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  • Writer's pictureNikhil Kotcharlakota

Football and Pricing - An outcome-based Pricing

Updated: Aug 8, 2023

Football transfers (Soccer for my American friends) contracts are very similar to SaaS buying or selling.

As the transfer prices get pretty high ($100M+) for a player I see something that is very common nowadays- An outcome-based component.

It is called an add-on in football contracts, and it essentially depends on how the player performs over the next 3-5 years.

As an example, a striker or forward can have a clause stating the number of goals he scores per season and, if he meets the metric, the selling club receives more money.

This is a prime example of outcome-based pricing where a portion of the transfer price is only guaranteed to the selling club if the player performs.

A selling club sets a price for the player according to its potential, and a buying club sets its price based on what that player can contribute to the team. After that, they begin negotiating and going back and forth on the price. That way, there is only one winner in the negotiation. There is always one party who is dissatisfied.

As outcome-based pricing becomes more common, the selling club could price based on the assessment of the buying club and price the remaining piece outcome-based. The buying club would be more than willing to pay the extra money if the player performs and meets all the targets set.

SaaS selling and buying can be very similar. Procurement teams are involved in larger contracts to negotiate the best price. SaaS seller and buyer can, however, agree on a smaller piece of fixed price and the remainder will be outcome-based, bringing the total contract value closer to the seller's expectations.

This way if the SaaS software never gets used, the cost will be minimal.

However if the buyer receives value from the tool, i.e the outcome targets are met the seller gets full value of the product.

Outcome-based pricing is the next evolution in pricing models.

Where else have you seen more examples of outcome-based pricing? Please let me know in the comments!

PS: I am a #manutd fan and got the idea for this post by looking at the price tag for this player and how the deal was structured.



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