Announcement about Stratelysis posts

Hello everyone,

Thank you for visiting my Stratelysis blog.

The situation of some of the brands I mention on Stratelysis have changed over the past seven months. Some of these case studies may not be actionable at this moment in time. Unfortunately, I will not be updating Stratelysis with new case studies on existing or different topics. It is my hope the case studies on this site will be good references for your business and/or functional strategies.

Best wishes for a strong 2010.

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Case Study #34: Local Motors Takes a Different Spin to Sustainably Design, Produce and Sell Cars

The global automotive and light duty truck industry fundamentally suffers from two things: Contracting demand and production overcapacity. It will take some time for product demand to be in equilibrium with production rates: “The sector as a whole is still way too big and is being protected from the market forces that should bring it back into line. Capacity in the global auto industry was 20% more than demand during the good times, when sales were rising year after year. Sales have slumped during the credit crisis and the resulting economic downturn, and yet most plants remain open, if partly idled.” (McGrath, Steve. “Large Parts of Auto Industry Should be Scrapped”. Wall Street Journal, November 25, 2009). McGrath wants manufacturers to stop building new automobiles and light duty trucks in the plants and consumers to start buying existing automobiles and light duty trucks on the lots. A demand-driven model for plant operations can optimize efficiencies. But, if the global demand for automobiles and light trucks are down, why are niche automotive brands, such as Tesla Motors, Fisker Karma and Local Motors, entering such a contracted, saturated marketplace?

Tesla Motors and Fisker Karma are differentiated from the major automotive and lighty duty truck manufacturers in terms of the core product offering. However, Local Motors is differentiated from the major automotive and light duty truck manufacturers in terms of the core service offering. John B. Rogers, Jr., President, CEO and Co-Founder of Local Motors, takes a different spin to automotive design, production and distribution:

• Crowdsourcing: Market research is a critical due diligence activity in the front-end of the product development process. The sample sizes vary by research design, but they cannot account for the full market size because of market study limitations. Rogers does not limit his scope to his target audiences. Instead, he calls for designers to submit sketches of their dream cars. There are currently 4,000 active contributors to the site, uploading drawings, commenting on each others' work, and voting on designs (Jana, Reena. “Local Motors: A New Kind of Car Company”. Businessweek, November 3, 2009). A sample size of 4,000 contributors is very robust to make product determinations. Based on the analysis of design contributions, Rogers learns that off-road vehicles present an underserved niche market (Jana). Check out the final result of the design contributions: Rally Fighter.

However, do all 4,000 contributors represent the underserved needs and wants of car buyers? Are they speaking from the voice of the car buyer or their own voice? The off-road, body-on-frame sport utility industry has been shrinking since 2005 as once SUV loyal customers migrate to more fuel-efficient vehicle, uni-body crossover vehicles. SUV loyal customers like the duality of on-road and off-road performance. For example, the Toyota FJ Cruiser, Nissan X-terra and the Jeep Grand Cherokee can perform well in off-road and on-road environments. I love the Rally Fighter, but if that high ground clearance is standard, some target customers may not trade-off on-road functionality for off-road performance. Local Motors may want to size the demand of the Rally Fighter through formal, quantitative studies that are targeted to owners of FJ Cruisers, X-terras and Cherokees. The results may help refine the micro-production forecasts.

• Micro-production: According to Jana, interested buyers can pay $99 for a place in line to purchase it. When production starts in June 2010, buyers will be invited to the company's headquarters in Wareham, Massachusetts to help build the car. The price tag is $50,000. A single Local Motors micro-factory has the capacity to sell 2,000 units per year at an average price of $40,000. Since production starts in June 2010, the micro-factory will have the ability to do 50% of the total build potential, 1,000 units, for the remainder of 2010. Let’s say Local Motors hits 100% of the total build potential. Assuming that one customer saves a build spot for one Rally Fighter, Local Motors immediately recognizes $99,000. Once the customer confirms the order, they will NOT be refunded the $99 for the place in line. When the customer’s number is called, they have to pay a $5,000 deposit to secure a build-date. Local Motors generates $5 million through the deposits. Then the customers are invited to Local Motor’s headquarters to participate in the build of their Rally Fighter. Local Motors generates $40 million through the delivery of the units. Between June 2010 and December 2010, Local Motors can generate $45 million through three revenue streams: line reservation, build date security deposit and vehicle price. Through this entire process, customers are engaged in an integrated vehicle purchase experience that is differentiated from prior vehicle purchase experiences.

While the micro-factory, collaborative build process is very unique, it is fundamentally inefficient. Local Motors can raise the price point to capture the “premium on production experience” and offset inefficiencies with the build process, however it is challenging to command anything higher given that the company is a new entrant to a highly competitive space. Local Motors must review the submitted renderings, study target markets and think about other demand-based models it can introduce to the market on its own OR with a partner. This will help justify an uptick in its production forecast without fully sacrificing the micro-factory, collaborative build process. In the interim, Local Motors must make sure every, single detail of the micro-factory, collaborative build process is aligned with their brand image. The company must immediately think about service model configuration. Customer expectations rise when they are allowed to be part of a product build. They will expect the same treatment when their product needs servicing. Will the customers return to the micro-factory to get servicing done? Or will they have to a Local Motors service partner that has to be trained on the Local Motors customer experience?

No start-up will have all of the answers right away. Local Motors is on a very exciting path to revolutionize the way people experience vehicle purchasing. A formal market research study on the Rally Fighter and the alignment of the micro-factory, collaborative build process with aftermarket services will be immediate priorities for Local Motors as it roars its engines to life in 2010.

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Case Study #33: Oprah Winfrey’s Partnership with Discovery Communications Represents Good Strategic Integration

Over the years, I receive a lot of good advice about what to do in Chicago, IL:

“Live downtown.”
“Wear multiple layers.”
“Eat the pizza.”
“Go to a Cubs game.”
“You gotta watch the Oprah Show live.”

I have two more years to act on the last piece of advice. A few days ago, Oprah Winfrey announces that she will end her 25-year run in the talk show business by September 2011. Daytime television will not be the same after Winfrey bids farewell to her loving fans. However, Winfrey’s decision to exit the talk show business is very “stratelytical”.

Millions of people watch Oprah’s talk show. Her show launches in syndication in 1986, averaging 6.6 million viewers in the week ending November 8 (Schechner, Sam. “Oprah Winfrey to End Her Program in 2011”.Wall Street Journal, November 19, 2009). What will these 6.6 million viewers tune into instead of Winfrey’s talk show after 2011? How will local stations replace her with equivalent content to minimize attrition from advertisers? How will advertisers reach such a large audience?

Winfrey is fundamentally deploying an inorganic strategy. According to Schechner, Winfrey will be turning her attention to her own television network OWN: The Oprah Winfrey Network. The channel is structured as a 50-50 joint venture between Winfrey and Discovery Communications.

OWN will replace its little-watched Discovery Health channel with the new offering. So, the 6.6 million viewers can breathe a sigh of relief – They can watch Winfrey on cable. The cost of switching is low for them, even if a percentage of the viewers need to be cable subscribers to watch channels on OWN. Unfortunately, local stations will still be challenged with replacement content, but can save money by not syndicating Winfrey’s premium content. Advertisers will be competing for spots on OWN. Discovery Communications will undoubtedly be able to command a premium on their rate cards for that kind of demand. It isn’t the end of the world for all of the players.

Winfrey’s company, Harpo Productions, Inc. is diversified. Its flagship product, the talk show, is the highest-rated TV talk show in history and is seen in almost every US market and in 145 countries. Winfrey’s incredible success in the talk show business space helps her expand her brand into books, movies, magazines and television show spaces. Harpo is a full-line media company, but it has an opportunity to be integrated. Since OWN will replace her current flagship, syndicated product, it can serve as the vertical integrator for her other businesses. Discovery Communications represents an excellent practice in media integration. It will not integrate OWN within its brand portfolio, but also help her integrate her non-talk show specific properties within the OWN media brand. Integration also leads to increased capabilities to measure viewership statistics, particularly engagement levels. There is already evidence of this evolving integration on Winfrey’s site.

While the syndication model is a huge revenue driver for Winfrey, it is also one that may pose some risk as television stations streamline because of adaptations in local viewership and advertising dollars. TV station owners, facing a record drop in advertising, are pushing their news crews to fill expanded schedules, allowing programmers to eliminate more costly syndicated programs such as “Dr. Phil.” In Los Angeles and San Francisco, stations are adding as much as 12 hours of news a week to schedules (Fixmer, Andy. “U.S. TV Stations Attract More Viewers With News Than ‘Seinfeld’”. Bloomberg, April 16, 2009). Winfrey viewership doesn’t really change during the recessionary period, but I imagine Winfrey prefer to align with a resource-driven, global media company than potentially lose syndication revenue from struggling local TV stations. Anticipating a risk now to mitigate its potential harmful impacts in the future is an excellent strategy.

It is already difficult to be an audience member on Winfrey’s talk show. Her exit announcement will make it that much harder to get a seat in the next few years. But, there will be other ways to interact with her brand, whether it is watching one of her movies or reading one of her books. Winfrey's partnership with Discovery Communications will help improve those interactions over time.

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Case Study #32: PUMA’S House of Brand Strategy Will Support Long-Term Business Vision

Puma is a well-respected and well-recognized global sports lifestyle brand. The company’s logo is a puma poised to pounce. According to Wikipedia, a puma is an “adaptable, generalist species” and a “capable stalk-and-ambush predator”. The word is shared by a range of companies besides the global sports lifestyle brand, ranging from automotive manufacturers to technology companies. The qualities of a puma can represent a company’s competitive spirit and ability to transcend short hardships with smart strategic actions. The puma is also a territorial and reclusive animal, characteristics that are shared with several high-end fashion brands. However, success cannot always be achieved through reclusive actions, nor can it be hunted down in the complex jungle of business opportunities. Puma’s integrated partnership and acquisition strategy enables it to sustainably grow without diminishing the brand’s equity and cannibalizing its core product line. Please click on the “Read More” hack to read a brief analysis of Puma’s partnership and acquisition strategies:

PUMA and the Alexander McQueen partnership: Alexander McQueen is a famous fashion designer who is known for the “juxtaposition between contrasting elements: fragility and strength, tradition and modernity and fluidity and severity”. His collections are distributed in over 39 countries through 194 wholesale accounts including specialty shops and department stores. The partnership with Puma is formed in 2005 and focuses on a footwear collection that conveys the physical and mental power of sports in an innovative way. This partnership can help PUMA expand its global market presence, distribution footprint and customer targets in a way that extends the brand into sports lifestyle without perplexing its core meaning. McQueen integrates unique his design capabilities with Puma’s brand equity to diversify his talents. The purpose of this partnership is to represent the PUMA brand through the powerful associations connected to athletic sports via the PUMA McQueen footwear product line.

PUMA and the Yashuhiro Mihara partnership: Yashuhiro Mihara strives to re-design sneakers. Mihara begins his shoe label, “Mihara Yasuhiro”, in 1997 and distributes the collection to 50 accounts a year later. The partnership with Puma is formed in 2000, five years before the PUMA McQueen partnership. Mihara’s core competencies in footwear design and development are aligned with PUMA’s core competencies in footwear design and development. They are also aligned on the vision of challenging the sneaker design. Specifically, Mihara’s collection with PUMA is inspired by animals and their environments in which they live. This is quite fitting for a brand represented by an animal. The purpose of this partnership is to represent the PUMA brand through the re-definition, re-vitalization and re-engineering of the sneaker via the PUMA Mihara footwear product line.

PUMA acquisition of Tretorn: Tretorn makes refined, yet simple rubber-made products. PUMA acquires Tretorn in 2001. This acquisition may not be as aligned with PUMA’s core brand, but it helps PUMA expand its global market presence, distribution footprint and customer targets. Tretorn’s brand strength in the rubber-made footwear category can help PUMA extend its brand into a recreational sports category, unlike the Mihara or McQueen partnerships which demonstrate the rawness and boldness that are generally associated with competitive sports. The purpose of this acquisition is to represent the PUMA brand as one that is functional for a recreational sports enthusiast, not one who is evoked by competitive sports footwear re-engineering and juxtaposed style elements.

PUMA acquisition of Hussein Chalayan: PUMA acquires a majority stake in Hussein Chalayan in 2008. Chalayan is highly regarded for his performance-based fashion productions. Chalayan is inspired by architectural theories, science and technology. According to PUMA, the relationship puts an emphasis on the company’s more fashion forward ranges, as it continues to post growth in its performance categories of football, motorsport, running and sailing. Growth in core categories can plateau over time, but can be maintained through retention activities at the distributor and customer level. However, innovation and diversification are essential for fashion companies in a market of transient tastes and fierce competition. The purpose PUMA’s acquisition of Chalayan is to adapt to the fashion forward market through an inorganic arrangement, rather than an organic arrangement, to penetrate a market that is on the periphery of the core brand.

PUMA is true to the associations that may stem from its logo: a puma poised to pounce. The company adapts itself to different capabilities for core and peripheral business opportunities. PUMA is a very formidable competitor in the global sports lifestyle category. However, unlike the puma animal, the company is not reclusive or territorial. Instead, PUMA strategically and sustainably “pounces“ on partnerships and acquisitions.

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Case Study #31: Oakley Targets Very Deep Pockets to Purchase Its $4,000 C Six Shades, But Can Grow Position in Eyewear Category

There’s a lot one can do with $4,000. It can be someone’s mortgage, family vacation or a down payment on a new car. Oakley thinks that one can use to cover their eyes for functional and aesthetic purposes. Last month, the manufacturer of premium sunglasses, goggles, prescription eyewear, apparel, footwear and accessories, announces that it will sell a line of $4,000 C Six shades. The move comes at a time when the $200 billion luxury-products industry, once thought recession-proof, is spiraling downward. Luxury-product sales globally are expected to fall a hefty 8% in 2009, projects a Bain & Co. study (Horovitz, Bruce. “Oakley plans line of $4,000 sunglasses”. USA Today, October 25, 2009). According to this article, About 80 layers of costly carbon fiber, a material more common to the aerospace and motor sports industries, are pressed into the frame. The ultracostly material and design make the frames more flexible and comfortable for athletes. Oakley will limit the line to 200 pairs in the next year.

Assuming Oakley sells all 200 pairs in 2010, they will generate $800,000, a fraction of the company’s multi-million dollar revenue potential. Therefore, the profitability of the C Six shades will be a blip for the company’s overall profitability for 2010. The limited volume of the C-Six shades isn’t significant enough to move Oakley’s existing positive brand equity that is carried by the rest of its product portfolio. The exclusivity of the C-Six shades may drive incremental demand that may cause Oakley to re-forecast current production levels, but the market for ultra-luxury goods will not be booming in 2010. Why is the company moving forward with the strategy?

First, Oakley doesn’t independently execute the strategy. It partners with racing specialist Crosby Composites to make the C-Six shades. Instead of laying down sheets in the complex form, Crosby and Oakley mill the frames out of solid blocks of carbon fiber, each 40 layers deep, using state-of-the-art Computer Numerically Controlled (CNC) drills spinning at 10,000 rpm for 24 hours to create a single pair (Joesph, Noah. “Oakley C Six shades: CNC milled from solid carbon fiber bullet”. Autoblog, August 28, 2009). This is a partnership of complementary assets: Oakley notices a sales decline in its core product line and does not want to dilute its brand by creating flanker products. Nor does it want to push products through global retail promotions. Oakley must diversify in a streamlined way. The motorsports industry is contracting during the recession as sponsors allocate funding in other areas of marketing, so Crosby Composites can apply its core capabilities into a new consumer product. Working with Oakley can help Crosby Composites grow and diversify its existing client portfolio.

Second, Oakley cannot stop innovating just because it is operating in a recovering global recession. The entire brand is built on product innovation and performance. Any departure from that main associative brand property will be damaging to Oakley’s business in the long-term. To maintain and grow its leadership in the eyewear category, Oakley teams up with a materials expert to co-create a product that is targeted to a very niche audience. The product costs as a proportion of the C Six shade revenue is high, but low as a proportion to the company’s overall costs and revenue. Oakley has an opportunity to use an integrated online media strategy to promote its thought leadership in innovation, design, performance and functionality based on its partnership with Crosby Composites. The interactions across these channels can be quantified and will help Oakley create two-way, sales-driving discourse for its more affordable line of products. The C-Six is intended for very deep pockets. But it can also have an expected measurable effect on the entire brand and business if the market-facing tactics are properly executed.

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Case Study #30: The Prancing Horse Named Ferrari Gallops Hard In 2008 and 2009

In downtown Chicago, the daily rumblings of heavy-to-mid range diesel engines in commercial trucks, off-highway equipment and transit buses are an expected part of the city’s urban stimulus. On rare occasions, these daily rumblings are pleasantly disrupted by the contained growl of a V8 engine that is housed in a super-premium sports car. Heads turn. People whisper: “What’s THAT car doing in MY neighborhood.” They trip over their own two feet. Okay fine - I TRIP over my own two feet. The contained growl of the V8 is drowned out by the rumblings of work being done in Chicago as the super-premium sports car quickly disappears into the urban landscape.

The Ferrari 458 Italia is an absolutely beautiful car. Ferrari’s GT models, which consist of the 458 Italia, F430 Spider, 430 Scuderia, Scuderia Spider 16M, Ferrari 599 GTB, 612 Scaglietti and Ferrari California, will most likely have a production volume of 5,800 to 6,300 units this year. According to The Auto Channel, Ferrari reports 2009 3Q revenues of 396 million euro, 54 million euros lower than 2008 3Q. It delivers 1,454 cars to clients in 2009 3Q, 4.3% less than 2008 3Q. Overall, revenues for the first nine months of 2009 total 1,287 million euro compared to 1,419million euro in the same period in 2008, while 4,680 cars were delivered to end clients, 6.9% lower than the first nine months of 2008.

Ferrari is not as recession-proof as it is perceived, but the 2009 year-to-date performance is being compared to a year that represents “results unprecedented in the entire history of the Company” (Borroz, Tony. “Ferrari Thrives, Even As Automakers Suffer” Wired, February 11, 2009). Some highlights include: production efficiencies, “One-to-One Personalization Program” for its 12-cylinder models and a 28% increase in licensing, retail and e-commerce activities.

The company dedicates tremendous resources to research and development. The return on sales reaches 17.6% in 2008, up from 15.7% in 2007. Having unprecedented business results during a recessionary period is impressive; Single digit declines in revenue and product deliveries are commendable for a super-premium brand operating in a global recession.

Product-driven brands do not need to exclusively improve the design or mechanical technicalities of existing products or build new ones to generate revenue. Both imperatives are high in cost and can be replicated by competitors. Recently, Ferrari launches the Ferrari California so it can offset sales attrition in more premium-level models in core and emerging markets, but the front-end development costs are most likely realized before the recession assuming it takes more than three years to distribute a super-premium sports car. In this case, the Ferrari California is a competent, high-performance substitute for an existing model, not a flanker model to boost incremental sales volume.

Product-driven brands are also built by integrated experiences that people have outside of the product: Ferrari markets its sports cars to an exclusive customer base, but the company’s Formula One presence creates a broad audience of fans. “Ferrari only sells approximately 7,000 vehicles a year. However, we have millions of fans following our racing activities,” says Dany Bahar, Global Sales and Brand Director at Ferrari. Race fans, though unlikely Ferrari buyers, will be a passionate audience whose participation is essential to the company’s efforts to promote its brand (Italian Car Maker Forms Stronger Customer, Fan Connection with Top-Performing Web Site – Microsoft Case Studies). The company transitions its Java-based Web site to Microsoft® Office SharePoint® Server 2007 and sees improvement in content management, enhanced user experience and higher site traffic. As racing fans interact with the Ferrari site, there are several data points that can be mined about their online behavior. Average time on different properties of the site, ranging from content views to video interaction, can yield assumptions about customer engagement. Not only do these data points help optimize interactive brand touchpoints, but they can also strengthen the brand through non-product building activities. Some of the data may even help with product-building activities. As the brand is invigorated by a large group of fans, it therefore enables the company to maintain demand and delivery levels to buying customers, regardless of economic conditions. If Ferrari doesn’t capture the feedback of its racing fans and only focuses on its micro-segment of very affluent clients, the company will have limited retention marketing tools to maintain demand and delivery levels. New customer acquisition in emerging markets, such as United Arab Emirates and China, is helpful for Ferrari’s growth outside of its core markets. Overall, a non-product driven, organic interactive strategy will help Ferrari maintain its position in core markets. A product-driven, push strategy will help Ferrari grow its position in emerging markets. For example, the touchpoint below represents the racing experience that Ferrari wants to build in its fans (organic, pull-focused) that can also be translated for its clientele (inorganic, push-focused):



Ferrari is also a good example of sustainable growth within its addressable competitive space. Most of that is stemmed from the fact that a minority of people can afford cars that are more than $100,000. Also, the limited functionality and utility in super-premium sports cars aren't mass market selling propositions. The temptation to translate the loved Ferrari brand into flanker models that are affordable to global automotive enthusiasts is resisted. The cost to long-term brand dilution and customer attrition will outweigh the short-term, low-margin sales gains in sales. In developed, yet sluggish growth economies, Ferrari's brand image can be maintained through the integrated experiences that rotate around the product. In developing, high growth economies, Ferrari's brand can be built through a product push strategy.

Equilibrium in Ferrari’s business performance will soon return – Like the contained growl of its V8 engine.

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Case Study #29: Chicago Cubs Acquisition by Ricketts Family Will Drive Local and State Level Economic Progress

It is unfortunate that Chicago does not get to host the 2016 Summer Olympic Games. One of the sources of disappointment stems from not capturing incremental economic impact and job creation from being able to host the Games. According to the “Chicago 2016 Economic Impact Analysis”, the Pre-Games (2011-2015), Games year (2016) and Post-Games year (2017-2011) would generate $22.5 billion in incremental economic impact and 315,000 jobs in incremental job creation in Illinois. Chicago would represent 61% of the incremental economic impact and 55% of the incremental job creation. It is tough not having the opportunity to achieve those metrics, but I give props to the Chicago 2016 planning committee for their hard work and relentless dedication.

Indira Gandhi, ex-prime minister of India who was assassinated 25 years ago on October 31st, 1984, said: “Have a bias toward action - let's see something happen now. You can break that big plan into small steps and take the first step right away.” While the big plan to drive incremental economic impact and job creation for Illinois via Chicago 2016 will not happen, I strongly believe that the Ricketts family acquisition of the Chicago Cubs are one of the steps to drive economic progress at local and state levels.

The price the Ricketts are paying for the Cubs is much lower than the $8.4 billion Illinois would have paid for the 2016 Summer Olympic Games. Therefore, the incremental economic impact and job creation will be significantly lower for the Ricketts acquisition than the 2016 Summer Olympic Games. The Ricketts are paying the bankrupt Tribune Company $845 million for a 95 percent stake in the team and Wrigley Field and 25 percent of the Comcast SportsNet Chicago cable channel that carries Cubs games (Sandomir, Richard. “New Owner to Improve Wrigley, and Maybe the Cubs”. New York Times, October 31, 2009). So, how is this hefty deal being financed?

Tom Ricketts father, Joe Ricketts, is the founder of TD Ameritrade. The family sells shares of the company to help finance the Cubs acquisition but still owns 90 million shares; one of Ricketts’s two brothers, Pete, and his father still sit on the board (Sandomir). The Ricketts maintain their decision-making power and manage risk by owning 90 million shares of TD Ameritrade while having controlling stake in the Cubs. Selling more shares to raise cash may relinquish control in a profitable company and unnecessarily inflate the acquisition cost for a new entity.

After raising $845 million through sales of TD Ameritrade shares, it may sound surprising to hear Tom Ricketts say: "We don't have quarterly results to worry about, or a year-end return. Our shareholders are our fans." The Ricketts are private owners of an entity and are not obligated to publicly report financial results on a quarterly or yearly basis. But, I really admire the transparency and accountability of the last line of his statement: “Our shareholders are our fans”. That commitment represents a bottoms-up approach to delivering the creation of overall value, not maximization for profit returns.

If the Ricketts are deploying a “fan-centric” approach to deliver overall value creation, one area of focus should be forecasting attendance. Here is the total attendance at Cubs games and year-over-year change (2001 to 2009):

2001: 2,779,454
2002: 2,692,071
2003: 2,962,630
2004: 3,170,184
2005: 3,099,992
2006: 3,123,215
2007: 3,252,462
2008: 3,300,200
2009: 3,168,859

(MLB Attendance Report - Chicago Cubs)

Since 2001, overall attendance increases by 14%, but in the nine seasons, there isn’t consistent year-over-year growth in attendance. This may be attributed to an overall increase in ticket prices. According to Team Marketing Report’s Fan Cost Index, which publishes data about average ticket prices for professional sports franchises, the average ticket to a Chicago Cubs game rose to $42.49 in 2008 from $28.45 in 2004, a 49 percent increase in four years, or three times the inflation rate of 16 percent during that period. The rise in prices for the Chicago White Sox and Chicago Bears also outpaces inflation (Templon, John. “High-price Chicago sports tickets will withstand downturn”, Medill Reports Chicago, October 18, 2008). The Fan Cost Index (FCI), a metric published by Team Marketing Research, measures the prices of two (2) adult average-price tickets, two (2) child average-price tickets, two (2) small draft beers, four (4) small soft drinks, four (4) regular-size hot dogs, parking for one (1) car, two (2) game programs and two (2) least expensive, adult-size adustable caps. Between 2008 and 2009, the FCI for Cubs games increases from $251.96 to $305.00, but attendance drops by 4%.To generate positive growth rates in attendance in 2010 and beyond, the Ricketts must develop a strategy to contain FCI while generating profit to wholly invest in ballpark and team expenditures.

Plans to open the Triangle Building at Clark and Waveland and re-modeling the ballpark’s bathrooms, concourses and concession stands are very “fan-centric” decisions. The Ricketts can benchmark retail business models when implementing these plans. Every touchpoint at a retail space gives customers an opportunity to interact with a brand and spend money. The Ricketts should consider doing extensive, insightful market research on Cubs fans to understand what improvements should be made at the ballpark. This is an excellent way of getting the community involved with a long-term project. The costs of re-modeling the ballpark and containing FCI will be offset by repeat purchases from a larger attendance pool. An increase in attendance rates also appeals to brands which are planning to spend dollars on events sponsorships and advertising to build awareness levels and drive sales. These activities will require headcount at various levels. More attendance at the games will also help local businesses in the neighborhood, not to mention the need of public services such as police officers and waste management. Overall, increasing attendance levels at games by reducing FCI and improving the ballpark based on “fan-centric” insights will provide incremental economic and job creation impacts.

It’s highly unlikely that the Cubs will generate even a tenth of incremental economic and job creation impacts as the 2016 Chicago Summer Olympic games. Nor does a transfer in business ownership mean that the Cubs are any closer to winning a World Series next year or five years from now. But, a family that sells several shares in a successful, publicly traded company to invest in a loved baseball team and its historical ballpark, definitely sees the “big plan” beyond their own self-interests as private owners.

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