The Indians and Variable Ticket Pricing

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Moneyball II: Statistics Driving Marketing for MLB’s Indians

 

 

By Curtis Eichelberger

 

Feb. 20 (Bloomberg) -- The Cleveland Indians may have found their most valuable statistics this season are coming from the ticket office rather than the playing field.

 

Using statistical analysis of ticket purchases to understand the preferences and price limits of their fans, the Indians learned that fireworks after a game draw an additional 4,000 fans; every one-degree temperature drop below 70 Fahrenheit costs them 300; and when the New York Yankees come to town, attendance jumps 11,000.

 

The Major League Baseball club is at the forefront of using statistical analysis to design pricing. The team says its plan will increase ticket revenue 5 percent this season as the U.S. skids into its worst economic decline since the Great Depression.

 

“The goal was to do a better job figuring out what people were willing to pay for their product,” said Vince Gennaro, 57, a Purchase, New York-based consultant who managed the research project. “Where could we add value to convince them to make the purchase or decrease the price where demand is lower?”

 

Since the recession started at the end of 2007, the U.S. economy has lost 3.57 million jobs, the biggest employment slump of any postwar economic contraction. In Cleveland, the unemployment rate rose to 7.1 percent in December, up from 6 percent a year earlier.

 

Baseball teams haven’t escaped the fallout. Teams including the Washington Nationals and Boston Red Sox have cut or frozen ticket prices this season. Oakland Athletics owner Lew Wolff said last month that ticket sales were down 10 percent.

 

Third Place

 

The Indians, who finished 81-81, third in the American League Central Division last season, charged an average $25.72 a ticket, according to Team Marketing Report, with attendance of 2.2 million for their 81 home games.

 

“We always had this premise that all games are not created equal,” said Vic Gregovits, the Indians’ senior vice president of sales and marketing. “But we were charging fans like they were.”

 

Gennaro, author of “Diamond Dollar$: The Economics of Winning in Baseball,” analyzed three years of Indians sales data. He correlated factors like attendance, no-shows and walk-up sales with weather, promotions, the team’s record and the school calendar to determine what isolated events contributed to purchases.

 

Royals, Red Sox?

 

He then asked more than 200 people in focus groups to rate their preferences. Would they rather watch the Indians play the Kansas City Royals during the warm days of July or the Boston Red Sox on cold, windy day in April? Would a bobblehead-doll promotion matter?

 

Lastly, the team researched the secondary ticket market to see which games drew more than face value.

 

“This gave us a mosaic of how fans placed a premium on certain games, and along with our regression analysis, really allowed us to start honing in on what our fans were thinking,” Gennaro said.

 

The Indians’ research revealed that when children are on summer break, attendance increases 1,200; if rain is in the forecast, it falls 2,200; a bobblehead-doll giveaway brings in 4,700 people; and any promotion involving centerfielder Grady Sizemore, an All-Star three of his five seasons, increases attendance by 6,600.

 

Adapted to Schedule

 

Once the research was complete, the team adapted it to the 2009 schedule.

 

“The Indians are at the forefront of what many teams are trying to do with variable pricing,” said Michael Arya, 47, co- founder of Pasadena, California-based TixTrack Inc., a company that analyzes the secondary ticket market and consults with professional teams. “It’s about more than just charging more when the Yankees come to town. They are trying to make educated decisions, based less on guesswork and more on analysis.”

 

The San Francisco Giants announced a plan in December that allows them to adjust prices up to the morning of the game, enabling the club to keep pace with the secondary market.

 

The Indians came up with a four-tiered ticket plan that lowered prices to fill empty seats and increased prices when demand was high.

 

Promotions, like giveaways and fireworks, and season-ticket campaigns were then designed to increase what fans in each of the pricing plans were demanding most.

 

The biggest discounts are during weekday games in April and May, when the weather can get cold and rainy, children are in school and other sports are still in season. Ticket prices for seats in the park’s lower bowl were cut by as much as 50 percent.

 

Cheaper in April

 

Tickets at the field box level (about seven rows behind the dugout) are $25 for weekday games in April and May; $50 for weekend games in those months; $60 for weekday games after Memorial Day and $70 for summer weekends.

 

“The economy is making us look for ways to show fans value,” Gregovits said.

 

Gennaro said that while baseball people have been using statistics to judge players for years, it hasn’t been used as much by sales and marketing departments.

 

“The industry moves on inertia, repeating what it did last year without a lot of fresh thought or quantitative analysis to understand the value of the promotion,” Gennaro said. “There is a whole world out there ready to be tapped into.”

 

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