What is the right ticket pricing policy for you?

The dynamic ticket pricing buzzword has been around the sports industry since 2007, and even though in every single sports marketing conference there is at least one panel or keynote on the subject, we haven’t seen it widely adopted in the industry on a global scale, and it seems that the jury is still out on this one.

Dynamic ticket pricing (DTP) is a policy, suggesting that ticket prices should fluctuate based on demand and supply, just like any other product in a free market, and what happens de-facto in the secondary ticket market. Over a short time span, ticket prices can either increase or decrease, based on different metrics analyzed by computer software.

Why is it that a practice we are so used to when buying flight tickets and many other products, faces so much resistance when discussing sports tickets?
The optimization problem is similar – limited capacity of the venue or airplane, expiration date of the ticket, and demand that shifts with time – and so is the math to provide a solution.
Cultural differences between the US and the rest of the world, relating to the roots and public perception of the sports industry as either private entertainment business or social organizations, may explain some of the difference in openness to adoption of DTP, but even in the US we have seen sports teams experimenting with DTP and reverting back to fixed pricing policies.
The benefits of DTP are clear. It enables the club to optimize both revenues and capacity utilization, by understanding the correct price point in each moment in time, not to lose ticket buyers deterred by a high price when demand is low, while avoiding leaving money on the table by underpricing when demand is high.
However, there are several obstacles DTP faces in the industry.
Let’s start with the obvious reason – regulation. In several countries, Brazil and Italy to name a couple, there are laws that prohibit DTP in sports. It’s a way for governments to protect the fans, which brings us to the key issue – fans’ view of DTP.
Many clubs believe that fans dislike DTP, believing that when DTP is practiced, they are being screwed over. Sports teams are not an airline. There’s this emotional attachment that doesn’t exist in other businesses, and clubs are afraid of poking it too much.
On the one hand, the emotional aspect means that fans aren’t likely to switch to a competitor due to ticket prices, however, it’s a sensitive relationship, and pricing is an extra-sensitive issue within it.
The result of DTP may end up confusing fans, as it interacts with questions related to product-related fences, and sale kick-off timing, when you may theoretically have the worst seat in the stadium priced higher than amazing seats, if it happens to be the last available ticket for a game that had a growing interest with time.
Also bear in mind that sports fans are a relatively organized consumer group. They have clubs, online and offline communities, and they interact with each other in between games and inside the stadium as well, so news travel fast, and people finding out how much others paid is quite a likely scenario. Exceptions are one-off events, such as yearly tournaments or mega events such as the Olympic Games for example.
We don’t like buying flight tickets. It’s mostly related to the feeling that we may find a better price if only we wait a bit longer. There are even several services providing recommendations regarding the purchase timing, trying to predict price trends in the future. Flight tickets’ pricing lacks transparency, and this is the root of the problem. We dislike it, because we are unable to make a well-informed decision.
Is more transparency to DTP in sports the key to more teams applying it around the world? Perhaps. So how do we add transparency to DTP? DTP defines prices based on real-time market demand. Predicting demand is one way of going about it.
Another way would be to set proactive rules, rather than reacting to market conditions. Having a set of rules which defines how prices behave, means that the club formulates these rules, and sets them in advance.
For example, the club can define the direction in which prices change. The most common practice is to have prices either freeze or go up, but never down. The idea is to protect early ticket buyers, and incentivize people to buy as early as possible, to avoid paying more. An alternative would be to have prices decrease with availability, justifying higher prices at the beginning with a wider selection of the best seats in the house.
The club can also define the limits of the price range – a minimum price to be paid on single-game tickets, to protect season ticket holders and guarantee that no one pays lower prices than them, and a maximum price, in case the club wishes to preserve a public image of an inclusive social organization. Naturally, with a sophisticated system, such limits can vary from one area of the stadium to another.
Lastly, with DTP, the club needs to define what triggers a price change. The classic scenario is of triggers related to market demand or to actual ticket sales, in real time, or even in a predictive manner. However, there could be other triggers as well, which offer more control in the hands of the club. For example, setting certain dates as the trigger. This concept is quite widespread in the music industry, with early-bird prices. However, there could be more than just two price steps, and again, different ones across different areas of your venue.
For the sake of clarity, we refer to such proactive practices as Flexible Ticket Pricing (FTP).
Since the rules behind FTP are pre-defined by the club itself, and price evolution is set in advance, it can also be communicated to the fans, and decrease the intransparency factor.
Ping us if you’d like to discuss DTP, FTP and also Fixed Pricing Optimization for your tickets.