As The Wall Street Journal notes, amidst the negativity created by the Sports Authority and Sports Chalet filing for bankruptcy, many sporting goods companies are on the verge of loosing their steam. One of the main reasons cited by a survey from the Sports & Fitness Association suggests that there is no decline in the people’s participation in sports, but they have spent less money on team sports since 2013. It has also revealed that though people are working out more, they might be working out differently than they used to, i.e., they are failing to see a need for new sporting equipment and loyalty for sporting goods is declining.
Of course, this is not to intend that all sports goods manufacturers are doing badly. But, more or less, it’s a warning alarm for the entire industry. Besides, apart from the recent lack of enthusiasm of the people as far as the buying of sporting goods is concerned, sporting goods manufacturers have always faced challenges. Most of those hurdles could be overcome, though, with the help of big data. As we know, buying data from market research companies is a costly affair. Plus, it’s an extremely passive way of getting that data as it scores zero when comes to customer engagement. The sports industry needs a way out of this, which will give it customer data along with a tint of customer engagement. The solution that brings the industry closets to these aims is a well-designed and executed customer loyalty program. Now, we will see how loyalty for sporting goods helps manufacturers in particular with the challenges they’re facing.
Unlike consumer packaged goods, the demand of sporting goods isn’t constant throughout the year. As spring gets in, demand for baseball equipment soars; in fall, soccer gear gathers all the demand. Until now manufacturers have been battling with these demand fluctuations by adjusting their product development cycle accordingly. But due to the unpredictable weather, which is the outcome of the very real problem of global warming, it has become impossible for the manufacturers to stay in line with that streamlined product development cycle. John McKenna, president of McKenna Logistics, a Canada-based third-party logistics (3PL) provider that handles athletic products, throws a light on this pain when he says, “A few years ago, spring arrived early and bikes started selling in March, instead of later in the year as usual,” says McKenna. Those kinds of unexpected changes mean we have to be dynamic with labor, and our walls have to be elastic to handle sudden product influxes.” Thus you need a realistic and predictable barometer to decide your production plan.
Through loyalty for sporting goods data, manufacturers are able to peep into the behavioral and preferential traits of customers. They can monitor the exact demand of a particular product in a particular season. It’s easy to judge on the basis of sales happen at multiple geographical demographics. In the wake of globalization, where countries’ boundaries have become porous, this is a must if they aspire to become a global genius of sports goods. Similarly, it helps their retail partners who have always struggled in forecasting their sales. They can be saved from the horror of losing out sales due to lack of inventory if demand surges. Obviously, as production has been done by taking care of demand based on the scientific data, they don’t have to be worried about the dead inventory. Remember that if manufacturers fail to get rid of dead inventory, they as well as retailers will have to sell those products for peanuts. Revenue can suffer a lot due to this.
Much like the electronics industry, most of the sporting goods products are manufactured in China or Taiwan with the belief that the low labor cost will make the manufacturing sustainable. But the local businesses have been learning the trade quickly to pose a serious competition. This is snatching the safety net of China away from many manufacturers.
Likewise, due to lack of business intelligence in the form of customer data, many manufacturers are suffering with dead inventory. Along with this, rising material costs, ascending warehousing and store costs, etc. are all eroding profit margins. The only option that is left for manufacturers is to cut the cost at all possible avenues. The other way is to up the sale to compensate the loss.
As the dynamism of loyalty makes people to stay with you, it ups the customer retention rate. And a 2% increase in customer retention has the same effect as decreasing cost by 10%. Also, increasing customer retention rate by 5% increases profit by 25 to 95%. The financial health of the manufacturers, therefore, can be safeguarded by a loyalty program. In the heat of decreasing margin, it becomes ultra-important!
This problem of lack of direct connection with the end customers due to the intricate web of retailers, suppliers, distributors and vendors isn’t a unique one. Like all manufacturers, sports goods manufacturers have to deal with it. But the problem gets accentuated with them due to the seasonality, as discussed earlier. Whether you are a manufacturer of football, baseball, soccer, basketball, or hockey goods, all seasons come to an end. And with this, there is a danger of ending customer engagement with the manufacturer as well. There is not much difference between decreased engagement and decreased sales.
A loyalty program serves as an effective antidote to disengagement. When you create a separate widget for your loyalty program on your website, with a promise of lucrative rewards, your customers at least have a reason to come to your website and share their contact details. You can keep fueling their excitement throughout the year by sending them the interesting information. Now, it’s not a rule that you should talk about your loyalty program all the time through this communication. You can talk about the incentives that your loyalty program offers. But just to kill the monotonality, which is the scourge of this kind of communication, you should also talk about the interesting happenings in the world of sports. You can have a tie up with a reputed sports magazine. Apart from avoiding the fall of interest levels, it makes the whole loyalty program highly desirable. It’s enough to put you in a different compared to your competitors.
The reason why loyalty programs, as discussed above, are able to tackle most of the origins of sports goods manufacturers’ headaches lie in their nature. Success, especially in the sports industry, always needs understanding—and managing—the ebb and flow of market demand and perpetual consumer engagement. And loyalty programs deliver immaculately, accurately and scientifically on these main fronts. When you look at it under the light of the speculations of the industry’s growth with a CAGR of 3.4% over 2015-2020 due to reasons such as enhanced disposable income, governments promoting sports activities and encouraging sports participation, the rising number of health-conscious people, loyalty programs shine with unprecedented importance.