice by year three, marketing and pricing are the least of your worries.