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What is Your Department Trying to Achieve With Ticket Pricing?

By Craig Morehead, Indiana State; Stephen Shapiro, South Carolina; Lamar Reams, Old Dominion; Chad McEvoy, Northern Illinois; Timothy Madden, East Carolina

A review of athletic department staff directories provides an indication of the importance of revenue generation to the college sport enterprise, with job titles related to business development, annual giving, donor relations, partnerships, licensing, revenue management, strategic marketing, ticket sales, premium seating, client services, and sponsorship. One generally accepted (if not expected) revenue source for intercollegiate athletics is ticketing, as departments across the country charge admission fees for various sports. Yet, to better understand ticket revenue, we must better understand ticket pricing, which functions as a means of cost recovery, represents value, and can influence behavior. To date, most pricing decision research has been conducted in the context of professional sport ticketing. However, due in part to their non-profit status, we should be careful not to assume intercollegiate athletic programs attempt to maximize revenues as they do in professional sport. 

 

Secondary ticket market research has provided evidence of primary ticket pricing inefficiencies within intercollegiate athletics. In a comparison between 2007 departmental season ticket prices and a mock season ticket derived from secondary market data, Sanford and Scott (2014) found only three Southeastern Conference schools had packages priced at market value, suggesting a gap between the asking price of a ticket and what a consumer is actually willing to pay to attend an event. Then, in a study of individual 2019 Power Five football games, Shapiro et al. (2021) found “get in” prices for tickets purchased on StubHub were less than the mean ticket price sold by athletics departments on the primary market. These presumed inefficiencies may stem from a lack of understanding regarding ticketing policy objectives, the factors considered when contemplating such policies, the individuals involved in decision making, or the strategies implemented to achieve departmental goals. 

 

Given the number of schools who charge admission for athletic events, and the millions generated from ticket sales annually, it can be argued that athletic administrators should think about the pricing strategies and decisions utilized within their own department. This is particularly important for collegiate ticket pricing, as decision makers must respond to the needs of supply-side stakeholders tasked with managing the department, as well as to consumers with the power to determine whether to invest in the department by making donations, purchasing tickets, and attending events. 

 

For example, consumers may feel “priced out” based on increased prices or decide to take advantage of myriad mediated channels available to watch a game rather than attend in-person. If this results in decreased attendance, there are a number of implications beyond potential box office losses, including potential loss of sponsorship value (Drayer et al., 2012), ancillary revenue (Shapiro & Drayer, 2012), donations (Gladden et al., 2005), and a loss of in-game atmosphere created by large crowds, including students (Simmons et al., 2017). 

 

The balance of revenue maximization and attendance at revenue generating college sporting events are important considerations for college sport administrators. With this in mind, and given the lack of research on college sport pricing decisions, the purpose of our research was to investigate administrative pricing decisions and objectives within the Football Bowl Subdivision. 

 

To accomplish this, we interviewed athletic directors, external operations administrators, business/finance officers, marketers, ticket office managers, and development directors to better understand departmental ticket-pricing policy and practice. A total of 20 athletic administrators from four different athletic departments (two Power 5 and two Group of 5 schools) participated in this study, with each department practicing a version of variable ticket pricing (i.e., charging different prices based on opponent, day of week, holidays, etc.) as a primary ticket-pricing strategy.

 

Findings

 

All but four administrators interviewed identified multiple objectives for setting ticket prices. This multi-faceted approach is not necessarily surprising, as “the complexity of pricing decisions imposes the need to pursue more than one objective at a time” (Avlonitis & Indounas, 2005, p. 48). What we found surprising, however, was the lack of congruence between administrators when describing their respective departmental objectives. Instead, administrators described disparate responses that can be categorized as revenue-, patronage-, and operations-oriented pricing objectives (Lovelock, 1996), as well as an attendance-oriented objective that may be unique to college sport. 

 

Revenue-oriented objectives. The revenue orientation toward pricing is an overarching desire to grow revenue via ticket sales and other ancillary revenue streams, where changes in ticket price will have only negligible effects on demand in an effort to protect ancillary revenues (Fort, 2004). Administrators noted ticket pricing can be a strategic move towards capturing additional ancillary revenue such as parking, merchandise, and concessions, making ticket pricing only one component of the entire fan revenue picture. As one marketer stated, “Once you get somebody into the venue, it’s so much bigger than just what they paid for that ticket … it’s all the ancillary things they could buy. It’s the fact that they’re probably one step closer to becoming a season ticket holder if we give them a good experience.”

 

As we know, donations are also a revenue stream linked to ticketing, but we argue it is important to recognize the allocation of these financial resources are subject to different administrative restrictions (i.e., foundation-based accounts vs. athletics general fund accounts). Therefore, the source of such revenues is an important distinction, as it may dictate how those financial resources are utilized. 

 

Patronage-oriented objectives. A patronage-based pricing orientation shows concern for affordability, fairness, and the opportunity to attend events. The overarching theme related to a patronage orientation is a sensitivity to what prospective ticket buyers can comfortably spend, rather than attempting to pinpoint the maximum they will pay. As another marketer stated, “[I am] a strong believer in a price point for everybody. We don’t want to stretch our fans so much that they think we’re gouging them … we want to give everybody that opportunity.” This distinction is important because it suggests a distinct departure from the revenue focus we often see in professional sport. More specifically, college athletic departments may not feel the pressure to maximize revenue since they may be financially subsidized through the state legislature, student fees, league disbursements, etc., and can function under the institution’s umbrella educational mission. These patronage-oriented objectives reflect a desire to establish goodwill and satisfy the needs of those with a vested interest in the department.

 

Operations-oriented objectives. This objective describes a desire to find the “just right” price by locating the “sweet spot” where all tickets are sold at the highest possible price. As one AD mentioned, “The primary goal is to get it right. You don’t want to leave money on the table and underprice your product. You don’t want to lose business and ticket sales—customers—by overpricing.” Such an objective is distinct from a revenue-orientation because no discussion of ancillary revenue streams exists. A dynamic ticket pricing strategy might be a viable option for departments with requisite resources who seek the “sweet spot” between capacity fulfillment and revenue maximization, as it allows management to adjust prices up or down to more accurately capitalize on real-time demand. However, few athletic departments have implemented such a strategy to achieve these efficiencies, which suggests true operations-oriented objectives in college athletics are scarce.

 

Attendance-oriented objectives. Although administrators who focus on attendance maximization could be considered to follow either operations-oriented or patronage-oriented objectives, our findings suggest it is important to draw clear distinctions, especially given the unique nature of intercollegiate athletics compared to professional sport. More specifically, attendance-oriented objectives focus on maximizing ticket distribution to increase attendance and ultimately pack the athletic venue, regardless of revenue. Attendance objectives may be important for departments because a full house may signal positive messages to recruits, generate media attention, increase school spirit, and enhance the institutional image (Yow et al., 2000). Furthermore, college administrators (especially within the Group of Five) might be considering the NCAA’s 15,000-spectator attendance requirement for football when making pricing decisions. In our research, several administrators described the role pricing plays in putting butts in seats, even if it requires deep discounts. It is not uncommon for tickets to be drastically discounted or even given away to achieve a sell-out or meet attendance requirements, which then results in little-to-no ticket revenue generated for the department. Furthermore, when deep discounting is implemented, such decisions undermine the fairness principle set forth with patronage-oriented objectives, especially among some season-ticket holders who might see their own investment as being undercut. When such tactics are implemented, the department risks devaluing its product by emphasizing the short-term solution of selling out the venue rather than the long-term strategic health of the department. 

 

Overlapping objectives, questionable understanding. Among the findings from this study, perhaps the most concerning for college athletic departments is the indication of no formalized objective driving pricing decisions. On one hand, it is plausible (and perhaps even desirable) to pursue multiple objectives simultaneously, especially considering large seating inventories within stadia where there are different pricing objectives for different sections (e.g., premium seating, young alumni, general admission). However, these objectives should be mutually agreed upon and lead to strategically sound pricing policy designed to achieve stated goals. Unfortunately, at present, the administrators representing common athletic departments in this study do not appear to be pulling in the same direction.

 

Implications

 

In a complex college athletics landscape, a more effective approach to ticket pricing can be a means to generate additional revenue, if that is, in fact, the departmental objective when determining price. Administrators interviewed in this study were generally concerned with short-term pricing rather than long-term value. Therefore, from a practical standpoint, administrators are encouraged to consider the long view when making pricing decisions. Price can be an indicator of quality, and therefore pricing decision-makers should take this possibility under consideration, as positive short-term gains may have negative long-term ramifications.

 

Athletic departments should consider systematic approaches to pricing decisions, especially in an era when athletic departments feel pressure to be self-sufficient. Based on our findings, there appears to be disparate levels of sophistication in pricing analysis and strategy development between departments, which may further widen the divide between the haves and the have-nots within college athletics. 

 

Among other considerations to consider when developing pricing strategy, it is important for administrators to understand consumer objections as to know whether a purchase barrier is related to price, or some other factor. Also, in an era of the experience economy, athletic administrators should balance the need to entertain the audience with the need to recoup such marketing expenses through efficient pricing. Finally, as the COVID-19 pandemic ends and venues begin to open up to spectators, athletic administrators need to better understand the role of pricing strategy as a means to achieve departmental objectives and meet the needs of myriad stakeholders.

 

If a department is particularly interested in the per capita revenue derived from attendees once they get into the venue, administrators may choose a more revenue-oriented pricing strategy. Departments that consider themselves stewards of the community and feel an obligation to provide reasonable “get-in” prices may select more of a patronage-oriented strategy. 

 

Although variable ticket pricing is common in intercollegiate athletics, departments with the means to institute dynamic pricing may want to consider doing so if they are truly looking for that “sweet spot” in an operations-based strategy. Meanwhile, those administrators who are interested in maximizing capacity regardless of revenue implications may consider attendance-oriented pricing strategies.  In reality, departments may choose to implement any combination of these strategies simultaneously, depending on what they are trying to achieve. 

 

The most important take-away from this research is that administrators tasked with determining ticket prices should communicate and agree on a coherent strategy that makes sense for their ultimate departmental objectives.

 


 

A full copy of the paper, “A qualitative exploration of ticket pricing decision in intercollegiate athletics,” can be found at the Journal of Issues in Intercollegiate Athletics.

 

 

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