How Major League Baseball Can Steal Profits Back From Ticket Scalpers Using the Right Pricing Solution

The National Baseball Hall of Fame recently inducted Ricky Henderson, one of baseball’s most prolific base stealers with a record 1,406 bases stolen in his career – yet, Major League Baseball has failed to deal with scalpers who steal millions in profits from their franchises every year. Scalpers have seized the lost opportunity where Baseball franchises lock in their ticket prices months before the season starts and choose not to adjust prices throughout the season. A more efficient secondary market thrives due to the scalpers’ ability to factor in several game variables (e.g. strength of opponent, seat type, starting lineup, weather conditions, etc.), as well as buyer-specific factors (e.g. age, attitude, clothing, jewelry, etc.) to determine the maximum (and therefore optimal from the seller’s perspective) price that each person is willing to pay. Another advantage for scalpers is their ability to immediately negotiate if the buyer doesn’t accept the first price, carefully moving the price down until both the buyer and seller agree upon a satisfactory price. To help reclaim these lost profits, the San Francisco Giants are now testing dynamic pricing software to help adjust ticket prices based on the expected consumer demand for each game. So what exactly is dynamic pricing, and is it powerful enough to replace the individualized pricing, negotiation, and sales effectiveness of ticket scalpers? Read the rest of this entry »

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Why Credit Doesn’t Matter to Maintain Competitive Advantage

Realizing I would be without a wireless connection on my train ride to NYC, I stopped to grab some light reading material at a kiosk in Union Station, where I found a plethora of headlines devoted to capital spending. I know that the loss of $50 Trillion in wealth in the last 18 months led to a severe credit crunch, but wasn’t that old news? Aren’t businesses starting to rebound with the distribution of the $700 Billion in TARP funds that helped prop up banks and car companies, along with another $2.5 Trillion spent to support the struggling financial system? I take a quick look through the daily business headlines, and they continue to reflect a particularly bleak outlook for businesses that are still struggling with low expectations for growth and profits, costly and scarce credit, weak consumer demand and a glut of production capacity. To compound matters, the current administration and Treasury Department will implement extensive financial regulations to curb future financial crises, and banks continue tightening their lending standards for all types of business loans. I hope these measures reduce the risk of another bubble market, but at what cost will these measures reduce the opportunity for many businesses to effectively compete in this economy? One thing is obvious: credit will no longer be a cheap commodity for businesses in the near future, period. But then again, is credit really necessary for businesses to stay competitive? Read the rest of this entry »

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Forget Your Competitors, The Power to Consistently Lead Your Market Lies In Understanding How Every Customer Values Your Product

Far too often, we have companies seeking our expertise to ascertain their competitors’ competitive strategy vis-à-vis their pricing, as if this will provide the magical insight they need to help them maximize their own revenues. My advice: save the detective work for Colombo and forget about your competitors! Your bottom line profits should not hinge upon a competitive response strategy that reacts to your competitors’ price moves, where you surrender control over your revenue structure and end up locking your firm into a race-to-the-bottom pricing with the rest of the industry. Escaping this destructive cycle lies in focusing relentlessly on your customers rather than your competitors. If you’ve read the news in the last 10 years, you may have realized that your customers are the most informed consumers in the history of the world! They are utilizing every available resource, from various news and industry websites to trade magazines to word-of-mouth gossip to Oprah to… well, even your price helps them determine their perceived value of your product. They are better informed about their purchases than ever before, but I wonder if you are learning as much about them and how they view your products?

Here’s an example to help you understand the magnitude of the problem your organization is facing: you sell thousands of products to tens of thousands of different customers each and every day, which is equivalent to millions (if not billions) of distinct customer-product interactions every day – impossible for even the most experienced sales managers to analyze individually. Now grab a pen and some paper and write this down: every sale is an interaction whose revenue can be uniquely maximized! Most companies fail to detect the subtle changes in their customers’ preferences over time, leaving significant profits on the table. And hence the reason for the detective work we’re often called to do; companies don’t realize they have all of the necessary data to maximize revenues right under their noses.

The solution here is Scientific Micromarket Management, which makes it possible for organizations to assess how each customer values your product and offer exactly that price every day in every market. Sure, we may be talking pennies and nickels here, but if you multiply these adjustments by the millions of potential customer-product combinations, then multiply these daily adjustments over the course of a year, and you will realize the significant amount of impact this will have on your bottom-line. Capitalizing on these billions of tiny demand shifts with a dynamic pricing system more targeted than human intuition enables companies to finally understand why every single customer buys what they buy from you and what they are willing to pay for it every time. This is far more comprehensive than any pricing strategy; this is a complete revenue optimization solution. Your customers are getting smarter about you, I think its time you got smarter about them.

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Globally, $50 Trillion of Wealth Disappeared in 2008; Will the Long Tail of Consumer Choices Survive?

The global financial crisis wiped out $50 Trillion of wealth in 2008, and the global economy is likely to shrink in 2009 for the first time since World War II. The cumulative effects have left consumers without any excess household income – some losing their homes or jobs altogether – and therefore less likely to spend on frivolous products or services. As this trend continues through the predicted turnaround starting in 2010, I wonder if we’ll see an equally large contraction in the number of consumer choices that have exploded in the past 10 years?

In October 2004, Chris Anderson coined the term the “Long Tail,” referring to a new economic model where companies sell more of less. This was a direct result of the ubiquity of the Internet (along with increased processing power and cheap online data storage), where an unlimited selection exists for information, products and services 24/7/365. He argued that consumers were no longer confined to a narrow list of choices that emerge from large corporate entities in the form of “blockbuster” hits that are meant to satisfy the masses. Instead, consumers were wandering further from mainstream tastes and discovering that their preferences lie in the form of smaller niche movies, books, music, websites, services, etc. I found the theory intriguing back in 2004, but am now reconsidering it’s viability in the context of the global economic crisis: will the long tail survive?

To answer this, I can simply skim the news headlines to find companies scrambling to trim the fat off their product portfolios. No longer is cutting prices a viable strategy for dealing with declining consumer demand. Companies have turned to the ax to focus marketing dollars on their higher-margin, best-selling brands to help retain consumers, who are trading down in the recession. Auto companies have been hardest hit, where GM’s Hummer, Saturn and Saab brands will likely be lost if a buyer isn’t found. Chrysler management has already stated that the company has too many brands and too many dealers. Ford remains afloat, but for how long? Food companies from Sara Lee Food Corp. to H.J. Heinz Co. are trimming their offerings. In the airline industry, Aloha, ATA, MAXjet, Skybus, and Champion Air grounded their planes. Simply put, the long tail just got a little shorter. OK, a lot shorter. As shrinking payrolls, housing values and credit availability continue to push consumer demand down, I think it’s likely Chris Anderson will annotate the theory of the Long Tail to show its existence is more often a byproduct of exuberance in the markets rather than a permanent trend.

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