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The Springfield Noreasters:

Maximizing revenue at Minor


League
Harvard Business School Case

Sameer Mathur, Ph.D. (Carnegie Mellon)


Marketing Professor, IIM Lucknow

Quiz: Springfield Noreaster


1)
2)
3)
4)
5)
6)
7)

How many games were Noreasters scheduled to play at home?


What was the total capacity of the Springfiled College stadium?
What was the population of Springfield, MA in 2008?
What was the profit margin from concession sales at the statdium?
What was the expected game attendance by full season ticket holders?
How much stadium rent did Noreasters pay Springfield Colleage?
How many total responses did Buckinghams survey generate?

THODI SI MATHS
8) How much money is needed from ticket sales and net concession income to cover
fixed costs? (Hint: Review Page 3 & Exhibit 1)
9) What is consumers cumulative willingness to pay (WTP) by price and ticket type?
(Hint: Prepare a pricing matrix, similar to Exhibit 6)
10) Calculate the expected revenue from snacks, souvenirs and arcade games, per
person? (Hint: Review Exhibit 5)
Harvard Business School Case
2

Quiz: Springfield Noreaster


1)
2)
3)
4)
5)
6)
7)

How many games were Noreasters scheduled to play at home? 38 (p.2)


What was the total capacity of the Springfiled College stadium? 3600 (p.2)
What was the population of Springfield, MA in 2008? 55,338 (p.2)
What was the profit margin from concession sales at the statdium? 39% (p.4)
What was the expected game attendance by full season ticket holders? 90% (p.6)
How much stadium rent did Noreasters pay Springfield Colleage? 0 (p.2)
How many total responses did Buckinghams survey generate? 625 (p.5)

THODI SI MATHS
1) How much money is needed from ticket sales and net concession income to
cover fixed costs? (Hint: Review Page 3 & Exhibit 1)
2) Calculate the expected revenue from snacks, souvenirs and arcade games, per
person? (Hint: Review Exhibit 5)
3) What is consumers cumulative willingness to pay (WTP) by price and ticket
type? (Hint: Prepare a pricing matrix, similar to Exhibit 6)
Harvard Business School Case
3

What are
Noreasters?
Who is
Larry Buckingham?
4

Who are the Players?


Larry Buckingham

oMarketing Director for Noreasters


Jimmy Mercante

o Owner of the Noreasters


Bob Cortez

o President and GM
Harvard Business School Case

What is the present


situation?
6

Situation Analysis (1/3)


A class-A minor league baseball team has started
up in Springfield, MA, a year and a half advance of
the first game
Game dates have already been determined, but
pricing decisions remain
A survey has been run with the expectation of
getting insights to help in pricing season and
single game tickets
Ancillary issues of concession sales also need
evaluation
The Springeld Noreasters: Maximizing Revenue in Minor League

Situation Analysis (2/3)


Entertainment Industry: Sports

The Springeld Noreasters: Maximizing Revenue in Minor League

Stadium (3/3)

Harvard Business School Case

Why study this


case?
10

Objectives of this Case (1/3)


Illustrate the design, implementation, and interpretation of
research surveys
o Evaluate primary research studies,
o Setting research objectives,
o Questionnaire design,

o Data analysis and interpretation.


Harvard Business School Case

11

Objectives of the Case (2/3)


To use quantitative analysis methods to develop a

"scaled" pricing strategy for a


perishable service that reflects constant

costs per production unit (in this case, stadium seats)

The Springeld Noreasters: Maximizing Revenue in Minor League

12

Objectives of the Case (3/3)


Understand the relationship between

pricing and its impact on the sales of


auxiliary products.
Harvard Business School Case

13

We will focus on
THREE inter-related
issues
14

Three Issues
1
Evaluate the

research surveys

undertaken by the League Sports Association and by


Larry Buckingham:
customer profile?
pricing?
single versus season tickets
The Springeld Noreasters: Maximizing Revenue in Minor League

15

Three Issues
2

optimal pricing policy?


The Springeld Noreasters: Maximizing Revenue in Minor League

16

Three Issues
3

Can Noreasters

breakeven?
The Springeld Noreasters: Maximizing Revenue in Minor League

17

Three Issues
1
Evaluate the

research surveys

undertaken by the League Sports Association and by


Larry Buckingham:
customer profile?
pricing?
single versus season tickets
The Springeld Noreasters: Maximizing Revenue in Minor League

18

Insights from the


League Sports
Association
survey?
19

Attendance / Exposure (1/3)


A. Total Percent Exposed During Past Year by Educa:on



Baseball Football
Basketball Hockey
College graduate 2
7 5 2
Some college 12 5 2
2
High school graduate 23
14 6 7
Some high school 39 26 11 13

The Springeld Noreasters: Maximizing Revenue in Minor League

20

Income-level of Audiences (2/3)


B. Income ComposiFon of Audiences



Baseball Football Basketball Hockey
$75,000 and over 13% 12% 15% 20%
$45,000 to $74,999 40% 37 34 32

$22,500 to $44,999 33% 34 32 30


Up to $22,499 14 17 19 18
100% 100% 100% 100%

Harvard Business School Case

21

Education-level of Audiences (3/3)


C. EducaFonal ComposiFon of Audiences of Four Professional Sports


Baseball Football Basketball Hockey


College graduate 18% 21% 20% 18%
Some college 26 18 18 16
High school graduate 23 24 24 26
Some high school 33 37 38 40
100% 100% 100% 100%




Source: League Sports Associa1on.

The Springeld Noreasters: Maximizing Revenue in Minor League

22

But..

These insights were 3 years old,


anecdotal, limited
I want to be able to tailor the teams offerings based on
knowledge of the local market

The Springeld Noreasters: Maximizing Revenue in Minor League

23

Insights from
Telephone
Interviews?
24

Telephone Interviews (1/3)


Larry Buckingham conducted

Telephone interviews of six


minor league baseball team Marketing
Directors across USA
The Springeld Noreasters: Maximizing Revenue in Minor League

25

Insights from Interviews (2/3)


Price Seats on par with the competition
movies, bowling, other sporting events

Season ticket versus Individual ticket


buying
The Springeld Noreasters: Maximizing Revenue in Minor League

26

Insights from Interviews (3/3)


Promote group ticket sales to Little League
teams, summer camps, promote family
days out

Concession Sales are crucial


The Springeld Noreasters: Maximizing Revenue in Minor League

27

Online Survey by
Larry Buckingham?
28

Design Objectives? (1/5)

The Springeld Noreasters: Maximizing Revenue in Minor League

29

Design Objectives (1/5)


Maximum Information Yield for DecisionMaking
Clarity in questions asked
Ease of data analysis
The Springeld Noreasters: Maximizing Revenue in Minor League

30

Questions on (2/5)

oPrice Sensitivity
oSports attendance patterns
Harvard Business School Case

31

Process.. (3/5)

How was the survey


conducted?
The Springeld Noreasters: Maximizing Revenue in Minor League

32

Process.. (3/5)
Mail 10000 postcards
Fill Online / Telephone Survey
Chance to Win $500 restaurant gift
certificate
The Springeld Noreasters: Maximizing Revenue in Minor League

33

Budget; Response Rates (4/5)

?
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Budget; Response Rates (4/5)


o$3,800 budget
o10000 postcards
o625 responses

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Budget; Response Rates (4/5)


List Source

Mail Qty.

Springfield residents, census tract


Minor league hockey team, individual,
and season ticket buyers
College football individual and
season ticket buyers
Parents of little league baseball players,
2007-08 season
Parents of girls softball players,
2007-08 season
Total

List Cost, per


thousand
names

Undeliverable

Net
Response

5,000

$90

250

5.2%

2,871

$125

97

6.1%

1,380

$125

41

7.6%

441

$130

20

17.3%

$130

12

11.4%

308

10,000
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420

36

Pretesting (5/5)

?
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37

Pretesting (5/5)
oPretested 3 times on friends, relatives,
business associates

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38

Insights from the


Online Survey by
Larry Buckingham?
39

Purchase Likelihood (1/4)


Exhibit 5: Survey Questionnaire and Response Distributions

Question

Response
Yes

1. Do you consider yourself a baseball fan?

2. In the past year, have you attended a professional baseball game?








3. During the past two or three years, how often have you
Never
attended a major-league game?
76%
4. During the past two or three years, how often have you
attended a minor-league game?
83%
5. During the past two or three years, how often have you
attended a college game?
79%

No

Not sure

38%

60%

2%

28%

72%

0%

1-2 times
20%
14%
17%

3-4 times
1%

5 or more times
3%

1%
2%

The Springeld Noreasters: Maximizing Revenue in Minor League

Not sure
0%

2%

0%

2%

0%

40

Purchase Likelihood (1/4)


Yes No


6. Have you ever purchased a season Fcket for a sporFng event? 23% 77%

7. If a minor league baseball team came to Springeld, is it likely you would (select one):

Not aOend at all


61%
Probably aOend just one game

21%
Probably subscribe to a 5-game package

11%
Probably subscribe to a 20-game half season

5%
Probably subscribe to a 38-game full season
2%

Harvard Business School Case

41

Willingness to Pay (2/4)


Less than $4

8. If you were to attend one game, what would you be willing to


pay?

0%

Less than $4
9. If you were to purchase a multi-game package of 5 tickets,
1%
what would you be willing to payper game?
10. If you were to purchase a half-season ticket for 20 games,
1%
what would you be willing to payper game?
11. If you were to purchase a full-season ticket for 38 games, what
would you be willing to payper game?
18%

$4
2%

$4

$6
5%

$6

$8
13%

$8

$10
31%

$10

$12
27%

$12

$14
22%
$14

2%

3%

19%

36%

34%

5%

7%

23%

28%

25%

15%

1%

26%

20%

14%

The Springeld Noreasters: Maximizing Revenue in Minor League

11%

10%

1%

42

Concession Sales (3/4)


nothing
more
12. What would you be willing to pay, per game, for a grandstand 24%
seat over and above the cost of a bleacher seat?
Nothing

13. How much do you expect to spend on snacks, souvenirs and


arcade games, per person, for each game you attend?

14. What is your age?

15. Are you:

8%

10% more 25% more


48%
19%
Less than
$5

$6-$10

11%

18 or under
1%

19-25
7.00%

Female
56%

Male
44%

Harvard Business School Case

50% more
9%

$11-15

45%

36%

26-35
30%

36-45
21%

46-55
19%

56-65+
19%


43

nothing
more
12. What would you be willing to pay, per game, for a grandstand 24%
seat over and above the cost of a bleacher seat?

Demographics (4/4)
Nothing

13. How much do you expect to spend on snacks, souvenirs and


arcade games, per person, for each game you attend?

14. What is your age?

15. Are you:

8%

10% more 25% more


48%
19%
Less than
$5

$6-$10

11%

18 or under
1%

19-25
7.00%

Female
56%

Male
44%

Harvard Business School Case

50% more
9%

$11-15

45%

36%

26-35
30%

36-45
21%

46-55
19%

56-65+
19%

44

Demographics (4/4)
None
34%

16. How many children, ages 5-16, live with you?

Some high
school

17. What is the last grade in school or college that you completed? 28

Up to
$22,499

One
38%

High
school

28

$22,500$44,999

Two
18%

Three
7%

Some
college

College degree

31

13

$45,000$74,900

Four
2%

More than 4
1%

$75,000 and
over

18. For statistical purposes only, which of the following broad


categories represents your household's annual income?

18%

36%

40%

6%

The Springeld Noreasters: Maximizing Revenue in Minor League

45

Three Issues
2

optimal pricing policy?


The Springeld Noreasters: Maximizing Revenue in Minor League

46

How much money is


needed from ticket
sales and
concessions to
cover fixed costs?
47

Annual operating expenses (Exhibit 1)


Fixed expenses

Players' salaries $887,000a


Bats and balls $22,500a
Uniforms
$8,000
League dues $175,000
Sta salaries $124,000
Oce expenses $110,000
Team travel $455,000
Market research & mailing lists $4,879
Advertising, sales, and marketing $175,000

Total xed expenses $1,961,379


a These expenses were paid by the major league team with which the Noreasters were aliated.

The Springeld Noreasters: Maximizing Revenue in Minor League

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Noreasters expenses and non ticket revenue


Fixed expensesa

Uniforms
League dues
Staff salaries
Office expenses
Team travel
Market research & mailing lists
Advertising, sales, and marketing
Total fixed expenses


Less nonticket revenue:
Advertising and sponsorship
City of Springfield & university contributions

Balance needed from ticket and concession sales


to cover fixed costs

$
8,000
$ 175,000
$ 124,000
$ 110,000
$ 455,000
$
4,879
$ 175,000
$ 1,051,879
$
$
$

25,000
21,000
46,000

Exhibit 1, Pg. 8

Case, Pg. 3

$ 1,005,879


a Note that expenses for players' salaries and for bats and balls, totaling

$909,500, are excluded as they are paid by the major league team with which
the Noreasters are affiliated.

49

Fixed Costs
Need to recover

$1,005,879
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50

Determining the
optimal pricing
strategy from
willingness-to-pay?
51

Pricing (1/7)

Exhibit 6 Buckinghams pricing matrix worksheet

$ per ticket

Less
Ticket Type

than $4

$4

$6

$8

$10

$12

$14

Single ticket
5-game ticket
20-game half-season
38-game season

Harvard Business School Case

52

WTP (2/7)
o31% are WTP $10
o49% are WTP more than $10
(Exhibit 5, Que 8)

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WTP by Price & Ticket Type (3/7)



Data from Case Exhibit 5, Consumer willingness to pay by price and ticket type

$ per ticket

Ticket Type

Single ticket

5-game ticket

20-game half-season
38-game season




Less

than $4
0%
1%
1%
18%

$4
2%
2%
7%
26%

$6

5%
3%
23%
20%

$8
13%
19%
28%
14%

$10
31%
36%
25%
11%

$12
27%
34%
15%
10%

$14
22%
5%
1%
1%


Harvard Business School Case

54

Cumulative Willingness to Pay (4/7)


27 % willing to pay $ 12
+ 22 % willing to pay $ 14
49 % willing to pay at least $ 12
Determine the total percentage of
consumers who are willing to
purchase at each price point
The Springeld Noreasters: Maximizing Revenue in Minor League

55

Cumulative Willingness to Pay (5/7)




Cumulative table of consumer willingness to pay by price and ticket type






Ticket Type
Single ticket

5-game ticket
20-game half-

38-game season

season


$ per












ticket


Less
than
$4
$6
$8
$10
$12
$14
$4
100% 100% 98%
93%
80% 49% 22%
100% 99% 97%
94%
75% 39%
5%
100% 99% 92%
69%
41% 16%
1%
100% 82% 56%
36%
22% 11%
1%


The Springeld Noreasters: Maximizing Revenue in Minor League

56

Expected Ticket Revenue (6/7)


Optimal prices by ticket type a




Ticket Type

Single ticket

5-game ticket
20-game half-
season
38-game season


$ per











ticket





Less
than
$4
$6
$8
$10
$12
$14
$4

$ $4.00 $5.88 $7.44 $8.00 $5.88 $3.08

$ $3.96 $5.82 $7.52 $7.50 $4.68 $0.70

$ $3.96 $5.52 $5.52 $4.10 $1.92 $0.14
$ $3.28 $3.36 $2.88 $2.20 $1.32 $0.14

This is the potential ticket revenue per


game for each ticket type/price pair.
Harvard Business School Case

57

Optimal
Pricing
Schedule
(7/7)


% of

Ticket Type
Single ticket
5-game ticket
20-game half-season
38-game season
Total

Ticket
Price
$10
$8
$7
$6

The Springeld Noreasters: Maximizing Revenue in Minor League

consume
interested
ticket typ
21%
11%
5%
2%
58

Three Issues
3

Will Noreasters

breakeven?
The Springeld Noreasters: Maximizing Revenue in Minor League

59

Revenue from
Tickets?
60

Consumers (1/4)


Exhibit 5, Que 7

Tickets and seats sold and total ticket revenue by ticket type



Ticket Type
Single ticket
5-game ticket
20-game half-season
38-game season

Ticket
Price
$10
$8
$7
$6

Total

% of
consumers
# of
% willing to # ticket
# seats
interested in
interested
buy at this
type
a
ticket type consumers ticket price
sold
sold
21%
11%
5%
2%

11,621
6,087
2,767
1,107

80%
94%
81%
56%

Total Ticket
revenue

Springfields


9,297 population
9,297
$ 92,968
=
5,722
28,610
$ 228,878
55,338
2,227
44,547
$ 311,830

620 23,552
(Case, p.$ 141,311
2)
106,006

$ 774,987


a From Springfield total of 55,338

The Springeld Noreasters: Maximizing Revenue in Minor League

61

Number of Tickets Sold (2/4)




Tickets and seats sold and total ticket revenue by ticket type
Tickets and seats sold and total ticket revenue by ticket type



Ticket Type
Ticket Type
Single ticket
Single ticket
5-
5-ggame ticket
ame ticket
20-
20-ggame half-
ame half-sseason
eason
38-
38-ggame season
ame season

Ticket
Ticket
Price
Price
$10
$10
$8
$8
$7
$7
$6
$6

Total
Total

From
Cumulative

WTP

% of
% of
consumers
# of
% willing to
consumers
# of
% willing to # ticket
# ticket
# seats
# seats
interested in
buy at this
type
interested in interested
interested
buy at this
type
a
a
ticket type
sold
ticket type consumers
consumers ticket price
ticket price sold
sold
sold
21%
21%
11%
11%
5%
5%
2%
2%

11,621
11,621
6,087
6,087
2,767
2,767
1,107
1,107

80%
80%
94%
94%
81%
81%
56%
56%

9,297
9,297
5,722
5,722
2,227
2,227
620
620


9,297
9,297
28,610
28,610
44,547
44,547
23,552
23,552

106,006
106,006

Total Ticket
Total Ticket
revenue
revenue
$
$ 92,968
92,968
$ 228,878
$ 228,878
$ 311,830
$ 311,830
$ 141,311
$ 141,311
$ 774,987
$ 774,987


a
a From
From SSpringfield
pringfield ttotal of
otal of 555,338
5,338

The Springeld Noreasters: Maximizing Revenue in Minor League

62

Cumulative Willingness to Pay (3/4)




Cumulative table of consumer willingness to pay by price and ticket type






Ticket Type
Single ticket

5-game ticket
20-game half-

38-game season

season


$ per












ticket


Less
than
$4
$6
$8
$10
$12
$14
$4
100% 100% 98%
93%
80% 49% 22%
100% 99% 97%
94%
75% 39%
5%
100% 99% 92%
69%
41% 16%
1%
100% 82% 56%
36%
22% 11%
1%


The Springeld Noreasters: Maximizing Revenue in Minor League

63

Ticket Revenue (4/4)




Tickets and seats sold and total ticket revenue by ticket type
Tickets and seats sold and total ticket revenue by ticket type



Ticket Type
Ticket Type
Single ticket
Single ticket
5-ggame ticket
ame ticket
5-
20-ggame half-
ame half-sseason
eason
20-
38-ggame season
ame season
38-

Ticket
Ticket
Price
Price
$10
$10
$8
$8
$7
$7
$6
$6

Total
Total

% of
% of
consumers
# of
% willing to # ticket
# ticket
consumers
# of
% willing to
# seats
interested in interested
interested
buy at this
type
# seats
interested in
buy at this
type
a
a
ticket type consumers
consumers ticket price
ticket price sold
sold
sold
ticket type
sold
21%
21%
11%
11%
5%
5%
2%
2%

11,621
11,621
6,087
6,087
2,767
2,767
1,107
1,107

80%
80%
94%
94%
81%
81%
56%
56%

9,297
9,297
5,722
5,722
2,227
2,227
620
620


9,297
9,297
28,610
28,610
44,547
44,547
23,552
23,552

106,006
106,006

Total Ticket
Total Ticket
revenue
revenue
$ 92,968
92,968
$
$ 228,878
$ 228,878
$ 311,830
$ 311,830
$ 141,311
$ 141,311
$ 774,987
$ 774,987

a From Springfield total of 55,338


a
From Springfield total of 55,338

The Springeld Noreasters: Maximizing Revenue in Minor League

64

Ticket Revenue (4/4)

Tickets and seats sold and total ticket revenue by ticket type



Ticket Type
Single ticket
5-game ticket
20-game half-season
38-game season

Ticket
Price
$10
$8
$7
$6

% of
consumers
# of
% willing to # ticket
# seats
interested in
interested
buy at this
type
a
ticket type consumers ticket price
sold
sold
21%
11%
5%
2%

11,621
6,087
2,767
1,107

80%
94%
81%
56%

Total

9,297
5,722
2,227
620

9,297
28,610
44,547
23,552
106,006

Total Ticket
revenue
$ 92,968
$ 228,878
$ 311,830
$ 141,311
$ 774,987


a From Springfield total of 55,338

What is the total capacity of


the stadium?
The Springeld Noreasters: Maximizing Revenue in Minor League

65

Revenue from
Concessions?
66

Concession Revenue Per Seat (1/3)

nothing
more
12. What would you be willing to pay, per game, for a grandstand 24%
seat over and above the cost of a bleacher seat?

Nothing

13. How much do you expect to spend on snacks, souvenirs and


arcade games, per person, for each game you attend?

14. What is your age?

8%

10% more 25% more


48%
19%
Less than
$5

$6-$10

11%

18 or under
1%

19-25
7.00%

Female
56%

Male
44%

50% more
9%

$11-15

45%
26-35
30%

36%
36-45
21%

46-55
19%

56-65+
19%

$0.00*8% + $2.50*11% + $8*45%



+ $13*36%

15. Are you:

$8.56

Harvard Business School Case

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Revenue From Concessions (2/3)


$8.56/seat

Case, p.6

Concessions revenue

Ticket type

# seats buying
concessions

Attendance

seats sold

Concession
revenue

Single ticket
5-game ticket
20-game half-season
38-game season
Total

9,297
28,610
44,547
23,552
106,006

100%
97%
95%
90%

9,297
27,751
42,320
21,197
100,565

Harvard Business School Case

$79,580
$237,552
$362,257
$181,443
$860,832

68

Net Income Per Seat (3/3)


Case, p.4

39% contribution margin


Net Income Per Seat
= $8.56 * 39%
=

$3.34

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Breakeven?
70

Breakeven Analysis

Breakeven analysis
Revenues:
Ticket sales
Concession sales (net)
Total revenues:
Balance needed from ticket and concession sales to cover
fixed costs
Net income

$774,987
$335,725
$1,110,712
$1,005,879
$104,833

The Springeld Noreasters: Maximizing Revenue in Minor League

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Take Aways From Case


o Can we generalize the insights?

Harvard Business School Case

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