SBJ/Feb. 7-13, 2011/Opinion

How do your fans value what you offer?

In high school economics, we’re taught the standard supply and demand curves. As price goes up, demand goes down and vice versa. So when we look at our half-empty stadiums, arenas and ballparks, our first thought is that if we lower ticket prices, surely attendance will increase. Sometimes we even consider making our tickets free because at least then we’ll make some money on concessions and merchandise. As Julia Roberts quipped in “Pretty Woman,” “Big mistake. Big. Huge!”

Sure, ticket prices don’t always reflect what the market will pay, but usually that’s not the case. Those economic demand curves, where quantity sold goes up as price goes down, only work when customers care about what you’re selling. The issue we’re facing is not one of price but of value.

We do formal or even informal surveys to determine why people are not attending our events, and so often we hear, “It’s too expensive.” This is like asking someone who’s declined your dinner invitation why he’s not coming. He’ll probably say he “has to work” or some other gentle, easy excuse when in reality he doesn’t get along with your other friends and would prefer not to spend two hours at your house. The bottom line is that if they really wanted to be there, they would be. If the customers valued our event, if they felt it was worth their time and money, they would pay for the tickets.

Therefore, we need to focus on increasing value, not necessarily decreasing price. Obvious things like a winning team and better seat locations increase value, but if we really seek to understand our fan base, other valued amenities and experiences will be uncovered. Perhaps it’s a play area for kids or novel concessions. Finding out what people value takes diligent research and time, so don’t wait until you have a problem to try to understand your fans. And if you already have a problem, don’t focus your research so much on price; try to understand what your potential fans value and alter the value proposition you offer accordingly.

We can also create value through creative pricing. For instance, how much should a Division I 18-game college basketball season-ticket cost? Those of us in the industry could probably give a ballpark number, but on the whole, a fan on the street would be pulling a number out of the air if we asked. Let’s say we determine that a season-ticket package is $225. Is that a good or bad price? What if I add that a nine-game plan is $200? How much better does that season ticket seem? By building in our own pricing benchmarks, we can create value for our customers.

The price we are exposed to the first time we purchase a service or product becomes a very strong anchor on what we believe that product/service “should” cost. This is the danger in giving away our tickets for free, especially to our first-time consumers. We are attributing a value of zero to our own products! We send the message that our product is not worth any of their money. They may be excited to be there for free, but are they ever going to pay to come back?

I accidentally ran an experiment that highlighted this effect. We had one group of 100 pay for discount group-rate tickets to a basketball game, and we had a second group of 100 that qualified to receive complimentary tickets. Eighty-seven of the people from the paid ticket group picked up their tickets. Only 18 of the people from the complimentary ticket group picked up their tickets. The latter group had no value attributed to the event.

The use of discount and free tickets probably isn’t going away any time soon, but at the very least, we must make certain our customers know what that ticket should have cost. We need to ensure the monetary value of that ticket is very clear, both on the ticket and more importantly in their brain.

Pricing is not about us; it should not be about our costs, our budgets or our revenue goals. Pricing is about the consumer and what they value and perceive as value. 

Elizabeth Cunningham (ecunningham2009@kellogg.northwestern.edu) is the associate director of marketing in the Northwestern University Athletic Department.

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