Northwestern’s Purple Pricing experiment

Last week, Northwestern announced an interesting new ticketing plan that the school will be experimenting with for the Penn State and Ohio State home games in association with Kellogg. The Wildcats said in that press conference with the Cubs a few weeks ago that the university will try to remain a “step ahead” in its marketing and product.

Indeed, using some variable pricing is certainly an innovative way to approach ticket sales. It has been used sparingly at the pro level — I know the Orlando Magic tried it for a short time among others — and teams at every level are well known for having premium pricing for tickets against big opponents (check the price of your ticket the next time the Yankees or Red Sox come to town).

Northwestern jumped in on this experiment to help Kellogg in a study of pricing and motivation as Northwestern economics professor Jeff Ely explained to Kevin Trahan of InsideNU:

We had the initial idea to do something related to pricing. Research was our initial motivation. It’s nice to have on campus and athletic department, which for kind of selfish research reasons, we can think of as a laboratory for the study we wanted to do. But of course we also saw that it would benefit them. That kind of synergy is what makes things happen; it probably wouldn’t have happened otherwise.

 

This will turn into an interesting experiment. Particularly now that Northwestern is struggling.

Here are the parameters of the offer:

The price for the Ohio State game on Feb. 28 and the Penn State game on March 7 (the final two home games of the year) will not have a set price. The price would be set at a certain amount at the beginning when this whole thing is announced. Then the price may decrease according to demand as the date of the game approaches. Anyone who had bought a ticket at a price that was later reduced would be refunded the difference of the final price offered for the game.

So, for instance, if the price for a 200-level ticket started at $25 and it was later reduced to $20, you would be refunded the $5 difference.

It is an interesting idea for those looking to buy single-game tickets (unfortunately this pricing plan is not being applied to those who bought full-season tickets). And the experiment is somewhat of a gamble on Northwestern’s part to undertake because it is putting a preference on filling seats rather than generating higher ticket sales. The theory, I guess, is there are power in numbers (I only got a B in Professor Witte’s macroeconomics class, so I am no economist).

That is quite clearly the experiment that Kellogg and Northwestern’s economics department are studying in implementing this pricing plan. Whether a sports team such as Northwestern can be profitable when letting prices, within certain parameters, be at the whims of the market.

This, of course, will not be a true market in the strictest economic terms. Northwestern has set floors for ticket prices to ensure there is at least a baseline sale price. And the market likely would have crashed after Jared Swopshire’s injury and Northwestern’s latest performance. Really, it seems this is targeted at getting higher ticket prices from opposing fans invading Northwestern’s stadium. When Michigan and Illinois come to town and sell out Welsh-Ryan, they might be paying a bit more to attend a game.

As Trahan notes in his really good story on the new pricing plan (linked again here), part of the reason Northwestern is really trying to do this to combat the secondary ticket market, like StubHub.

A typical seat in the 200 section for Northwestern basketball games cost $35. The Wildcats initially set the price for the Ohio State game at $70. Within four days, the price fell to $52. And, now, a week later, a ticket to next Thursday’s game will cost you $39.25. Northwestern’s injuries certainly account for the dramatic price decreaes and the loss of interest in the game. That is what happens when you leave pricing up tot he market and are trying to sell the game out with a pricing plan like this.

If you go onto a secondary ticket market like TiqIQ — which lists tickets from several secondary market ticket sites — a 200-level seat will cost you anywhere from $20-$258 for the Ohio State game. It seems like, then, Northwestern’s purple pricing is helping the Wildcats offer the best price on the market on average. And that is certainly the program’s purpose.

There is still about a week to go and so things could change. It will be interesting to see what the results are after the season is over.

  • http://www.northwesternmix.com/ NUMBSpiritLeader

    Interesting… I’m curious about other “experiments” that Kellogg could run.

    • cece

      yes, for the love of God, just get them to do things to help boost the crowd size, especially at football. practical things, please NU folks!!!!!!

  • http://twitter.com/krinz13 Kevin Rinz

    In econospeak, this experiment is about tracing out approximate demand curves for tickets to these games. Pretty cool. It would also be cool to compare Stubhub data for these games to data for similar games for which tickets were sold in the typical, fixed-price way.

  • Alum Dad

    At this point almost any admission price to watch this season’s debacle is too much. Let’s put a better team on the floor. People will pay more for a better product. Next, improve the facility. The majority of the seats in Welsh Ryan are crap. I’m not sure what the rest of the B1G facilities are like but I played at nicer facilities in high school. All seats available on a single game basis are on bleacher type seats. That way you get to squeeze 25 butts onto a piece of wood that should hold 20. What about some individual seats, with cup holders? What about a real scoreboard? What about some decent concessions? Under the experimental pricing approach the fans only benefit when the product stinks.

    • PB Cat

      Alum, I agree with everything in your post, but while you and I and the others agree about sitting on benches, I really feel the sight lines on the vast majority of the seats is very good.
      One thing I question is the $35 price in the 200 section. I sit in the purple 204 section near the top, in season tickets, and my price per seat is more like $22 or $25 per seat. I don’t have the actual price with me because I’m in Florida in February and March, and sold the tickets to friends at home.
      I understand the theory on the pricing but I question whether your initial cost is that high.

  • CEBPD

    Here’s how you boost crowd size…

    WIN GAMES.