What Do We Charge Now?

  • by , Columnist, July 13, 2010
Most sports marketing research lacks the methodological rigor and sophistication that I've seen in other categories, but it certainly doesn't lack sizzle. With murmurs of a double-dip recession compounding the lingering sting of the last 18 months, the relentless pursuit of optimum pricing strategy for sponsorships, tickets, personal seat licenses (PSLs) and sporting goods continue unabated.

That's good news for firms like ours that more than dabble in this stuff. Not tp be hypocritical, but I've never embraced glittering magic bullets or hocus pocus "proprietary" techniques. Rather I'd advocate a pragmatic look at how any sports brand can fairly value its assets. No matter what you are valuing, that process starts with fundamental insight needs, driven by two ostensibly simple questions:

1) How does the target truly value your product or property?

2) How differentiated is your offering relative to viable substitutes?

Getting good answers to these questions requires carefully designed market research. If you've read my posts more than once, you know that I'm the first to scream loudly at the proliferation of research instruments that ask useless direct questions, like "What should this cost?" or " Are you willing to pay "X?"

Ask yourself, honestly, can a survey respondent objectively answer questions like this? We researchers refer to these as leading questions, or by another term that I can't use in a "family" medium. So, while these questions may be the root of what sports marketers are trying to elicit from their targets, there's an art to asking them.

One simple way to get at the first question uses a complicated-sounding technique called the "Van Westendorp Price Elasticity Battery." You can really sound like a numbers geek, with that one ... but it's really a simple way of gauging price expectations through deeper, more natural probes.

We also use conjoint analysis ... another term that makes it sound like we wear pocket protectors but in reality involves designing a study where choices are forced among different product features and benefits. Respondents then often assign and evaluate values associated with each, resulting in optimal "product configuration."

It's a lot simpler than it may sound, and we've used it often to show clients where they may actually be leaving dollars on the table. The more direct questions, above, often sound the fire alarm that properties are priced too high. A well-designed research instrument can get at these insights and more, all for around the cost of a typical PSL.

The second question is also subjective. But differentiating your offering from a broadly drawn competitive set not only frames the opportunity that you may have to position your property at a premium but also helps sports marketers segment their products and services, create variations in marketing messaging for different customer groups and recognize that there are "different horses for different courses."

Find enough at a premium price point, and you may be able to weed out some of your most price-sensitive and least-profitable customers. The travel industry has practiced this type of "yield management" for years. Our industry is just now beginning to catch up. Again, sound research can help point the way.

If you're still looking for a magic bullet, I'll leave you with a simple strategy spawned by an observation shared by Prof. Devin Pope at our recent Wharton Sports Business Initiative Advisory Meeting. Pope's extensive research found people to have a left digit bias -- hence $199.99 is significantly preferable to $200.

Similarly, Pope's research showed that 20% more students re-took the SAT if they scored 1090, 1190, 1290, etc. ... than those who scored just 10 points higher. Ah, the power of numbers!

1 comment about "What Do We Charge Now? ".
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  1. Michael Nwosu from Excellent Ideas of America, July 13, 2010 at 12:02 p.m.

    RE: Prof. Devin Pope's research:

    $X.99 = $Y-$0.01
    For example $199.99 is $200 -$0.01
    Do you know when the marketing people introduced this $.99 instead of $1.00? In the 1960's.

    In my culture we called it mrketing dishonesty, and it still is. In the media it is called marketing trategy, which is based on marketing psychology. It is still dishonest and it costs the industry and the consumer more time and space than the 1 penny.
    Is there any way for the media to make this go away? When you go to the gas station you should know that gas id $1.60 per gallon not $1.59 9/10 ! Enough is enough.

    Excellent Ideas of america

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