SBJ/May 14-20, 2012/Opinion

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  • Cartoon: Miss me?

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  • Proper mix of promotional offerings can produce for teams

    With the 2012 Major League Baseball season well under way, MLB clubs are assessing their early season attendance totals with an eye on producing solid seasonlong turnstile counts. It’s an increasingly challenging pursuit. Given the nation’s high unemployment rate, sluggish economy, rising gas prices and staggering debt environment, forms of entertainment such as sports often are considered discretionary expenditures that can be cut back on when families feel economically insecure.

    Last season, MLB broke a three-year attendance decline by drawing 73,425,568 fans during the regular season, up slightly from 2010, marking the fifth-highest attendance in MLB history and the most since the 2008 season. Yet, 12 of the 30 clubs experienced a net decline in attendance in 2011. In fact, 2011 MLB attendance varied greatly between larger- and smaller-market teams and between teams with higher payrolls and those that couldn’t afford such expenditures.

    With 81 home games, MLB teams have more ticket inventory to sell than any other sport, and gate receipts account for the largest individual revenue source for teams, totaling 34 percent of total gross revenues on average. As such, it is important to understand the factors that drive MLB attendance given the revenue implications that affect overall profitability.

    The Center for Sports Business & Research at Penn State’s Smeal College of Business and Analytika Marketing Sciences, Sports Division, recently completed an extensive study on the major drivers of MLB attendance in collaboration with the Pittsburgh Pirates regarding their 2010 season. The research offers an in-depth look at factors that drive fans to attend MLB games: weather/climate, team performance, game venue, price/total cost of attendance, opponent and in-game promotions (e.g., T-shirts, fireworks, concerts, caps, blankets, bobbleheads). From a marketing perspective, team management has minimal control over such factors as weather, performance, opponent or venue (e.g., day of the week). A new dual-stage computer model was devised that accounts for these external drivers and determines what effect various types of in-game promotions have on game attendance. As shown in the first chart relating to the 2010 Pirates, it was interesting to find that in-game promotions had the strongest impact on overall fan attendance.

    During the 2010 season, the Pirates had a total attendance of 1,613,399 fans over 81 home games — 27th out of 30 teams. They utilized in-game promotions for 52 home games (almost 65 percent). This practice continued throughout MLB the following season. According to a SportsBusiness Journal report (Oct. 17-23, 2011), MLB teams combined for 798 giveaway dates in 2011, an increase of 11 percent over 2010. These teams also combined for 1,891 non-giveaway promotions in 2011 (e.g., fireworks, concerts, discounts), an increase of 33 percent over 2010.

    Based on a simple graphical analysis of the 2010 Pirates’ attendance and promotional schedule, it is not clear that just any form of promotion would have automatically increased attendance — i.e., having just any promotion or giveaway would not necessarily raise attendance above the season average of 19,919 fans. However, virtually every game with above-average attendance had a promotion. As a business, it’s important to determine which specific types of promotions to offer and when in order to maximize expected revenue or profitability. Using tailored nonlinear multistage estimation procedures, we were able to calibrate the effectiveness of each type of promotion above and beyond what would be expected by the weather conditions, team performance, venue and the team played. As shown in the bottom chart, promotions such as the bobblehead giveaways, concerts, fireworks, Skyblasts (concert and fireworks), etc., had more pronounced positive effects on overall game attendance. That is, one is able to quantify the expected relative effect in attendance for each type of promotion above and beyond the effects of the uncontrollable external factors.

    We developed optimization procedures that replace the less-productive promotions (i.e., those in the chart with lower than expected/negative relative changes to attendance) with the more productive ones (i.e., those in the chart with higher than expected/positive relative changes to attendance), while keeping the number of total promotions the same and considering costs and various constraints relating to repetitive promotions and days of the week. For the 2010 Pirates, this would have meant replacing several of the negative promotions such as blanket, bottle, cap and poster with the more positive promotions, such as bobblehead, concert, fireworks or T-shirt. Here, depending upon the set of managerial constraints used, we were able to devise a revised promotional schedule that could have increased attendance between 210,000 and 508,000 fans in 2010, translating to between $7 million and $17 million in seasonlong revenue.

    Such a promotional schedule can be devised for any MLB team (or for any team in any sport, for that matter) and can be tailored to the specific conditions faced by that team. The major takeaway from this research is that while promotions are important overall, optimizing the proper promotional mix can greatly enhance teams’ attendance, and revenue, while simultaneously considering costs. After all, the majority of sports managers measure the success of a sports promotion primarily by its ability to increase ticket sales and revenue. In total, MLB teams are leaving hundreds of millions of potential dollars on the table if they unscientifically conduct their promotional schedules. n

    Wayne S. DeSarbo is executive director of the Center for Sports Business & Research and the Smeal Distinguished Research Professor of Marketing at the Smeal College of Business at Penn State University. Ashley Stadler Blank, a doctoral student in marketing, and Christopher S. McKeon, coordinator for the Center for Sports Business & Research, contributed to this research and report.


    Promotions have strong impact on fan attendance




    Not all promotions are created equal

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  • After prayer, what job seekers should do to get noticed

    There are college students graduating this month who spent their senior year taking the necessary steps to prove to companies that they have what it takes to be future stars in the sports business. The opportunities they stalked might include small starting salaries or job descriptions filled with menial tasks, but they are embarking on their dreams of working in sports because each of them understands what it means to “bloom where you’re planted,” as my friend Mark Dyer is fond of saying.

    For those of you among this year’s graduates who have done little to no legwork, the gates of hell are about to open. I was recently asked by a student what I would do if I was one of the latter, and I offered two pieces of advice: Read the following Mark Cuban quote, and then pray.

    “[This is the] worst possible business in the world for a college graduate to try to get into because it doesn’t pay shit [and] there’s a thousand people applying for every job,” said the Mavericks owner, recently addressing the MIT Sloan Sports Analytics Conference. “I get 20 résumés a week, minimum, minimum, saying, ‘I’ll work for free. I just want a chance.’ I get some — I get one or two a month [saying] ‘I’ll pay you to come work.’”

    It’s an intimidating comment that’s purposefully meant to scare some of you away. Sports, like politics, attracts some of the best and brightest for jobs that pay better in other industries. The aforementioned student, undeterred by the Cuban quote, replied, “OK. So what do I do after I pray?” We hold a monthly networking meeting in Charlotte for people seeking jobs in sports, and this is what we tell the ones who are diligent enough to ask.

    Network like crazy

    There are more networking options readily available today than at any other time in the history of business. Social tools like LinkedIn, Twitter and Facebook are the preferred communication platforms of your generation, but not mine or many other hiring managers.

    Pick up the phone; attend networking events in your area; ask for a five-minute meeting (before, not during, working hours); and prepare your elevator speech. Create a map of people you meet and let them know other people and organizations with whom you’re communicating. Don’t “spray and pray” your résumé — a great phrase I recently heard. Did you like that job you found this morning on Career Builder? It was filled three days ago.

    Fandom is not a qualification

    Unless you’re applying for a job as assistant general manager or a fantasy sports editor, no one cares that you won your roto league seven years running. We look for type-A people who are highly self-motivated and want to rule the world — and might have different opinions on how to get there. We want ethical people who take the high road and aren’t afraid to ask, “Is this the right thing to do?” But the magic dust is that they’re collaborative. They want to be part of a team, not pretend to own a team. And the old press box rule applies across sports: “Don’t ask for autographs.”

    Preparation

    You know what turns off hiring managers? Someone who takes 30 minutes to prepare before coming to see them. In the agency world, we spend hundreds of hours doing background work just to prepare to approach a single potential client, so it’s obvious to us when a job candidate only visits our website to prepare for the interview. If they’re only going to consume a tiny amount, that’s how much they’ve told me they want it.

    Seek out people in your network who know about the company. If you don’t have one, find one. The best way to cut through the noise is to get someone to call on your behalf. And never take the introduction for granted because you’re risking the reputation of your reference.

    “I have kicked more people out of my office because they weren’t prepared,” said Louis Cunningham, a longtime sports marketer. “There was a friend of mine whose son came to me, and I guess he thought that because of my relationship with his father that he was going to get it easy, and I probably lit into him the hardest because he took advantage of his father’s relationship with me.”

    Thank-you notes

    Write a note to every person you meet. You’re elevating yourself. You’re differentiating. Make them remember you. If you’re under 35, you’ve grown up in a paperless culture, but you still need to follow your mom’s rule about thank-you notes. If you send me an email three minutes after our interview, I know you sent it in the parking lot, which doesn’t take any effort. I open up every handwritten note I receive; I unfortunately can’t say that about emails.

    The bad news if you’re a new graduate without a job? You’re standing on the starting line of the Ironman Triathlon. The good news? If you put in the work to get the work, you’re about to embark on a rewarding career that will bring so many memories that you’ll forget half of them.

    Any job search includes challenges and frustrations and discouraging times, but even on the bad days, make the choice to do something: volunteer, write two more letters and make two more phone calls.

    Remember the advice from Cuban, but find inspiration in the words of author Mary Anne Radmacher: “Courage doesn’t always roar. Sometimes courage is the quiet voice at the end of the day saying, ‘I will try again tomorrow.’”

    Mike Boykin is executive vice president of sports marketing at GMR Marketing. Follow him on Twitter @Mike_Boykin.

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  • How teams can keep season-ticket holders committed

    Consumer-facing brands invest significant resources to retain loyal customers. Credit cards, hotels, restaurants, auto service shops, even your local hair salon will offer incentives to win your repeat business. Professional sports organizations behave no differently; they want to hang on to fans who spend.

    In sports, buying lots of tickets well in advance produces the ultimate loyal customer: the season-ticket holder. Do not overlook the uniqueness of the season-ticket holder’s commitment; few business models encourage people to spend thousands of dollars up front before utilizing the product. It’s not like you give Macy’s $1,000 and decide what merchandise to buy later.

    Looking to add value to the season-ticket holder experience, teams pay a lot of attention to the relationship between the customer and the brand. It’s pretty obvious that the relationship between a fan and team differs from that of customer and typical brand. (The world’s biggest Big Mac fans don’t wear McDonald’s jerseys.) The emotion and passion a fan feels for the team drives a different dynamic, one that is always changing, prompting the need for continuous evaluation. Understanding this dynamic facilitates effective communication between team and brand.

    The Seattle Sounders FC’s Official Members Association has a say in who the team’s GM is.
    Photo by: GETTY IMAGES
    Perhaps now, the ideal analogy for the fan/team relationship finally exists. Recently while conducting focus groups on behalf of different team clients, I asked respondents to classify their relationship with the teams. My goal was to lay out an emotional spectrum of relationships and to understand where along this spectrum the answer lies. Respondents were offered the following terms by which to describe their relationship: family, friend, colleague, client and customer. Which term stood out as most frequently chosen? None of them. Why? Because the correct answer was not on the list.

    Think about the purchases you make on a daily basis. Each time you buy something, you expect something in return. If you are thirsty and buy a soda, you expect the soda to taste good and quench your thirst. Said differently — if you invest in a soda, your return should be refreshment and elimination of thirst.

    Return on investment

    As season-ticket holders continued lamenting the amounts of money spent without true fulfillment, the light bulb went on. Fans fancy themselves as investors. The money spent on season tickets? An investment. The return on investment? Entertainment. Someone to cheer for. Something to stand behind. Something that provides a sense of identity.

    In 1983, psychologist Caryl Rusbult developed the Investment Model of Commitment. Rusbult’s model in its pure form refers to marital relationships, but the principles are easily applied here. Simply explained: Satisfaction, quality of alternatives and investment all factor into commitment, which leads to relationship stability.

    Take a typical season-ticket holder. Clearly there exists commitment to the team. What drives that commitment? Firstly, a gratifying experience. A competitive team and good entertainment and customer service often drive gratification. Secondly, a lack of alternatives suggests greater likelihood of loyalty. To be sure, competition exists for a season-ticket holder’s discretionary income; fewer alternatives mean less competition.

    Thirdly, investment level plays a huge role in commitment. Think about the investment. While many season-ticket holders qualify as affluent, they still acknowledge and realize the size of the investment. Beyond money, time spent at the game and in travel, cost of parking, and schedule accommodations all represent investment. Then consider the pure emotional investment. The cheering, hoping and praying. They are all in. In exchange for their actions, they want equal and opposite reactions.

    When someone invests in a public company, the investor becomes entitled to privileges such as a proxy vote, shareholder meeting, and of course an annual report with a lot of behind-the-scenes information about how the company is run and why key decisions are made. I don’t foresee or recommend teams using fan proxy votes for decision-making, and a meeting for all season-ticket holders seems impractical. But why can’t a team issue an annual report to its season-ticket holder base? Season-ticket holders clamor for more communication, and not just any communication: VIP-level communication. A report summarizing key milestones, important team transactions (on and off the field or court), and certain financial performance metrics would be a terrific step toward treating season-ticket holders like investors. Note my emphasis on certain financial metrics: Teams are privately owned and obviously retain the right to keep certain information behind closed doors.

    Of course, teams try to satisfy their portion of the commitment by trying to field a competitive team, including perks and benefits, and offering pricing discounts for buying in advance. How else can a sports property add value? Certain teams have already made strides to be more communicative with season-ticket holders. For instance, the Golden State Warriors provided a contract to their season-ticket holders that guaranteed various performance goals in 2011-12 in exchange for risk-free renewal. The Seattle Sounders FC has created an Official Members Association that, among other things, will allow fans to vote on whether to retain general manager Adrian Hanauer following the 2012 season. In an effort to be a customer-centric organization, the Philadelphia Eagles maintain a 35-person season-ticket-holder advisory board that meets monthly; they provide input and feedback regarding the organization’s business practices.

    Everyone wants to root for a team that has a chance every time out. Season-ticket holders invest in more than a team, or an organization. They invest in a brand. Their return on their investment will never be measured in dollars, but rather in emotional metrics and willingness to invest again. By helping ensure balance on both sides of the relationship, the team only helps add to that return.

    Steve Seiferheld (steveseiferheld@turnkeyse.com) heads the custom research division of Turnkey Intelligence.

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