Sunderland Fans 2 image courtesy of © Ronnie Macdonald, Flickr 2011.
*This is the first installment in a two-part series on pricing in the Premier League. Tony Hodgson, Managing Director of Pricing Solutions UK, applies the principals of the 5Cs of Pricing to assess if ticket prices and costs associated with the game are justified.
Every October the BBC produces a report looking into the “Price of Football”, covering everything from season ticket prices to the cost of a halftime pie. This year’s report continued the recent trend of outraging fans, with a number of headline findings highlighting the discrepancies not only against inflation, but also other high-profile European football leagues.
“The average price of the cheapest season tickets
across English football has risen at almost
twice the rate of the cost of living since 2011.”
The report has been widely analysed and well reported elsewhere. For example, findings like fifth-tier Alfreton Town fans paying the same for a match day ticket as some of their Spanish counterparts do to watch former European Champions Barcelona, are understandably generating buzz. As pricing consultants – and football fans ourselves – we’d like to try and shed some light on why Premier League clubs have been able maintain these seemingly ever increasing prices, as well as how they may look to restructure this if they remain unsustainable.
Whilst the “Price of Football” report looks into football teams across the league pyramid, for the purposes this report we will mainly be referring to Premier League clubs.
When advising customers on how to price their products or services we often consider the five Cs of pricing: customer, conditions, cost, capacity and competition. We’ve used the same approach here to try and explore how football clubs are sustaining their pricing:
As the quote earlier highlighted, football ticket prices haven’t been affected by economic conditions and have been able to sustain a number of increases in recent years.
However, other outside factors may start to impact how football clubs look at pricing. Surveys such the BBC’s “Price of Football” are making the issue increasingly visible and scrutiny from fan groups and politicians has never been higher. A task force has even been set up by Sports Minister Helen Grant to address the issue, whilst the Labour party have talked about helping fans have a voice on club boards!
Conversely, financial fair-play rules have meant that clubs are only allowed to make certain losses each year, placing more importance on ticket prices as revenues are increasingly being affected by the next ‘C’…
These pricing principals allude to the fact that Premier league football clubs are in a strong position to maintain price increases. In fact, were they in another industry and offering a less emotive product, increases would likely even go unchallenged!But when it comes to football – to this industry – is the League about to reach a tipping point?
For customers purchasing tickets, whether they are match day or season tickets, typical pricing methods used by football clubs tend to be the same as we’d advocate in other industries.
Segmentation is the basic building block of good pricing as it recognises that customers value products and their attributes differently, and what drives willingness to pay. Football clubs currently use customer segmentation by offering various levels of seat quality and add on features and facilities – such as corporate boxes – to determine differing price brackets.
With such a strong correlation between wages and league position, and the promised land of championships or more lucrative television revenue and sponsorships constantly beckoning, clubs look to recruit ever more expensive players.
In addition to this – as with ticket prices – wages and agent fees have undergone rampant inflation in recent years, eating into revenues and causing ticket prices to become the focus of increases.
When challenged on raising prices, many Premier League clubs state that their full stadia mean they must have got it right. Many are running at over 95% capacity. In any industry where capacity is scare, suppliers are in a good position to raise prices.
The old adage is that you can change your job, your partner or even your religion, but you can’t change your football team. Therefore it’s commonly thought that fans are not price sensitive and will forego other luxuries rather than miss attending a game. This gives clubs a sense of security that allows them to increase prices with confidence.
Article written by Tony Hodgson, Managing Director, Pricing Solutions UK. Tony is headquartered in Pricing Solutions’ London Office. Pricing Solutions is an international pricing strategy consultancy dedicated to helping clients achieve world class pricing competency.