Designing Ticket Price Strategies for Professional Sports Teams Using Conjoint Analysis

Article excerpt

Executive summary

This study was originally conducted as part of a consulting project to provide practical information and strategic advice to the management of a professional soccer team in Korea. The consultation commenced when the management decided to transfer the team from its original home town to a town in another region. Since it was the first time in that region's history that any kind of a professional team had been based there, there was insufficient information about operating in the region. Thus, the team required sports management consultation in order to adapt successfully to the region's culture and its fans. In addition, devising an effective pricing strategy was one of the main objectives of the project. This research, therefore, was initiated in order to provide management with practical information such as local fans' ticket purchasing behaviour, the importance of attributes when purchasing a ticket and price susceptibility. In order to provide this information, conjoint analysis, a technique that is normally used in general business, was utilised. This technique was used to discover which attribute was relatively more important and had most effect in selecting the optimal mix of benefits to purchase a ticket. The findings from this research will help managers to implement effective pricing strategies. In turn, an increase in total ticket sales and financial stability may be expected.

The findings of this research suggest several insights for management on constructing pricing strategies. Firstly, the fans in the particular region studied perceived Player (with a local home town background) to be the most prominent attribute that affected their interest in choosing the most appropriate ticket price set. This was followed by Price, Coupon and Point. Although Price was the most influential attribute to the high and middle school student segment, Player was still considered to be a more significant attribute in terms of retaining this particular segment in the long-term. Secondly, the importance level of both Coupon and Point were significantly lower than Player and Price. However, Coupon being more important than Point indicates that fans prefer immediate benefits rather than accumulating points for future usage. Finally, without losing large numbers of fans but maximising profit, the recommended range of ticket price sets were, in United States Dollars (USD), $9 ($14 for premium seats) to $10 ($16) for general adults and college students groups, and $7 to $8 for middle and high school students.

'Player' implies the existence of a star player within the team with or without a local home town background. 'Point' refers to accumulated points that can be used toward future benefits, such as participating in special team events. 'Coupon' refers to vouchers that can be utilised to obtain instant discounts on merchandise, concessions and products (or services) from participating local business affiliates. 'Price' is the expected ticket price.

Introduction

Price is perhaps one of the most prominent methods a business has for communicating the value of its product or service. It is also the most important factor that determines profit. Yet countless businesses fail to get their pricing strategies right (Bernstein, 2006). Devising successful pricing strategies is equally as important for managers in the sports industry as it is for general business managers. However, as in the general business environment, many professional sports teams fail to constitute successful pricing strategies. This is particularly the case in Korea.

For the Korean professional sports industry, economic success is critical as there are currently no professional sports teams that generate a profit (Kang et al, 2007). It has been a few decades since the first establishment of Korean professional baseball in 1982 and currently there are over 30 teams in three major professional sports (baseball, soccer and basketball). …