27 November 2014

Common Ticketing Strategies in Sports

This essay gives a broad overview about the marketing theory behind the term ‘strategy’ and describes why and how strategies are developed and used. Finally it gives an overview about three common ticketing strategy approaches used by professional sports clubs nowadays.

In my post from the 28th October I identified three reasons why on-site spectators are crucial for every sport club. In addition to these reasons, Drayer et al. (2012: 184) argue that facts like increasing revenue needs, through for instance growing player salaries and operational expenses, and latest technological developments force sport marketers to seek for more effective ticketing strategies in order to meet the organisations’ needs.
Generally speaking a strategy could be defined as “a plan of action designed to achieve a long-term or overall aim” (Oxford 2014). Although the sport business is characterised through certain particularities and generic marketing measures cannot be simply adopted without adapting them, it is worth considering the not sport related marketing theory at this point in order to provide a basic theoretical foundation. According to Palmer (2007: 23) a successful marketing management process consists of the four fundamental stages analysis, planning, implementation and control, whereat the planning stage comprises the development of a strategy based on the specific circumstances identified during the analysis stage. It is also generally acknowledged that, event though there are particular situations that require specific marketing strategies like for example the introduction of a new product, an on-going implementation of marketing measures is crucial for an organisation in order to reach its objectives on a permanent basis (Hooley et al. 2004: 44-47; Palmer 2007: 23; Jobber & Ellis-Chadwick 2013: 54-58).

When it comes to selling tickets, the sport related literature agrees on the perception that there is a wide array of strategies and tactics that could be used to pursue ticketing objectives. However, there is also accordance about the fact that a ticketing strategy is never a ‘one size fits all’ model. Instead a customised approach, which considers the specific circumstances of the particular organisation, is required (Irwin et al. 2008: 88-91; Meir & Arthur 2007: 322/323; Fullerton 2010: 4/523; Lee & Kang 2011; Rishe & Mondello 2003). Nevertheless there are, as listed below, several acknowledged basic practices, which are nowadays considered to be expedient.

According to basic marketing theories, a strategy is always linked to particular objectives, defined during the analysis and the planning stage, which are again linked to the corporate objectives of the overall organisation (Rowley 1997; Meir & Arthur 2007: 326; Shilbury et al. 2009: 35). For sport clubs this circumstance becomes obvious when comparing the objectives of the profit orientated franchise clubs in most North American Major Leagues with the not-for-profit approach in, for instance, German basketball (Dietl et al. 2011). Whether a club follows the objective of revenue maximisation or increasing the attendance (Lee & Kang 2011), the overall purpose of developing a (ticketing) strategy is to gain a competitive advantage towards direct and indirect competitors (Schwarz & Hunter 2008: 9; Shilbury et al. 2009: 35). This is mainly achieved through adapting an organisation’s marketing mix (4 Ps, respectively 7 Ps) to the specific needs of the customers (Palmer 2004: 19).
Although all parts of the marketing mix are important and should not be neglected, the ‘Price’ element could be considered as the most crucial one when it comes to ticketing strategies (Lee & Kang 2011; Drayer et al. 2012; Shapiro & Drayer 2014; Irwin et al. 2008: 89; Fullerton 2010: 523). One major reason for that is the fact that Price is the only element of the marketing mix which actually generates revenue (Kotler & Armstrong 2004; Clowes & Clements 2003) as well as the fact that price significantly influences the decision making of customers, as described later in this passage.

When it comes to ticketing strategies, broadly defined it could be distinguished between four different ticketing strategy approaches, which also demonstrate the development over time from a comparable simple approach right up to complex strategies, based on latest marketing insights.
The first and most simple strategy is based on a ‘one size fits all’ concept where clubs charge the same price for every ticket and every game throughout the whole season (Drayer et al. 2012: 184).
The seconds approach alters this strategy and is also known under the terminology ‘discriminatory ticket pricing’. It mainly comprises different prices for different seat categories (e.g. standing stands versus courtside seats) and different customer segments, such as discounts for students and children (Fullerton 2010: 526; Meir & Arthur 2007: 333; Rishe & Mondello 2003: 73; Drayer et al. 2012: 184).
The third approach is called ‘Variable Pricing’ (hereinafter known as VP) and means “selling a seat for different prices depending upon timing or the opponent” (Fullerton 2010: 527). This strategy takes factors like demand and attractiveness of the game into account and aims primarily on maximising the attendance at low-demand games and increasing the revenue at more popular ones (Drayer et al. 2012: 188; King 2002; Drayer & Shapiro 2011; Mullin et al. 2007: 227). Commonly a VP strategy divides the totality of games per season into two or three categories, each representing teams with the same projected attractiveness and demand (Clowes & Clements 2003: 116). Timing is the second major factor the strategy takes into account. Because different times and dates, for instance weekdays versus weekends or public holidays, create different demands, different prices for peak and off-peak games seem to be advisable (Blakey 2011: 86). According to Cameron (2002) the two requirements for a successful implementation of a VP strategy are to keep accurate transaction records and to consider the interests of season tickets holders.
The fourth and most complex approach develops the aforementioned VP strategy further and is known as ‘Dynamic Ticket Pricing’ (hereinafter known as DTP). In 2009 the San Francisco Giants (Major League Baseball) became the first professional sports team which introduced a purely DTP based strategy. Beside the aforementioned timing and opponent, the DTP considers numerous internal and external factors as for instance player performances or even the weather. By using a special DTP technology, clubs can set and adapt ticket prices in real time which allows them to quickly react to demand changes and achieve both, revenue and attendance maximisation objectives (Drayer et al. 2012; Shapiro & Drayer 2014; Rishe 2012). Although DTP, which originally comes from the airline and hotel industry, is nowadays successfully established at some primarily North American sports clubs, Drayer et al. (2012) emphasise the challenges and risks associated with the implementation of such a strategy. Due to missing know-how and technology developed for the specifics of the European market, as well as the lack of required relevant customer information and empirical values at most clubs, considering a DTP strategy for the case of any professional club in Germany seems not to be expedient at this point.

The circumstance that most clubs already altered their ticket prices based on different seat categories and customer segments, as well as the fact that the DTP approach is not effective viable at this point, shifts the focus upon a VP strategy. Researches prove that there are several sport leagues that already implemented the VP approach successfully, including some clubs of the football Premier League (Clowes & Clements 2003), the National Football League (Rishe & Mondello 2003), some clubs of the Major League Baseball (King 2002), and in several college sports (Mullin et al. 2007: 228) to name but a few. In near future hopefully some more will follow!

A list of references and literature used in this essay is available upon request.

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