Executive Summary
Ultimate Toronto club (UTC), a not-for-profit organization, is the third largest Ultimate club in Canada based on its market share. Jason Robinson was brought into the club in 2006, and was tasked with the challenge of increasing membership into the club, and reducing member turnover rates.
A high increase in for-profit competitors in the greater Toronto region was causing a rapid drop in UTC’s market share. This case study evaluates UTC’s position in the market, and effectiveness of strategies used by the club as well as recommendations.
Problem Statement
Competition from profit making establishments is gradually eating up Toronto Ultimate Club’s market share. While the club could grow its membership by 30 percent annually, the high membership turnover rate will undermine any progress made.
Situation Analysis
Objectives
The main objectives for Ultimate Toronto club include; growing the sport of Ultimate Frisbee in Canada, providing quality ultimate leagues and programs, and developing Ultimate players and the community (exhibit 3). Another key objective forthe Ultimate Toronto club is to grow at a healthy sustainable rate, and maintaining club membership.
Background
Ultimate Toronto club is currently the third largest Ultimate club in Canada, with membership growing by an annual rate of 30 percent, but the club is experiencing a significantly high turnover rate in membership. The club is known for its competitive nature and quality services, which attract serious Ultimate players.
For-profit companies have realized the potential in the sport, and have targeted niche markets, a consequence of which has been a reduction in market share for UTC. UTC ageing membership population offers a limited growth potential for the club in terms of revenues, and Ultimate sporting activities. UTC has recognized the need for change; for it to grow, it has to be able to attract newer and younger members.
SWOT Analysis
Strengths
Toronto Ultimate club has used a blend of recreational and competitive membership programs to boost its market position, helping the not-for profit organization attain its current third ranking in the market. The club is well known for its competitive leagues, and quality Ultimate services, which might explain the healthy and sustainable 30 percent annual growth in membership.
The Frisbee leagues form loyalty within groups, which helps secure future subscription fees, and support for future missions. Toronto Ultimate club offers year round tournaments, for instance outdoor fall, spring and summer leagues, and indoors winter leagues.
This strategy forms a basis for concrete earnings throughout the year, as compared to competitors who only offer outdoor leagues in specific seasons. UTC’s website provides members with current information about the club, and could therefore be a source for consumer satisfaction.
Weaknesses
Ultimate Toronto Club has no field of its own, which subjects the club to rental expenses for access to fields for sporting activities, not to mention the uncertainty and higher rental fees brought about by competitive bidding.
The club does not have other sporting activities, other than Ultimate Frisbee, while its competitors offer other leagues such as basketball, softball, football and soccer. The club will therefore be at a disadvantage while competing with these other clubs, since they offer more service packages.
UTC is also relies too much on volunteers, who may not offer the same services as full time staff. UTC’s full time staff is limited in number, which may seem to overstretch the current team.
Ultimate Toronto club has harsh regulations, for example penalties are imposed on teams that consistently achieve low “spirit scores”. This could de-motivate members since the regulations defeat the concept of the free spirit of the game, which could help explain the high membership turnover rate.
Opportunities
A major opportunity for Ultimate Toronto club to capitalize on is the rising numbers of minorities in Toronto, as they are under-represented within UTC. Individuals of Asian descent form almost 50 percent of visible minority population, and present opportunity for growth in UTC’s membership base.
As a cultural and entertainment hub in the country, clubs such as UTC have high growth opportunities in the recreational field. UTC could also capitalize on the gaining acceptance levels for Ultimate Frisbee in Canada.
UTC has more to gain by targeting the middle income group, who form the majority proportion of Toronto’s population (exhibit 2). Toronto’s population is made up of an even age distribution (exhibit 1), and younger adults present a higher opportunity for growth.
Most young professionals live on their own, without families, and thus have more disposable income. Female leagues would also suffice in the achievement of UTC’s objectives. Ladies would be more comfortable competing among themselves. This idea would help attract more female members into the club, and increase loyalty levels.
Threats
For-profit clubs are able to gain in market share by identifying and targeting specific niches, thereby improving the reception from consumers in the market. This has resulted in a decline in Ultimate Toronto club’s growth, declining market share, and could also help explain UTC’s membership turnover rate.Increased competition will also lead to higher field rental charges due to increased bidding.
The economic downturn in 2008 affected both businesses and individuals alike. Although most countries emerged from the global recession, some individuals are still skeptical about the future. Uncertainty about the future outlook may lead to decreased household spending.
Indirect competition also poses a threat for the continuance of UTC’s operations. Numerous health and fitness centers in Toronto provide cheaper alternatives for individuals who want to keep fit, but have limited recreational time or budgets. A higher percentage of young adults are spending more of their free time indoors, leaving Ultimate clubs such as UTC with idle facilities.
Lack of quality partnerships may weigh down on the success of strategies implemented by Ultimate Toronto club. Continued decentralization of the sport will counteract the uniformity of the rules, and eventually lead to loss in appeal for the sport.
Market Analysis
UTC main target market is serious Ultimate Frisbee players, due to the competitive and quality leagues in the club. Whereas Ultimate Toronto club serves both serious and recreational members, the move to focus on this target could discourage casual players from joining the leagues. Competitors, such as Everyman Sports, have positioned themselves as the go-to place for fun, subsequently increasing their market share in the sport.
Recreational Sporting Club (RSC) has positioned itself as a one-stop sports league shop, where it provides for a wide range of sporting activities other than Ultimate Frisbee. This strategy will lead to rapid growth of RSC, since it serves various recreational interests, rather than clubs that only satisfy one need.
Ultimate Toronto club has an ageing membership group, which could make the club lose its competitive edge due to decreased individual performance levels. Competitors that target their marketing efforts towards niche markets are able to compel consumers to take up their service offerings because their specialized needs and interests have been covered (Armstrong & Kotler 2010).
The main basis for segmentation in this market would be through age distribution. Young professionals provide a feasible growth potential, given their rising income levels.
Young adults have little financial obligations, so the disposable income could go towards recreational activities such as Ultimate Frisbee. Toronto is among the most populated and wealthiest cities in Canada, with a healthy average annual income of Cdn$30,350 for its residents.
Financial Analysis
In the best case scenario (probability =30%), UTC could have 4,500 members in the short term, while in worst case scenario (probability=20%), members would be 3,000. The normal scenario is equivalent to 3800 members. Expected earnings will therefore be $250,250 (4,500*$65*0.3 + 3,800*$65*0.5 + 3,000*$65*0.2). The club will be able to brake-even if it achieves quality partnerships in excess of $250,000.
Critical Factors
Keys to Success
Assuring accessibility to the club’s services would be a quick way of increasing membership. Favorable pricing policies are likely to attract and retain members, and ward off competition. Differentiation of services at the club will increase the intrinsic value to consumers, thereby increasing levels of loyalty and lower membership turnover rates.
Effective promotion activities that communicate UTC’s value delivery and affordability will create awareness for the club’s programs and profile, increase interest in Ultimate Frisbee, hence lead to a rise in membership rates.
Key Uncertainties
It’s difficult to ascertain how competitors will react following Ultimate Toronto club’s strategic move. A reduction in subscription fees or team charge in leagues may lead to a price war, which will hinder any chances of growth due to the low liquidity resulting from decreased surpluses.
Alternatives
Options
The product change option would decrease the rigidity of the regulations, whereby the flexibility in rules may lead to customization of leagues according to prevailing circumstances or individual wants.
These changes may increase the spirit of fun in the Ultimate Frisbee, in the process leading to increased player satisfaction. Satisfied members would mean that the club will receive more loyalty, which will be evidenced in reduced turnover rates.
The rising cost of field space may have a negative effect on Ultimate Toronto club’s contribution margins, but the club charges the highest fees per team in summer leagues. UTC charges a team $800 for a spot in the summer leagues, while competitors such as Recreational Sporting Club, Everyman Sports and West Side Sports charge $539, $476 and $500 per season respectively.
An increase in prices would not be feasible since it will not help UTC achieve its growth objectives, as members would move to competitor clubs that offer better prices.
Various promotional options come up, where UTC could use mass media to create awareness about the club. Promotion via 102.1 The Edge, a popular radio service in Toronto, would reach an approximated 800,000 listeners per week.
Advertising through radio is a relatively cheaper as compared to other modes of advertising, so it will not have a large impact on the budget. The Edge is accustomed to younger listeners, who form an attractive consumer segment for UTC, and thus complement the positioning strategy.
Promotion via the Toronto Star, which was the most popular daily in Canada, would guarantee a larger audience for UTC. While The Edge may have reached 800,000 people weekly, The Toronto Star can serve an estimated 1 million people on a day to day basis, or almost 22 percent of Toronto’s population, and has standard pricing rates (exhibit 6).
CBS Outdoor Canada (CBS) was the market leader in outdoor advertising, through mediums such as posters, transit shelters and bus, subway and streetcar advertising. Advertising through CBS could be an effective way of targeting the youth market, which is categorized by individuals who have limited attention span.
Facebook, on the other hand, could be used to reach a wider population base than conventional advertising media. UTC will be in a better to choose its audience base geographically, and demographically, which is probably the best feature of the online application to advertising companies.
The bid pricing mechanism may lead to higher prices, thus cash strapped organizations will not be able to compete for the best placements. The UTC promotion team may offer direct selling, which helps in building relationships between new members and the club. (Ivey management Services, 2009)
Analysis of Alternatives
The radio and newspaper options present alternatively cheap advertising rates (exhibit 5 and 6), but may not necessarily be effective. The target market, made up of young individuals, may be impatient and thus not pay full attention to these advertisements. Another disadvantage is that there is no clear way in measuring response rate from readers or listeners.
CBS outdoor Canada has a track record of being effective and efficient in advertising placements, but its four week option is rather expensive for UTC. The proposed marketing budget is $50,000 (10 percent of $500,000), while the cheapest for week cost is $50,000, a plan that would reach 48 percent of Toronto’s population.
The high costs and low market penetration would therefore not justify CBS option over other advertising media, such as the newspaper which reaches a greater audience.
Facebook would probably be the most suitable option for UTC promotions. The option allows UTC to bid for a comfortable price (exhibit8), and offers greater control in placement expenses. UTC will be able to determine the audience based on geographical and demographic characteristics.
Furthermore, friends and families can recommend UTC related content to other people on Facebook, thereby providing free promotion services to organization. The UTC promotion team may offer benefits of direct selling, but local athletic functions where booths can be set up are rare, which may slow down UTC’s awareness campaigns. Costs for using the promotion team are not certain; hence this may deter budgeting efforts.
Recommendations
In the short term, Ultimate Toronto Club should use promotional mediums to generate awareness. By targeting a broader market base, UTC will achieve an increase in membership.
While the club is positioned to serve serious players, deregulation in league rules may promote the element of fun and freedom in the club, resulting to higher consumer satisfaction scores, and therefore a decline in the attrition rate. Prominent athletes could be contracted to endorse the club in the market.
In the long-term, UTC could offer more sporting activities, and thereby enter other markets and consequently foster the club’s growth ambitions. A field could be secured, in the process reducing expenses related to rental fees. If the grounds are large enough, then sporting activities can carry-on seamlessly. Proportions of the grounds can also be rented out to other clubs, therefore providing the club with another revenue streams.
Action Plan
Jason Robinson should first ensure an appropriate promotional tool, which could either be through Facebook, The Edge or Toronto Star, or a combination of some elements of each. Once costs are ascertained, the UTC promotion team could be sent to various sporting events to promote the club.
Value enhancement is another critical factor that management should emphasize if the club is to increase satisfaction to consumers (Brassington & Pettitt 2006).
In the future, the club can implement pricing policies that would offer discounts to loyal members, and members who enroll their friends and relatives to the club. In the third year of the strategic plan, the club can use a mixture of retained earnings and debt to finance the acquisition of new grounds.
Risk Management
The club could use key performance indicators, such as growth data and membership attrition rates to measure effectiveness of its programs. Professional publications relating to recreational clubs analyze industry data, including market shares, which could be a good basis for comparing different strategies.
Should promotional activities fail, Ultimate Toronto club could increase the budget to allow for value engineering in club activities and grounds, in the process differentiating the club from competitors. Stabilizing prices, or reducing rates, will be essential if the clubs growth rate slows down.
References
Armstrong, G. & Kotler, P. (2010). Marketing: An Introduction, 10th Ed. New York, NY: prentice Hall.
Brassington, F. & Pettitt, S. (2006). Principles of Marketing, 4th Ed. New York, NY: prentice Hall.
Ivey management Services. (2009). Case Study: The Toronto Ultimate Club. London, Ontario: Ivey Publishing.