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ODay_Ticketing

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ODay_Ticketing

  1. 1. Using Dynamic and Variable Ticket Pricing to Attain the Perfect Balance Between The Primary and Secondary Markets By, Rory O’Day MCA 605 University of San Francisco 14th April 2015
  2. 2. O’Day 1 Dynamic Ticket Pricing (DTP) and Variable Ticket Pricing (VTP) are both relatively new strategies that have been implemented by many organizations and institutions in an attempt to increase revenue. These two strategies are similar in the fact that they allow the respective university to alter their ticket prices for games; however, it is how the ticket prices change is what differentiates the two. VTP allows the company to set their prices for tickets in the Primary Market to a predetermined amount, usually before the season begins. DTP is much more erratic and unpredictable, as the price of the ticket is a result of the ever changing Secondary Market. The Secondary Market has been generating a significant amount of revenue for years, and just recently organizations and universities began to tap into that market. Through the successful implementation of DTP and VTP universities and organizations have successfully entered the Secondary Market with the goal of attaining the perfect relationship between the Secondary and Primary Markets. However, increasing revenue is not the only reason for entering the Secondary market; other benefits include, happier season ticket holders and the opportunity for casual fans to obtain unique tickets. The San Francisco Giants were very successful in their attempt to penetrate the Secondary Market, and are seen as pioneers. Many teams and universities have followed in the Giants footsteps with similar strategies after seeing their success. DTP and VTP have allowed the universities to increase their revenue and are now becoming more popular with D1 schools in the United States, with various members of both mid-major and Power 5 conferences utilizing them. A substantial amount of universities have utilized DTP or VTP in recent years, in an attempt to keep their fans and season ticket holders while also finding the perfect balance between the Primary and Secondary Markets. Many D1 schools in the United States utilize VTP in an attempt to predetermine the perfect balance between ticket prices and the demand for that game. With the application of VTP, institutions are altering their ticket prices for individual games based on a variety of factors, including but not limited to: the time of year, the opponent and the day of the week. Pennsylvania State University (PSU) have recently started using VTP, and claim they are doing it for their fans. According to the PSU website, they
  3. 3. O’Day 2 implemented this because their fans asked for it and it was the PSU fans’ idea.1 This may seem unusual, however PSU is attempting to receive a positive response to their alteration of their ticket prices, and attempting to put a unique spin on it. The University of Michigan (UM) implemented a DTP recently, and failed miserably. Even though the two schools utilized different strategies, PSU have made it clear that their version of VTP is not like that of UM to keep their season ticket holders and fans happy. A lot people hate change, so keeping your fans and season ticket holders is essential. PSU states on their website that they are not only not using the same pricing model as MU but, “Penn State season ticket holders can post tickets from their package on our Ticket Exchange for up to 15 times (15x) the face value.”2 Both of the aforementioned statements are intended to keep their fans and season ticket holders happy. To be successful with implementing a new ticketing system, ensuring that your fans are happy is vital. DTP has become very popular in recent years for D1 schools because of the success it has given a variety of teams and organizations; however it can be erratic and is not always successful, as seem with UM. DTP helps determine the price of a ticket based on an algorithm and the prices are constantly changing. For DTP to be successful, the organization must be extremely flexible with what they are willing to sell each ticket for. In recent years many D1 schools, both mid-major and Power 5 members have implemented a form of DTP. One example is the Fresno State University (FSU) football program, a member of the Mountain West Conference, who used a DTP in 2014.3 FSU saw what other organizations were doing and decided to give DTP to generate more revenue for their program. Paul Ladwig, Fresno State senior Associate Athletic Director for External Relations, stated in 2014 that "The dynamic ticket pricing strategies developed for the Nebraska game have worked perfectly” and “The monies generated 1 Pennsylvania State University, “Penn State Variable Pricing,” http://www.gopsusports.com/tickets/m-footbl-tickets-variable-pricing-faq.html, accessed April 2015. 2 Ibid. 3 John Solomon, “Dynamic Ticket Pricing Gains Traction in College Football,” CBS Sports, October 1, 2014, http://www.cbssports.com/collegefootball/writer/jon- solomon/24730405/dynamic-ticket-pricing-gains-traction-in-college-football, accessed April 2015.
  4. 4. O’Day 3 from these tickets stay right here in the Fresno State Athletic department.”4 By tapping into the Secondary market, FSU now keeps money generated from ticket sales in their Athletic Department, which has given FSU the ability to increase their revenue. Next year, FSU will be able to analyze the data from the Secondary Market to assess their success in pricing their tickets, and maybe they will be able to get closer to the perfect relationship between the two markets. The perfect relationship between the Primary and Secondary Markets would involve eliminating the consumer surplus as much as possible for resellers; yet still provide the opportunity for resellers to be active on Secondary Markets for data purposes, and also keeping season ticket holders and fans happy. Those three goals are difficult to achieve simultaneously, as the less consumer surplus there is for resellers, the weaker the Secondary Market will be. If the Secondary Market is too weak, there may not be enough data to analyze. Having data to compare the Primary and Secondary Markets is essential because it will allow an organization to understand how they did in pricing their tickets. So to obtain the perfect relationship between the two markets, an organization will want to sell their tickets at a similar price to their market value on the Secondary Market, but not the exact same price, to allow for a Secondary Market to exist. If an organization can sell their tickets at near the market price in the Primary Market, then that organization will have almost maximized their revenue by minimizing the consumer surplus for resellers. However, they will not want to fully eliminate the Secondary Market. The Secondary Market provides a significant amount of important data for organizations, because it shows them how effective they were at pricing their tickets and the organization can use this information for the pricing of future events. Maximizing revenue from the Primary Market, while also allowing the Secondary Market to exist to analytical reasons to attain the perfect relationship between the two markets. To be successful at implementing DTP and VTP, universities must try to find the right balance between the Primary and Secondary Markets, while also keeping their fans and season ticket holders happy. The closer a university comes to the perfect balance, the 4 John Solomon, “Dynamic Ticket Pricing Gains Traction in College Football,” CBS Sports, October 1, 2014, http://www.cbssports.com/collegefootball/writer/jon- solomon/24730405/dynamic-ticket-pricing-gains-traction-in-college-football, accessed April 2015.
  5. 5. O’Day 4 better of they will be. DTP and VTP have their differences, but both require a lot of attention and must be implemented correctly for a university to be successful. PSU and FSU have both done a good job so far with their implementation, however, UM has shown that it is no easy task. PSU has done a great job of keeping their fans happy while FSU has generated more revenue. Each of the two schools have a part of the perfect balance down, however, only time will tell if they can attain the perfect overall balance. It is no secret that universities and companies are changing their these ticketing strategies to increase their revenue, however, to succeed, the respective university must show their fans and season ticket holders that they are benefitting from the change as well. If the university can do this, and have their Primary Market prices near those of the Secondary Market, then they will be as close to the perfect balance as possible and succeed with their changes.

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