I’ve received a lot of inquiries from my article “How Startups Can Win In The Crowded Sports Market.” In it, I discussed a number of winning strategies to apply to your startup such as cost leadership, product differentiation and buyer composition. The subsequent question I keep getting asked is, “But where should I enter the market?”
Go-to-market strategies are action plans designed to achieve a competitive advantage over incumbent competition. Successful market entry is an indicator that you have identified an optimal level of the overall industry, have the right positioning to attract new customers and a price point that they are willing to pay. Market entry within the $72B North American sports market might come down to how you position yourself from the low volume, high value professional sports leagues to the high volume, low revenue amateur organizations.
Above, the tiered pyramid model illustrates five very distinct tiers that hold the most potential for startups in the massive sports-tech sector. However, you don’t necessarily have to target the pro sports tier in order to accelerate growth in a profitable way. Evaluate all tiers of the market before the outcome is known. Below are a few examples of startups and the strategies they used to successfully gain footing in the sports market:
When targeting pro sports leagues there’s a lot of money, but more of a limit to the market and who you’re able to sell to because there’s only four major pro sports leagues in North America. The startups are limited by the number of teams in the sport and the buying power is often too high, hindering the ability to achieve profitability.
One shining example of gaining early adoption from the pro market (before moving down the pyramid) is ShotTracker, a sensor-based system that delivers live stats and analytics via an app to coaches, players and fans. ShotTracker placed focus on influential people at the highest level of the game rather than the whole pyramid. With investment from the likes of Magic Johnson and David Stern they received a glowing NBA endorsement while knowing their greatest potential may very well be in high schools and colleges. The system is affordable and not just reserved for the pros.
ShotTracker just announced a first-of-its-kind partnership with the National Association of Basketball Coaches (NABC) to power all four championship round games at this year’s Hall of Fame Classic. The championship-round matchups will be the first NCAA Division I contests to offer access to ShotTracker’s real-time stats and analytics.
A recreation (rec) league refers to play within a local league formed of teams from the same general area. Unless you actually own the league, a custom apparel company or make the team management software, the market opportunity has limited scale. Your knowledge of a particular sport and its consumers are also a highly critical indicator for future success.
For example, according to US Lacrosse 2016 Participation Survey, there are currently 864,000 Americans playing youth, high school and college lacrosse and growing roughly 10% year over year; yet only 12,000 are playing post-college. Lacrosse suffers an overall 98.6% attrition rate by the age of 22 due to lack of playing opportunities and the inherent physicality of the sport. The average cost of outfitting a lacrosse player is $675, preventing people from sampling the sport. The data would lead most to believe that this isn’t an attractive market. But if you have a unique understanding of the consumer experience better than anyone else, then this can lend to your competitive advantage.
SidelineSwap, a marketplace for athletes to buy and sell gear, initially targeted lacrosse players. Lacrosse players, especially in rec leagues, are huge connoisseurs and collectors of gear. SidelineSwap did extremely well in this sport and now their most profitable customers hail from other categories like hockey, golf or skiing. Some of their customers make $100K a year selling used hockey equipment online.
If you initially target the college tier, adoption could potentially pull upsteam to the pros, but it rarely flows down to the amateur level. The sports ticketing segment is one area where startups have seen tremendous success developing use cases that can be applied to larger pro organizations, leagues and venues. From the college level up to pro, ticket sales is large driver of revenue. The same can’t be said for the tiers below college.
BANDWAGON is a good example of demonstrating solid traction in the college tier before matriculating to the pros. Their core product, the Stadium Identity Management Platform, identifies fans in attendance so that personalized game day experiences can be delivered. BANDWAGON founder, Harold Hughes states, “We started with college football because of each university’s autonomy and unique set of problems.”
They solved a problem for a particular sport within college athletic departments, developed a buyer persona based on real data from existing customers and a repeatable selling process before acquiring new customers in pro sports leagues.
Amateur / Youth
In the amateur and youth tier, there are over 300,000 sports organizations, which is attractive because of more potential buyers. However, targeting amateur organizations won’t be ideal for every startup. Capturing a large share of this market requires high human contact points and a great deal of time. For small, bootstrapped, poorly connected or minimally funded startups this is a tough hill to climb.
However, if the opportunity is big enough and the economics make sense, then that could be enough to make your strategy work without scaling to the broader sports market. GameChanger, a mobile baseball app, is a good example of acknowledging the competitive landscape and tapping overlooked buyers going deep and wide within just the amateur baseball level.
These are just a few examples of market entry in the sports industry. I didn’t mention the behemoth startups such as Peloton that are dominating the at-home fitness enthusiast crowd.
The most successful startups learn their industry’s structure, have a transformative business model and position their company where forces are weakest. Startups should consider the barriers to entry, sales & marketing costs and the expected outcome of where you enter the market. Whether you’re taking a top-down or bottom-up approach, you should always build a system to inform your hypothesis.