Shared Customers, Strategy Key to Allegiant, MiLB Partnership
BY ADAM GROSSMAN
One way that sports sponsorships differ from traditional advertising is that they can create a two-way beneficial relationship where shared customers can lead to a shared strategy from which both the buyer and seller directly benefit through a partnership. Allegiant’s new credit card partnership with Minor League Baseball (MiLB) is an example of how this occurs.
Allegiant was an airline founded in 1997 that struggled at first to gain traction. In the early 2000s its senior leadership team recognized that the company “needed to be more than a 'me too' competitor” and used a form of judo strategy to achieve this goal. The core idea of judo strategy is to take a competitor’s strength and turn it into a weakness that can be used to your advantage.
That is exactly what Allegiant airlines has done to be successful. The core strategy of many larger airlines is to focus on the business traveler, to provide as many direct flights as possible from big cities, and to use hubs to connect to smaller markets. This approach enables airlines to achieve success targeting the customers and routes that can provide the most profits. Business travelers typically are less price sensitive (i.e. the priority is to get to a specific destination at a specific time over a specific price) and there are more business customers in large cities.
This is also the approach that attracts the most competition and is most replicated in the industry. Allegiant realized that it could not compete with larger, well-funded competitors using this strategy. Instead, it recognized that targeting leisure travelers in underserved cities looking for direct flights could be a profitable approach for the company even with low-cost tickets. It also realized that larger airlines would not compete for this demographic because they had committed their capital and strategic resources specifically to not target this customer. Allegiant’s positioning became a catalyst for the company to quickly become a market leader with this customer segment and to make it one of the fastest growing airlines.
This positioning has also enabled Allegiant to sell “third-party travel products, such as hotel rooms, rental cars and hotel shuttle products and show/park tickets bundled with the purchase of air transportation [emphasis added]” to this customer base. Airlines as a whole are trying to increase revenue by selling third-party products to customers. Selling these products has helped to fuel Allegiant’s rise, as the company has seen a 23.8% compound annual growth rate (CAGR) from 2005-2017 from these offerings.
Selling third-party products, however, is not unique to Allegiant. Most, if not all, of the company’s larger competitors offer these types of products, including credit cards. To continue with a comparable growth rate in the future, Allegiant needed to develop third-party products that would specifically resonate with its core customers. That is exactly where the credit card partnership with MiLB comes into play. MiLB teams’ customers are similar to Allegiant’s customers and MiLB teams’ strategies often look similar to Allegiant’s strategy.
More specifically, MiLB teams often are located in “underserved” cities and employ judo strategy to achieve to achieve their goals. In our book The Sports Strategist: Developing Leaders for a High-Performance Industry, my co-authors and I highlight the Dayton Dragons MiLB team and its approach to selling season tickets. Many major professional sports teams are focused on selling full-season ticket packages to lock-in as much revenue as possible. Dayton used a form of judo strategy by determining what games fans could attend and developing season ticket packages that fit its fans’ needs. Dayton could use this strategy in large part because it had a smaller venue and a smaller target market than major professional teams. Its positioning played a critical role in the Dragons having a 1,000+ game sellout streak that continued into the 2018 season.
This example creates the foundation for the strategic fit for an expansion of the Allegiant / MiLB partnership. The new Allegiant World Mastercard® “will enable fans to gain rewards specific to their favorite MiLB teams and local communities.” These rewards should uniquely resonate with Allegiant’s customer base of leisure travelers that want direct flights and entertainment options for underserved cities. This is not a specific reward that necessarily makes sense for larger airlines or larger sports leagues to offer because it will not resonate as well with their customers.
MiLB can potentially increase its fan base by providing a credit card with travel options that are specifically designed for the needs of its core customers in smaller cities. The easier it is for leisure fliers to get to MiLB ballparks through Allegiant, the more likely its fans will value its rewards (potentially including tickets, merchandise, and concessions) and increase engagement with its teams. Both Allegiant and MiLB can work together as partners to leverage each other’s assets to grow revenue with a shared customer base and strategy.
Recognizing fit to maximize partnership success is at the core of B6A’s Corporate Asset Valuation Model (CAV) analysis. In particular, we focus on how specific relationships can generate revenue growth for specific companies given their specific needs. The Allegiant / MiLB example highlights why we take this approach and recommend that buyers and sellers of sports sponsorship should use a similar form of analysis.