I've spent the better part of the last nine plus months talking to as many industry experts as I possibly can to learn about the different areas and opportunities that exist in the industry. I dedicate several pages of notes in leather binders that I own to each meeting that I have. Whether it's an in person meeting that I take notes on after leaving, or a phone conversation that I take notes during, I always dedicate several pages to the conversations that I have. After nine months, I have filled three large leather books with my notes. On a recent international flight I took, I spent the duration reading through these notes. Upon finishing reading through my notes, I was struck by three common topics that I have discussed often during my conversations with industry experts.
1) The emergence of dynamic pricing in the sports industry and why teams and the industry in general have been so incredibly slow to adapt this capability.
2) How teams "weather the storm," so-to-speak, in years when their teams do not perform well on the "field" and they struggle to attract fans to the stadium.
3) How to correctly use and value social media in today's sports industry.
What I'd like to share in this post, are parts of conversations I have had, what experts are saying, and what my personal thoughts are on each of these issues. I also think this post may end up being interesting for me to look back at in a few months or years, as each of these spaces are changing constantly at break-neck speeds. Without further adieu...
1) Dynamic Pricing... let me tell you a thing or two about dynamic pricing...
One of the things that has surprised me is how slow teams in the industry have been to adopt dynamic pricing in their practices - don't even get me started on the IMMENSE opportunity for teams when it comes to consumer tracking, which will be a separate post all on its own in the near future. I realize that some teams have larger budgets and discretionary spending abilities, however the value that dynamic pricing appears to offer seems to vastly outweigh the cost of hiring or arming a smart numbers-oriented nerd individual with data and Microsoft excel. Yes, I know that dynamic pricing software exists and can cost a pretty penny at far north of $250k, but it is possible to build and run your own models in excel if you simply slow down and take the time to do it - again the need for a smart numbers-oriented nerd individual.
I could sit here and write a short novel full of statistics to back the value-add of implementing dynamic pricing. However, at this point I want to share a few of the opinions I've gotten around the industry and my thoughts on each of them:
"we price dynamically so that we sell every seat in the house" - this is perhaps the most common response I receive when I talk to organizations that are currently using dynamic pricing. The main idea here being that teams are using dynamic pricing to increase their overall revenue by pricing tickets higher (generally) to more accurately equate supply to demand. Organizations will usually approach this by trying to set prices that sell all remaining available tickets - i.e., sellouts. This has to be the most logical way of using dynamic pricing. Or does it?
"we try to price in such a way that we sell every seat in our stadium, minus one" - the first time I heard this, I was somewhat perplexed. Why would a team want to sell every seat, save one? Why not sell the last seat and make that amount of additional income? The reason I would come to learn, is because this is the closest way that an organization can truly equate supply to demand. Think about it. If you sell every single seat in your stadium, chances are there was some level of excess demand. Or rather, you used an incorrect price point - you theoretically left money on the table. By pricing to sell out minus one, you will have theoretically priced at a level where there is not a single additional person who will purchase a ticket to your event for that given price point.
"tiered pricing is more effective for us at this point" - some organizations argue that tiered pricing is still the most effective way for them to price their tickets. I will be the first to admit that I am not in a position to say what is best for any particular organization, but I question the logic of tiered pricing being the absolute best way to price efficiently. By only using tiered pricing, teams do not offer themselves the flexibility to price efficiently for hot-ticket games, and as a result are not pricing in the most efficient or optimal manner. Could there be a happy medium between tiered and some degree of dynamic - absolutely, but it depends completely on the objectives of the organization (more on this in a bit).
"there's no point in us pricing dynamically" - oddly I have to say that the individuals I talk to that have this sentiment generally have it for a good reason. The sentiment is generally felt by teams that have trouble selling-out their venues. Dynamic pricing is considered to be a tool that can help organizations increase revenue through raising ticket prices. As a result, for an organization that is not selling-out, pricing tickets at a higher price will most likely not lead to an increase in revenue. However, the point behind dynamic pricing is to increase revenue, which can be achieved through raising or lowering ticket prices. The concern for teams lowering prices in order to increase revenue (through increased demand at a lower price point) is that an organization runs the risk of devaluing tickets and agitating season ticket holders by offering ticket prices below the price that they paid for their tickets.
So what is the right answer for an organization? As any well-trained MBA student will tell you, it depends on a number of factors.
2) Weathering the Storm in Good times and Bad
An unfortunate reality for teams is the fact that ticket sales are most often connected to team performance. The better a team performs the higher the demand for tickets.
Having spoken with a number of organizations, all seem to agree that it is vital during poor-performing years to keep fan engagement up. Examples of how to do this have ranged from doing whatever it takes to get fans to the stadium through promotions, discounts, etc. all the way to creating events outside the stadium to keep awareness up. Sure, I buy this. If a team I follow is performing well and in first place, I’m okay with spending a pretty penny to attend a game, but if that same team is in the cellar of the standings, you bet I need more value in return.
However, I have noticed something that not a lot of teams seem to consider. What can you do to prepare during “good” years to help weather the storms during down times? I have asked the question time and time again to well-run and forward-thinking organizations only to time and time again be told that the main focus at the time for resources is placed elsewhere. Again, I’ll be the first to admit that I have no idea what the priorities are of specific organizations, but I have to imagine that building your brand in such a way that would help weather the storm is an important issue that needs to be paid attention to more. Let’s explore this…
Organizations are always building their brands, make no mistake about it. My previous paragraph is not intended to say that organizations aren’t doing this constantly, but instead is intended to question what type of brand-building should be taking place. I believe this is also an “it depends” scenario. One factor to consider is the recent and long-term history of the organization. Are you a team that consistently sends out a competitive squad year after year (think Detroit Red Wings, New York Yankees), or are you like the majority of organizations where your success on the field ebbs and flows? If you’re the former, maybe this isn’t that big of a deal, but I have to imagine that if your organization is in the latter (and there’s nothing wrong with that!), then planning for the ups and downs in performance seems like a no brainer.
Great, talk is cheap, so what is it that teams should be consistently trying to do to protect themselves against the down years? First, set real expectations for what a reasonable target attendance number could look like during down years. What sport do you play? If you play once a week versus five times a week, your scarcity factor in the number of games that individuals can attend over a season changes. I also say “could” look like because teams already have an idea of what attendance does look like, not what it could look like. Second, be honest with yourself as to how your organization is really performing. Is your organization taking every advantage of its current market? Probably not. What multicultural avenues is your organization exploring? Does your regional area have a large number of Hispanics, Irish-Americans, LGBT, college kids? If so, what specific events and outreach initiatives have you created to reach out to them? What is your social media strategy? What platforms and channels are you delivering on and who is it that you are really targeting? My point is this - I have not seen a lot of teams truly exhausting their ways of identifying potential consumers. Saying it is not in the budget is not an excuse during a day and age that many fan engagement channels come at little to no absolute cost. Well... maybe a little creativity and elbow grease are required.
3) 10,000 “likes” on Facebook is worth $100,000… well maybe
Talk about the go-to topic when you run out of things to talk about with people in the industry… joking aside, there aren't many hotter topics in the industry right now than social media. A lot of this has to do with the fact that everyone from your nieces and nephews to your grandmother and grandfather are on it, but also because the space is changing so incredibly fast. When Twitter first came out, I vowed to never have a Twitter account or to even read about how it worked. At the time my Facebook and email were enough. Who cares what disgusting greasy sandwich today's celebrity stuffed down their throat at lunch? Yet here I am in March of 2013 with a Twitter account, because I was originally narrow-minded on all the applications Twitter could be used for. I ultimately signed up for an account because it’s where I get my news from around the sports industry within moments of news breaking. Anyone who is in the industry knows exactly what I’m talking about.
To be honest, I’m not even sure where to begin with my thoughts on social media in the industry. You have some teams that have decided to have a single voice in social media and have only one Twitter or Facebook account while others have accounts set up for kids, adults, ticket sales, concession sales, player updates, staff updates, towel boy updates, blah blah blah blah blah. But the real big gorilla in the room is how to go about valuating different social media channels.
One question I ask a lot of the individuals I speak with is how they go about attaching value to Facebook “likes”. The responses are all very similar in that it is incredibly hard if not impossible. I’m not sure if I agree that it’s impossible, but will agree that there are a lot of variables that can change what certain metrics may or may not be worth.
Another question that I struggle with is the role that social media should be playing in the sports industry. To me, social media started as a platform to hold conversations; to communicate and connect with people from all walks of life from all over the world. That’s not to say social media cannot be adapted for other purposes, but I continue to wonder whether or not deviating from social media’s original purpose and intent can be harmful to organizations and brands? I see many organizations trying to use social media to sell more tickets. My thought is that organizations most likely want to be seen and considered a “friend” in the conversations taking place on social media instead of a person who is trying to push more sales onto them morning, noon and night - (on a quick side-note, I do believe teams can use social media to sell more tickets, but they must be cognizant that they may be walking a very fine line, risking alienating and turning potential consumers off if they market and communicate in the wrong way).
As mentioned above, there are many variables involved in determining the true value of social media’s impact on an organization. One obvious differentiator is the size and scale of the organization in question. Are you Microsoft? A big market team? A small market team? 10,000 “likes” on Microsoft’s Facebook page after launching a new operating system may actually be a negative if Apple’s Facebook page received 1,000,000 “likes” after a new operating system launch, whereas 10,000 “likes” on a small market teams Facebook page after winning a game may be the next big thing since sliced bread. The point is that I see a lot of teams making a HUGE mistake. I see a lot of teams trying to benchmark themselves against other teams and other organizations – wrong wrong wrong wrong wrong! So many business leaders in the industry (actually both in and outside of sports) don’t seem to understand the underlying purpose and usefulness of social media and instead tell their staff’s “I want 100,000 “likes” by the end of the year”. What? Why? Where did they get that number? Is it because it sounds nice and because the team down the street was able to reach that? Benchmarks are great, no doubt, but organizations need to realize that no two organizations are alike and as a result neither are any two fan bases. A 1,000 “likes” for one organization could be 10X as valuable as 1,000,000 “likes” for another. This brings me to my next question.
What are you using social media for? Are you providing content in the form of news and updates, conversing with fans, offering promotions, or offering ticket sales?
So are 10,000 “likes” worth $100,000? Maybe.
-Alex