CHAPTER 1

TRANSACTIONAL VERSUS RELATIONSHIP MARKETING MODEL

For most of the team's early existence, the New England Patriots brand waswidely considered all-around flimsy: a marginal team on the playing field and amediocre, middle-of-the-pack business organization. Everything about theorganization reeked of poor business planning and knee-jerk decision making.Games were rarely sold out, and I remember as a kid following the news to see ifthe coming Sunday's home game was going to be blacked out on TV because of thelack of interest in attending games at Foxboro Stadium. The stadium was built onthe cheap and was outdated as soon as it opened. When it rained, the concoursesflooded. I'm not exaggerating when I tell you there was not one true fan amenityin that building; its most egregious flaw was posing as an NFL stadium whileoffering only cold aluminum benches instead of seats. Those metalbenches epitomized price-driven decision making and made it blatantly clear thatno thought had been given to the fans.

Today, just about anyone who is familiar with the team, fan or not, views theorganization as a model franchise—both on the field and in its businessstructure and execution—and it has the Forbes magazine cover storyto prove it. As with the vast majority of successful businesses, transforming itfrom so-so to a powerhouse did not occur overnight; it took years of carefulreorganization from the ground up (and the top down) to reinvent both the brandand the business model to the level of excellence it now enjoys.

When I joined the New England Patriots back in 1997, the transformation hadalready been set in motion. The rebuilding of the organization had begun,initiated shortly after the Kraft family purchased the team and grounded in thefamily's clear vision of the team's future. Because the Krafts had owned FoxboroStadium prior to buying the team, they enjoyed an inside position; they wereprimed to apply their business success in other industries to the team, and theyhad a real understanding of how to turn the franchise around. When the Kraftfamily bought the team, it focused on cleaning up the image and experience ofgoing to games at Foxboro Stadium. That transition was going to requiremigrating the team's business practices from a transactional to a relationship-orientedmodel.

Whether you realize it or not, you're already deeply familiar with transactionalbusiness models. Those folks selling bouquets of flowers on the street atstoplights are the simplest example. As you slow down to stop at the red light,they come to your window, hoping you will buy a bunch for $10. If you do, theygrab the ten-spot, hand you your flowers, and you're off. They are, too—inhopes of landing their next sucker. This is a purely transactional sale. It'snot quite so cut-and-dried in the context of an enormous organization like thePatriots, but the model is transactional just the same. Let's look at onespecific area of the organization so you can get a better idea of what I mean:sponsorship.

The reason companies sponsor the team is to use the Patriots' identity andassets for their own branding and marketing initiatives. Before the rebuildingof the organization, selling a sponsorship package would go something like this:the sponsorship sales reps would get a meeting with a company they felt wouldbuy in, show up at the meeting, and plunk down a package of team and stadiumassets like signs, media, and logo rights. The sales team's approach was toalways focus on selling the inventory that it had in stock, so if it hadn't soldenough, say, signs for the year, that would be the first thing on the table forsale to a potential sponsor—whether or not it was relevant to thatcompany. The ways in which the company could use the inventory were not animportant part of the equation. The team just wanted to sell its inventory andwas focused on getting the sale.

Once the transaction was complete, the sales reps were off to the next sale. Itwas almost like, "Thanks for signing the contract. See you in three years!" (atthe deal's expiration date). The process was all about closing business and notabout producing results for the customers, which, at the time, was a typical wayof doing business in the NFL and other leagues. Unfortunately, some teamsstill operate this way, not recognizing that transactional business isbuilt around short-term gain and sacrifices long-term vision and sustainability.

The biggest issue with this approach was that when the contract expired,evaluating whether the inventory had helped the sponsor see a return on itsinvestment was about as reliable as flipping a coin. Let's face it: it is prettydifficult to determine whether a sign in a stadium actually drove business toyour company. Come budget evaluation time, things that aren't easily quantifiedare easier to do without. If the added value couldn't be proven, sponsors mightnot renew, which further forced the staff to operate in a reactionary,year-to-year selling method. They continuously worked to replace lost sponsors,each rep a hamster running on its wheel—there was plenty of motion, but noprogress.

A cycle like this obviously hampers revenue growth; it's a struggle just to keepup with the status quo. At a football team, revenue-generation plans like thisare disastrous for the team because the marketing group ends up being dependenton wins to fuel the team's financial advances—when the team wins, it makesmoney selling more merchandise, tickets, and sponsorship. The problem is that asports team's winning is unpredictable, and the folks in marketing have zerocontrol over the performance of the team. Having a marketing plan based on winsand losses will cause you to lose revenue. It's a stupid plan.

Dependence on the team's win record is not a great strategy for generatingrecurring revenue, and the same is true for any other business. You sell aproduct or service, but no organization should rely purely on the validity ofthe product to generate revenue. No matter how significant the brand, it's therelationship that the organization forms with its consumers to cause continuedrevenue growth that drives revenue. We're going to get into how to generaterevenue beyond your product in great detail in...