"We are not living an era of change, we are living through a change of era."
The development of innovation ecosystems is usually driven by three pillars:
New technologies and their democratization.
A change in market & consumer dynamics, usually driven by those technological advancements.
An influx of resources into the market, mainly in the form of talent or financial investment, with the aim of capitalizing on the emerging opportunities and scaling up those initiatives.
It is those companies that are able to enter this "magic triangle" and build businesses with solid processes and operation frameworks that thrive and even succeed at creating new market categories in this new era.
"Marketplaces" look to reduce friction for users across the purchase journey and are a prime example of this dynamic. A few examples within the world of sport are Playtomic, a business that is changing the way users play Padel, or Gympass, a giant within a category that is disrupting the fitness industry.
In this post we will look at how two of the most successful "sport related" marketplaces are playing the game and what lessons your sport or fitness brand can learn from them.
Playtomic´s business model & origins: Conquering the "racquet" space by focusing on the customer experience
Playtomic was founded in Spain back in 2017 with the idea of becoming the "Booking.com" for sport. It was originally conceived as a software that would enable user reservations across all sport activities of a given facility through an app. With this approach though, in which they tried to target a high volume of customers, they incurred in a very high CAC. This was not a sustainable strategy....
It was at that moment, they decided to niche down and focus only on Padel, even though they recognize that at the time, it was not an obvious choice. Today, the business looks to facilitate Padel / Tennis court reservations for users by gathering the available slots from different facilities around the city into the platform. So, instead of users having to contact each facility separately, they can browse across all of them within the platform and find a place and time that best suits them. The app today even has an AI component to it, as it is able to find a match for any given user based on skill, location and time preference.
Playtomic´s sources of revenue consider a B2B model (It charges 250€ per month to facilities subscribed to their software) as well as a B2C (users pay a commission of about €0,20 for each reservation).
And, after succeeding in Padel, they added other sport verticals such as Tennis and even started testing selling equipment & apparel as a means to evolve the business and drive
higher ARPU.
The following videos summarizes quite well how their dashboard for facilities works:
And this one shows how users interact with the product:
The go-to market strategy: A flywheel that manages to lower CAC
Their current model is based on creating a virtuous circle between users and facilities with the key here being to drive user demand and retention.
They were able to unlock "user acquisition" by reaching agreements with the Padel clubs where basically, the customer would make a court reservation through Playtomic and in exchange, they would pay a commission to the club. One thing that was critical for Playtomic is that it was the facility who carried out the marketing strategy for them, which helped them minimize their CAC.
Simultaneous, LTV is usually high since the Padel fan plays the sport very frequently and in many cases, for many years.
If your business is able to maximize LTV while keeping a low CAC....Money!!
Playtomic´s North Star, investment & international expansion
During 2021, Playtomic has achieved remarkable metrics that prove the overall health of the brand:
There are 1 million monthly users; out of those, 50% use the app weekly and 200K-300K even use it daily. In our view, "weekly active users" can be considered their North Star Metric and it seems impressive.
In Spain, they have experienced an average 20% growth per month between March and July of this year although it seems reasonable to think that the number may decrease a bit during the fall-winter season.
70% of the matches are user generated while 30% are suggested by the algorithm we mentioned above
Their growth at the international level is also worth noting:
In 2019 they entered their 1st international market and today they have presence across 33 markets.
Spain is credited for 20% of their revenues and 80%, obviously, comes from the international scene.
Growth through acquisitions has been one of the levers they have relied most upon over the last few years. Some of their most noticeable operations have been Playven (Based in Silicon Valley) or Prenota Un Campo (Italy). Playtomic has also been able to close a partnership in Sweden with Padel Zenter, the brand founded by football legend, Zlatan Ibrahimovic.
Finally, after acquiring the American company, Kourts, during the summer of 2021, forecasts are that it has 4.000 facilities under management.
Playtomic´s future: Looking at trespassing the next frontier
The company predicts it can reach €100 million in revenues by the end of 2021, which is a remarkable increase vs the €25 million it earned in 2020.
They aim to grow in existing markets: Europe (Belgium, Netherlands, France, the Nordic markets, etc.), LatAm (Mexico, Ecuador, Panama, etc.) & Middle East (UAE) and will also pursue aggresive expansion across the United States.
They obviously recognize the need to invest in product to improve the CX, so expect to see some developments on that side.
They have not ruled out acquiring their own facilities, which is a strategy that would mimic what other digital pure players are carrying out.
As the team at Category Pirates explain, the business model of the future needs to rely on digital services combined with "in person" experiences and physical good.
Playtomic seems to be following that playbook to the letter.
What can your sport business learn from Playtomic´s spectacular growth?
Validate your idea by focusing on a very specific niche. Not only does this make sense from a "marketing" perspective, as we have seen it also has positive financial implications.
The right partnerships can help you lower CAC and maximize LTV; those are the metrics that will determine the success (or not) of the business.
If possible, design you service with "Network Effects" in mind; it will drive greater referrals and, again, help you keep CAC under control. In Playtomic´s case, the more people that use the app the better; this fuels demand from the facilities side as well and even helps them feed into their algorithm for more precise matches.
Identify and pursue your North Star relentlessly. Remember that your North Star is that metric that proves that your customer is getting value out of your product. In AirBnB´s case it was "number of reservations per user" and, similarly, in Playtomic´s case we could argue "reservations per user" is their north star metric.
Embrace the magic triangle in your business model: A digital service, an in person experience and a physical good. This is what will separate the winners from the losers...
Invest in product and customer experience: Keep a super high standard on the product experience (regardless of you having a digital service or a "brick & mortar" business) because that is what will increase the chances of users coming back.
Gympass´ origins: From scratching a personal itch, to pivoting the business model and taking over the fitness industry
Gympass was founded in 2012 by Brazilian entrepreneur Cesar Carvalho but the origins of the idea go back to the time when he was a consultant at McKinsey. As picked by Forbes, at that time, Carvalho points out that:
"At one stage, I was paying memberships at three different gyms at the same time but I only rarely managed to use them. Then I thought of a monthly fee that would give me access to any gym, regardless of where I was - so that I could keep up a physical activity routine, even with all the changes at work."
After sharing his idea with his network, he realized there was"willingness to pay" for such a service, which helped him validate his idea. Originally though, his plan was to develop a B2C model which proved to be the wrong approach given the low volume of users that signed up. Nine months after launching the service, a conversation with a person in his network (an employee at PWC) gave him valuable insight that drove him to pivot the idea to a B2B2C model.
That PWC employee loved Gympass to such an extent that he wanted to share it with all the employees at his office. It was at that time when Carvalho closed a deal with PWC that "brought in 500 sign-ups in the first three days of the partnership - more than the company's accumulated retail customer base at that point."
Gympass´ international expansion: Piggybacking on their first client
Signing PWC is a key move that cannot be overlooked:
It provided Gympass with instant access to a worldwide network of PWC employees; TAM suddenly increased dramatically.
They were able to add the logo of one of the biggest firms in the world to its list of clients, which provided credibility.
PWC themselves, whose business is based on providing professional services to other major firms at a global stage, has an impressive portfolio of customers. Because the product was of high quality and it solved a real pain point within the customer journey of those busy consultants and auditors, word quickly spread out among other PWC employees and even people working for PWC´s clients.
Gympass suddenly gained access to other major businesses and their current list of customers includes, among many others, Banco Santander, Unilever, Accenture, KPMG or McDonalds, who also have large teams distributed around the world. This kicked off their internationalization (from Mexico, to Spain and from there, to Europe) and just 5 years after being founded, it was able to make it to the United States.
Gympass´ business model, KPIs & investment
Today, Gympass has become a powerhouse of the fitness industry. It keeps the aforementioned B2B2C model where companies pay a monthly fee (100% or part of it) that give employees the right to access any fitness brand within the Gympass platform, which offers services broken up into the following categories:
Physical health
Emotional health
Nutrition
Sleep
As picked up by Techcrunch´s coverage of Gympass´ latest investment round, "Gympass saw a record 4 million monthly check-ins across its network of more than 50,000 global partners. In fact, for some of the partners, usage hit above pre-COVID levels."
So far, and with their latest investment round taking place in June 2021, Gympass has been able to raise $520 million in funding over 6 investment round.
What are the main lessons that sport businesses learn from Gympass´ growth?
Scratch your own itch: Many business ideas are born after the founder experiences first hand a problem that they set out to solve. That though, should not be enough to justify launching a new business; it is important to test for "willingness to pay" among a relevant group of potential customers.
Pivot to meet customer needs: It is of upmost importance though, to avoid "falling in love" with your idea. You must be willing to understand customer and market dynamics and shape your offering to them, while staying true to your core principles.
The value of getting your first customers right: This was vital for Gympass; the right customer (PWC) helped them expand their TAM from "local" to "global," gain credibility by being able to add the PWC logo to their list of customers and gain access to new users through referrals (keeping CAC under control)
Gympass´ main advantage (and of those who play in the "fitness demand aggregator category") is that it reduces friction in the purchase journey. Customers are only one click away from those 50,000 gyms and it gives them endless possibilities to design their own heath & fitness routine.
Low friction + More Options = Success
The next frontier is always evolving
Gympass & Playtomic are changing their industries by adopting a relentless focus on the user experience, keeping CAC under control and maximizing LTV. They are benefiting from new technologies that are changing how customer´s purchase within their corresponding categories (Fitness & Padel), which is enabling new business opportunities.
Ask yourself whether your sport brand can embrace the triangle composed of technology, consumer dynamics and resources but keeping in mind it is not a static framework. It needs to evolve as we go deeper into new eras; this forces your sport brand to keep on top of new initiatives and trends and understand which of those will actually drive changes in your customer´s behavior.
Build your business model´s foundation, from there keep pursuing the next frontier and if we can be of assistance along that journey, do not hesitate to get in touch!
Keep safe.
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