Most marketing courses will identify the 4 P’s of marketing: Product, Price, Place, and Promotions. Most marketing professors will tell you that the effective utilization of these P’s is critical to the success of any business.
While the secondary market is certainly unique, the importance of these marketing aspects is no less important. For example, the importance of the “Product” component is evidenced by the increased competition for high-demand tickets. However, given the immense size of the secondary market, differentiating your product from your competitors’ may be challenging as there is likely another similar ticket available.
The “Price” component is likely the most important “P” in the secondary market as effective price-setting strategies can enhance profitability without incurring significant expenses. Further, a reseller’s asking price represents the primary way that most resellers can differentiate their product from their competitors. While this often involves lowering prices, this does not always have to be the case. Indeed, a detailed understanding of the market may illuminate specific trends that actually allow for an increase in price.
Ultimately, the bottom line of any ticket resale business is to buy low and sell high. While experienced resellers may be able to grasp a “feel” for the market, those wanting further information before determining which tickets to buy and which tickets to sell (and at what price) must do their research.
Pricing strategies can be simplified to cost-based (pricing in order to offset or slightly exceed all or a portion of organizational costs) or demand-based (pricing based on what the market will bear). Recent research has indicated that brokers are primarily using demand-based strategies. Therefore, research is needed to determine what prices the market will bear. For example, the authors of this article recently conducted research on NFL playoff tickets.
Our study examined the factors that influenced fans’ perceived value for NFL playoff games during the 2007-2008 season using sell prices on eBay. A variety of factors commonly used to price tickets in both the primary and secondary markets were considered. Based on data from over 1,700 ticket transactions, a model was developed to understand the factors that affect the variability in NFL playoff ticket prices. Results indicated higher prices in the secondary market were associated with team performance, day of the game (Saturday or Sunday), face value, population and income of the home city, number of days before the event that the ticket was sold, along with several other measured factors. These variables can and should be examined regularly and each market must be examined individually for accuracy.
So what do you need to conduct your own research? Quality research depends on quality data. Without large datasets, reaching conclusions on the market demand for tickets is no less subjective than using one’s intuition. Fortunately, there is no shortage of data available. First, every reseller should be tracking the details of each transaction they make. This includes information on final sale price, purchase price, day of the week, month of the year, number of days before the event, location, team performance, star players, and any other factors which may alter the demand… even weather forecasts.
For resellers that transact large numbers of tickets, this set of data may be large enough to draw significant conclusions about the demand conditions for specific events. Some resellers may even find it advantageous to share data with a trusted colleague in order to further enhance the value of the research. Other sources of data exist as well. As our study indicates, tracking transactions on eBay provided rich data which allowed us to illuminate specific demand trends. With a rapidly-growing list of online ticket resale websites, access to data has never been easier.
Once the large dataset is in place, the challenge then becomes making sense of all those numbers. Fortunately, there are several programs that allow you to track data as well as analyze it with relative ease. Several companies have even created specific ticket-tracking software. However, most spreadsheet programs, such as Microsoft Excel, can provide similar results. Resellers who are uncomfortable crunching their own numbers can easily hire a research firm to help them analyze the data. Further, many researchers work for colleges and universities and are often willing to help practitioners conduct useful research.
In many ways, the differing philosophies over price-setting represent a similar debate to the one explained in the book, “Moneyball.” In this book, the General Manager wanted to use a predominantly statistical approach to evaluating baseball players because a scout’s perception can be influenced by other factors while the numbers cannot. On the other hand, the scouts had watched thousands of games involving thousands of players and felt that this experience gave them insight into the true value of a player that statistics alone couldn’t provide.
Consider a reseller that sells ten tickets every day. Now imagine that individual undervaluing each ticket by a mere $1. Small miscalculations such as this can add up to large differences in the bottom line. In an industry with increasing competition and sophistication and decreased emphasis on interpersonal relationships (as a result of the dominance of the online segment of ticket resale), price-setting has become the single most critical component of the ticket resale business. As such, serious resellers should be using both their knowledge of the industry as well as the data provided by high-quality research to develop strategies for price optimization.
After four seasons with the Oakland Athletics, Joris Drayer completed his Ph.D. at University of Northern Colorado in 2007. Drayer’s dissertation examines the strategic interactions between the primary and secondary ticket markets in the NFL. Currently a professor at The University of Memphis, Drayer conducts research covering a variety of ticketing-related topic areas, including price determination, demand estimates in the secondary market, the development of competitive strategies, and consumer perceptions of price and value. Drayer also conducts research on consumer behavior, particularly in relation to fantasy sports participation. Drayer also teaches undergraduate and graduate courses in sport marketing and finance.
Dr. Stephen Shapiro is an assistant professor of sport management. His research interests include college athletic fundraising, ticket pricing in the primary and secondary market, and the relationship between attitudes and sport-related consumption. He has conducted research for multiple college athletic departments, the United States Olympic Committee (USOC), and individual National Governing Bodies, including USA Taekwondo, USA Softball, and the United States Bowling Congress. Dr. Shapiro teaches courses in sport finance and statistics. He is an alumnus of the University of Northern Colorado (Ph.D. in Sport Administration) and the University of Central Florida (M.S. in Management and B.A. in Advertising/Public Relations).