April 24, 2014

Is the AFL’s variable pricing policy a folly?

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You can’t blame many AFL fans for baulking at the league’s new variable pricing policy. They see half empty stands on TV and wonder why they should pay a premium for seats no one else wants. Club members aren’t clear on where they can sit and how much extra it might cost. Where confusion goes, cynicism follows.

Has the AFL priced fans out of a day at the footy? Surprisingly, the average home and away crowd this year is up 4% on last year’s total.

That’s not to say that the AFL has got its Etihad and MCG pricing right. You don’t price to create friction with your customers. Price tags are a call to action, not an argument.

The AFL's variable pricing has kicked up a storm Image:

The AFL’s variable pricing has kicked up a storm

Cost of living pressures are real, particularly for families on limited incomes. But how much a person is willing to pay to attend an event depends as much on what’s in their head as what’s in their wallet. Just because something’s expensive doesn’t mean there’s no demand for it. Likewise, a flood of cheap tickets won’t necessarily make people more interested in coming to games.

The NRL can drop tickets to 80c yet only get 12,500 to see the Roosters battle the Bulldogs on a Friday night. Yet barely a fortnight earlier the MLB sells 76,000 tickets to its Sydney Opening Series priced from $99 to $499 – and fleeces $40 for a hotdog. The amount of entertainment each game offered can’t explain such extreme revenue disparity. It was how the mind contrasted the value of each event as a brand that mattered.

Striking a fair and sustainable ticket price is a tricky business. It requires plenty of tweaks along the way. But this complexity shouldn’t be passed onto fans.

Variable schmariable

The AFL probably thought ‘variable ticketing’ would sound a lot more palatable than ‘price hike.’

But variability suggests the unexpected. I’m not sure people enjoy spending money when the cost of something is uncertain. If a retail price isn’t clearly marked how long will customers fumble about searching for the tag before they move on?

Choice can be overrated. Every day the internet floods us with price variability and dynamic deals. It’s fatiguing. Hence the emergence of comparison sites that limit our choices. People don’t want to spend all day weighing up variables. They usually just want the best deal possible.

The AFL has created a Ramsay’s Kitchen Nightmare of a ticketing system. They need to limit the menu.

If you want to put forward a strong value proposition then simple is better. Take supermarkets. The two major chains are fighting for ownership of the ‘low cost’ position. Woolworths thinks that by introducing multiple discount categories they’ll appear cheaper. They took out TV ads to explain how their new pricing system works: red tags are ‘Everyday Saver’ discounts; yellow tags are weekly ‘Big Saver’ discounts; orange tags are ‘Extra Saver’ discounts reserved for loyalty cardholders.

What’s Coles’ message? Their prices are “down down.”

Keeping it simple is helping Coles win the supermarket war. For two years their growth has eclipsed Woolworths. People don’t want to be educated about your pricing, they need to get it straight away. If you need to waste time explaining your pricing structure then it’s probably wrong.

Membership had its advantages

Club memberships are one of the pillars of the AFL’s business model, averaging about 20% of club revenue across the comp. For years they’ve been sold as a simple value proposition – your ticket gets you a cheaper seat at the game, subject to availability.

Attendance has been the media measuring stick for the AFL’s new ticketing system. But there’s a feeling amongst some members that the league is double dipping by railroading them into buying reserved seats on top of their annual club dues. Could we see a knock on effect in next year’s membership uptake?

Variable ticketing has to an extant eroded the value of being a club member. A Collingwood adult general admission home game membership is $17.73 per match. Members have to pay an extra $8.50 for the cheapest MCG or Etihad seats at a fully ticketed match. That’s $26.23 plus booking fees. Yet a non-member off the street only has to pay $25 plus booking for the same seat. It’s a similar story at other clubs.

Dallas Mavericks owner Mark Cuban wants his season tickets to be cheaper than his single match tickets. He knows the value of rewarding loyal season ticket holders: “Fans know when you care. You can’t fake it.”

In contrast, Andrew Demetriou gave members a kick for being no-shows at poorly drawing matches. He’s since softened his line. No doubt he (and the AFL) wishes he had his time over.

No team in the AFL has been as dominant as Hawthorn in recent years. Yet for all their success the Hawks haven’t increased the cost of their basic general admission memberships. The AFL has said that their higher priced variable tickets are selling well. Maybe it’s time to look at the lower end of the market. If a big successful club like Hawthorn thinks there’s some softness in their cheapest membership category (‘PRICE FREEZE’ is stamped all over their membership website) then making these people effectively pay more for tickets than non-members probably isn’t the way to go.

Open the floodgates?

Part of the problem with the current variable pricing structure is that matches are fixed into a category at the start of the season, yet often the perceived quality of a contest hinges on the form teams carry over from the previous week.

The Bulldogs v Tigers match at Etihad Stadium is a prime example. It was billed as a Category A game. Yet the Bulldogs had just stuttered through the ‘worst game ever played’ against North Melbourne, while Richmond had played like the Tigers of old (not in the good way) in their worrying second half capitulation against Carlton. Barely more than 30,000 showed up.

The AFL believe that market sensitive dynamic ticketing might be the answer and have indicated a possible trial later this year. It might well work, but I’m not sure it quite fits the AFL’s membership model. Where will the early demand for tickets come from if the vast army of paid-up members hold out and play it by ear?

In the old days a sell out was a sell out. Some 15,000 fans were locked out of the MCG the day of the first Collingwood v Essendon Anzac Day clash. It added to the folklore of the event and no doubt made people more willing to pay a ticket premium in following years.

The AFL says that reserved seats are there to protect fans from the inconvenience of being turned away from games. But maybe a stadium as vast as the MCG needs the odd lockout to bridge the current disconnect in people’s minds between pricing and demand.

I doubt H&M are worried about the queue of inconvenienced customers snaking out the door of their Melbourne store. And I don’t see the queue getting any shorter. Fans will naturally be peeved if they can’t get into a ground, but they can’t argue the toss. If it’s full its full. They’re more likely to be infuriated by a ticketing system they suspect – rightly or wrongly – is ripping them off.

For all its recent bad press the AFL deserves its dues. It has an enviable record of getting people to come through the gate. You don’t become the fourth most attended league in the world by accident. Attendance is a key part of their ‘play, go, live’ growth strategy. The league is right to single out stadium food and drink costs as unreasonable (they’ll have a chance to do something about it when they finally take control of Etihad Stadium). But the storm over variable ticketing is a wake up call. There’s always a limit to what brands can compel from their customers, even in footy mad Melbourne.

One Comment

  1. benattagteam

    Nice work Anthony. Do you have any idea whether variable pricing strategies have worked for overseas clubs? What have they done to combat the season pass/membership issues that have arisen like they have here?

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