Welcome to the latest episode of the Loylogic Podcast, From Frequent Flyer Programs to Fan Engagement Programs: How Loyalty Can Be the Savior of Sport.
The past few months have seen us enjoy a wonderful summer of sport, with the Paris Olympics and Paralympics, the Euro football championships, and an incredible Tour de France to name just some. But what happens once those big events are over? How can sport remain at the forefront of people’s attention? How can sports continue to drive participation and engagement with the help of loyalty?
In this episode, we focus on how fan engagement programs (FEPs) can offer a lifeline for clubs, leagues and sports federations amid changing media consumption trends and financial challenges. We discuss how loyalty can better engage fans, including those who attend games every week and the masses of hidden fans, and unpick how sports organizations can replicate the success and engagement expertise of frequent flyer programs (FFPs), to leverage fan loyalty to drive financial growth and emotional connection.
Joining us to share their views are Philip Shelper, CEO of loyalty consultancy and Loylogic partner Loyalty & Reward Co, and Loylogic’s CEO, Gabi Kool, who both have experience of the international sports arena. Philip has worked on a number of loyalty programs for international sports federations and an English Premiership football club. Gabi, away from his time at Loylogic, is president of the International Korfball Federation, which is an IOC Recognized Federation, where he’s a passionate advocate for the development of Korfball, which he hopes to see make it to a future Olympic Games.
To find out loyalty can be the savior of sport, listen below or read the full transcript further down the page.
(2:08) Gabi, for context, can you provide a quick overview of who the key stakeholders in the world of sport are and how it's structured?
Gabi: "The world of sport is a very complex ecosystem, so let me maybe run you through almost like a top 10 of the key players in there. So, if you start maybe at the top, it's the international sports organization level. That's where you will find the IOC. The IOC, of course, governs the Olympic Games and also recognizes the International Federations. In short, they're called the IFS who manage the individual sports and there are about 72 recognized by the by the IOC.
"Then you also have national Olympic Committees at that same level, so they represent the IOC at the national level and oversee the participation in the Olympics and also promote sports within their countries. Then at the second level, you have got something which is called national governing bodies, in short, called NGBs. In that group, you will find national federations who govern specific sports within individual countries. They're quite often under the umbrella of an IF so, for example, this would be the FA in England for football, but could also be professional leagues which organize and regulate professional competition within the country or region. To build on the FA example, which will be, then the Premier League in the UK, or the NFL or Serie A in Italy for football.
"At the third level, what you have in the ecosystem is clubs and teams. So, these are professional clubs who are competing in various leagues and competitions. But also, of course, national teams. Fourth layer would be athletes. Within there you've got professional athletes who compete at the highest level. But of course, maybe even more importantly, also the grassroots level, which are the amateur athletes.
"If you go to the next levels, you have event organizers. So often there are event management companies involved. Also host cities are a player in that ecosystem for large events. Another level would be sponsors and advertisers, where, basically, very often, you will find the investment in sports through the sponsorships. And then there are broadcasters and media rights. These are television networks, streaming platforms, media outlets etc.
"And then you've got the fans and spectators, who are another big group in the ecosystem, and then the last two would be government and regulatory bodies. So, for example, national governments often play an important role in the sport ecosystem, also via their financing and support, but also organizations like WADA, who are the anti-doping agency, or CAS, which is the Court of Arbitration for Sport.
"And then lastly, you've also got agents and managers playing a role there. All in all, it's a very interconnected ecosystem, especially I think in the topic of today's discussion around loyalty. It's interesting to think about what kind of fans and followers and kind of individual consumers are in connection to these kinds of layers, and how can you come up with compelling propositions there."
(5:12) As mentioned, there's lots of different stakeholders at different levels, and the ecosystem is interconnected. Are there any common challenges that you can draw out that all of these different stakeholders are facing?
Gabi: "So maybe I can start before Philip shares lots and lots of examples and experience as well dealing with a lot of the sport bodies around the world. The two key topics that I see coming across a lot is, of course, attracting income via sponsorship and media rights. It doesn't matter who I speak to, it's a topic that always comes up. It's always a challenge for a lot of the sports bodies. And then the second part, which is a bit linked to that, is the ability to reach the younger generation, especially because of their different media consumption patterns. So of course, there's tons and different kind of topics that will come up for all these examples that I mentioned previously, but those probably will be two major ones that I often see coming across."
Philip: "I think the main thing is the recognition that they're incredibly complex organizations. So, a major sports club would have numerous divisions covering ticketing, food and beverage, they'd have a merchandise team, people who look after the stadium, all the hospitality, sponsorships, media, they might have an Academy for teaching junior sport. They'll be doing some grassroots investment. They've got the memberships, transport for fans for away games and more. Compared to the average company, they're way more complex and have got so much more going on, and they never really know which way their fortunes are going, because that internal team can be doing everything perfectly, and yet the team is losing and so the amount of money that they get coming in for ticket sales or for media or for future seasons drops away. There's a lot that I think they need to take into account in planning what their future is going to be."
(7:24) Gabi, coming back to one of the challenges that you mentioned there, that I know you're very interested in, what are the specific problems around the current media landscape and the changing consumption habits, and how is that impacting sport?
Gabi: "I will give some examples, basically, kind of to paint the picture there a little bit. But if you take a step back, kind of what most sports organizations are dealing with, and especially also the larger ones as well, there's a fragmentation of viewership. With the rise of the streaming platforms, you see that audiences are increasingly spread across multiple channels, so it becomes much harder for traditional broadcasters to capture the large and unified audiences compared to what it used to be. So nowadays, with this fragmentation, you would have linear TV, these are companies like ESPN or Fox, you got streaming exclusive partners, which could be YouTube or Apple doing kind of a specific event via their kind of channels. There are streaming bundles, there's direct from leagues platforms like mlb.tv or like nba.tv and then, of course, you've got the second screens like TikTok or instar or snap, who are also starting to broadcast particular matches or content kind of in there. So, it becomes much more fragmented than what the sports organizations were used to dealing with. In light of that, they also see a declining traditional TV viewership, because, especially the younger generations, they prefer on demand mobile content and so that starts affecting the advertising revenues for the broadcasters.
"Then you'll also see topic of piracy in that space. So basically, a lot of people are consuming it via less formal kind of channels, in that sense. So, the ease of accessing illegal streams undermines the legitimate broadcaster’s revenue potential in there.
"All of that paints quite a complicated media landscape for them. And if I give you a numeric example, if you think about people in their 50s, 60s, they are probably worth about 1,000 euros per year for when it comes to sports media distribution. Then slightly younger, 30 to 40, probably they sit now at around 800 euros per year of what they represent in media distribution value. But then the younger ones are going to 700 euros and often quite far below. If you look at the Serie A as an example in the Italian Football League, all in all, it basically means that series lost about 304 million euros per season in the latest cycle. And of course, that financial shortfall creates all kind of challenges for the clubs associated so it's an example of where it starts hurting. And probably the main way to keep the attention or get the attention of the sports administrators is to follow the money in that part, because that's where usually it affects their ability to run their clubs or their organizations."
(9:13) Given this whole changing media consumption, does it mean that there's a whole untapped fan base that sport is now failing to engage and therefore monetize?
Philip: "I think there definitely is, that's what we refer to as hidden fans. And it's not just a modern phenomenon. It's something that has always existed, ever since television was invented. Actually, clubs are doing a better and better job of making it easier and easier for fans all around the world to engage with them, but there is a lot of fans who don't go to the games. They might buy merchandise, but there's no record of them buying that merchandise. They watch the games, but they might do it at the pub. So, they don't have any sort of subscription. There's no tracking of it. They go to work on a Monday and talk obsessively about how good or bad the game was, and so on and so forth. So in our estimates, that could be as much as 60 to 80% of the total fan base is completely hidden by a club, and that means that all the different opportunities for the club to drive engagement with that base and to monetize them, but also to recognize them and make them feel closer to the club don't exist.
"From our perspective, there's enormous opportunity there that would be better for the clubs, but also better for the fans as well. And it's all about making it an easy and rewarding experience that they're attracted to enough to take the step of doing that formal engagement."
(12:08) Is that why sport is perfectly suited to loyalty?
Gabi: "I think if you if you look at the comparison to the frequent flyer program model, which has probably been the most successful in that particular space and has created enormous valuations for the airlines who own those loyalty programs, Qantas in kind of Philip's backyard, of course, is a great example. But also, if you look at all the US-based carriers, also European carriers, very often, their valuations are in the millions, even billions of dollars. And if you take a look at their model and basically unpack that, I think there's a very great blueprint for sports organizations to write on that part.
"If you look at an FFP, the key thing why that's so profitable is that on one hand side, they've got accrual partners where people can earn those miles. And basically, those accrual partners buy the miles from the airline at a relatively high cost per mile or per point, and then when those miles are being redeemed, there is a very high perceived value of the reward, i.e. the perishable airline seat, but the actual cost for the airline is much lower. So one of the big kind of secrets or tricks in these FFP models is like, you sell it at a much higher cost per point, and then when the member exchanges that for the reward, it's actually a much lower cost to you, but it has a very high perceived value.
"If you draw that parallel to the sports world, basically you would have to find a lot of accrual partners who are willing to buy a sports-related currency, either a currency linked to a club or a federation, or something like IOC level, maybe even in there. But then, when they use these sport-related points, you need to be able to offer them something which is relatively low cost to you as a program operator, but has got very high perceived value, so access to games, money can buy type experiences. There's a whole range of examples that we'll unpack a little bit more so, but the ecosystem of an FFP model is perfectly replicable in the sports world."
Philip: "I think one of the unique aspects of a sports team is a loyalty program is not needed to generate loyalty. The fans are already loyal. Some of them are obsessively loyal. And so, unlike an airline, where the airlines have to keep working very, very hard to maintain that share of wallet and stimulate the base to travel more, the sports teams kind of already have that. And actually, for many of the bigger sports teams, they don't have enough tickets to sell to each game, and so there is a slightly different dynamic there. So, I think the big opportunity for a loyalty program is to provide that better recognition and reward fans and make them feel like they do have that deeper connection in the same way that a good quality loyalty program would build emotional engagement between the member and the brand. It's that establishment of that formalized two-way relationship is where the big opportunity is.
"Now to Gabi's point and the frequent flyer model. I tend to agree. I think there is definitely some parallels there. You've got the club, you've got the obsessed fan base, you've then got sponsors, but you've also got other companies who would be interested in being connected to the club, that can't afford sponsorship, who might be happy to be earn partners. There's definitely the opportunity to build out that engaged ecosystem of companies that are buying points to give to the fans.
"Then on the other side, you've got all the money can't buy experiences that a club would be able to provide to the fans that they can redeem those points on as well. I think it's a really fascinating model."
(15:55) There's obviously a lot of opportunity there. Philip, what's the current situation when it comes to sport and loyalty, is the sports industry tapping into the benefits loyalty can bring, or you've touched on it already, is there so much more that can happen to drive engagement?
Philip: "They're barely scratching the surface at the moment. I think traditionally, teams have focused much more on memberships that provide fans with access to games, dedicated seating, discount hospitality packages. So, it's more that subscription loyalty program strategy, but they can definitely do a lot more to engage fans who can't or don't want to attend the live games. There are enormous amounts of fans out there who actually don't want to go to a game. They're obsessed about and would live and die for the team, but the idea of going to a game actually isn't that interesting to them. They might go to one or two, or they just can't get tickets, and all the tickets are too expensive, so they don't bother. So, building out a loyalty program that provides fans with a lot of other ways that they can engage in a way that is meaningful to them, is definitely something that clubs could do a lot better at."
Gabi: "I would build on Philip's input there. It also depends a little, if you think about a club, they need to do their kind of strategies, and they are only scratching the surface right now, but you see some interesting propositions coming. If you think about a national federation, the Football Federation, their national team only plays X number of times per year. So how do you basically keep the engagement going in between those kinds of games? If you think about an IOC when it's every two years when there's a winter games and a summer Olympics, you get massive attention during these kinds of games, but then how do you keep that ongoing engagement? There are different kind of propositions you can build on there. So, it also depends a little bit on how you design, what you design for whom, in that sense, on the proposition, because they've got different needs.
"I think in general, there are lots of opportunities. You see some emerging loyalty programs, but in terms of the sponsorship synergies or the data utilization, it's quite often still a bit ad hoc. It's not kind of a master plan embedded in a larger strategy of the organization."
Philip: “At a league level, the next level up, we're not really seeing anything at all, and I feel that's quite disappointing, because some of the leagues, particularly bigger leagues, could play a critical role in helping clubs to roll out comprehensive loyalty strategies. Loyalty is complex, it requires technology, it requires expertise, and you need to get the proper design. You need the right commercial model; you need operational excellence. So where we see a big opportunity is a league engaging a loyalty consultancy or company to design out a program, bring in the technology and enable that to be cascaded down to the teams, so that the teams can get access to something with shared cost and maybe a centralized operations team to run it for them, so the whole league can actually have a good quality design loyalty program for their club with a fraction of the cost of what it would be if they tried to design it out themselves."
(19:17) I guess a big part of that is knowing what excites fans and what actually drives engagement. So, Gabi, how do you see that playing it? What are the trends that you're seeing?
Gabi: "I just came back from the Paris Games at the opening ceremony in my other kind of hat, as President of the International Korfball Federation. I had a chance to speak with a lot of the presidents of other International Federations. And exactly to Phil's point, how can you maybe do things collectively together, for big impact, because you might not have the individual resources available between each of the IFs. But if you bundle your kind of efforts, you can do much bigger things, and also you might have got a couple of million followers there, and another Federation is kind of there, so the scale can be enormous, right?
"I think it comes down to what are these fans kind of looking for. It varies a little bit. Is it the exclusive content and behind the scenes access? There are some notable examples on fan tokenization, NFTs, what people can do with it. But also, what we see is a lot of interest on how can you bring the physical sport world together with the eSports world? The esports world is also massively growing. Saudi Arabia just signed an agreement with the IOC for the next 12 years to have the Olympic esport games in Saudi and they're expecting that to turn into a $13 billion kind of industry just for the Kingdom of Saudi Arabia alone. You see massive groups of youngsters also in that kind of space. When you think about the rewards and the content. The sky's the limit actually."
(21:03) Coming back to what you were saying earlier about the airline loyalty program side of things. What can sport learn from those frequent flyer programs, and how can they bring that success to the fore for the good of the sporting community?
Gabi: "The internal tagline that we're using when we talk about how we see ourselves helping and supporting sports organizations, we call it from FFP to FEP: from frequent flyer programs to fan engagement programs.
"Where we think that sport communities can learn best is to replicate a lot of the great thinking on how you set up such an ecosystem? How do you manage it? How do you commercialize it? It starts by creating a big idea. It doesn't matter if it's a club or a federation or an IF, basically whatever the audience is in there. So, you create a big idea with a high-level engagement vision. Then based on that, you define the blueprint of your program, which should include all the key elements for such a fan engagement proposition. Program concept, program organization, business case. And then when you've done that, you validate that blueprint with all the stakeholders involved in your FEP, including the sponsors, the fans, and especially also the accrual partners, if you think about kind of a point space, because they will have to fund the currency.
"On the redemption side, you need to make sure you've got a very robust and creative offering in place which the members can spend their currency on. Probably the question is, do you go alone as an organization, or do you go together with a group of organizations? And then there's kind of people like us out there to help. There's so much knowledge in there, and you don't need to reinvent the wheel, right? That's kind of, I think, one of the key things for these sports organizations, because loyalty is complex, and therefore you need to make sure you don't make it more complex than it needs to be."
(23:12) Philip, what would be the right loyalty strategy?
Philip: "I definitely would always lean towards the club or the league owning the program so that they've got full control. I think the likes of socios.com has been attractive to a lot of clubs because it's very much a plug and play solution, and it provides some instant revenue for the club without them having to do anything. But certainly, the opportunity, the monetization and having control of that fan experience is going to work much better if they do own the program.
"So, I think if it's a big club, they should definitely be going their own. They're going to have the scale of fans to be able to layer a loyalty program over that very effectively. If it is smaller clubs, then, as I was talking about earlier, getting the league to build out the capabilities which can then cascade down to individual clubs would be a great way to do it, and it save them a lot of cost. But also building up those partnership networks could work across multiple teams and provide fans with lots of opportunities to earn points or currency or credits, whatever it might be to then use with their specific club."
(24:26) So where does loyalty come into play in overcoming the challenge of the changing media kind of situation?
Gabi: "I think there's an enormous monetization opportunity there, like if we draw back to the parallel to the ecosystem of how frequent flyer programs are being run, if you would replicate setups like that, you can create enormous income for the entities, but you need to design it properly. You need to think it through carefully on who those accrual partners would be for your fan base, what kind of brands would like to get in touch with your community. We tend to refer to this as Brands 2 Communities, which means if you understand the DNA of your community, then you understand what kind of brands would like to get their content or stories or offers in front of that particular community.
"Of course, you've got existing sponsors of clubs or federations or IFs out there, but you can also basically extend that to the accrual partnership network very easily. So I think the with the media income under pressure, loyalty offers a great opportunity for sports bodies to generate new income, and if designed well, also these media partners that need a helping hand in there can also find their way within such a loyalty ecosystem to get their media rights and media opportunities much better monetized in a very fragmented kind of landscape. So that's how I see the opportunity for large sports organizations."
(25:52) Wrapping up a lot of what we've already talked about here, what's the member value in this new loyalty led world of sport?
Gabi: "I think to the earlier discussion, fans are deeply in love with their sport or their club, right? What they're looking for is personalization, recognition if they've been a lifelong fan, to being part of the community. So really, that sense of belonging, but also having some kind of an influence or access to certain kinds of content in the recognition element, the exclusive access special rewards are what I think the fans are looking for, in this case, the members.
"The flip side of the what the clubs or the federations are looking for comes from the fact that a lot of these people in sports, would love, basically, for people to support their club or their sport, but they also are very passionate about getting people to move in general, because we see a lot of data out there of the world getting more obese, younger generations being less involved in clubs and organized sport. The true enemy is not moving and not being involved in sport. Yes, you try to do your best for your federation, your club, to get people involved in there and highly competitive on the pitches, as Philip mentioned. But basically, the much, much bigger opportunity that people are deeply passionate about, I've seen, is how you get people connected to sport, and I think that's where, integral loyalty platform or ecosystems can really play a role."
(27:24) So for sporting organizations, where do they start? What challenges do you think they should aim to solve, first through loyalty programs?
Philip: "I definitely think that they should start with better recognition of their long-term fans. If they try to do anything else, then they'll get those long-term fans offside. But it's very easy to do it. One of the clubs that we're working with identified when a fan who was having their birthday was going to be at a club, going to be at a game, and they actually delivered a cake to them during half time, right? There are a lot of very small, quite low-cost things you can do to really make someone provide them with an experience they're going to remember the rest of their life.
"I think providing more opportunities to for fans to influence hard decisions would be a really great thing. Clubs generally do not like this. They don't want to be giving control over to the fans, but even giving them some say on a few different things, I think would definitely appeal to them. Then, it's all about reaching out to that hidden fan base and engaging them as best as possible, and then providing better sponsor promotion. Sponsors are paying a lot of money for the right to put their brand on the team jersey, and anything that can be done in order to better support sponsors, particularly through a loyalty program stimulating fans to go and spend with the sponsors and be able to track that is going to be hugely beneficial to the sponsor in demonstrating the value they're getting from the sponsorship, as well as for the club, in getting the sponsor to sign up for the next."
(29:14) Gabi, how should sports organizations move forward?
Gabi: "I think the old saying of go slow in order to go fast is also valid here, because you do basically get a lot more value if you think as a sports organization, "Okay, what is kind of our plan? What do we want to kind of build in there?" And then, create your big idea, create a program blueprint, validate it, then kind of launch it. I think that would be the right approach in there.
"On a practical level, the examples that Philip referred to, it’s true that sponsors, you can almost draw a parallel between them and the number one funding partner in airline loyalty programs, which are co-brand credit card offerings. But if you see how difficult it is even for that organization to communicate directly via the airline's database. Basically, you can see similarities there between the sponsor community with a sports organization on how difficult it is for them to get in touch with the fans directly, so facilitating that direct engagement in that ecosystem, whereas airlines need to almost think like becoming marketing machines for their partners, sports organizations also have that opportunity, and quite often it's not well enough thought through by a sponsor, and how can you then leverage and engage with that community kind of in there, right? So that's, that's one thing in the design.
"I think in the next step, what I would encourage sports organizations to think about and understand and learn how valuable these loyalty entities could become, just in their own right, as an additional asset for a sports organization. And there's some really good examples out there, and that's kind of what I would encourage them to do as a next step."
(30:57) Coming back to the bold claim that we made at the outset of the discussion, how can loyalty be the savior of sport?
Gabi: "I do think this from FFP to FEP idea might be the proposition here, right? So how can you go from the frequent flyer program thinking to a fan engagement program thinking in there? The opportunity is there for the first number of sports organizations to create multi billion-dollar valuations via such an entity. But the airlines also didn't get that overnight, right? They basically had to build it, the technology, the thinking, the fan base, the offering kind of in there. So, while there are learnings to be taken in there, and plenty of support from companies such as ourselves, Loylogic and Loyalty and Reward Co, it will not happen as a miracle overnight, right? This is kind of a long-term engagement, and therefore you also need to think about what you want to do. It's not like a marketing gimmick where you just kind of do something and then basically, the dollars will fly in. That's not how it works. It needs to be an integral part of the club's or the Federation's strategy. There will be early movers in there that will take the time to think about it in that way, and there will be more tactical, ad hoc type initiatives, and I think the first group will be more successful with that."
Philip: I agree. I think the reality is that a lot of sports clubs and even leagues are not as lucrative and cashed up as what fans and people might perceive them to be. Certainly, there is a small number of clubs that are doing incredibly well, but they tend to be in the minority. Most clubs are trying to get together enough revenue and most of that goes into buying new players and putting on games. Any opportunity for a club to be able to build out a sizable new revenue stream should be highly attractive to them.
"And as per Gabi's talk of the frequent flyer program or the fan engagement program using the points earn and redemption economics, there's a really great opportunity there, but it does need to be symbiotic. It's not just enough to say, great, let's monetize our highly loyal fan base. It needs to be done in a way that provides fans with desirable, motivating value, so that they're getting something out of it, and the club is also getting something out of it. And
Really, the key to that is access. That's what the fans really want. They want access to players. They want access to the games. They want access to limited edition merchandise value offers, things that are really going to get them excited about engaging with that program, and then you've got a winning, successful recipe there."
