The Springfield Nor’easters:

Maximizing revenue at Minor

League
Harvard Business School Case

Prem P Dewani, Fellow (IIM A), Marketing Professor, IIM Lucknow

premd@iiml.ac.in, 9935996244
Price Discriminations
Second Degree Price Discrimination

https://www.youtube.com/watch?v=h73HeC-2SbQ

First Degree Price Discrimination

https://www.youtube.com/watch?v=1kSk1Hu3TVM

Third Degree Price Discrimination

https://www.youtube.com/watch?v=81xgZrImmCc

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 Price Discriminations
Reference Price

Perceived Price Fairness and Probability of exchange to happen (willingness to buy)

Demand Forecasts

Breakeven Analysis

New Service/New Product Pricing

Designing Surveys

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Reference Price (Price of the next best alternative, Competitors Price)

Price of Test Match Ticket (1500) (Functional)

Price of an ODI (2000) (mixed)
Price of IPL (5000)(hedonic)

College league 5 to 6 $
Minor Leagues (4 $ to 14 $)
Major League 12 to 325
Value of the Offerings
Cost …….Not
Competitor (other entertainment)

Viewers / consumers (12 to 35 years old boys/Men: 85 percent)

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 What are
Nor’easters?
Who is
Larry Buckingham? 5
 Who are the Players?
Larry Buckingham
o Marketing Director for Nor’easters
Jimmy Mercante
o Owner of the Nor’easters
Bob Cortez
o President and GM
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What is the present
situation?
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 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

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 Situation Analysis (2/3)

Entertainment Industry: Sports

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Stadium (3/3)

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Why study this
case?
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 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.

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 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)

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Objectives of the Case (3/3)

Understand the relationship between

pricing and its impact on the sales of
auxiliary products.

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 We will focus on
THREE inter-related
issues
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 Three Issues
1
Evaluate the research surveys
undertaken by the League Sports Association and by
Larry Buckingham:

customer profile?
pricing?
single versus season tickets
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 Three Issues
2

optimal pricing policy?

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 Three Issues
3 Can Nor’easters

breakeven?
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 Three Issues
1
Evaluate the research surveys
undertaken by the League Sports Association and by
Larry Buckingham:

customer profile?
pricing?
single versus season tickets
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Insights from the
League Sports
Association
survey?
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 Attendance / Exposure (1/3)
A. Total Percent Exposed During Past Year by Education

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

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 Income-level of Audiences (2/3)
B. Income Composition 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%

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Education-level of Audiences (3/3)
C. Educational Composition 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 Association.

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 But..

These insights were 3 years old,

anecdotal, limited
‘I want to be able to tailor the team’s offerings based on
knowledge of the local market’

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Insights from
Telephone
Interviews?
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Telephone Interviews (1/3)
Larry Buckingham conducted
Telephone interviews of six
minor league baseball team Marketing
Directors across USA

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Insights from Interviews (2/3)
Price Seats on par with the competition –
movies, bowling, other sporting events

Season ticket versus Individual ticket

buying
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Insights from Interviews (3/3)
Promote group ticket sales to Little League
teams, summer camps, promote family
days out

Concession Sales are crucial

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 Online Survey by
Larry Buckingham?
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Design Objectives? (1/5)

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 Design Objectives (1/5)
Maximum Information Yield for Decision-
Making

Clarity in questions asked

Ease of data analysis

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 Questions on (2/5)

oPrice Sensitivity
oSports attendance patterns

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 Process.. (3/5)

How was the survey

conducted?
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 Process.. (3/5)
Mail 10000 postcards

Fill Online / Telephone Survey

Chance to Win $500 restaurant gift

certificate
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Budget; Response Rates (4/5)

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Budget; Response Rates (4/5)

o $3,800 budget
o 10000 postcards
o 625 responses

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 Budget; Response Rates (4/5)
     
List Cost, per Net
List Source Mail Qty. thousand Undeliverable Response
names

         
Springfield residents, census tract 5,000 $90 250 5.2%
Minor league hockey team, individual,
and season ticket buyers 2,871 $125 97 6.1%
         
College football individual and 1,380 $125 41 7.6%
season ticket buyers
         
Parents of little league baseball players, 441 $130 20 17.3%
2007-08 season
         
Parents of girls softball players, 2007- 308 $130 12 11.4%
08 season
       
Total 10,000   420  

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Pretesting (5/5)

?
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 Pretesting (5/5)

o Pretested 3 times on friends, relatives,

business associates

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 Insights from the
Online Survey by
Larry Buckingham?
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 Purchase Likelihood (1/4)
Exhibit 5: Survey Questionnaire and Response Distributions
 

Question Response
 
Yes No Not sure
1. Do you consider yourself a baseball fan? 38% 60% 2%
 
2. In the past year, have you attended a professional baseball game? 28% 72% 0%
 

 
3. During the past two or three years, how often have you Never 1-2 times 3-4 times 5 or more times Not sure
attended a major-league game? 76% 20% 1% 3% 0%
4. During the past two or three years, how often have you
attended a minor-league game? 83% 14% 1% 2% 0%
5. During the past two or three years, how often have you
attended a college game? 79% 17% 2% 2% 0%

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 Purchase Likelihood (1/4)
Yes No

6. Have you ever purchased a season ticket for a sporting event? 23% 77%

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

Not attend at all 61%

Probably attend 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%

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Willingness to Pay (2/4)

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Concession Sales (3/4)

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Demographics (4/4)

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 Demographics (4/4)

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 Three Issues
2

optimal pricing policy?

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How much money is
needed from ticket
sales and
concessions to
cover fixed costs?
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Annual operating expenses (Exhibit 1)
Fixed expenses
Players' salaries $887,000a
Bats and balls $22,500a
Uniforms $8,000
League dues $175,000
Staff salaries $124,000
Office expenses $110,000
Team travel $455,000
Market research & mailing lists $4,879
Advertising, sales, and marketing $175,000

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Exhibit 1, Pg. 8

Case, Pg. 3

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 Fixed Costs

Need to recover
$1,005,879
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 Determining the
optimal pricing
strategy from
willingness-to-pay?
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Pricing (1/7)

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 WTP (2/7)

o 31% are WTP $10

o 49% are WTP more than $10
(Exhibit 5, Que 8)

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WTP by Price & Ticket Type (3/7)

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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
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Cumulative Willingness to Pay (5/7)

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Expected Ticket Revenue (6/7)

This is the potential ticket revenue per

game for each ticket type/price pair.
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Optimal Pricing Schedule (7/7)

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 Three Issues
3 Will Nor’easters

breakeven?
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Revenue from
Tickets?
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 Consumers (1/4)
Exhibit 5, Que 7

Springfield’s
population =
55,338
(Case, p. 2)

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Number of Tickets Sold (2/4)
From
Cumulative WTP

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Cumulative Willingness to Pay (3/4)

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 Ticket Revenue (4/4)

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 Ticket Revenue (4/4)

What is the total capacity of

the stadium?
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Revenue from
Concessions?
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 Concession Revenue Per Seat (1/3)

$0.00*8% + $2.50*11% + $8*45% + $13*36%

= $8.56
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Revenue From Concessions (2/3)
Case, p.6 $8.56/seat

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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?

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 Breakeven Analysis

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 Take Away From Case
o Can we generalize the insights?

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