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The Dynamics of Dynamic Pricing

The Dynamics of Dynamic Pricing

| On 04, Dec 2013

This week the DTTWLN staff is doing an in-depth look at the Cleveland Indians attendance. While everyone knows the Indians have an attendance problem, how they necessarily got to this point appears to be an explanation with many answers including play on the field, population and economic changes and improvements in technology. Regardless of the reasons, one thing is certain, the Indians have an attendance problem. This afternoon, we examine the tipping point in the current attendance decline.

Previous Stories This Week:
From the Perfect Storm to the Indians Attendance Disaster by Bob Toth
Times Have Changed While Indians Attendance Issues Have Worsened by Mike Brandyberry
Indians Attendance Issues Have Spanned Over 65 Years by Vince Guerrieri
The Tipping Point in this Generation’s Attendance Decline by Vince Guerrieri

 

It seems every season many fans have a reason they don’t attend Cleveland Indians games. In past years it has been easy to point to a struggling team, or a team over-achieving with journeyman players that can’t hold it together for the full, 162-game schedule. But after $117 million spent last winter on the 25-man roster, those reasons became obsolete.

The 2013 reason to not attend games was some of the Indians’ changes in their dynamic pricing plan.

Dynamic pricing is a model used in many industries like the movie, airline, hotel and rental car businesses where it is accepted that not all products are created equal. When and where you fly, what time of year or day of the week depends on the price of your flight or hotel stay. Over the last four seasons many Major League Baseball teams—including the Cleveland Indians—have adopted the dynamic pricing system. With an 81 home game schedule, spanning six months, Major League Baseball is a perfect sports product for a dynamic pricing system. Clearly, the value of an Indians’ ticket in April on a Tuesday evening against Kansas City has a different value than a ticket in July on a Saturday evening against the New York Yankees. Demand is higher for the latter, so why not expect the price to be the same?

In 2013 the Indians promoted their “buy early and save” to try and change the fans’ way of purchasing tickets. Fans that purchased tickets a day, or week(s) in advance would receive a value over the fan who walked up to the Progressive Field box office and purchased a ticket on game day.

But whether dynamic pricing really kept fans away in 2013, or it was just the new reason fans used to justify their lack of interest, fans did not show up at Progressive Field. Some of the Indians’ strategies for 2013 did create frustration, however.

The biggest change in 2013 was the elimination of upper reserved tickets being available for $8, even on game day. Those seats provided a very affordable ticket to fans on a budget to get in to an Indians game. Now, the upper reserved seats were around $21–depending on the game (sometimes they were more, other times less). The Indians did their best to encourage fans to sit in better seats—thus more expensive seats—in 2013.

Fans were frustrated to walk up to the box office on game day to learn they could no longer purchase an $8 admission and sneak into a lower level seat like most upper reserved ticket purchasers did. However, the Indians did provide an economical offer for each game. Upper bleacher seats were available for $10 or $12 online, providing a better seat than the upper reserved option in the same low-price value. While fans clamored over the loss of their $8 upper reserved seats, often the upper bleacher seats remained unsold.

And while dynamic pricing is designed to create a better profit margin for the team according to Forbes, the Indians still have one of the best ticket values in Major League Baseball. Only five teams had a cheaper average ticket price in baseball in 2013 according to the Fan Cost Index. At an average ticket price of $19.59, it seems the Indians are still providing a reasonably priced ticket for fans, especially for those that can plan ahead to buy. Better yet, the Indians had the fourth lowest FCI in baseball—a full $50 below the MLB average—in 2013. A team’s FCI is determined by the cost of four adult average-price tickets, two small draft beers, four small soft drinks, four regular-size hot dogs, parking for one car, two game programs and two least expensive, adult-size adjustable caps.

Fans best value to purchase economical tickets will always be to buy season tickets, or even a partial season plan. Season ticket holders can save over 40% versus non-season ticket holders. For fans who can’t commit to that many games in advance, committing to buying an Indians ticket just the day before the game can save money on the game day costs. The Indians do plan to incentivize fans who buy online with even deeper discounts in 2014, possibly counteracting Ticketmaster fees.

One thing is certain about dynamic pricing, it has created some confusion for the average fan. When ticket prices seem to be constantly fluctuating, fans don’t know what a ticket actually costs, so they don’t know if they can afford it or not. This past summer we wrote a column asking fans why they don’t go to games and what they felt was a fair cost for lower reserved tickets and found them for the same day at approximately the same price. Is it possible fans don’t purchase tickets they can afford, because they can’t find a regular, static price that lets them know seats are in their price range? Fans can’t take a family down to the ball game for a $31 lower reserved ticket on a Sunday afternoon when it is tough to find a listing of prices. It’s tough to have a listing of prices when they are always changing.

Possibly the problem with dynamic pricing in Cleveland isn’t the cost, but the information, in ticket availability.

Looking ahead to 2014, the Indians will use dynamic pricing again, meaning a fan’s ability to commit to season tickets and/or plan in advance will be imperative to getting the best value to see a baseball game.

It’s a dynamic the organization and fans are still finding ways to adjust to and ways to work together.

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