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Case Study on Maximizing Revenue in the Minor Leagues

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Recommendations on how to make a minor league baseball team more profitable using promotions to increase attendance.

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Case Study on Maximizing Revenue in the Minor Leagues

  1. 1. 1 The Springfield Nor’easters: Maximizing Revenues in the Minor Leagues Marki Jacob Professor Morgan
  2. 2. 2 Marketing 372 09 February 2016
  3. 3. 3 The Problem The Nor’easters baseball team is having problems putting together a pricing strategy that would enable them to gain enough revenue to profit or break even. The elements to consider while making the pricing plan would include: who is the target market, how it would affect the attendance of both die hard and casual fans. 25% of the residents in Springfield live below the poverty line, and 60% have children under 18. These groups also need to be considered when designing a marketing strategy. By organizing a pricing strategy, and effectively marketing and promoting they can increase attendance and the amount of season ticket holders. Analyzing the Problem Attracting people to attend games when 60% answered “no” to being a baseball fan on the survey means that the entertainment level and benefits need to be a main focus to get casual fans more interested in the events. Attending a sporting event is more about the experience, not if the team wins or loses. To achieve better entertainment, the target markets need to be reached. The two market segments are children and parents, considering they make up a quarter of Springfield’s population, and the die-hard fans that would be interested in season tickets. To address the needs of the casual fans, there needs to be more engagement between the crowd and the event, such as raffles and competitions. As well as have more family-friendly opportunities. To increase the amount of season ticket holders there needs to be more benefits tacked on to incentivize spending that much money
  4. 4. 4 and making that large of a commitment. Considering the needs of casual fans and die-hard fans will increase the attendance and revenue during the first season of the Nor’easters baseball games. Pricing Strategies Ticket Type $4 $6 $8 $10 $12 $14 Single Ticket X X 5-game X 20-game X 38-game X Looking at the survey results, for a single ticket 31% chose $10 and 27% chose $12. Taking into consideration that 36% chose $10 for the 5-game package, $11 would be the best price for a single game ticket so fans will save $1 per game if they choose the 5-game package. For the half-season package of 20 games, the best pricing would be $8, this would be a $160 purchase with $60 in savings when compared to single tickets. A season pass should be priced at $6 per game, this being a $190 purchase. Spending only $30 more, they can upgrade from the 20-game package, to a full season pass. A grandstand seat should be priced at $12, considering the survey
  5. 5. 5 results shows an overwhelming percentage of people only wanting to spend 10% more than the cost of a single ticket. I believe it is important to keep all of these as ticket options for the fans to choose from. Giving more options gives them more control; this could increase the chances of them purchasing a package rather than just a single ticket. Also, varying the prices of the different seating, as well as the packages, shows that they can save by purchasing more tickets. This is important because the more tickets a fan purchases, the more opportunities they have to purchase from concessions. Offering half-season tickets is important as well, because for those who do not think they have the financial and time resources to commit to a season ticket, they again feel like they have more control over their choices. Variable pricing is also important since the league is just starting out it would not make sense to change the prices of the games day-by-day according to the context of the events. Keeping the prices the same from the beginning of the season to the end lets the fans know what to expect, it will only deter them if they see the prices start rising. Promotions The Points-System- The points-system is a way of attracting people to not only the season tickets, but also to purchase more from concessions. By utilizing the fact that the majority of people use technology regularly, there can be an app created where fans gain points for the extras they purchase at the games. This app would double as a debit card with the ability to be scanned at the time of purchase, the amount would then be
  6. 6. 6 tracked on the app and they would receive a certain amount of points for every some amount of money they spend (i.e. 5 points for every dollar). The affect of this type of promotion can not only increase the amount of season ticket holders, because they would be acquiring benefits by purchasing one, but also influences people to buy more from concessions because they want to obtain as many points as they can. This is a good way of tracking buying behavior, as well. The types of prizes received could be: 100 points-T-shirt 150 points-Discount on merchandise 200 points-Baseball signed by the team 250 points-Gift card 600 points-Throw the first pitch at a game Kids Club- The objective of this option is to increase the amount of children involved with the Nor’easters. With this, we can build future fans that will eventually be a part of the generating of revenue. The Nor’easters are a new team, so the amount of time it takes to build a true fan base could take years. Creating a Kids Club means that the children would have to pay a certain upfront fee, somewhere around $25 for a season. With this fee they get free access to the sporting events. And they also get to be apart of activities with the team. Activities can include: Baseball or t-shirt signings from the team members, throwing the first pitch at the beginning of a game, clinics that could teach the kids hands-on about the mechanics of the game, and
  7. 7. 7 participating in activities during the 7th inning stretch. Kids club members get into the games for free, while the parents still have to pay for their own tickets. Prizes and Sponsors- A more common way of generating revenue is getting corporate sponsors that will pay the team to show their advertisements. Putting up posters on the fences is one way of achieving this, or by giving the fans a chance to win items from the sponsors. For example: Raffling. Fans can pay a dollar to get put into a raffle, and who ever wins will receive something like a gift card from a local sponsor, or merchandise. Another way of giving the crowd a chance to win prizes is to do competitions during “media-timeouts”(timeouts during the game for advertising purposes). Races around the bases, eating contests, or baseball throwing contests are examples of the types of competitions that can be put on during the baseball games. Will They Break Even? 8956 people answered the survey, 5373 of those are baseball fans, and 3473 said they would actually attend games. To figure out if they would break even, we need to use the number of people who would actually attend the games to figure out the revenue they would generate. The numbers are adjusted from the amount of undeliverable surveys and the amount of non-responses. The concession revenue is adjusted for the amount of no-shows. And the numbers only reflect the people who answered, not spouses, friends or children.
  8. 8. 8 Single ticket 1881 people-$20691 5-game 985 people-$49250 20-game 429 people-$68480 Season ticket 179 people-$34010 Kids club (Estimate) 500 kids join-$15000 Grandstand (Estimate)$1000 Concessions $49700 Grand total $238,131 Adjusted revenue after sponsors and promotions $1,200,000 $238,131 shows just a sample of what they would be making in the first season using the survey results and estimates. If we include the other factors, such as those who bring friends and family, the amount of revenue gets closer to breaking even, but still not quite. So far, only $34010 of that revenue comes from season tickets, by doing more promotions for this package they can sway more fans into purchasing those instead of the other packages and double the revenue. With the research I have done, adjusting the revenue to add sponsors and impacts of promotions, the amount could end up closer to $1,200,000, this is still not breaking even with the $1,961,379 spent in operating expenses. Since, this is the first season the Nor’easters will be playing, it takes time to generate a committed fan base that is willing to attend every game and spend a large amount of money of souvenirs and food. The odds of them breaking even in the first season is low. The first season is
  9. 9. 9 usually a trial run to see what they need to fix in order to gain a larger audience. So realistically, no, the Nor’easters would not break even in the first season. Using the Class as a Resource I used the lectures and the textbook to help me put together this well- thought out plan by gathering information about the different ticketing options, as well as how to promote them. I learned about the different types of fans and how that affects how to promote the sporting events and ticketing options. Overall, learning about the broad subject of generating revenue in sports was helpful, I was not aware of how much went into the process before reading the textbook; it made this case study much easier. I have learned that it is more important to work this into a long term plan rather than only focusing on the first season results.
  10. 10. 10 Bibliography •Howard, Dennis Ramsay., and John L. Crompton. Financing Sport. Morgantown, WV: Fitness Information Technology, 2005. Print. •Kaye, Katie. "How Leagues, Teams Are Using Data to Boost Ticket Sales, Retain Fans, Help Marketers." Ad Age. 21 Jan. 2014. Web. 09 Feb. 2016. •"NACMAMarketing." NACMAMarketing. Web. 09 Feb. 2016. •Sheiner, Ty. "4 Winning Sports Social Media Marketing Campaigns You Can Learn from." Brafton. 2012. Web. 09 Feb. 2016. •"Sports CRM: Service Activity Plans." YouTube. YouTube, 10 Sept. 2014. Web. 09 Feb. 2016.

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