💵 Upside Analysis: "Premium" is the New Buzz Word Among Some Sports Tech Startups
We have been working with sports tech startups for the past 10 years. Now in the past few years we have seen the emergence of a new “buzz” word among some sports tech startups. This new buzz word is “Premium”. In this analysis we will discuss this in greater details and talk about the implications and where some startups should be a bit careful with such strategy especially as they are trying to sign new team customers.
Claiming a Premium strategy is just a way for startups to justify their high pricing strategy to help them reach their top line
Before we get into the implications of having a “premium” strategy, let’s take a step back and think about why some sports tech startups are now saying to teams that they are “premium” meaning that they have a “premium” pricing strategy. The most obvious reason is that most of the time they are trying to justify their high price point when selling their product(s) to teams.
Now I have seen startups charging at least $100k-$150k per year (without any monthly payment options) without any lower pricing options. Now let me tell you this: For teams that have an annual sports tech performance budget of $100k-$200k, which is very common, having a startup charge them $100k-$150k is a major problem. Not to mention that some sports tech startups sometimes charge additional fees to teams to customize their software. That does not fly with some teams, as it should be.
Now could some of those startups charge less or offer lower price points? I believe that most of the time they can. They know what their cost is and what margin they have, so why can’t they charge less to try to get the customer in the door? I will let you answer that question. The answer is pretty obvious. They probably have a top line revenue in mind that they are trying to hit. So by charging a premium pricing it could be one of the ways for them to reach their top line. It it ok sometimes to have a premium pricing strategy but without offering multiple price points is a major mistake in my opinion.
Being premium could also mean less customers and higher turnover and less revenue long term
Now the problem of having a premium pricing strategy without any lower pricing options could also mean initially less customers in the short term, but also a higher churn rate long term.
I want to be clear here: The mistake here is to not offer multiple pricing options. It is ok to have higher pricing points but you have to offer multiple pricing option and options for teams to pay monthly as well as annually. Flexibility is key here.
Having a premium pricing strategy could label those startups as “expensive” among elite sports teams
The word goes around very quickly among pro teams. Practitioners of teams talk among each other about vendors, new trends..so let me tell you this. If you are a new startup and are charging a high price point to teams without multiple pricing options the word could go around very quickly among teams. So to all the startups out there sometimes it is ok to charge a little bit less, get the customer in the door, than trying to charge a premium to teams. It will go a long way because those startups could end up having more customers down the road.
As a startup owner would you rather have 50 customers that you charge $40,000 for your product ($2M in total revenue) or 10 customers that you charge $100,000 ($1M in total revenue)? Sometimes you have to pick your battle especially if you are a new vendor in the space.
For some startups, offering a premium pricing does not always mean offering high quality products and excellent customer service
The other issue that I have seen sometimes with some sports tech startups charging a premium to teams is that sometimes they do not offer a high quality product, top customer service and charge teams extra fees on top to customize the product.
Let’s face it! What teams should expect if they are going to get charged a premium is an excellent product, top customer service…anything less than that would turn off any teams. So to those startups charging a premium please make sure to hit a home run in all the other areas (product, customer support, maintenance, etc..). Otherwise this could backfire.
Here is what those sports tech startups should focus on:
Excellent Product:
Offer a product or service that delivers exceptional quality and solves real problems for customers.
Continuously innovate and refine the product to stay ahead of competitors.
Ensure the product is reliable, user-friendly, and provides tangible value to users.
Customer Support:
Provide responsive, empathetic, and efficient customer service that prioritizes resolving customer concerns promptly.
Use multiple channels (e.g., phone, email, chat, social media) to make support accessible.
Build strong relationships with customers through regular engagement and proactive communication.
Flexible Pricing (if possible):
Develop pricing models that accommodate a range of customer budgets and needs, such as tiered plans, pay-as-you-go, or discounts for long-term commitments.
Regularly assess market trends and customer feedback to adjust pricing strategies.
Emphasize the value customers receive relative to the cost, ensuring transparency and fairness.
Bottom line: Having a “premium” pricing strategy can be a double edge sword for many sports tech startups. It is ok to charge a premium sometimes but those sports tech startups need to offer an excellent product, flexible pricing, and top customer service experience. We expect more sports tech startups to adopt a “premium strategy” in the coming years as a way to maximize their top line. My advice to those startups is this: Make sure to offer the red carpet treatment to teams because if you don’t this could impact you long term.
If you are a startups looking to get traction with pro teams, raise money, or get guidance on your product, feel free to contact me at julien@upsideglobal.co
Best,
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