Monday, April 23, 2012
Dynamic pricing is new trend in ticket sales
By Doug Williams Special to ESPN.com
Many professional teams have begun the practice of adjusting ticket prices based on demand.
The seat in Section U of the Skyline Deck at Target Field is high above the left-field line and provides a panoramic view of the Minneapolis skyline.
From Seat 1 in Row 5, a Twins fan can watch Joe Mauer rip line drives on the diamond below or gaze into the distance at the downtown highrises.
What’s the price to sit there?
That’s where it gets complicated.
The face value for a ticket in the Skyline Deck section, bought before the season, ranges from $29 to $37, depending on the date and opponent.
But consider: Over a 10-game span in late April and early May, with the Twins hosting the Red Sox, Royals, Angels and Blue Jays, single-game prices to sit in that seat are $27 for the first game, go to $30, drop back to $27, plummet to $19 for three straight dates, climb back to $22, rise to $23 for two games and then finish at $31.
This is what’s known in the industry as dynamic pricing, and if it hasn’t come to a ballpark near you yet, it will.
Forbes magazine rated the “proliferation of dynamic pricing” as the No. 3 sports business story to watch in 2012. More than a dozen major league teams have embraced it in 2012, and so have many NBA and NHL teams. St. Louis Cardinals fans can sign up to receive a “Dynamic Deal of the Week” email. The Mets deliver dynamic pricing updates through an e-newsletter, Twitter and Facebook.
The Twins studied the model in 2010, adopted it for some sections in 2011 and then instituted dynamic pricing for most sections of Target Field this season.
Mike Clough, the Twins’ director of ticket sales and service, often uses the term “demand-based” pricing when explaining the concept. Essentially, ticket prices will fluctuate based on demand.
“It gives us a lot of flexibility,” Clough says.
For high-demand games -- against the Yankees or Red Sox, for instance -- prices likely will rise as a date approaches. Weekend dates, planned promotions, a juicy pitching matchup, a holiday or the home team in a pennant race could also spark a price rise.
Conversely, early-season dates when the weather may be cold might prompt a price cut. Weeknight games, bland opponents, a drop in the standings or a team’s desire to get more people in the seats for a certain date might also trigger a lower price.
“We like to view it as maximize revenue on your high-demand games,” Clough says. “On your low-demand games, drive ticket sales by offering a lower price. It makes sense.”
Just as four-man pitching rotations have vanished, so have the days when a team would lock in its prices for all seats and dates months in advance.
The Twins -- on their “Demand-based Pricing” page – also offer a “Steal of the Week.” Right now, it’s $19 in the Skyline Deck for each of three weekend games against the Royals in late April. Clough recently noted that for 75 remaining Twins home games, listed ticket prices for the Skyline Deck seats (where season tickets are not sold) were “flat” for 61 games (meeting preseason face values), up for seven games and down for seven games.
As the season progresses and demand increases or decreases, those prices can change. Clough says dynamic pricing allows a team to “right-size” its tickets to reflect demand.
“It gives you the ability if you’ve made a mistake somewhere, or the team goes on a crazy playoff run or you trade your star player and need to right-size your prices up or down, yeah, it gives you the opportunity to do that.”
Jeremy Eglen is the chief operating officer for Dignonex, which develops and provides software to about a dozen pro sports teams, including the Twins. The algorithms in that software allow it to examine about 40 variables for every game on a team’s schedule and come up with a suggested price for tickets in each section of the park.
Among those variables are weather, historical sales trends, current standings, pitchers, the day of the week and the demand in the “secondary market” -- tickets resold by sites such as StubHub.
“We’re trying to find the right price at any point in time of the sales cycle,” Eglen says. “So a ticket may be valued differently by the consumer from the time it [first] goes on sale till three weeks before the game to a week before the game. The prices reflect the value the consumer puts on that ticket.”
Companies such as Digonex or Qcue -- which works with more than 30 teams in Major League Baseball, the NBA, NHL and Major League Soccer – can give teams daily updated ticket-price recommendations. But those companies don’t set the prices. The teams do.
Brooks Boyer, vice president and chief marketing officer of the Chicago White Sox, says, “We make the call on price changes.”
“We have a committee here that gets together on a weekly basis and looks out at the whole season,” he says. Prices are updated based on the committee’s decision after reviewing Qcue’s input.
The reality is that for one great series or one great pitching duel, a team knows the market will bear a higher price.
“[Jake] Peavy and [Justin] Verlander could end up facing each other on a bobblehead day,” says Boyer, whose team adopted dynamic pricing throughout U.S. Cellular Field this season. “You’ve got a couple of things going, and by the way it’s supposed to be 72 [degrees] and perfect. You’ve got [good] weather. It’s a Saturday. You’ve got fireworks. Any of those combinations could come together and it could cause a spike.”
But the other reality is that a team not only wants to make as much as it can on that game, but it wants to foster a long-term relationship with its fans.
Dynamic pricing can’t all be one way -- up.
Prices need to be adjusted down, too, offering bargains to fans.
“Teams are very much aware that the fans are driving the team,” Eglen says. “They don’t want to engage in gouging every last dime they can get out of the fans. They want a long-term positive relationship.”
Steve Fanelli, executive director for ticket sales and promotions for the Oakland Athletics, says the team adopted dynamic pricing throughout its ballpark this season. Like other teams, the A’s set prices low for season tickets and single-game tickets before the season and use that as a base for fluctuation.
“I think fans are catching on to the message that we’re trying to put out there that if you buy your tickets early, you get probably pretty substantial savings on some of the games,” Fanelli says.
The idea is that season ticket-holders are the lifeblood of a team and deserve the best deals. If the price of a seat in a season-ticket package is $18, for example, and $24 as a single-game purchase, the cost under dynamic pricing could climb above that $24 level or down to $18, but never go below $18.
“It actually gave us a chance to push season tickets a little harder this offseason,” Fanelli says. “So if you bought your season package, you’re able to buy them at a fixed cost. … A lot of times those people are picking the weekend games or some of the premium games that we’ve identified in the past, and they’re getting them at a fixed rate as opposed to what the single-game price is. It’s a pretty substantial savings in some cases.”
Fanelli said when tickets first went on sale for this season, the prices of 60 percent of Athletics tickets for 2012 were lower than 2011. Later, prices changed.
The message: Buy early and save.
Remarkably, the Twins, White Sox and A’s have received no negative feedback from fans about their pricing strategy. As Fanelli noted, fans are used to the concept in other areas -- it’s common in the airline and hotel industries and on websites such as Amazon.com -- and fans are savvy enough to buy early and hunt for bargains.
“I think people are understanding what we’re trying to accomplish,” Fanelli says.
Of course, not all fans have bought into it.
One Cubs fan, disgruntled about dynamic pricing in the bleachers at Wrigley Field this season, where ticket prices will range from $17 to $78, attacked the practice in a letter to the Chicago Sun-Times.
“All excuses for the computer to jack prices up,” he wrote. “It’s ‘Moneyball,’ except it’s used on the fans instead of the players. True, prices will drop if it’s a school night or it’s going to rain or if Houston’s coming to town. But only by so much. That’s because teams that dynamically price promise they will not sell tickets for less than what season ticket holders paid.”