Ticket Pricing Like Your Career Depended On It
Tue, 10/01/2013 - 19:12 — Steve DeLay
YOU HAVE THREE KEYS TO CONSIDER WHEN SETTING TICKET PRICES
Setting ticket prices should be the toughest decision a team has every year.
As the President or Ticket Sales Manager of a team, part of your obligation is to try to make a profit for your team owner. That means raising revenue every year. You can't just gloss over ticket pricing and spend a few minutes or an hour on it. Your decisions on ticket prices will resonate for years to come. Great years on the field allow you to increase prices but do you raise them so high you cost yourself in a future year when the team performance slackens? Likewise, in a tough year, don't just wave off a price increase and say, "we'll do it next year when we're better." Stare at each section, each price point and each type of buyer and consider everything. Ticket pricing discussions may take an entire day or even two days.
WHAT TO CONSIDER
These days, everyone is caught up in the world of pricing analytics and what the right price is for each seat for each game. While I'm a big believer in analytics and evaluating numbers, trends and data, I don't think analytics should be the only consideration for setting ticket prices. After all, airlines are famous for a different price for every seat on every flight and they haven't exactly been a successful industry in the last 25 years.
There are a couple other questions you have to ask yourself.
- What price helps you sell out the building more often?
- What price helps you maximize gate receipts?
Here's why both questions are important. Let me give you two examples.
The Pittsburgh Pirates sold out 34 games this year, a PNC Park record. Sellouts beget more sellouts. Fans have more fun at sold out games. There is a buzz, an electricity. Fans who attend sellouts naturally want to attend more games. The media goes bonkers over all the sellouts.
All Pirates metrics are up this year, TV ratings, gate receipts, merchandise sales and I'm sure sponsorship revenues. Next year, with an aggressive off-season ticket sales effort and smart sponsorship packaging, the metrics will be even higher. This allows even more investment in players, higher payroll, more development in the minors and hopefully continued success on the field.
The Pirates sold out the building more often than ever before and maximized gate receipts.
On the flip side, the Oakland A's and Cleveland Indians have been whacked in the media for their attendance this year. (And it pains me as a die-hard Indians fan to read those articles) Both teams are in the bottom five of overall MLB attendance. More challenging is the Indians sold out only one game this year, the home opener. Yes, their revenues are up 20% but they are still getting killed by the media. That in turn can negatively affect sponsorship revenues and future ticket sales. The A's are slightly better with nine sellouts this season but are still getting thumped with countless articles about their dumpy stadium. More sellouts would have alleviated some of that negativity.
Both teams need to think maximize revenue AND sell out the building. (At the time of this writing, I'm thrilled to report that the Indians had sold out their Wild Card playoff game)
A THIRD RULE OF THUMB
A third rule of thumb I believe in is "Under virtually all circumstances, you have to raise prices every year."
This may sound a little radical, especially to those teams that finished last in their division. Any salesperson of any product is going to scream death by 1,000 cuts if you want to raise prices when your team didn't make the playoffs or finished below .500.
Let's face it though. There is this little thing called inflation. The cost of doing business goes up every year. Players don't ask for a pay cut after a tough year. The cost of keeping the grass green or the lights on doesn't go down if your team loses more games then it wins. Even if you are just raising prices by 3-5%, you are training your fans that a price increase has to happen to help you field a competitive team. Of course the fans will scream. However, it's a very vocal and very small minority.
I will qualify this when I say "virtually all circumstances..." There are a few cases like an record-setting awful year, trading a couple big superstars or some other catastrophe that might make me think twice about raising prices but remember, it's about making the product on the field better.
The key is don't hide it. Tell the fans how you're investing the money. If your team is not raising revenue the owner is digging deeper and deeper in to their pocket to improve the team. Ticket price increases will likely cover only a little bit of the money the team is investing in player development. Just because an owner is rich, doesn't obligate them to lose his shirt owning the team. As long as the money is invested in the right places and the team performance does turn around, you'll be well positioned with the right ticket prices.
THE PITTSBURGH PIRATES CASE STUDY
Let's go back to the Pirates. For 20+ years, they were the face of futility. They didn't have a winning season, let alone make the playoffs for more than two decades. Now that they've finally gotten over the hump, they have decided to raise ticket prices. This after they hadn't raised prices since 2002. Read the article about how much the Pirates had invested in player development, even without raising prices. I'm stunned the owner survived that long without an increase in revenue. Even with next year's raise, they still have the fourth cheapest tickets in the league. Imagine if they had raised prices just a little bit each year (or at worst every other year), how much more would the team have been able to invest in developing players and fielding a competitive team even earlier. I like Frank Coonelly's comment in 2011 that they were going to raise prices to catch up to the league average. I admire his guts because back in 2011, they Pirates were still awful.
Ticket pricing isn't easy. Don't take a laissez-faire attitude toward it. Don't just raise prices 3% across the board. Take the time and energy to really study it, think about it and make the hard decisions.
Steve DeLay has more than 20 years experience selling tickets and sponsorships for teams in MLB, NHL, NBA and Minor League Baseball. He works as a consultant for teams and colleges on ticket and sponsorship sales strategy and training. He can be reached at email@example.com or follow him on Twitter @SteveDeLay2.
Check out past Ticket Sales Thursday posts on The Migala Report.
Check out past Ticket Sales and Service articles on The Migala Report.