Devilish Variable Pricing Schemes

Variable pricing – charging different prices for the same seat depending on different variables of the particular game (opponent, date and starting time, etc.) – has come to New Jersey. The NJ Devils recently announced a three-tier pricing structure that will charge higher than normal prices for the more popular games and lower than normal prices for some of the less popular games. It’s a trend that you will see more and more in all the major professional sports as teams get more savvy as to the prices that fans will pay to attend games.

What’s interesting about the Devil’s move to variable pricing is that they are basing some of the price changes on data recovered from the secondary market–including StubHub.com and the team’s own ticket exchange. Very sophisticated information compared to what they could have extracted even five years earlier.

While the Devils may be one of the first in the NHL to change to variable pricing, they remain way behind some of the more sophisticated professional teams in terms of pricing innovation. The San Francisco Giants, for one, have gone beyond variable pricing and currently utilize an algorithmic-based pricing model – dynamic pricing – where the face value of every ticket rises or falls based on demand. Because of the myriad variables involved (opponent, day and time of game, pitching match up, etc.), the price of some seats have gone up (and down) over 200% for particular games.

For those who long for traditional pricing – same price for the same seat no matter who the opponent – you’re not going to like the trend to variable and even dynamic pricing. And if you’re frustrated by the way airlines have totally complicated their variable pricing model, just wait for professional sports to follow.

Here’s the takeaway: As professional sports teams look to find new ways to increase revenue, adopting variable pricing will be be at the top of their list. Let’s just hope they don’t screw it up any more than the airlines have.

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Patrick Lefler is the founder of The Spruance Group – a management consultancy that helps growing companies grow faster. He is a former Marine Corps officer; a graduate of both Annapolis and The Wharton School, and has over twenty years of industry expertise.