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Update: With MLB underway, dynamic pricing gains interest
Dynamic pricing, or pricing according to market demand, has long been used in the hotel and airline industries. However, the move to sports ticketing, a likely candidate due to the many variables affecting ticket demand, has been slow.
Launched in 2007, Qcue was the first company to provide a dynamic pricing algorithm to be applied to ticket pricing. Its model can be customized for a variety of entities, including promoters and venues, but its work with sports teams has gained the company its trailblazing reputation.
Grabbing the first team ever to contract for a dynamic model in 2009, the San Francisco Giants, Qcue now has over 30 clients on its roster, including the Utah Jazz, the NHL's Nashville Predators and NASCAR.
In February of 2011, Qcue's Director of Pricing and Operations, Dan Meehan, discussed with TicketNews why dynamic pricing is taking off now. "We've put the technology in place that makes it a lot easier to change the pricing on thousands of tickets at once. That's really the first step."
Also, with increasing numbers of MLB teams signing on, the dynamic pricing model has found a perfect match. "There's bigger stadiums than almost any other sport," Meehan said in the same interview. "There's a bigger percentage of seats not held by season ticket holders. Then there's all kinds of factors that go into determining price. The weather, the day of the week, who the opponent is, the starting pitcher."
And it is turning out to be better suited than any previous model, including dynamic pricing's predecessor, variable pricing. A term often confused with dynamic pricing, variable pricing in sports traditionally entails ticket price changes contingent on one or two variables, such as opposing team or day of the week, and often set months in advance.
In contrast, dynamic pricing simultaneously takes into account numerous variables — dynamic pricer Digonex boasts a 40 variable algorithm, according to a recent ESPN report — and prices adjust accordingly.
In essence, dynamic pricing helps teams to fill seats and fans to find bargains.
Steve Fanelli, Executive Director of Ticket Sales and Operations for the Oakland Athletics, recently told Forbes Magazine how the move from variable to dynamic pricing has led to more sold-out games: "We…saw that fans were buying tickets earlier in the cycle, and therefore, we were getting spillover from our sold out events into other games. In 2010, we did not sell out a single game in advance of day of event…in 2011, this happened four times."
The dynamic model does present a unique problem for the dynamic pricer, namely how not to anger season ticket holders who see prices dropping rapidly on single-game seats.
To address this problem, teams have held season ticket prices low, providing a floor below which no dynamically priced ticket may fall.
With all this new growth in the world of dynamic pricing, where is the practice headed? In a recent conversation with TicketNews, Qcue's CEO and Founder Barry Kahn shared his perspective on the status of dynamic pricing today.
"Dynamic pricing in sports is rapidly becoming commonplace," said Kahn, "and I think you'll start seeing the term 'dynamic' getting dropped as this just becomes how sports tickets are priced.
"Market traction is growing at a very fast pace."
Kahn is also finding significant changes in acceptance of the model. "The doors are definitely opening much quicker these days. We're growing faster than any of our competitors largely because of the client successes that we can share."
But Kahn sees different problems ahead related to the variable/dynamic term confusion. "Today the primary resistance is in how the term 'dynamic pricing' has come to be known within the industry," says Kahn."Some teams are using the terminology to describe minor price changes or changes to a variable pricing structure.”
"Those teams don't necessarily need tools to do this and may opt to make changes manually, but it is our experience that this approach does not drive nearly the same revenue benefits as true dynamic pricing."
Wherever the model is headed, Kahn sees his company as having a significant impact on the future of dynamic pricing.
"Qcue has redefined the sports ticketing landscape and has been at the heart of an increase in analytics that is now encompassing the space. I think the biggest change is that we now have a seat at the table for conversations regarding all types of ticketing innovation."
Once a seemingly exotic alternative to pricing, the dynamic model now appears to be the future of sports ticketing.