From 1995 to 2001, the Cleveland Indians were one of the hottest teams in baseball: Six playoffs reached in seven years (the seventh missed by only one game) and two World Series appearances (both of them lost, with one of the losses coming despite leading after eight innings in game 7). From June 7, 1995 to April 4, 2001, they sold out 455 consecutive home games, a clear record at the time. An impressive team with impressive players like Manny Ramirez, Albert Belle, Kenny Lofton, Omar Vizquel, Jim Thome, Orel Hershiser, Charles Nagy or the Alomar brothers, Roberto and Sandy, Jr.
Barely ten years later, things have changed significantly. Not only is the ballpark no longer called “Jacobs Field” but “Progressive Field” instead, also a lot of the seats are not used when the Tribe swings the bat: The stadium with a capacity of 45,199 has not even been sold out once this season, except for the opening game the attendance never reached 30,000 and eight of the 49 home games this season had less than 11,000 people watching it live at the ballpark.
It’s not unusual for US pro sports teams to have some very strong phases followed by some phases of rebuilding (more on rebuilding in my previous blog entry “What your HR can learn from NFL teams (except for Detroit)”). Still, the development in Cleveland over the last nine years is quite extreme. That’s maybe one of the reasons why the Indians developed a very special offer: If you want to attend the game against the White Sox on September 1 at 12:05 p.m., you can do so for just $15 which includes a $10 voucher for use at the stadium, e.g. for buying food, drinks or merchandising articles. So basically you get in for five Dollars if we assume that you would buy some drinks and a hot dog anyway.
The offer is called “Lunch and 3 Innings” and will be presented for the sixth time this year. The Indians promote it like this on the website: “Catch lunch and the game on your break (…) Plus – take a longer lunch and enjoy the whole game! Your ticket is good for the whole game, so you don’t have to leave after your lunch break ends”.
When I first read about it, I instantly liked the creativity of the approach but then started to wonder whether or not this is a good marketing idea. While thinking about it I found that there are a lot of marketing basics that can be shown or even explained using this example.
First, this special pricing or rebate obviously aims at bringing people into the stadium that would not have come otherwise. In a more theoretical view, a purchasing decision always compares the value perceived to the price you have to pay to receive that value. So the target group may be those people that are interested in baseball and the Indians, but not interested enough to pay 50 bucks to see them take on the White Sox. Sounds like a good idea, but why use a rebate to bring them in?
The basic idea of a rebate is that it is only a temporary reduction of the price. It makes sense if you want to avoid people to feel that the low (rebated) price would be normal as that would make it tough to drive prices back up again without losing many customers.
At the same time the price also has an impact on the perceived value of a product (note: in my opinion it is a common misconception that the value of a product would be the decisive factor, as an “objective” value either does not exist or is tough to determine. When humans make their purchasing decision, they base them on their perception of what value a product has for them. In hard core theory there should not be a difference between these two (objective vs. perceived value), but hey, we don’t live in theory, do we?). Some luxury goods are even more demanded when prices are higher (“Giffen Goods”). If the Indians were cutting down prices permanently to five Dollars, people might perceive the value of watching an Indians game as very low (“they wouldn’t do this if they weren’t crap”).
But there more in this case study:
Obviously the Indians hope that they can bring in people that would not have come without the offer and in turn can fascinate them enough to come back. This idea is heavily backed by research and probably all of you have heard before that it is many times more complicated and expensive to activate a new customer compared to bringing back an existing one to making another purchase.
Then there’s the idea of critical mass. A game is also a social event. If it wasn’t, why shouldn’t you just watch it on TV? You interact with others in the stadium, you see them, they see you, you cheer or boo together and you feel part of the community. If there are only 10,000 spectators in a stadium build for more than four times as many, it is hard to get the feeling of community. Just imagine Facebook with only three users – that probably would not be very convincing. More users grow the number of potential connections between users in an exponential way (“Metcalfe’s Law”). You need a critical mass to be attractive; bringing in more people into the ballpark may help to reach that critical mass. And wouldn’t it feel better to tell your peers that you were at a sold-out ballpark instead of at an empty one?
So all this makes the “Lunch and 3 Innings” offer sound like a great idea. But there are also some downsides.
First you can’t make sure that only those spectators that would not have come without the offer make use of it. If your regular customers also buy the offer, you may simply end up with lower revenues from the same customers.
In order to make sure only very price sensitive customers make use of the offer, rebates are usually presented in a way that requires customers to go a little bit out of their way to receive the rebate. Ever wondered why you have to cut out those coupons manually from the newspaper? No, it’s not because they are not able to send them nicely pre-cut by post. For the “Lunch and 3 Innings” offer, you just book it on the Indians website like any other ticket. Too easy!
That brings me to my main criticism of “Lunch and 3 Innings”: The whole program reflects a very low self-esteem of the Indians organization. It seems as if they would not believe in the quality and value of their product any more.
A baseball game consists of nine innings (or sometimes more). By promoting that watching just three innings would be fine, you demonstrate that it does not matter who wins as long as there’s food available. I don’t see any attempt to create identification with the product “Indians baseball”.
How about adding another five or ten Dollars voucher that can be used when buying tickets to any other home game of the season, valid only if the Indians win today?
Or combine it with the idea of making people go a little out of their way to receive the rebate: Instead of simply offering the tickets for ordering on the website, why not exclusively offering “Lunch and 3 Innings” to people that send in a photo of themselves with an Indians merchandising product. I admit that this might lead to relatively more regular visitors applying, as they usually own more merchandising articles than non regulars, but then again it might also lead to non-regulars connecting with regulars before the match to lend them some articles for taking the photo, which is also a desired effect. And you could use the photos on your website and create a feeling of community.
And yes, a lunch break is usually shorter than a baseball game. But who could allow you to stay throughout the whole game? Right, your boss. One more self-confident way of presenting the offer would therefore be to reduce the voucher to five dollars instead of ten unless you bring your boss with you, which would bring the vouchers back to ten dollars for the whole group (and did I say that the boss could come in for free?). This simple approach would load up the event in a positive way: The Indians were the reason why you did not have to work for as many hours as usual and even the boss can feel good for offering joy to his subordinates without sacrificing a lot.
These are just some rather rough ideas that would probably have to be fine tuned before implementing, but they show that granting rebates does not automatically mean diluting your brand.
To summarize, rebates may play an important role in your pricing strategy, however if you don’t show and demonstrate belief in your product, how can you expect your customers to do so? A rebate will only work if you make sure that you do not grant it because there is something wrong with you product, service or brand.
When looking at the “Lunch and 3 Innings” offer, I don’t feel like the Indians organization is particularly fond of their product. That’s a pity because the creative core of the offer would have earned a better execution.