The dilemma of dynamic ticket pricing in football
A model that is already applied in other sectors helps to maximize revenue, but can also harm fans
How much would you be willing to pay to go to a football match on your team? The answer will likely be: it depends. Many variables are taken into account when fans (of different degrees of involvement) decide or not to go to the stadium. A classic on a weekend probably gets more attention than a formal match on a rainy Wednesday, which is why the prices people are willing to pay are different.
On the other hand, pricing a product/service is also a complex task that, like the act of buying, considers several factors. In this case, the final price does not only reflect a value greater than the costs, which in the end generates profit. A product’s label also informs its positioning, such as what happens with “premium” products, for example, whether they are jewelry, cars, clothing, etc. who charge more for seeking to be associated with quality, exclusivity and status.
A practice already established in several business sectors that appears as a possible solution to “fine tune” supply/demand in the sports industry is called dynamic pricing.
Dynamic Pricing
Unlike what we are used to in static pricing (which, as the name implies, has a fixed price — graph on the left), dynamic pricing (graph on the right) adjusts the amount charged for a good or service according to demand, usually over time.
In the hotel and airline ticket purchase sector, this practice is more consolidated. Those looking for a flight in advance tend to pay much less than someone who wants to travel tomorrow, because, in theory, they have different price sensitivities. That is, whoever postpones the purchase until the last minute would agree to pay a value slightly above the average for the same product, either by choice or by urgency.
Dynamic Pricing in Sport
In sports, baseball’s San Francisco Giants was one of the exponents in implementing the system in 2009. That season the club tested dynamic pricing on 2,000 of the 41,500 seats in its stadium (less than 5% of capacity) generated by an algorithm that automatically adjusted the value of tickets according to several variables. After a sample of 17 games, sales increased by 20% in the tested sections, which resulted in additional revenue of half a million dollars.
Derby County, England, was the first football club to adopt dynamic pricing in 2012. A study published in the European Sport Management Quarterly, which evaluated ticket prices in the 2013/14 season, showed that the derby against Nottingham Forest was the most expensive match of the season. Confrontations with smaller teams like Yeovil Town and Bolton had lower prices (image below).
The study also demonstrated the escalation of prices for the same ticket over time. Tickets sold 27 days in advance were, on average, 20% cheaper than those sold on the day of the match, while the day before the matches registered the biggest price increase: 4.8% (chart below).
The feasibility of this type of pricing in which the ticket for the same match has different prices, however, fundamentally depends on the demand for a match being greater than the supply. That is, that there are more fans wanting the ticket than tickets available for sale. For this reason, it could be considered difficult to implement in a large majority of Brazilian clubs, for example, in addition to the technology costs, of course.
Arsenal also discriminates the price of matches for season ticket holders (meat tickets for all games in the season), but in a slightly different way. According to “previous levels of demand and interest”, games are grouped into five categories: A,B,C, EL4 and EL3 (read here). The most important, like classics, were category A, while matches against teams like Huddersfield and Burnely were category C.
In addition to the “level of interest” of the matches, as seen in the case of English clubs above, other variables can also be taken into account when pricing a ticket:
- Weather (heat, rain, etc.)
- Weekday (weekend x midweek)
- Time (morning, afternoon, night)
- Day of the month (probably by the end of the month many people will have already spent a good part of their salary)
- Stadium sector (environment and distance from the pitch)
- Recent team performance (comes on a winning streak or lost the last matches…)
- Uncertainty of outcome (fans tend to like unpredictable matches more as they consider them more exciting)
Several of these variables were proposed in another study, this time published in Axioms, a scientific journal specializing in mathematics, in 2017 on a proposal for a dynamic pricing approach for football tickets.
Economy (short term) x Relationship (long term)
From an economic point of view, the implementation of dynamic pricing seems quite reasonable since it tends to maximize the clubs’ box office revenue. Real life, however, implies a broader analysis of the situation and for this I resorted to some points of behavioral economics.
One of the worst things for consumers is the feeling that they are being exploited. Richard Thaler, Nobel Prize in economics, wrote in his book “Misbehaving” an entire chapter dedicated to the subject: “What seems fair?”. Would it be fair for the consumer to pay more for a bottle of alcohol in gel at the beginning of the pandemic, for example?
When it comes to numbers, which there is a lot of demand for a product, the answer would be “yes”: it is fair to charge more for something that is most sought after (law of supply and demand).
But for several companies, and especially for football clubs, the relationship with the consumer/fan must be taken into account. In the sporting context in which identity and sense of community are essential, to what extent would dynamic pricing be economically beneficial without harming the relationship with the fan?
A club that sets out to create long-term value would vehemently reject the risk of being seen as “unfair” or “greedy” for overcharging. This is because the short-term gain would directly affect the consumer’s perception of the brand.
This dichotomy between profit maximization and relationship could be softened with customization, differentiation, product communication actions and, especially, the common sense of managers, so that the ticket price does not end up costing the dissatisfaction of the main asset of a club: its supporter.
Twitter: Theodoro Montoto
