Football is back! Kind of. Okay so football isn’t really back per se, but the NFL preseason did begin in August. NFL teams each play four “preseason” games and give their respective second and third string players a shot at proving themselves. Teams that play very well accordingly stoke their fans’ hopes for a Super Bowl appearance in the upcoming year. Other teams, like the Chicago Bears, manage to play astoundingly mediocre football and leave fans across the country screaming, “Come on! Even I could catch that!”
Recently, some NFL owners have even taken to social media to apologize for early lackluster performances. Although President and CEO of the Indianapolis Colts, Jim Irsay, recently apologized via Twitter for his team’s crap performance and total shellacking by the Buffalo Bills, he is not ready to apologize for another facet of the Indianapolis Colts experience: ticket prices. In fact, Jim Irsay has become a bit of a polemicist for the current pricing of Colts season tickets. In another barrage of tweets Irsay made an effort to justify his position:
The Debate is Centered on Value Perception
The Indianapolis Colts owner’s comments seemingly blew up the Twittersphere and launched a debate around a central question: Is it unfair that a season ticket package forces fans to purchase two preseason tickets that are pegged at the same price of a regular season game? Some Colts fans argue that preseason games shouldn’t be priced the same as regular season games, since NFL stars (or even starters for that matter) play relatively little in the preseason. NFL owners, like Jim Irsay, are of the opinion that the consistent price of season tickets actually generates tremendous value since certain games in the regular season are actually worth far more than the price printed on the ticket.
Given that Irsay’s argument and the surrounding controversy all boil down to a debate over value (or the lack thereof), we thought we should weigh in since we are huge proponents of value-based pricing. Essentially, the debacle surrounding the price of NFL preseason tickets presents three important pricing and packaging lessons:
1. Value is Relative
To the chagrin of disgruntled Colts fans, Irsay actually makes a valid point about value and pricing. Irsay and other NFL owners know that fans who purchase season tickets are hardcore football junkies. They need their Sunday fix, and being forced to pay for two additional preseason home games generally won’t deter them from buying. However, the price of a premium season ticket package at Lucas Oil Stadium is a whopping $1260 (club seats are even more). For some Colts fans, $1260 is far too much to spend on a season ticket, but that’s why the organization also offers a season ticket package in a less desirable area of the stadium for $400. By further segmenting potential season ticket holders into two subsets, the Colts are able to price seats of varying quality at appealing rates for both types of hardcore fans.
The bottom line: The Colts front office uses a segment-based pricing approach to expand its offerings and capture the maximum amount each type of fan is willing to pay, but it couldn’t do this without putting in the time to identify and understand potential ticket holders. The customer base is broken down into two broad personas (season ticket holders and those who purchase single game tickets), but the devoted fans who buy season tickets are segmented even further. Your business might have multiple customer types as well, and identifying the value each persona places on your product or service is crucial to ensuring your pricing is on target and designed to maximize revenue.
Photo Credit: hyku
2. Bundling Allows You to Capture More Revenue
When I think of price bundling as a tool to maximize revenue, I am always reminded of my cell phone carrier. When my wife and I signed up for a plan, our biggest concern was going over the data limit every month, so we purchased a family plan that allowed us to share data. Uniting our phone services in this way costs a little more upfront, but the extra money we pay is worth it for the peace of mind in knowing it’s nearly impossible for us to go over the 1 GB limit.
Indianapolis Colts season ticket holders similarly want the ability to access any home game they like (including the most popular games at a consistent price) and are willing to pay for a ticket bundle that includes a few features (preseason games) they don’t necessarily care about. Jim Irsay nailed it by saying, “The 10 home game tics have varying value.” Packaging the tickets together in a bundle gives the Colts the opportunity to stabilize their perceived price point and maximize revenue in the long run.
The bottom line: Whether you’re selling software, cell phones, or football tickets, consider how you might bundle your most popular features together in a package your customers will want to buy. The “packaging” component of your company’s pricing strategy is critical since categorizing your features in different ways enables you to appeal to different customer segments. The products or services you offer might be enticing individually, but packaged together (correctly), you could have a profitable product that is just too good to pass up.
3. Don't Make Add-ons a Barrier, Make Them a Bonus
The NFL is currently exploring changes to the four-game preseason in an effort to improve the experience, but fans who purchase season ticket packages still view the required preseason games as a frustrating barrier to what they really want - eight regular season, home game tickets. The Colts’ most loyal customers (season ticket holders) have shown they truly loathe the current season ticket pricing scheme, and the organization might consider offering two types of season ticket packages in order to squash the beef: one regular season package (eight games) and one package with preseason tickets included (ten games). This would appease the fans that find little value in the exhibition games. Conversely, rewarding season ticket holders who purchase the extra games by discounting preseason tickets slightly might persuade loyal fans the tickets are more of a bonus than an obstruction.
The bottom line: Don't let your pricing be constraining or constricting. Sometimes a great pricing strategy can be derailed by a vocal customer segment that doesn’t neatly fit into an existing pricing option. Complaints about your pricing structure shouldn't be disregarded as they present opportunities for your business to creatively adjust your pricing to turn disgruntled prospects into delighted customers. Explore expanding your pricing tiers to deliver actual value to different types of customers. Because a product that isn't valued, isn't going to be purchased.