Business Analytics: Michigan Gets Dynamic
A few weeks ago, the University of Michigan announced their new pricing strategies for this upcoming football season. They are one of the first “high-profile” universities to implement a dynamic pricing system. This means single-game tickets will be priced on their current market values. Thus, the amount of money you spend on a ticket is dependent upon when you buy it and the amount of tickets remaining in relation to demand. Simply put, if you’re thinking about purchasing a Notre Dame or Ohio State ticket, you better do so now.
Dynamic pricing has become more prominent in the professional leagues over the past 3 or 4 years. First implemented in the hotel and airline industries, dynamic pricing was adopted by professional teams in response to the secondary market, which has profited mightily against the traditional pricing systems. Major League Baseball was the first league to utilize dynamic pricing strategies. With 162 games in a regular season, teams needed a better system for increasing ticket revenues, particularly for the low-demand games. Dynamic pricing has proven to be successful, which is critical considering the current state of baseball.
A similar secondary market is present among other leagues as well. With dozens of regular-season games, the National Basketball Association and National Hockey League have also responded to the need for an effective pricing system. Due to the low amount of games and obvious market dominance, the NFL and college football haven’t shifted towards dynamic pricing just yet. However, a gradual shift towards better pricing strategies seems likely for both of these leagues.
The results from Michigan’s dynamic pricing may very well cause a domino effect in college football. According to one Forbes writer, “Michigan is likely to generate close to $5 million of additional ticketing revenue as a result of their move to dynamic pricing.” In addition to Michigan, California, Georgetown (basketball), Washington, and South Florida have also begun implementing dynamic pricing models. If they see similar success, the demand for ticketing companies like QCUE and Digonex will skyrocket among universities.
It's often said that professional sports are about ten years behind traditional businesses (and collegiate sports are five years behind professional sports) with regards to their business strategies. If this holds true, dynamic pricing will soon finally be commonplace in college athletics.
Mark Simmons is the blog's featured columnist on business analytics.