THE SPRINGFIELD NOR’ EASTERS: MAXIMIZING REVENUES IN

MINOR LEAGUE
EXCECUTIVE SUMMARY:
The Nor’ easters
is a new Class A minor league baseball team in Springfield, Massachusetts. It isthe only
professional baseball team from Springfield. Another professional team is the minor
league ice hockey team, The Falcons. The owner of the Nor’ easters team is Jimmy
Mercante &the General Manager is
Bob Cortez. The Nor’ easters team did not play any game yet. Mr.Mercante & Mr. Cortez
expected the Nor’ easters to start playing after one & a half year. LarryBuckingham is the
Marketing Director for the Nor’ easters te
am. His job is to set the ticketpricing in order to maximize revenues & at least get a
breakeven. He analyzed various data likethe 2005 League Sports Association survey, views
& ideas from other MDs of minor leaguebaseball & also surveyed the populatio
n of Springfield in order to decide the ticket price for Nor’
easters baseball game.
DATA ANALYSIS:
Buckingham decided to take following things into consideration before deciding the ticket
price,their target market & how to breakeven:1.

Past survey research: National research conducted by League Sports Association in 2005.2.

Other minor league Marketing Directors’ advice regarding ticket pricing.

3.

Springfield’s
demographics & economy.4.

The Nor’ easters’ b

aseball game & the stadium.5.

Annual expense of the Nor easters team.6.

To conduct a survey through a proper questionnaire in order to get an idea about what the
Springfield’s population is willing to pay
& what is the target market.1.

National research conducted by League Sports Association in 2005 indicated:

Families with school age children were three times more likely than senior citizens orfamilies
with preschoolers to attend baseball game.

Only 8% of those surveyed had attended a baseball game.

23% of them had watched on television.

Income composition of audience of baseball as given in
Table 1 Annual income rangeof baseball audience

2
2.

Advices of other minor league baseball Marketing Directors:

To take into consideration the profit revenues from concessions like soda, beer, food& other
baseball merchandise.

To price the tickets in competition with the tickets of movies, bowling & othersporting
events.

Taking into consideration the Springfield’s economy.

To discover the interest of the baseball fans in buying individual tickets, half season& full
season.

Promoting group ticket sales with special offers or discounts.

To make efforts for sponsorships from the restaurants, colleges & other businesses
inSpringfield.3.

Springfield’s
demographics & economy:

Population of Springfield is 55,338.

As surveyed in 2008, there was a 3.6% drop in median income of households since1990.

In 2006, median income of household with three was $37,800 & median income ingeneral
was $31,046.
Nearly 25% of families were below poverty line.

Economy was changing; new businesses entered Springfield hence there was a hopeof future
employment for youth.

More than 25% of the residents were younger or 18 years old.

Nearly 60% of the families comprised of children of 18 or younger.

10% were senior citizens living alone or as couples.

25% were single men & women below 65 years of age.

5% comprised of other living configuration.4.

The Nor’ easters’ b

aseball game & stadium:

The team will start playing in 2008 from mid-June till first week of September.

It is supposed to play 76-game season including 38 games at home.

Games were scheduled for six evenings from Monday- Saturday & one afternoon onSunday.

The Springfield’s college offered the

m to use its former high school football field forconducting matches.

It was converted to a stadium of 3,600 open air arena with 2,000 bleacher seats &1,600
grandstand seats.

The deal was to give 100% parking revenues generated from this game which was $4per car
in exchange of this stadium.

3
5.
The annual expenses of the Nor’ easters’ team
as given in
Table 2 Annual expenditure of
Nor’ easters team

The stadium expenses are not considered because

it is given by the Springfield’s
college in exchange of 100% parking fee ($4 per car).

The Major league team with which the Nor’ easters

team is affiliated provide players’

salaries ($887,000) & expense incurred for bats & balls ($22,500).

The City of Springfield & three other colleges provided a financial support of $21,000 in
total.

Nearby hotels & restaurants agreed to give $25,000 for advertising & sponsorship.

The remaining expense is to be earned by the ticket & concession sales as shown in
Table 3 Revenues required to breakeven.

The expense to be covered by

ticket sales & concession profit
in order to
breakeven
is
$1,005,879
.6.

To conduct a survey through a proper questionnaire & to analyze the target market :

Buckingham knew that college student appear less in professional sports due to highticket
rates or transportation problem. So, he was supposed to target the residents of Springfield.

His survey research objectives were:

•
The buying behavior of population for professional baseball.
•
The price of ticket.
•
Interest of people in buying concessions.

He wanted to identify the baseball fans in the town because he knew only baseball
fans can subscribe a survey without ever seeing any game of Nor’ easters.

Once the survey was prepared & rejected.

The second survey was given a trial on friends & relatives & then sent to randomlytwo
groups of people.1. 5000 names of Springfield residents whose income was above poverty
level.2. 5000 names from mailing list of minor league hockey & college football ticketbuyers,
parents of Little League baseball & softball players.

The survey response of just first week was tabulated with only 625 responses.

The response from both the groups was similar.

The response tabulation was more inclined towards the response from families withchildren
younger to 18 years of age. It was 64% of the total response.

Also the net response of the parents of Little League baseball players & softballplayers was
17.3% & 11.4% respectively. So our target markets are baseball fans &also families with kids
playing sports.
4

The 2005 Sports League Association survey also mentioned that families with schoolchildren
are three times more likely to attend baseball game than retirees & familieswith preschoolers
KEY DECISION CRITERIA:
The questions from the survey which allows us to get some information about buying
behaviorof people & their interest in buying concessions is mentioned in
Table 4 Survey questionnaire 7 response.
If we take the survey as the representation of the entire population of the Springfield
thenfollowing are the points which should be taken into consideration before plotting ticket
price:

Population of Springfield is 55,338.

25% of the families are below poverty level representing 13,834 of the total population.
Survey was sent to the random people whose household income is above poverty level.

Hence the data is further considered from the total population above poverty level whichis
41,503.

Out of 41503, 38% which is 15,771 consider themselves as baseball fans.

23% of the population which is 12,728 people has purchased a ticket for sporting event inthe
past.

If a baseball team comes to Springfield then 39% of the residents which is 16,186
areinterested in attending one or more games as shown in
Table 4 Survey questionnaire &response.

Amongst these people 93% are willing to pay $8 or more for one game.

76% of the population is ready to pay 10% more for the grandstand seat than the
bleacherseat.

Only 8% of the ticket buyers are not interested in buying concessions.

Total number of seats for all 38 games is 136,800 with 76,000 & 60,800 for bleacher
&grandstand respectively.

The household income of the audience attending baseball as surveyed in 2005 given in
Table 1 Annual income range of baseball audience
constitutes only 14% of audience withincome below $22,500 & yet are attending baseball.

In the survey as shown in

Table 4 Survey questionnaire & response
there are 18% of thepeople with household income below $22,500 but yet we can expect
them to attend thegame as they are the part of baseball fan club.

5
PLOTTING THE TICKET PRICE:
Calculation of the amount of people interested in buying tickets for one or more games,total
ticket purchased & the population who will actually attend is given in
Table 5 Total population, tickets & attendance.

Seats available for single game & 38 games are given in

Table 6 Total seats in the entireseason.

The buyers for 5-game, 20-game & full season tickets are offered 10%, 20% & 40%discounts
respectively.

Bu
ckingham’s pricing matrix worksheet is calculated on the
basis of total seats whichwere sold, 104,589. The calculations are given in
Table 7 Buckingham’s pricing matrix
worksheet

After calculating the revenues generated from various ticket price, it also becomesimportant
to calculate the forecasted revenues generated from concession profit marginwhich is 40%.

It is mentioned in the case study that the concession profit margin should be no less that39%.

If we charge 40% instead of 39% then audience will have to pay just a few cents on eachitem
but we can make $8,441 more.

The calculation of revenues generated from concession profit margin is done on the basisof
total number of audience who actually attend which is 98,675 as given in
Table 8 Concession rates generated annually & its profit margin.

The total revenues generated from the ticket sales & concession sales are provided in
Table 9 Total revenues of ticket sales & concession profit
.

76% are ready to pay 10% above the price of a bleacher seat for a grandstand seat.

If we increase the grandstand seat price by 20-25% then only 28% are ready to pay for it.

Assuming 50% of the population will buy the grandstand & remaining 50% will buybleacher
seat we can calculate further.
Making an increase of $1 for the grandstand ticket for various ticket rates, the revenuestotal
up as shown in
Table 10 Revenues of various ticket range with bleacher & grand seats.

The appropriate
ticket price
per game for bleacher seat will be
$8
& for grandstand seat willbe
$9
because:

With $8 & $9 for bleacher & grandstand respectively we can get a profit of $23,590.

If we charge less then there will be more amounts

of ‘no shows’ which will affect our
concession revenues as mentioned by Buckingham.

The colleges charge $5-$6 for an adult ticket & other hockey & baseball minor leagueteams
of the region charge between $6 & $26 (at AAA level).

Many baseball fans had to drive to Boston to watch a game so they would definitelyprefer
giving $8.
6

We will not be able to break even & will face a huge loss $306,849 & $144,071 for$4-$5 &
$6-$7 respectively so no less than $8-$9 is affordable.

From the survey 93% of the population is ready to pay $8 or above for single ticketper game.

94% of the population is ready to pay $8 for 5 game package & we are giving 10%discount &
offering ticket of $7.2 each in order to convince more people to buy grouptickets.

92% of the people are ready to pay $6 for half season tickets & by giving 20%discount our
ticket price is $6.4.

82% of the people are ready to pay $4 for full season tickets & we are charging $4.8per ticket
by giving 40% discount.
This price range is affordable for maximum people of Springfield so that we canexpect more
number of people to buy the tickets.

Looking at the household’s annual income in

Table 4 Survey questionnaire &response,
many people would avoid buying higher priced tickets.

Also the demographics indicate, 60% of the household has children younger to 18years of
age, so the expense of the household increases accordingly which indicates ahuge potential
market but only if charged economically.

If we charge $ 10 or more there might be a chance that more number of people mightnot buy
it.

There is also a chance of baseball fans buying the ticket but not spending onconcessions or
buy just single game ticket because they paid higher for the ticket.

One of the MD advised Buckingham that his city is economically similar toSpringfield & so
one will have to be careful with every dollar, so charging moremight decrease the revenues
instead of increasing.

Major league baseball team charges $12 per tickets & charging the same for minorleague
makes no sense.

People buying tickets are not just paying for tickets they also have to pay for parkingwhich is
$4 per car as well as will spend on average $8 for concessions & our priorityshould be to
increase affordability of the tickets so that baseball fans wishfully buythe tickets.

Those people who belong to high income range & wish to pay more can certainly
buygrandstand tickets or buy full season tickets & can spend more on soda & snacks.

So, because of these reasons I anticipate that $8 for bleacher & $9 for the grandstandseat is
appropriate.
7
WORST CASE SCENARIO:

In this case from the survey response those people who are not willing to pay $8 or
moremight not turn up resulting into 7% decrease in total ticket sales for one game,
6%decrease in 5 game package, 8% decrease in 20 game package & the maximum
18%decrease in full game package.

The sales for the concessions will also decrease accordingly.

Our matrix of charging $8 & $9 per ticket & earning a profit of $23,590 will go wrong
&instead there will be a loss of $119,270 as shown in
Table 11 Worst case scenario
.

Concession sales are calculated on the basis attendance of 100%, 97%, 95% & 90% forone
game, 5 games, 20 games & full season respectively & at an average of $8 perperson.
BEST CASE SCENARIO:

The best thing we could assume is to sell maximum number of seats.

Here the assumption is made on the basis of survey response. Those who wish to attend
1game (21%) is increased to 24%, those for 5-games pack (11%) is increased to 13%, for20-
games (5%) is increased to 6% & for full season (2%) is increased to 3% resultinginto selling
of 134,058 tickets

The total attendance & concession sales are calculated as it is in worst case scenario.

The profit generated is $200,298 as shown in

Table 12 Best case scenario

RECOMMENDATION
:

In order to avoid the worst case scenario & to achieve best case scenario, Buckinghamshould
plot the survey results again with more number of surveys instead of just 625 of them

Buckingham was satisfied with the survey data but survey response of only 625
peoplerepresenting the entire population of 55,338 is very critical.

The maximum survey net response as given in the case study 17.3% by parents of
LittleLeague baseball players. The reason I suppose for this low net response is its
lengthbecause it should be quick & easy for the public to answer. So the survey should be
mademore compact.
‘The Springfield daily’ advised to spread awareness & bring all the baseball fans & other
people together who are interested in watching a professional game.

Also to encourage target market to buy tickets by introducing special offers like freebaseball
merchandise autographed by the players & so on.

The baseball fans are also fans of the baseball players so the players of Nor’ easters
should meet & greet people in order to increase their fan following & in return the
ticketrevenues.
8

The estimation of annual expense in

Table 2 Annual expenditure of Nor’ easters team
includes $175,000 for advertising, sales & marketing which is still to come. It willdefinitely
raise the ticket sales significantly if done in a proper way.

23% of those surveyed, purchased a season ticket for sporting event as given in
Table 4Survey questionnaire & response
so if proper marketing is done then there might be ahuge increase in full season ticket buyers
instead of just 2%.