Sprocket Sports Pricing & Fee Structure
What Consumers Need to Know
The subject of “junk fees” has been in the news recently as consumers have grown weary of an increasing number of surprise supplemental charges on many purchases such as concert tickets and hotel rooms. These seemingly arbitrary and unexplained extra fees feel like a huge rip-off or “money grabs” – and they often are – which is why Congress and state governments are starting to take action.
So when you register your child for a sports program through Sprocket Sports and see a “processing fee” or “administrative fee” added at checkout, it can understandably seem like yet another rip-off. That’s why it’s important to understand exactly what these fees represent.
Sprocket Sports is a provider of youth sports club management software. Our online platform gives clubs an administration platform with myriad tools for running a club including a public website, tryout and team management tools, registrations and payments, a mobile app, and much more. The type of software system that we sell is known as “Software-as-a-Service” (SaaS) because our technology is delivered to our clients over the Internet rather than permanently installed on a hard drive. The advantage of this model is that our customers benefit from Sprocket’s ongoing system upgrades and improvements to the software without incurring any development, installation, or maintenance costs. At Sprocket, we call our solution “Software-AND-a-Service” because in addition to the best-in-class software we provide, we also include a high level of professional customer service and support to our clubs and families.
In the corporate world, technology companies such as ours typically charge annual software subscription fees of $25,000 to $100,000 or more for the software and ongoing service. Recognizing that most youth sports clubs – many of which are non-profit organizations - cannot afford those prices, Sprocket Sports uses a different pricing model that includes a modest annual technology subscription fee, plus a payment processing fee for every registration via credit card, debit card or ACH/bank that Sprocket processes on behalf of the club.
All electronic payments incur transaction costs. Credit card processing expenses range widely based on the type of credit card used with some “high rewards” card transactions costing in excess of 4% of the purchase price. The total “swipe fee” is comprised primarily of fees that are paid to the credit card issuer (Capital One, Chase, Citibank, etc.) and the credit card network (VISA, MC, Discover). Other electronic system processors in the payments ecosystem that facilitate the transaction (including but not limited to Sprocket Sports) also take a small part of the total percentage. Many businesses absorb this expense as an operating cost and ultimately it affects the retail price of their goods and services. For example, when you go to a store and buy a $100 pair of sneakers, you do not pay 3.5% on top of the $100 – the business has already built that cost into the price of your shoes.
Some businesses and non-profits, however, might choose to ask the customer to pay the processing fees. For example, when you donate to a charity using a credit card, you might be given the option to pay 3.0% more in order to cover the processing fees so that all of the intended amount of your donation goes to the organization. Or when paying state taxes, you might see a lower cost option for paying by ACH instead of credit card. ACH is less expensive because there are no dollars going to credit card issuers or networks – just a fee for electronically processing the payment from the bank to the vendor.
When Sprocket processes registrations for our clients, we take a very small percentage of the total credit card processing fee as partial payment for our software and services. We also offer a lower cost ACH option. Our clubs then have the option of absorbing that cost (“eating the fee”) or passing it on to the customer as an added fee at the point of purchase. Sprocket’s platform gives clubs the flexibility to administer whichever approach they choose.