The fourth marketing P, pricing, strikes again at the ballpark. The Los Angeles Dodgers, according to a recent WSJ article, are trying a different tack in selling the worst seats in the stadium–giving away free food. Tickets in the boonies that once cost $6-8 dollars now sell for $40 or more, however the seats come with all you can eat hot dogs, nachos, and sodas.
The WSJ article, Free Eats Sell Bad Ballpark Seats, May 16, 2007, mentions how the Dodgers have struggled to seats in the right field pavilion, but seem to have solved the problem by offering all you can eat food as part of the ticket price. The gamble seems to be working as seats in the pavilion have sold out for eight of the first 18 games.
I'm not sure if the Dodgers are using analytics to price these seats or pulling prices out of the air, however, the economics of this deal appear to make sense.
Like an unsold airline seat for a plane that has just taken off, an unsold seat at a ballgame is unused and perishable capacity. I'm not exactly sure what hotdogs, chips and sodas cost, but hotdogs are probably under a dollar, chips are pennies and margins are huge in fountain drinks (sodas). The article mentions, "(The Dodgers) expect their new venture to make money at some point; even if it doesn't, though, the pavilion fans are spending on parking, merchandise and even additional food and drinks."
I've been to Dodger Stadium and while I've never sat in the right field pavilion, this seems like a pretty good deal. A Dodger fan can have a big dinner (if you can call it that) and enjoy a competitive major league baseball game for a reasonable price. Plus, with the Dodgers playing in the National league, there's always a chance a fan might catch Barry Bonds' next homerun ball!
The real effect of this marketing experiment is using the power of pricing to reach out to different customer segments. This deal won't appeal to everyone. For example there are some Dodger fans that want the best seat in the house–no matter how many free hot dogs are served. Others are more price conscious and are looking for the best possible "deal"–which could be these specially priced seats. In fact, in lieu of this special pricing, some Dodger fans might not have considered attending a Dodgers game this year!
In a previous post I noted that the Dodgers are already on the cutting edge of pricing since they are now pricing seats in the ballpark based on seasonal demand, proximity to home plate, who the Dodgers are playing etc. Rafi Mohammed, in his book, "The Art of Pricing" calls this pricing strategy the "multi-pricing mindset." He says, "Some customers will value your product more than others will. The right way to think about pricing is as a series of strategies that serve and capture different profit margins from customers with different product valuations."
Pricing seats in the less desirable right field pavilion (with all you can eat hot dogs) is an example of the Dodgers attempting to maximize their profits through the power of pricing. But will this marketing experiment actually help drive profits? Only time will tell, however, this strategy is causing other pro sports teams to take notice.
According to the article, "Dodgers executives say a handful of other teams across pro sports have already contacted them about copying the concept, including the Philadelphia-based owners of the National Basketball Association's 76ers and the National Hockey League's Flyers."
For now, even though I am two hours away from Dodger stadium, I'll have to pass on this deal. My daily caloric intake limit would be blown wide open if I stationed myself in the Dodgers right field bleachers.
However, when they institute all you can drink beer–I'm in.
Questions: What are you doing to examine and then price unused capacity in your business or enterprise? Are you pricing, like the Dodgers, based on what customers are willing to pay? Are there hidden profits that can be unearthed in your business through the power of pricing?
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