The Springfield Noreasters Maximizing Revenues in the Minor Leagues Case Write-Up
Business Overview From: Marketing Consultant To: President, General Manager Bob Cortez and Board Directors A new Class A minor league baseball team called the Nor’easters is coming to Springfield, MA. News around town was that another professional sports team, the Falcons, was having trouble drawing revenue. Since the Nor’easters are a new team it’ll be challenging for them to draw fans. Springfield is located 90 miles away from Boston and is the third largest city in Massachusetts. Springfield had lost many high wage residents resulting in 3. % drop in average wages since 1990. Median income of a family of three was $37,800 and median household income was $31,046. Springfield Nor’easters would need to bring die-hard sports fans that are tired of driving to Boston at a fraction of the price. With a declining economy reasonable ticket prices would be ideal for the community. The task of Larry Buckingham, marketing director for Nor’easters, is to sell Nor’easters residents on the baseball experience. Buckingham’s strength is that he has experience in entertainment, marketing and specifically pricing tickets.
People wanted to attend games to have fun and revenue wasn’t correlated toward the teams’ win/lost results but more of the baseball experience. The audience trends toward a more family and student friendly environment to support a small community team in the neighborhood. Buckingham’s weakness was that his theatre background wasn’t ideal toward marketing to sports fans. To counteract his lack of experience in the sports industry, Buckingham sought out help by communicating with other minor league teams to better understand the local industry.
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Buckingham conducted a survey of Springfield residents to try to gauge how much he can price tickets. The survey he created needed to help price tickets to where they would draw a loyal crowd away from competing venues such as: college football, movies, bowling, and minor league hockey. Local colleges set their ticket prices between $5-6 for adult and $3 for children. Nor’easters needed to entice people from going to a Boston Red Sox game that was 90 miles away with an expensive price tag of $12-325/game. The goal is to keep prices as competitive as possible while keeping attendance p. If you price tickets at a competing rate, you can increase revenue exponentially. Buckingham didn’t want to give the tickets away but also didn’t want to overprice causing unsuspecting fans to not attend games. Without people attending the game, you wouldn’t have the opportunity to cross-sell and have fans also purchase items at the concession and merchandise booths. In order to remain profitable management set a goal to break-even in the first season. With only 38 home games to sell to consumers, this proved to be a challenging task.
Buckingham used marketing research to learn this unfamiliar market and find out what consumer’s behaviors were toward certain prices. A survey was conducted using 10,000 requests from a diverse range of people with income levels above the poverty rate and a mailing list of sports fanatics. These results would better inform Buckingham of potential customers who would be willing to attend games. However, the problem with the survey was that the results were biased toward a certain group of individuals and didn’t represent the majority of residents in Springfield.
Out of the results, only 625 people answered the survey while 4% were returned as undeliverable. 6. 5% of the people surveyed responded to the results giving us a good indicator of a customer base to start with but a small fraction of the population to represent all of the 55,338 people in Springfield. The Nor’easters play at Springfield College, which had been converted into a 3,600-seat open arena. The college provided the stadium for free in exchange for 100% of the parking revenue. Identify Marketing Concepts Solution 1: Party zone birthday parties (entertainment value)
We’d like to introduce a party zone solution to increase revenue from ticket sales, to bring in more diehard fans, and create a more fun atmosphere for the local community. This idea would be a great alternative since it brings in more fans and revenue without using many seats to do so and also increases the Springfield Nor’easters entertainment value and name as a fun location for kids. In addition to fun, we’ll sell food from concession stands or cater to the parties needs. We would designate a section of the stadium for large groups to rent if they just want to sit down and watch the game.
These sections in the stadium are located in the left and right field lines of the stadium oppose of each other. Space is plentiful as we estimate attendance to increase. Kid’s parties may bring in 20-30 students in their class along with 2 parents. This will increase attendance an estimated 60-90 people per party. If you include siblings, friends, or facility members, attendance can potentially amount to over 100/party. An estimated 100 in attendance with an average concession stand rate of $11-$13/person can amount to roughly to $1,100-$1,300 in increase revenue not including the rental of the party zone location.
Solution 2: Shuttle service Another solution consists of providing shuttle buses for college students as the case provided students didn’t have proper transportation to the baseball stadium. To fill in stands at the stadium I recommend we discount these tickets for students since they don’t really have a lot of money to spend. Providing tickets and transportation at a reasonable cost for students can be a tremendous opportunity to increase revenue. With a few campuses around students can come in groups willing to drink away their school stress from finals and homework.
With our previous strategies, we’re only selling roughly about 18,184-21,450 tickets for the season when we have over 136,800 tickets available. We’re only selling about 13-16% our maximum capacity leaving over 100,000 tickets for the season. Our operating costs are fixed so anything to generate more revenue is beneficial. Providing a flat rate of roughly $8/ticket with transportation shuttles for students will draw in ticket and concession stand sales. When weighing the cost of leasing a few shuttle buses, gas, and salary for the drivers, the benefits will outweigh the cost.
Since the baseball club doesn’t receive any additional revenue from stadium parking by leasing shuttle busses the Nor’easters have an opportunity to have access to fans where transportation may be a challenge. Also, shuttle busses are an excellent way to promote the team, create brand awareness and loyal fan base. Finally shuttle buses can also be used to sell small souvenirs such as baseballs, hats and other small items. Solution 3: Buy-One-Get-One-Free Strategy Lastly, if we price tickets with a promotional buy one get one free strategy, we can attract more potential fans to the ball park.
With increased attendance, we can increase revenue with more people attending the games. Each additional person we get inside the stadium will amount to $11-$13 in sales at concession and merchandise stands. Fans will appreciate the value Nor’easters offer to help develop diehard fans for the future. Getting the fans in the door is the optimal solution, as it’ll cost the price of one ticket to get two fans in the door. We have over 100,000 tickets projected to not sell that discounting these tickets is the best strategy.
The benefit to a buy-one-get-one-free strategy is that it provides the Nor’easters with an opportunity to draw more people to attend a game. Beyond on the respondents from the questionnaire the Nor’easters are not expected to sell out any games this season. Therefore, by offering a two-for-one special the ball club can absorb the cost of one ticket with the promise that more people at the game will increase the amount of concession revenue. The increase in concession revenue should offset any ticket cost.
For example, if the Nor’easter applies a tiered pricing structure they can give away the cheapest ticket of $6. 00 and almost guarantee they will make the money back on concessions. If people get a free ticket to attend a game it’s a good chance they will spend money on concessions. Moreover, this is a great marketing initiative to generate interest and create goodwill within the Springfield community. On the other hand, if the baseball club decides to utilize a single across the board price of $14. 00 dollars they may not want to give too many seats so they are not losing money.
Analysis of the Proposed Solutions First Option: The data for the first option is taken from the survey conducted by the team’s Marketing Director. Our first ticket pricing solution is based on a tiered pricing structure. Based on the responses from the survey we determined that 22% of respondents to the survey are willing to pay $14. 00 per ticket, 93% willing to purchase a ticket at $8. 00 and 98% willing to pay $6. 00 per ticket. Under this scenario, the team is able to generate $ 870,444. 60 from sale of tickets, $ 244,757. 5391 from concession.
In total, the team will generate $1,115,202. 14. In addition, the money pledged by local restaurants and nearby colleges adds up to $41,000. This leaves the team with a net profit of $279,323. 14 Baseball games and most traditional sports have a tiered pricing structure. The purpose of a tiered ticket pricing structure is to maximize the total amount of ticket revenue per game. The Springfield Nor’easters will be playing in baseball stadium that has been converted to a 3,600-seat, open-air arena with 2,000-seat bleachers and 1,600 grandstand seats.
The total capacity represents the average size for a Class-A baseball team. A tiered pricing structure allows more Springfield residents to buy tickets for a ball game. By pricing tickets at different rates it allows for any potential consumer to afford to attend a game. Moreover, a tiered pricing structure increases overall revenue and market penetration. While the tiered pricing structure appears as one-fits all solution there are both pros and cons to this approach. On the one hand, a tiered pricing structure will allow more people of different economic classes to purchase tickets.
Based on the survey results, the customer profile are Springfield residents who are 26-35 years in age and have children. Their average income per person is between $22,500 to $75,000 and would attend fewer than five games a year. Since he found out that at least 39% of the population of Springfield would attend at least one game a year. With this statistic, we can find that Larry can expect 21,582 people to attend at least one game in the season. On the other hand, because the ticket pricing is already inexpensive we believe that a $14. 0 across the board price is reasonable and will generate more revenue. Second Option: Our second pricing solution is based on all respondents paying the highest ticketing price of $14. 00. This proposed solution is based on creating a first come first served demand. We propose the $14 price since 76% of respondents to the survey indicated that they are willing to pay more for a ticket. In addition, under the second option, the MD spends $70,000 on marketing and advertising. As more people learn about the game, demand for tickets increase and thus the MD can raise the price of tickets to $14.
The total fixed costs increase to $946,879 under this option. Although the total costs increase by a small amount ($70,000), the revenue generated from sale of tickets rise significantly ($1,535, 983. 66). The total revenue under the second option, which includes concessions and pledges grow to $1,821,741. 20. This leaves the team with a net profit of $874,862. 20. The higher ticket price also presents benefits and trade-offs. The obvious by charging a flat fee across the board the Nor’easters will be able to generate higher revenues from ticketing.
The additional revenue could be re-invested into the marketing initiatives or other forms of entertainment that would encourage more fans to attend games. On the other hand, there may not be as many people willing to pay for the same price for a ticket yet sit in the bleachers. Also, a decline in ticket sales will also impact concession sales. Given that the majority of Springfield residents are families with children under the age of 18 the average family may not be able to afford $14. 0 tickets for everyone member of the family and pay for food drinks and souvenirs at the concession stand. Our team prefers the second solution since by spending only $70,000 on marketing and advertising; the team is able to earn a higher net profit. Conclusion: We feel solutions one and two would be the best solutions to implement, as the team is new to the community. With a young demographic we want to develop a loyal fan base that the community will come to celebrate and view Nor’easters baseball games as fun and entertaining. This will increase the value of Nor’easters reputation.
Discounting prices for solution two is ideal, as more fans will flock to the stadium and purchase merchandise and food. Students don’t have a lot of money and offering them cheap tickets with transportation will draw more students to the ballpark. Solution two will increase profits by taking in more revenue from student purchases versus the cost of the shuttles, gas, and drivers. Our main concern was to get fans in the seats because an empty seat couldn’t purchase any merchandise or food from concession stands. Since costs are fixed, these costs would have to be paid no matter what.