The Springfield Nor’easters:

Maximizing Revenue in the Minor Leagues

Submitted by Group 12

Nor’easters are a new class A minor league team from Springfield, which is the third
largest city in Massachusetts. The city has a low average income and struggling economy.
Nor’easters need to decide how to price their home game tickets. For the same, they would
have to figure out the demand, what factors to consider, and how to give a good value
proposition to the Springfield residents while also breaking even. Through research on
minor league games in other areas, they had found out that concession sales brought in
huge margins and their pricing would also be crucial to the revenue.
To find out the current mindset of potential spectators, they decided to send out
questionnaires that would help them arrive at a solid pricing scheme.
Q1. What do you consider to be the key findings of the research survey? Comment on what
Buckingham learned about a prospective customer profile, pricing, and single-ticket versus
season- ticket packages

To understand the results of the survey, we could consider something called the typical
customer profile. A typical customer who responded to this survey would be 26-35 years
old with children and would be earning around $22,500 to $75,000. This typical customer
would attend less than 5 games in a year and is probably looking for some family
entertainment. Additionally, as per the survey, 39% of the population would attend the
games at least once. Therefore, we can safely assume a turnout of at least 21,582 people
throughout the game.

Regarding willingness to pay for various ticket bundles, the willingness to pay falls
somewhere in between $10-$14 per game and the demand for premium seating is low. The
market for single ticket buying is the biggest and it is assumed that attendees are attending
in substitution of other entertainment options and pricing has to be set as such. There is
only a small amount of market for the full season tickets and lowering the price of tickets
will be necessary to increase demand.

While the willingness to pay for a single ticket is between $10-$14 for a single game, it
drastically reduces to $6 to $10 for the half game bundle and further falls to ‘less than $4’
to $6 for the full season ticket.

Q2. What considerations should the Nor’easters take into account in establishing a pricing
policy?

To establish a pricing policy, Nor’easters need to consider:

1. Revenue: At every price, what kind of revenue they can expect from tickets as well as
from concession sales.
2. Discounts: They should look at the kinds of discounts they can offer for various price
points.
3. Attendance: They also need to anticipate how many people may purchase the tickets
and out of those how many actually end up going for each game at all the price points.
4. Competition: They may see people coming to watch the game as a substitution for other
 forms of entertainment like movies and bowling and that should also be considered
while setting a price.

Also, we need to keep in mind that the Major League games are priced starting from $12.
They shouldn’t price it so low as to be indistinguishable from local colleges ($5-$6) and no
so high which turns people away from coming at all. The pricing will also determine
whether they would break even, if not make profits.

Q3. Design a ticket pricing plan for the Nor’easters the first season. Be very specific, and
explain the assumptions, especially assumptions of cause and effect, that underlie your
strategy. Should Buckingham offer more than one type of season package? How, if at all,
should ticket pricing vary by package type? How, if at all, can Buckingham take advantage
of consumer interest in grandstand seating?

We have tried to derive the ticket pricing plan from the survey. Here, we have assumed
that the grandstand seating is not important to the target population as according to the
survey 72% of people are not ready to pay more than 10% of the original ticket price.
Rather than discounting for non-premium seats, we can sell the general admission ticket
at a higher price to everyone, on a first come first serve basis, as the prices are already very
low. Pricing decision is strongly influenced by concession sales and the packaging type as
can be seen in the excel. We also observe that if Buckingham sells tickets at $14 then he
will be able to get only 14% of the people willing to go. Hence, there will be less number
of people to buy a concession. However, if he sells tickets at $10 there would be 80%
attendance. From the excel we can see that $10 is the optimal pricing for which the highest
revenue is generated. The revenue will start decreasing if we offer a price lower than that.
While developing the pricing strategy we also considered that as the concessions spending
increases, the number of people actually spending decreases. We can assume that $8 is
what 81% of the people will spend on concessions as we can see from the survey data that
81% people are willing to pay between $6 and $10.

A similar approach is followed for the packaging options as well and the following results
were obtained and can be seen in the excel.

Calculations Attached in the excel sheet

Group 12
Calculations.xlsx

Ticket Price Concessions

Single Ticket Option $10 $8

5-Game Ticket Option $8 $8

Half Season Ticket Option $6 $8

Full Season Ticket Option $4 $8

Q4. Using the pricing plan you have designed and given Buckingham’s assumptions about
concession sales, will the team reach breakeven in the first year? If not, what options does
Buckingham have to reach his target?

From the excel sheet, we can see that a profit of $53,676 can be expected at the current
pricing. To arrive at this number, we first figured out the total population of Springfield
that would be willing to go to at least one game during the year, which is 21,582. We also
assumed that 54% of the population would be interested in one game, 28% would be
interested in at least 5, 13% would be interested in half the season, and 5% would be
interested in attending the full season. Now, 80% of the 54% of the population who would
be willing to go to one game, would actually go at $10. Similar approach is followed for
other pricing packages as well and we see that 9297 people would go to one game, 5722
people would go to 5 games, 2546 people would go to 20 games, and 908 would go to the
full season. Using these figures we calculate the revenue generated from tickets for this
entire season to be $765,258. We also know that concessions can contribute around 30%-
50% of revenue on top of ticket sales. Here we assume that not everyone who attends the
game will buy concession, taking no shows into consideration as well. We need to consider
the percentage of people not showing up, the percentage of people buying concessions at
a particular price and the profit margin to be able to calculate the revenue generated from
concessions. This calculation will give us an estimate of the revenue generated from
concessions by each group. We get a total of $1,105,555 from concessions, ticket sales,
support from town and school, and sponsorship from local businesses. The fixed cost is
given as $1,051,879 so subtracting that from $1,105,555 gives a net profit of $53,676.
Hence, Buckingham would be able to break even given that the assumption that people
will attend is not violated.

Calculations Attached in the excel sheet

Group 12
Calculations.xlsx