The Maximizing Revenue Myth in Ticket Sales

Why the intent of one or two game ticketing maximization may be a myth and how it hurts the lifetime revenue value of your customer base.

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Over the course of the past few seasons we have seen a change in the philosophy of organizations when it comes to ticket sales, especially those who are in a good sales position including likely playoffs, playoff run or championship contender, Simply, the fear of lost revenue to brokers and the panic need to maximize revenue can actually be hurting current bottom lines and driving increased ticket supply in the future.

To explain, the industry has gotten away from one of the most important aspects of the ticket sales cycle since even before the internet. Sell early. Or, the basic economics of supply and demand. One of the critical reasons for this is thinking that by selling early you may miss out on potential single game sales revenue at inflated prices.

The problem with theory can be narrowed down to a flooding of inventory having a short and long term effect on your customer base. At a time when we should be growing our fan bases by gobbling up customers as the media exposure and interest is at its highest, we are allowing seats to go unsold because of ticket revenue FOMO. The expansive problem is a lot more detailed so let's examine point by point this ideology and how it pertains to ticket sales:

Are you calculating revenue on your season and playoff receipts or just one specific game?

One of the more interesting points we see when attempting to maximize revenue on more popular games, such as high value playoff games, is that we look at that event in a silo versus the season or playoffs as a whole. If you are holding out inventory for the chance to maximize on a specific game or two, are you calculating that into your numbers?

• Did you really make additional revenue as a whole or did you just increase price per unit one specific game but lose overall?
• How many tickets went unsold in your previous rounds that could have been sold via a lower price or a decent price within in full menu packages?
• How much did an influx of inventory lower your cost per ticket due to inflated supply? Meaning, while you made an inflated price could that price have been even higher with less supply - causing even more sales in earlier rounds and higher prices on less tickets in the maximization game?

Are you afraid pricing individual ticket sales to sell will create a revenue stream for brokers?

This is a pretty common theme or question when this topic is discussed. The problem with the question is that of course if you do not manage your inventory correctly you can see this problem.

However, it is an easily avoidable situation with proper inventory management. If you manage correctly you should sell more packages early at a slightly inflated price (see the next point about consumer package buyers offsetting costs) leaving less seats available for individual sales. Because of less supply you can certainly charge a higher rate for a handful of individual tickets because you have capitalized already throughout the season and all playoffs games.

That being said, brokers can play an important part of your ecosystem because the upfront payments limit inventory for less sellable games, therefore creating less supply. This allows not only brokers to capitalize on the resale market, it creates urgency for consumer package sales throughout the playoffs, the following season and into the next seasons playoff. All aiding an organization's long term efforts. By maximizing revenue on one or two games, you may (and most likely are) killing the LTV of your current base by overpricing and forcing the cancellation of your best clients.

This of course starts a cycle of increased supply, lower demand, lower pricing and higher cost sales and marketing efforts.

Are you identifying resale customers who are offsetting costs (not brokers)?

When I was at the Pittsburgh Penguins starting in the late 90's we had a star stacked team that was a contender. The playoffs could be difficult to sell out as the turn around for some games were brief. This was not a problem for a Game 7 where sales skyrocketed, but was for most other playoff games, especially in the early rounds.

Fast Forward 10 years and we were in the same on-ice situation but with different players. We sold out every playoff game easily, even the first few years when we were not considered championship threats.

What changed? The ease of online ticket sales and resale changed. Fans were more likely to buy season tickets and playoff packages because they could easily offset costs. This limited supply allowed us to manage the number of tickets available on a per game basis. The resale market was strong but aided not only brokers, it aided those who normally would not give us up front money because they either could not afford to, did not have a desire too, or could not attend all games. The resale market created a strong economic curve.

If you are worried about the resale of the top games, you are limiting the LTV of customers because they are less likely to renew. A few years of losing package sales due to overpricing (in fear of FOMO) or limiting resale efforts through various tactics (in fear of FOMO) you create more supply, thus creating a cycle and inflated inventory that becomes impossible to manage. Over the course of a few years, 5 years, or even a decade it will create financial losses and not gains. Despite your efforts for one or two Game 7's.

Are you identifying time and marketing expenses needed to move tickets combined with the loss of secondary digital exposure and consumer database efforts?

This can become more subjective but may be the most compelling of all questions. How much additional effort and expenses are required to move tickets throughout the year and into the playoffs?

It would be wise of most organizations to take a detailed look at staffing models and marketing initiatives and analyze the expenses associated with each. Work in a comparison with additional package sales created by a more sellable pricing structure combined with a healthy resale market.

It is a well known fact that it is cheaper and easier to keep existing customers instead of finding new customers. How much does that stat change when applied to the renewal of season ticket packages vs buying individual tickets or finding new customers: It is much cheaper and profitable long term to keep existing season ticket holders who are emotionally tied to your organization and openly have a desire to give you bulk upfront payments. This is not just over new customers, it is also over finding new customers who only give you a little bit at time a few times per year by purchasing individual tickets.

It is a lot of work to move tickets in a short period of time. It is also not healthy to flood the open market and attempt to direct pricing. Resale sites thrive off of pure economic driven inventory strategies. In the second scenario you not only create an expense savings, you maximize secondary sites ability to advertise digitally through retail ecommerce and utilize powerful consumer data within your markets.

The end result of spending less out of your own pocket, but gaining marketing efforts through other outlets retail efforts will go along way to your long term bottom line and health as an organization.

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Read More Articles from Mike:

The Need for E-commerce in B2B Ticketing

Why Teams and Leagues are Partnering with Secondary Sites

Why Businesses are Gravitating to SuiteHop

Avoiding Shark Statistics in Sports Business

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