Steve Milano has been involved in the tennis industry since the late 1970s in a wide variety of roles, as well as a corporate and nonprofit executive for decades outside of tennis. In addition to his corporate work, Steve Milano is currently the executive director of USHSTA, the United States High School Tennis Association.
Do You Use Loss-Leaders to Increase Revenues?
By Steve Milano
Have you ever wondered why tennis balls are so much cheaper in the U.S. than the rest of the world?
It’s because Walmart, Target, and other retailers sell them at or below cost to attract affluent tennis players into their stores, knowing that these customers will spend more money on other products (usually impulse items) while in the store.
This is known as loss-leader pricing or selling something at a loss to generate other sales that result in an overall profit.
Think about getting a free drink with the purchase of a hamburger and fries. Soda costs retailers pennies per cup, which they more than make up for on the full price of a burger and fries.
Tennis facilities can also use loss leaders to significantly increase their profits.
A Simple Example of a Tennis Loss Leader
I used to go to a Friday night social round-robin in Atlanta at the Blackburn Tennis Center. For $8, you got two hours of mixed doubles, balls, and snacks (subs, soda, and energy bars). The reservation phone line would start ringing at 9:00 a.m. and you would have to hit redial for 30 minutes some weeks because the 36 men’s slots filled up by 10:00 am. Many weeks, all 72 slots filled up and you had to go on a waiting list.
By the time Blackburn paid the pro running the round-robin, paid a desk person to stay until 9:00 pm, and paid for lights, balls, and snacks, they couldn’t have been making much money at $8 per person.
With me and many others, however, they did. Over time.
Once I started going to Blackburn for the Friday night round-robin, I started buying my grips and wristbands there. I had my racquets strung there. I got on a mixed team and paid for practices. I entered a flex league and made Blackburn my home court. The friends I made invited me to play social matches during the week, then go out for dinner afterward. I played singles with my buddies at Blackburn. I even started dropping in on some of the drill programs.
I spent about $1,500 at this public facility (with low court fees) because I was attracted to the Friday night round robin.
When new management took over and changed the round-robin, Atlanta’s biggest mixer basically died within 90 days. Many of us went over to Sandy Springs Tennis Center for their Friday night round-robin, which grew to 60 players.
Once I started going to Sandy Springs for the Friday night round-robin, I started buying my grips and wristbands there. I had my racquets strung there. I got on three men’s and mixed teams and paid for practices. I made Sandy Springs my home court for flex singles and doubles league matches. The friends I made invited me to play social matches during the week, then go out for dinner afterward. I played singles with my buddies. I even started dropping in on some of the drill programs.
I was at Sandy Springs three to five times per week and spent more close to $2,000 a year there.
I went through this same pattern at Bitsy Grant for a short time when I first came to Atlanta. At every tennis facility where I played in a Friday night social round-robin, I ended up “nesting” there and spending almost all of my tennis dollars.
Should You Make a Profit on Every Program you Run?
If you’ve ever gone to your favorite restaurant, you’ve probably notice daily specials. These are often higher-end entrees (shrimp or filet or salmon) sold at a discount price. A restaurant owner friend of mine once told me the people who ordered his specials got the best value of anyone in the house. “I don’t make money on specials. I just run then to keep customers from getting bored and to attract new customers.”
When restaurants offer break-even or loss leader meals, they make that money back by keeping their regular customers coming back. Those customers might bring two or three friends who spend enough to make up for the “loss” on the special.
If you don’t offer free or low-cost beginner programs, social round robins, tournaments or other programs aimed at making your club people’s home base, you are missing out on an opportunity to make money from their equipment, ball, clothing, footwear, league, food and beverage (even just vending machines), lesson and casual play spending.
Easy to Track
Determining whether or not your mixers or drill clinics or learn-to-play programs should be easy if you track signups. Don’t throw away your signup sheets each week. Put your participants into a spreadsheet or CRM system and determine how many of your participants are repeat attendees and how many are one-timers who never come again.
If you track attendance across the board, you can determine what other programs these players take, if they book casual playtime or if they are on teams playing out of your facility. As you determine who your frequent players are, ask them where they buy their balls, grips, strings, etc.
You don’t have to do this type of tracking for every person who comes to your facility or do it for years on end, but it’s helpful to do this for a one-year cycle to determine if loss-leader programs can generate significant spending with participants throughout the year.
Use your Dead Time
Where do you have dead court time? Saturday morning? Offer a free or low-cost men’s drop-in round- robin. Tuesday nights after 8:00 pm? Offer a Girls Night Out drill program for $5 per player. Are Sunday evenings dead? Try a low-cost Family Night or Parent/Child event.
Loss leaders might not make a profit, but they can absorb some of your overhead expenses. If you have a restaurant or bar, you will likely generate more F&B revenues with loss-leader programs.
You can also provide your teaching staff with additional hours, helping prevent qualified staff members from leaving. Would it help you retain your top staff members if you could offer them an extra four to six hours per week at full pay? If a loss leader is priced to cover your costs (including your staff time), you not only lose nothing, but you improve your staff retention and eliminate the costs associated with employee turnover.
Look for opportunities at your facility to introduce loss-leaders that might have a strong impact on spending by attendees elsewhere at your club, or provide your staff with the extra hours that keep them from leaving, and taking students with them.