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Proper mix of promotional offerings can produce for teams
Published May 14, 2012, Page 18
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