So continuing on with info relevant to both new and existing esport teams, I thought I’d stick to more specifics around pricing. This one’s a pretty contested topic that very few people like to talk about.
It’s understandable that many would like to hide their pricing and its model from competitors. Unfortunately, the bulk of esport teams aim to undercut on price and almost without realizing then communicate to their prospective partners that all esports orgs are equivalent just by virtue of being a pro-team organization in the space. Every brand has a different quality fan-base and communication style unique to them. Price is relative to what you can offer.
This isn’t the case and I hope if anything that over time those looking to lead the industry forward start to build out their unique value propositions instead of accepting almost micro-investments at the cost of themselves and others. This is an industry full of incredibly hard-working people. The greatest teams in esports aren’t born, they are nurtured and groomed by everyone in the organization. Cash flows are one of the biggest concerns of any business and esports is no exception so I can also sympathise with those who accept very low cash offers from prospective partners.
Many don’t try to define their pricing early so end up negotiating what they feel their business needs to survive instead. It’s easy to forget amongst the esports-event-a-day era we live in now that an esports org is still a scarce thing. And scarcity of resource equates to a higher price point. In a world full of bananas (yeah, I went there) one might cost $1.00 but if there’s now only 20 banana’s world-wide you’re gonna be paying a lot more than a dollar. I used to love economics for reminding me of all the most obvious things in the world. But the analogy is still one worth thinking about as a preface for discussing pricing.
A couple bullet points on pricing:
1. Think Value. Really understand what value you offer that’s unique to your competitors. If it isn’t unique, you’re competing on price. Not cool for you and not cool for your potential partner because they’re expecting you to take the lead on presenting a sensible pricing model.
2. Assess Alternatives. You’re selling a host of items but be well versed with industry standards like Ad-Words, CPMS (Video, Live-streams, etc) and mobile advertising. This will help as a benchmark when discussing rates with your customers if pricing ever becomes a point of contention. You should be providing value in your pricing and that means understanding what else is out there so you’re well informed.
3. Understand Google-Ad Words. Using Ad-Words as an example, you know Google determines your Cost-per-click rate based on your max bid and quality score. Quality score is determined by the expected CTR (click-through rate), relevance of the ad’s content and things like the quality of your landing page. It’s basically Google’s way of figuring out whether your ad meets your customers needs. This can be anywhere upward of $1. If part of your pricing model for your prospective partner/sponsor involves a measure of ‘interaction’ or even the often dreaded ‘click-throughs’ then it often helps to know where you stand price wise in comparison. Remember, as an esports organization you’re offering brands a direct communication channel to their ideal target audience. A much higher % of click-throughs can be deemed ‘high quality’.
4. Think of your prospects margins and how they make money. Yep, this matters. Be realistic in your assessment of this. It’s not something you can gauge immediately always but you should feel confident asking the right questions from your client to ascertain what equates to success for them. Do your homework on their business, it all helps. If a single purchase of a product (typical with something like PC memory) results in an extremely low-margin for the producer then you’ll need to justify charging them $10,000 for a string of video adverts unless you can predict their impact to bottom line or brand equity.
5. Value-based pricing affords creativity. Pricing for esports teams should have some uniformity in the sense that parts of your inventory have a fixed value but for the majority, you’re an expert to those seeking esports as an advertising channel. Be creative in your offerings to deliver the best value for your client. If you expect your messages to be well received by the community then you can afford to price this higher because there’s more mutual value. In my experience, a single fantastic month-long campaign can vary anywhere from $5,000 to $20,000USD so don’t let those around you dictate your pricing.
6. Talk to an Agency. Yep, agencies have been thinking, creating and delivering creative marketing to clients for a little while now. Find a mentor at an agency you admire and find out what they generally utilize to price their offerings. Many agencies work through multiples of billable rates of those involved with client work thus ensuring their costs are covered with a healthy margin. So if billable rate of a junior account exec writing up a PR plan is $50 p/hour and the task takes an hour, that $50 rate is often calculated by dividing salary by billable hours and multiplying by often 1.5, 2 or greater. For the select few, if you’ve got some cash flow spare, I seriously recommend scoping out some boutique agencies to handle a campaign for you to get amazing insight into what they charge and how they treat paying clients.
Bit of a long one but let’s hope this brings something of value to those seeking out a better understanding of esports pricing. I’ll work on putting together some specific examples with actual indicative numbers sometime soon if I get an inkling it’ll help someone!