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Dear Faithful Readers,
Organizations are constantly faced with the issue of setting the right price for tickets in order to maximize profits. The growth and emergence of secondary ticket markets has made it increasingly difficult to determine the face value of a ticket, which can cause teams to lose large amounts of revenue in the process. Dynamic pricing is an alternative that many teams have implemented, but it still does not seem to be the end-all and be-all solution. Northwestern University has its concerns with dynamic pricing and has begun to look for new ways to evolve ticketing in sports. Continue reading to see how the Wildcats have undertaken a new initiative that is bound to help them combat secondary market pressures while optimizing price points and maximizing revenues.
Enjoy the feature,
Chantelle Neep
[email protected]
P.S. - Want even more revenue generating ideas? Follow @NatlSportsForum on Twitter to get more helpful insights on #sportsbiz, #sponsorship and more!
PROGRAM TITLE
Northwestern University: Purple Pricing
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OBJECTIVES
As ticketing evolves at hyper speeds in the sports industry, it’s essential that organizations stay ahead in the marketplace in order to ensure profits. Technological advances as well as the secondary ticket market have forced teams to alter the way they do business. Teams often see tickets sold on the secondary market at higher prices than face value, which leaves sales executives wondering how to efficiently set ticket prices. Dynamic ticket pricing is a solution that many teams have adopted, but it can leave fans playing a guessing game. Fans can ultimately pay different prices for the same seats—which can lead to the association of hesitation and anxiety with the ticket purchasing process. The Northwestern University Athletic Department has taken a creative problem solving approach to these issues by tapping into valuable campus resources. Teaming up with two university professors from their prestigious Economics department, Northwestern has implemented an experimental pricing strategy that has proven to keep fans confident when purchasing tickets to a Wildcats game. And many decision-makers in the sports industry have taken notice.
PROGRAM DESCRIPTION
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Northwestern has instituted the “Purple Pricing” initiative for their two remaining men’s basketball home games in order to guarantee fans the fairest prices while simultaneously gathering research about their purchasing preferences. Purple Pricing was designed to replicate a “Dutch auction” with a twist. Once the Northwestern Athletic Department sets a price, the market determines the final price to attend a men’s basketball game. Purple Pricing allows fans to purchase a ticket and reserve their spot for the game at any time without worrying about overpaying. With this initiative, prices will never increase; however, if demand decreases over time and prices in turn decrease, fans who bought their tickets in advance at an initially higher price are guaranteed a refund depending on what the final price of their ticket was on game day. For example: if a fan purchases a ticket in section 200 for $45 two weeks before the game, and the final price for a seat in section 200 was $37—after the game, the ticket buyer is given a refund of the difference in cost, which in this case is $8.
Purple Pricing effectively limits a fan’s incentive to game the system while at the same time motivating them to buy early. As a result, fans avoid the risk of missing the game in case of a sellout and get the best selection of seats, on top of being ensured the fairest price possible. An underlying goal of the initiative is to build trust between the Northwestern brand and fans in the Chicago market, effectively enhancing fan loyalty. As Shawn Sullivan, Director of Sales and Marketing at Northwestern, puts it, “Purple Pricing provides fans a way to fairly get the best seat at the best price.”
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Secondary ticket markets often skew what appears to be the real price fans are willing to pay, but Purple Pricing limits the arbitrage opportunities typically available to savvy buyers on the secondary market. In the end, Purple Pricing will likely give Northwestern increasingly accurate research data that can be used when pricing tickets in the future.
Purple Pricing was in effect for the men’s basketball game at Welsh-Ryan Arena on February 28th against Ohio State and will be used again for the March 7th tilt against Penn State.
Click the image above to learn more about Purple Pricing!
MEDIA
Northwestern has yet not taken any special measures to promote the Purple Pricing initiative in order to allow the process to unfold organically. Besides the Purple Pricing release on their website, Northwestern has continued to advertise men’s basketball game through traditional marketing channels such as print, radio, outdoor signage, etc.
CAMPUS COMMUNITY
The Northwestern Athletic Department had been discussing how to price tickets more efficiently when Economics Professor Jeff Ely and Sandeep Baliga, a Kellogg School economist, opportunistically reached out to them and volunteered to conduct a research study of ticket sales. After several meetings, the Purple Pricing initiative was born with Jeff and Sandeep leading the way. Their research team will evaluate how ticket prices change on a daily basis and the trends that develop throughout the experimental phase of Purple Pricing. The new initiative has created strong ties between Northwestern Athletics and academic faculty on campus—a mutually beneficial relationship that will likely yield the Athletic Department top-notch resources for sales and marketing campaigns for years to come. Click Here to watch a video created by Jeff and Sandeep explaining Purple Pricing.
RESULTS
Northwestern will not have direct results from Purple Pricing until both games are complete, but to date, Purple Pricing has accomplished the immediate objectives of Northwestern. Sullivan adds, “So far, Purple Pricing has had a positive influence and provided us with valuable information about what fans are willing to pay. From a PR standpoint, the results have been great as well. Fans are continuously calling in to learn more about Purple Pricing and we have received a good amount of news coverage as a result.”
LOOKING AHEAD
Purple Pricing is an initiative that is innovative and unprecedented in the sports industry. Although it is currently a small experiment, the concept at its roots is very sound. However, there are a few factors that the future of Purple Pricing depends on. Similar ventures will need to take place to determine whether this initiative will optimize ticket sales in a larger setting such as a football stadium-Northwestern’s Ryan Field can hold close to 50,000 people, relative to the 8,100 capacity Welsh-Ryan Arena. Also, Purple Pricing will rely on technological advances in ticketing software in order to support the system on a daily basis. With that being said, Northwestern is optimistic about their Purple Pricing initiative and if it is successful, many teams will begin to consider a similar ticketing strategy in the future.
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