Management science researcher and MBA professor studies whether, how and when variable pricing strategies can increase ticket sales for the NFL games
As the year winds down with just days before Thanksgiving, families are making plans to gather, and many of those plans include watching non-stop hours of football. With football in mind, Moore School management science associate professor Necati Tereyagoglu and his colleagues have done intricate research on NFL data to see if lower ticket prices for less desirable games and higher prices for more desirable games — as opposed to charging the same price for all games —could boost overall team ticket sales.
Performing in-depth research on large volumes of data related to organizations’ change in pricing strategies, such as some NFL teams’ switching to variable pricing strategies after 2014, inform Tereyagoglu’s curriculum and lectures for the courses he teaches like the revenue management course for the Full-Time MBA program. In the revenue management course, one-year MBA and International MBA candidates learn quantitative and qualitative skills to identify revenue opportunities in different business contexts. In Tereyagoglu’s course, MBA and IMBA candidates learn comprehensive business analytics tools like R statistical software and intricate Excel spreadsheet modeling.
“Revenue management is a powerful discipline that enables companies to understand the complexities of today’s diverse marketplace and allows managers to make rapid and confident decisions in the face of uncertainty,” Tereyagoglu said. “It is the science of selling the right product or service to the right customer at the right time for the right price. In this era of growing supply-chain problems, it is critical for managers to identify the right price based on analytics- and data-driven solutions. The course is designed to show the Full-Time MBA students how capacity-based dynamic pricing decisions can allow both consumers and producers to maximize the value they capture from a transaction.”
Concentrating on business analytics-driven solutions, Tereyagoglu uses his NFL pricing study as an example for his Full-Time MBA students in the revenue management course. For Tereyagoglu’s research on NFL variable pricing, he and his co-authors looked at NFL season homegame ticket pricing and sales data and team-, game- and team-hometown related information from 10 different sources over the course of 2012 - 2015.
“Scoring a Touchdown with Variable Pricing: Evidence from a Quasi-Experiment in the NFL Ticket Markets” — Management Science journal, October 2022.
Why it matters:
- Varying prices to potentially bring in more revenue means that NFL teams could set prices based on the expected popularity of NFL games, recoup revenue lost to the resale market, provide value and transparency for season ticket holders and increase sales from tickets purchased directly from the NFL teams themselves. These objectives align with the league’s goals to improve revenue by increasing attendance overall, which has a direct impact on future television and sponsorship contracts and by preventing potential television blackouts.
- With the goal of increasing revenue and attendance for all NFL games, less popular games with teams who aren’t ranked or as popular allow the teams to decrease the price of those tickets to potentially sell more tickets overall.
- Tereyagoglu and his co-authors’ findings suggest that at least some people purchase tickets to sell later at a higher price, but the number of ticket listings on the resale market does not change for these games after variable pricing. Hence, variable pricing does not increase rates of scalping tickets versus tickets purchased directly from the teams.
- The researchers found that adoption of variable pricing by the NFL teams led to a 1.59 percent increase in ticket sales directly purchased from the teams. The effect is higher in team hometowns with lower income and higher income spreads. This finding supports the criticism that traditional fixed pricing strategies favor the customers with higher incomes. They also found that teams with a greater price differentiation across games attain higher ticket sales overall.
- Policymakers could encourage variable pricing for organizations to address issues like traditional fixed pricing strategies that favor customers with higher incomes; the research findings show variable pricing was most effective in team hometowns with lower income levels and greater variation in income levels.
- Tereyagoglu and his co-authors collected information on paid attendance numbers, customers’ resale market activities, an extensive set of team- and demographics-related information, seating maps, ticket prices, stadium-seat capacities, preseason and weekly Vegas odds for a team to win the Super Bowl, among others.
- The time period they studied ranged from 2012 - 2015.
- They used extensive data from 10 total sources:
- The NFL’s website
- The Internet Archive’s Wayback Machine search tool
- Team Marketing Report
- The U.S. Census Bureau
- The Brandeis University Heller School for Social Policy and Management’s DiversityData.org project
- Using data from the NFL and other related sources, the research included a deep analysis of the data sets to determine whether, how and when variable pricing strategies could boost ticket sales directly from the NFL teams.
About Necati Tereyagoglu:
- Tereyagoglu joined the Moore School in 2019 and is now an associate professor of management science as well as academic director of the Center for Applied Business Analytics.
- His research focuses on pricing and revenue management and marketplace analytics, with special emphases on consumer behavior, economic networks and resale markets. He has had the opportunity to work on pricing and revenue management problems in automotive, entertainment, luxury and packaged-food industries.
- Tereyagoglu teaches graduate and undergraduate courses in revenue management, supply chain management and business analytics.
- He earned his Bachelor's degree in Industrial Engineering from Bilkent University in Turkey and his Master's in Statistics and a Ph.D. in Operations and Information Management from the Wharton School of the University of Pennsylvania.
Tereyagoglu researched this NFL pricing topic with Hayri A. Arslan, Assistant Professor of Economics at the University of Texas at San Antonio, and Ovunc Yilmaz, Assistant Professor of Operations at the University of Colorado Boulder.