Achim Ittner global VP, sports at SAP SE, reveals the risks and rewards when deploying
dynamic pricing – and the keys to making it work
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Whatever you do, don’t alienate your fanbase — the people you depend on to fill your venues and in the process, fill your coffers. Historically, that’s been the golden rule.
Lately, however, some teams and ticketing agencies have been testing that rule with dynamic pricing, where they adjust the cost of a game ticket based on real-time demand and prevailing market factors. As familiar as the concept is to anyone who’s taken an Uber or shopped for airline tickets, dynamic pricing is a relatively new phenomenon when it comes to sporting events.
Defenders of the practice will say it’s merely a technology-enabled exercise in supply and demand dynamics. They’ll also point out that dynamic pricing can work both ways — favorably for the fans in some instances, favorably for the organization in others.
There are substantial benefits to dynamic pricing approaches, to be sure. It can increase revenue for teams and on-site vendors. In can help fill a venue when ticket sales are lagging. It can incentivize fans to buy tickets earlier than they otherwise would, providing a degree of revenue certainty to the team and vendors.
Compelling reasons aside, before sports teams embrace dynamic pricing, they should also be aware of the risks of moving away from fixed pricing models, chief among them the potential to anger and alienate the fanbase.
That risk is very real. In England, for example, the Football Supporters Association (FSA), pointing to dynamic pricing as the cause of runaway ticket costs for recently announced reunion concerts by the band Oasis, said, “With impeccable timing after the Oasis fiasco, voices in football have started to float the idea of infecting football with dynamic pricing… any underhand increases will be met with enormous opposition.”
In markets like Germany, meanwhile, fans hold seats on football club boards, giving them a voice in club decisions, including ticketing policy. The uproar in England suggests dynamic pricing would be a hard sell in situations like these. That’s the case in the U.S., where consumers in general show an aversion to dynamic pricing. In a recent Nerd Wallet survey, 22% of Americans said they would not spend money at a business that uses the practice.
Dynamic pricing also presents ethical questions. Does it preclude lower-income fans, and more price-sensitive fans, from attending events to support their favorite team? Does the fact that different customers are paying different prices for a similar seat constitute price discrimination? Does the practice amount to exploitation?
As valid as questions like these are, dynamic pricing can be an idea worth exploring for sports events, as long as teams and their ticketing agencies give fans reasons to embrace it. To get fans onboard, teams could offer discounted game tickets, enrich the value of a ticket by packaging compelling offers for related products and services such as a signed merchandise or discounted parking, and spread goodwill with ticket giveaways or merchandise deals. Before all of this however, clubs would also be well-advised to gather and analyze fan sentiment about dynamic pricing in advance.
To get fans to buy into the concept and to make it viable from a business perspective, teams will need the technology to create a seamless process. It’s going to take intelligent back-office capabilities to collect, share and analyze in real time a large amount of data from internal ticketing or transactional systems, and a powerful, AI-powered and algorithm-driven price optimization engine that draws from these data sources to predict ticket demand and adjust real time prices.
Ultimately, with their words and purchasing decisions, fans will tell you exactly how they feel about dynamic pricing, and whether you’re in danger of breaking that golden rule.
