Earlier this week, I had the chance to interview Barry Kahn, CEO of the dynamic ticket pricing company Qcue. Barry was recently named to Sports Business Journal’s Forty Under 40 Class of 2011. We discussed what exactly dynamic pricing is and some of the impact it can have on the sports industry.
First off, thanks for taking the time to discuss dynamic pricing with my readers. For those that might not be familiar with the topic, can you give us a quick synopsis of what dynamic pricing means?
Barry Kahn: Dynamic pricing is all about finding the right value for a ticket and recognizing that the value often changes between the time it goes on sale until it is purchased. Prior to dynamic pricing, teams would set prices months before the season and then were forced to stick with them. With dynamic pricing, teams now have flexibility to adjust prices throughout the season. We apply advanced analysis to adjust prices based on sales and other measures of shifting demand. The result is better scaling throughout the house and better variable pricing.
While the idea of maximizing the value of premium games seems great, I think some companies are afraid that dynamic pricing could undervalue other games. How is this handled within the structure of dynamic pricing?
BK: Most teams face an internal debate – price for a sell out or price to maximize sales? I like to view dynamic pricing as giving a team the flexibility to balance these priorities. They can price to fill the venue while retaining the opportunity to take advantage of a high demand situation. While this may mean some lower prices for low demand games, dynamic pricing isn’t about dropping prices to sell at any cost. It’s about setting prices more accurately to sell at the right cost. That typically means maintaining price integrity. You have to take into account all games – all sections – season ticket holders, group sales, promotions, etc. Our software does this. In addition to real time data covering all of these categories, we also pull in historical data to provide a complete picture. We look closely at every section in the stadium and all upcoming games to ensure that price changes in one section or for one game, do not negatively impact a different section or game. We have seen clients increase revenue in both high and low demand situations.
How does dynamic pricing in the primary market (purchasing directly from teams) impact sales in the secondary market?
BK: There will always be a secondary market, we aren’t changing that. What we are doing is helping the teams compete with the secondary market by providing them with the flexibility to change prices as the market dictates. People that scoop up tickets only to resell them at a high markup may be impacted, however in the case of season ticket holders, all teams that we work with have taken great care to protect this group and ensure they get the lowest prices available. Dynamic pricing will actually help this group price their tickets more accurately for resale.
What types of insights can teams gather from dynamic pricing?
BK: With dynamic pricing, teams gain a better understanding of what drives sales using variables such as real-time sales, day of the week, opponents, etc. to set more accurate prices from the onset and maximize demand across the house. We compare dozens of price factors throughout a season, across venues and between ticket sections and provide teams with flexible business views of past price performance, current sales activity and future sales projections. But the real power of dynamic pricing is its ability to take all of this data and provide specific price recommendations that can be made in real-time, across all points of sale.
If a team wanted to go down this road, what is the best way for them to proceed?
BK: Call us! In all seriousness, dynamic pricing is a sophisticated process. Some teams may try a do-it-yourself approach, but there is tremendous value in using a proven software solution. For example, in the case of Major League Baseball, you are looking at 81 games and 20+ sections. Analyzing the data and changing prices could be someone’s full time job, whereas by using an existing dynamic pricing solution, teams can change thousands of prices in minutes.
Barry Kahn is CEO and founder of Qcue, the most widely deployed dynamic pricing solution on the market. He works closely with professional sports organizations across MLB, MLS, NBA, NHL and NASCAR to optimize revenue while providing the best value to fans. He holds a Ph.D. and an M.S. in economics from The University of Texas at Austin, and a B.S. in applied engineering physics from Cornell University.