Pricing Lessons From MLB Tickets
Not that long ago professional sports teams clung to the argument that all tickets were the same price because all games offered the same value.
That value was seeing the home team play. It didn't matter when – whether it was a cold early spring evening or a summer afternoon. It didn’t matter against who – whether it was against a storied team, a divisional rival, or a team nobody cared about. All that mattered was the home team, and since they were always part of the package the tickets were always the same price.
This was of course completely out of step with the way that fans actually valued the games. They would far rather watch (example) baseball on a summer afternoon than a cold night in April. And, in the case of Toronto Blue Jays fans, of course they would pay more to see storied franchises and divisional rivals like the Boston Red Sox and New York Yankees.
Trying to “average out” prices doesn’t work. It just means that there are premium games that get sold well below market value, and second tier games that don’t sell at all because they’re priced above market value.
Scalpers took advantage of this. They could buy (discounted) seasons tickets and sell premium games well above their cost. Lots of middling games would be sold closer to face value, and some dog games would be sold at a loss.
By accepting that not all games are created equal the team increases sales as well as profits that they had been losing to scalpers.
The first step is trying to better understand how customers value the games, as outlined here:
The formula for ticket pricing revolves around a system of five categories, which grades games according to their significance, such as dates and popularity of opponents. There are, for instance, two “A-plus” games —Opening Day and Canada Day — followed by 32 “A” games, which feature key opponents such as the Yankees and Red Sox, as well as weekend series. The rest of the games are B games (20), C games (18) and D games (9).
Realizing that there are some games that offer less value – the C and D games – they’re charging less for those tickets.
We’ve decreased prices for a third of our games next season.
They’ll make less money per ticket, but hopefully sell a lot more of them. This is important because if a seat is unsold at game time there is no chance to sell it later. They’re turning on the lats and playing the game anyway, less revenue is better than no revenue. And of course there is the hope that, once in the building, those spectators will buy very profitable hot dogs, beer, etc.
It’s also better for fans. The family that wants to see a game, the casual fan that doesn’t really care about the opponent…. they can do that for less money.
Meanwhile the more serious fan who is interested in specific matchup, or a fan that values other attributes (weather, etc.) has to pay more:
13 per cent price increase for 54 games
It’s good for the team because they’re recapturing profit that would otherwise have been lost to scalpers.
As for the fan that wants those tickets…. it’s more complicated. It’s a double-digit increase and nobody likes that.
On the other hand there are limited quantities of these tickets – there is no guarantee that everybody gets one. The higher prices (especially relative to the newly discounted games) means that the serious fan is less likely to be fighting with the casual fan for part of that limited supply. These premium games are more likely to be available to the fans willing to pay for them.
The higher prices also make the tickets less valuable to scalpers, and that benefits serious fans two ways. The first is that by dealing with the box office they understand what they are paying, even if higher, is the official price and not a gouge. Secondly they should see that the extra money is going to the team, instead of scalpers, which hopefully helps make the team better.
In The Flower Business
The flower business is good at realizing that there is a higher value placed on their product at two main times of the year – Mother's Day and Valentine's Day – and charging accordingly.
We’re not as good at understanding that some potential customers don’t see the value at regular prices the rest of the year. The baseball team raises the prices of the A and B tickets, and florists do the same. But the baseball team also discounts the price of the C and D tickets. The flower business generally doesn’t do that. Instead they try and get B prices for C & D tickets, resulting in lower sales and smaller profits.
The customers that only buy on special occasions are ideal candidates for careful discounting via hurdles etc. to increase both sales and profits.