What is so wrong with flexible pricing in football?

Getting bums on seats. Peter Werkman/Flickr, CC BY-ND

Flexible pricing models are all the rage. Uber, the rider-driver taxi application, openly utilises surge pricing, which can instantly double prices when a few raindrops start falling. A number of leading arts companies including the Royal Shakespeare Company and most recently Disney theme parks have implemented demand-led pricing initiatives, too. So why are football fans so exorcised when their clubs try to break away from old-fashioned approaches to pricing?

Football ticket pricing already often varies according to the seat’s view, match timing, live television coverage and opposition attractiveness, but it could also factor in the teams recent performance, real time demand changes, player injuries and selection or even the latest weather forecast. More closely matching supply and demand via a transparent and dynamic approach could also help reduce illegal reselling.

For leading English football clubs, ticket revenues – generating a fifth of average income – have been dwarfed in recent years by growing income from media, merchandising and sponsorship. Perhaps acting out of self interest, but also with a clear understanding of the vital role played by fans in creating the stadium atmosphere, supporter groups have flexed their muscle to campaign against ticket pricing changes.

Manchester United travelling away fans were unhappy to be charged £71 each to watch the team be beaten in far away Denmark. Fans of north-west rivals Liverpool bemoaned attempts by their club management to recoup some of the millions spent on stadium expansion through a £77 top price ticket. A walkout by around 10,000 empowered fans forced a significant management climb down and secured a two year season ticket price freeze. But fan pressure that forces low balling of the real value of match tickets can foster the conditions for dubious secondary re-selling. A more dynamic approach might be better.

Warning! We may be giving succour to touts. Pittaya Sroilong, CC BY

Demanding audience

Sports fans are of course already accustomed to non-price-related rationing strategies. Clubs discriminate by limiting sales to season ticket holders and club members according to previous attendance, or by recognising their recent sales value with loyalty points. Gold, silver and bronze fixture categories are frequently used by clubs to gently vary availability and recognise more and less attractive opposition, lesser cup competitions and unappealing game times. All key demand factors.

Many increasingly commercially oriented sporting entities already have a careful eye on yield enhancement, with an array of hospitality packages targeted at the less price sensitive company entertainment budget holders. For example London-based Arsenal, whose league-leading match day take represents 30% of their income, ask £450 per head for one of their match and a meal services.

It is the kind of profit focused approach that can leave a bitter taste for fans. In the streets around Manchester City’s Etihad stadium you will see local businesses signal their own ethical reluctance to cash in on demand peaks with signs proclaiming “No match day pricing”. Football fans supposedly are more than just customers and research amongst club supporter groups identified that the maximum price for a premier league ticket should be just £30, with some suggesting as little as £20. Asking a powerful lobby group what they want to pay of course is very different from establishing what they are actually prepared to pay, after all turkeys rarely vote for Christmas.

Chipping in. sstrieu, CC BY-ND

easyPricing

While the idea is nearly heretical in some football communities, dynamic pricing has been largely embraced by consumers in the travel industry. This strategy allows for attractive lead-in pricing which starts low and ratchets up with demand. Demand responsive pricing was popularised by new-entrant, low-cost airlines like easyJet following European Union liberalisation in the late 1990s. With the promise “book early for low fares”, hotels, car hire companies and airlines now routinely structure their lead-in offers to entice consumers, relying on demand driven, step pricing to take a premium from those willing to pay higher fares closer to departure.

These so-called airline pricing models are also being used in the arts. The venerable Royal Shakespeare Company, under pressure to reduce their reliance on societal subsidies, found that a variable pricing model enabled them to balance the need to offer accessible pricing whilst generating sufficient revenues. Canadian circus creatives Cirque du Soleil trialled dynamic pricing for this winter’s London tour dates. With a modest 30% seat price differential they were able to sell more tickets and increase ticket revenues by 12%. Even Disney is getting in on peak pricing, with a 20% higher tariff now charged at its US theme parks during the busiest days. No mean squeak. Ahem.

Event organisers tread precariously as they seek to balance the value for money versus availability appeal of their offers, relying as they do on spectator word-of-mouth to build interest that drives sales. They also need to cultivate a positive, engaged audience, a fundamental element of live performances. It is the contagious fervour and noisy appreciation that paying customers generate that is fundamentally important in co-creating the event atmosphere. Should event managers then leave audience make up merely to random chance when big data analysis can calculate an individual’s lifetime attractiveness, their value to corporate sponsors or likely social media impact? Not so far fetched, but perhaps a little too Big Brother.

Sunderland fans celebrate. Ronnie Macdonald, CC BY

Reducing waste

Peak pricing has its critics of course, as families with school-aged children will testify when paying thousands more for a holiday during half-term, but I personally dislike more the panic buying engendered by stampede or scarcity marketing strategies and would welcome a more open and transparent approach. Flexible pricing models in football would also put a lid on the amoral greed of opportunistic re-sellers and criminals who seek to profit from an all-too-frequent mis-match between supply and demand.

There is a critique that airline style pricing might unfairly advantage the wealthy. But there can be good news too for those of more modest means to benefit from low price off-peak offers filling otherwise empty seats. Using cross subsidisation to lower pricing that widens inclusion and diversifies participation rates should be seen positively for delivering social value, not as a negative. It should have consequent benefits for the football clubs.

Examples from the arts and hospitality industries show that dynamic pricing can offer a more meritocratic and efficient revenue management strategy, leading to more diverse and inclusive pricing policies. It can reduce wasted seats and allow those willing and able to pay more to do so ethically and legally.

Football industry pricing needs to innovate more, not to drive up already large revenues but to bring more transparency to the murky world of ticket sales and help resource widening participation initiatives.