It is not possible to establish how many owners race Standardbreds. Regardless of the number, they represent a very small percentage of the number of people who have the discretionary income that would allow them to have some form of ownership interest.
Harness Racing must identify ways of reaching this group. Once they have been reached, their interest must be held and fostered with the right message. Harness Racing offers an exciting and enjoyable entertainment package, to succeed in the leisure industry it must highlight that.
What are the strategies that Harness Racing can use to tap into the vast majority of people who can afford to participate in the industry as an owner but do not? This group represents considerable potential for the industry. If Harness Racing can extend its circle of interest and make people consider owning a horse, it will almost certainly attract new owners.
Almost everyone in Australia knows what harness racing is, and for many it has positive connotations. Very few however have been helped into becoming an owner, or been told explicitly how to do it.
2. FOCUS ON CURRENT OWNERS
Industry efforts to increase horse numbers tend to focus on current owners by increasing the returns they receive. Increasing stakes and introducing incentive schemes are commonly accepted strategies to improve ownership numbers. These strategies increase the return to owners and lead to increased interest and investment confidence from current owners.
This approach has proven to be successful and it is necessary to encourage investment from current owners and even the broader group of people that have a detailed knowledge of the industry. After all, this group is more likely to invest further in the industry, under the right conditions, than the rest of the population.
Although this approach is necessary, it is probably limited in achieving ownership growth. The number of horses that win, let alone recoup their costs is a very small percentage of the horses that are purchased or bred. Even if stakes are increased dramatically the percentage of horses that break even will still be very small.
This shows that it is unlikely owners race horses primarily for financial reasons, there must be other reasons. Concentrating on improving the return to current owners as a means of increasing ownership may therefore be limited.
Harness Racing traditionally receives strong support in the rural sector. However, the narrower the support base, the more susceptible Harness Racing is to economic down-turns. This is particularly relevant as the rural sector is prone to weather and commodity price cycles.
Also, the rural population is shrinking, both as a proportion of the population and in actual numbers. Relative national wealth is also moving from the rural to the urban sector. Therefore focusing on increasing returns to existing owners to achieve growth will accentuate any existing imbalance.
Increasing the returns to owners will target those who are more likely to increase their investment in ownership, but it ignores the large group of people who are not directly involved in the industry and represent a large pool of potential owners. Harness Racing has a place in Australian society and it is important to utilise and maintain that position.
The industry should identify ways to increase ownership numbers and diversity. To do this the industry must increase its circle of interest.
Harness Racings circle of interest is those people who have the information, or access to the information, that would enable them to consider becoming an owner. At present new owners tend to become interested and gain the requisite information through an association with an existing owner or trainer. What about all the people who have some understanding or even interest in the industry but have never had an opportunity to seriously consider becoming an owner?
Entry into ownership is cyclical. The more people who are involved means more people who know someone involved in Harness Racing and could in turn become interested. Aiming at the large group who currently do not have the necessary information therefore has the potential to significantly increase interest in Harness Racing. This could not only impact in the area of ownership, but also in other areas of the industry like betting, breeding, etc.
4. EXTERNAL INFLUENCES
When looking at ownership it is important to analyse factors influencing the horse ownership market. Such an analysis includes political, economic, social and technological (PEST) factors (Roberts 1997).
Harness Racing is heavily influenced by political decision making. The 1994 Privatisation of the Victorian TAB was a successful political move for the Government and also gave the Victorian thoroughbred industry an advantage over other States. A large part of that success was due to favourable regulatory treatment, most significantly a licence for half of the States gaming machines and favourable tax treatment.
The Victorian sale has lead to a similar move in NSW and made other States look closely at the possibility of TAB Privatisation.
Wagering taxation is an important source of income for State Governments. Nonetheless, in a move to stimulate the racing industry the Western Australia Government removed on-course tax in 1992. Similarly the privatisation of the Victorian TAB was accompanied by a lowering of wagering tax. This put competitive pressure on other States and consequently the NSW Government also lowered its taxation rate in 1997.
This is significant for the industry because of the less is more principle that lowering betting deductions stimulates turnover. In theory, tax cuts lowers the rate of deduction and stimulate turnover leading to improved industry income.
(i) Economic Rationalism
There has been trend by Governments worldwide towards deregulation and privatisation of markets and organisations. This has been done for a range of ideological and pragmatic reasons. The experience in Australia has largely been successful in the primary goals of lowering public debt and improving organisational efficiency. The NSW Government has stated it believes that privatisation will lead to cost savings of $30 million in the NSW TAB (Roberts 1997).
(ii) Household Disposable Income
Competition has eroded the dominance of wagering in the gaming market, from around 70% in the 1970s to 17% in 1996. As a percentage of household disposable income it has fallen from 0.75 in 1991 to 0.54 in 1996 (Roberts 1997). While these figures illustrate a loss in market share, they represent a period where there has been significant one-off entrants into the gaming market.
In Victoria, where the introduction of new entrants has been most significant, after a period of decline wagering turnover is predicted to increase on average by 2% over the next 4 years (Nolan 1997).
(i) Product Development
Improvements in technology have allowed TABs to offer customers faster services and a range of initiatives such as television coverage of races, fixed odds betting and telephone accounts. Increased TAB turnover has been accompanied by a corresponding decline in attendances on-course and turnover through bookmakers. This has lead to a fundamental change in the industry as it adjusts to the different nature of its main source of income, the punter.
Still in its infancy, betting through the Internet has potentially huge repercussions for the industry. The NSW and New Zealand TAB have started offering on-line betting services, accompanied by a range of on-line information which is also offered by other TABs.
There are already a number of Internet sites around the world offering casino and sports betting services. This has raised complex jurisdictional and regulatory issues.
TABs are important sources of income for the industry. If organisations without the same statutory obligations as TABs offer betting on-line, they may not have to fund the industry or pay tax. Apart from giving them a competitive advantage it has obvious ramifications for the industry.
From its beginnings Harness Racing has had strong social roots. From its first appearances at country shows the industry has maintained a social focus. Over time the importance of racing for money has altered the focus and nature of the industry. Ironically perhaps, as on-course attendances drop, there is a renewed emphasis on the social occasion factor of Harness Racing as a marketing tool.
5. IDENTIFY THE TARGET
Research done by the New Zealand Racing Industry Board into Standardbred ownership identified that 86% of owners were over 40 years old. It also found that 61% of owners earned less that $50 000 and 30% earned less than $30 000.
These figures indicate that income is not necessarily an issue for existing owners. However, there may be a perception amongst non-owners that is different. The figures show that age certainly does appear to be a factor.
In the research owners sighted the following reasons as the main factors that lead to them entering ownership.
Based on the results of this research, there are opportunities to increase participation in ownership by targeting people who have an interest in racing or betting but have not had extensive exposure to ownership. People aged 25 to 40 in particular may be a significant target to focus on.
There are differences between the Australian and New Zealand industry, although the situation in Australia is probably not dissimilar. Only research here would confirm or reject any comparison.
Further research specifically on the target group would also be valuable. This research could identify their attitudes to ownership such as perceived benefits that would attract them into ownership or perceived barriers that may make them reluctant.
What are the aspects of ownership that owners enjoy? The list may include the following factors.
A. Social Involvement
One positive aspect of ownership for many is the social connection, getting together with friends and family. In many towns in Australia the Harness Racing Club is an important part of the community with a long history and tradition. Race meetings can be a significant community occasion and ownership provides an opportunity to increase peoples level of involvement and enjoyment of these occasions.
Harness Racing is a sport, and like any sport one of its key facets is competition. Competition and the desire to win are part of human nature and it is part of the Australian psyche in particular. The excitement of winning is one of racings most well known attributes. This competitive spirit manifests itself in the publics love of champion horses and their continued support well after their racing days.
C. Prestige Product
Horses are prestige goods. People buy prestige goods because they feel that it differentiates them and reflects well on them personally. Selling by appealing to peoples egos can be a valuable strategy and Harness Racing is fortunate that it has a product to utilise this approach.
D. Financial Return Through Gambling
Money is a high profile reason why people race horses. The importance of stakes in attracting owners has been outlined earlier. One of the important factors in stimulating betting is providing punters with information. Owning a horse gives an owner access to information that gives them an advantage over the average punter. As well as increasing their confidence this probably improves their chances of betting successfully.
Breeding provides a wider involvement in the industry and gives the extra satisfaction of being involved in the horses development from the outset. Breeding a successful horse gives the owner the joy of knowing they met the extra challenge of making the right breeding decisions. Breeding a horse instead of buying it a later stage can also reduce the cost of gaining ownership and provide an ongoing interest and benefit after the horse finishes its racing career.
Any barriers to getting the target group into ownership have to be identified, and if possible overcome. To the uninitiated there are a number of obstacles to becoming an owner. A strategy that emphasises the positive, but does not break down the barriers to entry will have little success.
A. Knowledge Barrier
All these questions and numerous others act as a deterrent to a someone without specific and detailed knowledge. Even to long time owners some of these questions remain difficult. The key is information. The industry has to find a way or ways of over coming the information gap in the target group.
What are ways of helping prospective owners overcome this problem. Different forms of ownership can help in achieving this.
For example a syndicate or partnership with friends or family can provide the uninitiated with access to the knowledge they do not have. It can also make the ownership experience more enjoyable.
Developing a partnership or professional relationship with a trainer can also overcome the hurdle of a lack of information. It may remove the new owner from some of the involvement and decision making, but it also means a committed and focused trainer and partner.
B. Financial Barrier
Purchasing a horse outright and paying for all the training, vet, transport, racing and costs can be a costly proposition. The NZ Racing Industry Board research shows however that cost does not necessarily prohibit ownership, even for lower middle income earners. It is important that potential owners know the ways of over coming any perceived financial barrier.
Again, forms of ownership such as syndicates and partnerships spreads the costs and the risks while still providing the fun and excitement associated with ownership. A partnership with a trainer can also lower training costs.
Breeding a horse can also lower the cost of owning a horse, although it may not be as attractive to first time owners. A suitable horse can also help offset purchase costs later on through breeding opportunities.
8. REACHING THE TARGET
Once the triggers and barriers are known, it is necessary to develop a strategy that must
a) highlights the benefits of ownership.
b) provide the answer, or at least access to the answers, to the perceived barriers.
What is the right way to approach the target group? Whatever the strategy, it must reach the target audience, so it has to be properly directed. The fact that people interested in horses, racing and betting are more likely to become owners is helpful as it easier for the industry to reach them.
The next step is to come up with an idea that will encourage people make to the initial contact. Then the information and answers to their questions to help them to carry on must be freely avaliable. Once this is developed it needs to get to the target group.
The industry may already have, or could develop, information on people in this group through databases and other resources already developed. For example, data collected from people attending race meetings or TAB customers would be valuable in approaching the target group.
An association through family and friends who own horses is a common way for people to become owners. Therefore, encouraging existing owners to inform others about the strategy the industry has developed to attract owners would be a good approach.
9. TYPES OF STRATEGIES
The following are examples of ways to approach the target audience, they are not intended to be a complete list. They could be done separately or in combination.
A. Inbound Telephone
One strategy is to advise the target group of a free-phone service. It is important that the person handling enquires can answer all the likely questions that could arise and have well developed tele-marketing expertise. They should be able to provide written information and also refer interested people to trainers, Owners' Associations or other organisations that can provide more specific assistance to encourage people to take the next step.
In addition to a specific telephone service, the industry can utilise messages on existing phone services to promote and advertise ownership promotion.
The benefits of a free-phone are that it acts as a gateway, passing on inquiries, so is low cost, and easy to set up and operate. It is extremely important however that any inquiries are cultivated and that means the standard of service and advice given all the way down the chain, as well as the first contact, have to be extremely high.
B. Open Days
Another, more complicated strategy is to invited the target group to a series of information days. These would be held at tracks involving trainers, horses (possibly for sale) drivers, breeders etc. This is another way of introducing people to the industry and industry professionals that they would rely on to become involved in the industry.
The benefits of information days are that they are good adverts for the industry. People go to the track, see horses and meet people and personalities involved in the industry that they usually see from afar.
The draw backs are that information days would take more resources are probably less likely to elicit an initial response that a free phone call. The responsibility for success lies with more organisations, making planning the operation more complex.
C. Ownership Facilitator
A further approach maybe to develop the role of an ownership facilitator. This person would handle any enquires from interested people and assist them through all the steps of ownership. For example they could help ensure that people go into the type of ownership that suits them and remain available for advice at any time.
The benefits of this option are that it provides a relationship with the potential customer and would build confidence through continued support. A facilitator could also follow-up on any enquires and identify opportunities for new ownership promotion. Given their constant exposure to potential owners they would also gain valuable information on attracting owners.
It is important to measure the results of any strategy to establish if it was cost effective.
This involves defining how results will be measured. This will depend on the nature of any strategy that is put in place. For example, how many people called the free-phone? how many people went to an open day?
Regardless of their nature, there needs to be predetermined standards, systems put in place to measure them and a set time frame to do it in.
The evaluation process should also identify aspects of the plan that were successful and why, and conversely, aspects that were not successful and why. This will improve decisions on how the plan can be improve or if it should be continued.
11. LOSS OF OWNERS
The two factors influencing the number of owners is the entry of new owners and the loss of existing owners. This makes it important then to identify what existing owners think is important and also the causes that may lead to give up ownership.
The New Zealand research examined these issues, although there could be important differences between NZ and the Australian industry regarding some of these factors. Work may be necessary to get comparable information in Australia. In addition, this work could also provide more detail than was available through the New Zealand research.
The most popular incentive current owners believe should be provided or improved:
86% of owners survey attended race meetings 7 times or more per season. Owners also identified additional benefits they would like to receive on raceday, in order they were:
For those owners who have considered relinquishing ownership there were two stand out reasons, the level of stakes and the costs of ownership. This is interesting given that the aim of winning stakes was very low on the list of reasons given for becoming an owner.
In summary, there could be value in developing programmes that address the issues that the research highlighted. This would concentrate on providing owners with the needs and desires that were identified. In conjunction with the continuing goal of increasing stakes and lowering the costs of ownership, working on these other areas could help maintain the number of owners currently in the industry.
PAPER JOINTLY PREPARED BY:
Dennis Roberts "The Derby Club"
Macquarie Graduate School of Management