The Columbus Dispatch reported this week that The Ohio State University has raised football ticket prices for 2013, from $70 to $79 — a 13% increase. While this is consistent with my last two articles on pricing — in general, and specifically for nonprofits — I will admit there are differences between The Ohio State University and the average nonprofit. Still, there are lessons to be learned here.
In addition to the across-the-board increase, the Board of Trustees authorized the designation of up to two games as “premier.” If there is one premier game, tickets may be as high as $175. If there are two designated, tickets may be $125 for one and $150 for the other.
Thirteen percent is not an insignificant increase, but I don’t want to get into the philosophical debate about the “fairness” of it. Certainly, the University would argue that costs have gone up since the most recent price increase three years ago. But, in an economic slowdown with stalled wages and low inflation, thirteen percent higher costs might be tough to demonstrate.
No, increased costs are not the reason for these increases. Clearly, it’s supply and demand and “what the market will bear.” First, let’s look at the “regular” games.
It’s probably safe to say that the $79 price point was chosen for the psychological benefit of not crossing the $80 barrier. I’ll also bet you a dollar that the next price increase, whenever it happens, will be to $89. Why the most recent price was $70 rather than $69 likely has more to do with an aversion to the lower number rather than the University’s desire to extract an extra dollar from its fans. I’ll leave that to DrRuth.com to sort through.
As for the “premier” games, it’s unlikely that the cost of hosting the Michigan Wolverines in Ohio Stadium is any higher than a Purdue game. In fact, the OSU-Michigan game is a great example of the “unique service” I referenced in last week’s post as being resistant to competitive pricing. In the minds of many fans, there simply is no substitute for the Michigan game. What allows OSU to charge a higher price for Michigan game tickets is demand that far outstrips supply.
There is nothing wrong with pricing your product or service in a way that maximizes revenues. On the other hand, OSU’s recent ticket price increases provide a reminder of the importance of public relations in pricing changes. A large increase in one year can result in a customer backlash. This is just one more reason pricing decisions must be based on deliberate research and planning in order to be successful.
Does your organization provide a product or service that is unique? Contact Counterpart CFO for a free/no obligation pricing review.