How does dynamic pricing affect the consistent consumer?
Consistent consumers are advocates and supporters of your product long term. They are the folks who you see in the rain during the Tuesday night games, those who show up even when the opponent or the home team are cellar dwellars in a battle of mediocrity.
So I’ve been thinking about how dynamic ticket pricing affects the consistent consumer. In sports business, the discussion tends to be on whether or not the price with shoot too high for the average customer, but what about the consistent one? That person that you can count on coming to your business regardless of what the weather, etc. Could dynamic pricing become a wedge issue with that consistent customer?
I get it, diehards may only make up 10-15 percent of an audience, but they do deserve our respect that we aren’t gouging them.
Let’s use it in another scenario:
Every day, you go to your favorite coffee stand. You enjoy coffee, but you don’t buy it from anywhere and you can’t really remember what got you started into habitually attending this coffee stand. But the atmosphere has grown on you, so have the small staff of workers who sell you a tall latte for $3.45 and its always made just the way you like it, without even asking. There aren’t a lot of people who attend this coffee stand, but that’s okay. You are one of their regular customers and you buy that tall latte each day to support an environment that you like.
Then, a newspaper reporter happens to have a tall latte at that coffee stand. They really like it too and decide to write a story about it. The newspaper editors make it a front page story. Suddenly, the local TV crew and some social media folks all jump onto the media buzz. The coffee stands’ business triples as everyone wants to be part of a winning product.
While you’re appreciative of the coffee stand getting the recognition that it deserves, now you have to stand in long lines behind a lot of new customer faces. And to handle that foot traffic, the coffee stand has hired more staff. Even though you’ve been a regular for a long time, you’re finding that sometimes the new staff members don’t know your name, or your order. And because the coffee stand is doing a lot more traffic, they’ve decided to go to dynamic pricing on their items.
Now, your tall latte is $5.45 which is a full $2 more than you ever paid for it previously.
So, the question must be asked: By raising the price of the highest demand games, aren’t you punishing those long-term, early adopters of your product?
This is an issue with dynamic pricing that hasn’t really come up before. It stands to reason that the wrong customers, the most loyal advocates of your brand, are being gouged because more fair weather fans have taken an interest afterward in your product. Great, the franchise has more money, but is there is a cost to your core consumer which must be considered?
The argument can be pushed toward converting more of those consistent customers to season passes – as with the coffee stand, which may have had a $20 pass for a coffee each day of a week. However, under the dynamic price structure, even the week pass would jump from $20 to $30. Even then, that still goes after those loyal customers who have bought the product first.
While an argument can be made about season tickets showing fan loyalty, those prices also rise due to dynamic pricing structures. So, if the team doesn’t do well, the price stays at a fair market rate for those buyers who support it long term. But, when the team ends up doing gang-busters in the standings and is the talk of the town, creating hot demand for the ticket, the fair weather fans end up driving up the price on the team’s consistent customers.
In the world of sports, the word “branding” gets thrown around a lot.
Could a dynamically priced team be “branding” itself as a place to stay away from when the team is down, simply because if you enjoy and support the team consistently, you’ll be shut out or have to pay additional taxes on the same games once the team has improved in the standings?
It’s something to consider.