Deadlines and Cubs tickets

It’s an absolutely gorgeous in Chicago today. It’s so nice that when our son said he wished he had a Little League game today, my wife and I said that we would see about getting Cubs tickets for tonight’s game against the Rockies. So where should I go look for tickets? Should I buy them from the Cubs themselves or look on the secondary market? The secondary market, of course, means StubHub, the partner for most Major League Baseball teams for reselling tickets. Here’s how the Chicago Tribune puts it (Baseball teams get dynamic with ticket pricing, May 12).

Teams deal with StubHub because the online reseller provides a trusted outlet for season ticket holders to dispose of tickets to games they don’t attend. Buyers also have confidence that tickets on StubHub are not counterfeit.

But the first signs of backlash against StubHub appeared in the past offseason, when MLB renewed its five-year agreement with the website.

Two teams, the New York Yankees and the Los Angeles Angels, opted out of the partnership to form their own ticket exchanges with Ticketmaster because they wanted more control over pricing on the secondary market, said Bob Bowman, CEO of MLB Advanced Media.

StubHub spokesman Glenn Lehrman was more blunt: “There’s one clear reason why those teams are not using StubHub. They did not like to see tickets resold below face value. We let the market dictate prices.”

The Cubs also considered opting out. Team officials were unhappy after some of their tickets were listed on StubHub for less than a $1, not including fees, for the team’s final three home games last season. In 2012, the Cubs lost more than 100 games for the first time since 1966.

To address some of the league’s concerns, StubHub now includes fees in ticket listings. The cheapest baseball ticket on StubHub is $6, which includes commissions and a delivery fee.

The Cubs also are one of two teams that cut off StubHub sales six hours before game time, up from two hours in 2012. By ending sales on StubHub earlier, the Cubs presumably hope to sell more last-minute tickets.

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Upgrade auctions

Getting moved from coach to the front of the plane is one of the nicer things that can happen on a long flight. If you a lot (especially on full fare tickets), getting upgraded can be a routine occurrence. Of course, that raises the question of why airlines pretty much give upgrades away. Yes, it makes sense to take care of really good customers particularly when moving someone up to business class costs the airline very little. But there is no guarantee that high status frequent flyers necessarily want the upgrade more than some more lowly coach passengers. That is, Mr Executive Platinum may not be willing to pay more than Ms. No Status for the privilege of escaping the cattle car.

Now Ms. No Status may get her chance to score an upgraded if she is willing to open up her wallet as several airlines are starting to auction off upgrades (Flier Auctions: Better Seats, Going Once, Going Twice…, Wall Street Journal, Apr 24).

Airlines overseas have started auctioning off upgrades, with travelers in economy or premium-economy cabins bidding against each other for seats that offer better space, food, service and sleep. Bids for premium seats that otherwise might fly empty begin online weeks in advance and typically close 48 hours before takeoff. The company behind the auction technology says it may come to the U.S. soon.

So far, airlines say travelers end up spending more for upgrades in online auctions than they would spend at check-in. Unlike a casual offer at an airport kiosk, the auction system can generate excitement as fliers strategize about how to win.

“You can buy the cheapest ticket and still have a chance of sitting in business class,” said Danny Saadon, North America vice president for El Al Airlines, where the average winning bid for a business-class upgrade is $800. That’s a deal when the airline’s business-class tickets cost anywhere from $3,000 to $10,000 more than coach.

Different airlines run the auction in different ways since the system from Plusgrade, a New York City company, allows flexibility. An airline can choose who can participate in the auction so it may choose to offer the opportunity to bid to all customers or only those that bought in a particular fare class or to those that meet a certain profile. Besides access to business class, El Al also auctions off empty middle seats to those in couch want some extra elbow room.

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Managing a harbor wait list

I live in Wilmette, the village just north of Evanston. It is a pleasant place if a little sleepy. However, we currently have a controversy brewing over Wilmette Harbor. The harbor is where the North Shore Sanitary Channel enters Lake Michigan. To quote Wikipedia, “The North Shore Channel is a drainage canal built between 1907 and 1910 to flush the sewage-filled North Branch of the Chicago River down the Chicago Sanitary and Ship Canal.” Of course, that quote doesn’t quite do justice to the harbor. Where the channel meets the lake, there is a lock that keeps the nasty stuff out.  Wilmette Harbor is actually a picturesque place with a Coast Guard station and space for 300 or so boats.

The kerfuffle is all about who will run the harbor. It is owned by the Metropolitan Water Reclamation District (MWRD), a regional government entity tasked with maintaining water quality, not accommodating boaters. Hence, they have outsourced the management of the harbor. For the last 75 years, the Wilmette Harbor Association has had the gig. The Wilmette Harbor Association’s lease has expired and they and other parties have bid to run the harbor, notably Wilmette Harbor Management. Following a murky process, the staff of the MWRD recommend the Wilmette Harbor Association’s bid be accepted even though it was lower than Wilmette Harbor Management’s. The MWRD’s commissioners voted against granting Wilmette Harbor Association the lease and now it is uncertain whether the harbor will be open this summer. For Chicago Tribune articles on this soap opera, see here and here.

I don’t own a boat so don’t have a whole lot at stake in this fight. However, there is an interesting operations question at the heart of the conflict. The Wilmette Harbor Association and Wilmette Harbor Management have very different ideas about how manage the queue for slips at the harbor.

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Domino’s in India: Meeting deadlines by turning away business

My colleague Sunil pointed me a neat article on Domino’s Pizza’s Indian operations.  While the chain long ago gave up on an explicit delivery time guarantee, their Indian franchisee Jubilant Foodworks still promises 30 minutes or the pie is free. That is not an easy promise to keep in, for example, an old neighborhood with streets running every which way and no really good maps. Still they manage to hit the thirty minute target remarkably often despite not having a whole of lot time for the actual delivery part of the process (Domino’s deadline to deliver, Financial Times, Jan 17).

With preparation, baking and boxing of pizzas taking 12-13 minutes, Indian deliverymen have 8-10 minutes to ferry their piping hot cargo to its destination – leaving a margin of just a few minutes. Riders cannot race to their destinations either: their motorbikes are modified to restrict their maximum speed to 45kph. That means riders must know every street, pothole, traffic light, choke point, construction site and police roadblock in their sectors of fast-changing, densely populated cities. …

Of all Domino’s deliveries in India, less than 0.5 per cent take more than 30 minutes to reach the consumer. Top managers monitor every store’s late rate closely. Rising pizza giveaways are seen as an indicator that a store is being overwhelmed by rapidly growing business – and that the area may be ripe for an additional outlet – or that local congestion is worsening considerably. “We watch that number like hawks,” Mr Kaul says.

Now there are obviously several steps in making these deliveries happen — from making sure that the kitchen staff is well-trained to scheduling enough delivery drivers. The most interesting part to my mind is the last thing hinted at in the quote above: How does Domino’s think about locating stores — and defining their service areas — so they can hit their delivery window?

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Pricing Northwestern basketball tickets

A (really) brief follow up on yesterday’s post on pricing Warrior basketball tickets. Checkout what our colleagues Sandeep Baliga and Jeff Ely are doing with the price of Northwestern basketball tickets! Here is how the describe on their Cheap Talk blog:

We are using a system which could roughly be described as a uniform price multi-unit Dutch Auction. In simpler terms we are setting an initial price and allowing prices to gradually fall until either the game sells out or we hit our target price. Thus we are implementing a form of dynamic pricing but unlike most systems used by other venues our prices are determined by demand not by some mysterious algorithm.

But here is the key feature of our pricing system: as prices fall, you are guaranteed to pay the lowest price you could have got by delaying your purchase. That is, regardless of what price is listed at the time you reserve your seat, the price you will actually pay is the final price.

What that means is that fans have no reason to wait around and watch the price changes and try to time their purchases to get the best possible deal. We take care of that for you.

This program is available for games against Ohio State (Feb 28) and Penn State (Mar 7).

 

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Dynamically pricing the Warriors

Back in the early 90s, I was in graduate school in the Bay Area and playing in a regular faculty-PhD student basketball game. At the time, the Golden State Warriors held a high draft pick and while waiting for everyone to show up for our game, there was an animated discussion about what the Warriors would. Our conclusion was that they would screw it up. After all, they had recently traded away Mitch Richmond and had previously had traded away Robert Parish so they could get their hands on Joe Barry Carroll. Twenty years on, the Warriors basketball  performance hasn’t gotten a lot better. Sure, they are currently sixth in the West and would make the playoffs if the season ended today. But that would only be their second playoff appearance since I left the Bay Area many years ago.

That long history of mediocrity makes the team’s business performance all the more remarkable. In each of the last eight seasons, they their average home attendance has been over 18,000 — giving them one of the highest average attendance in the NBA. How have they managed to do this? They used lots of data in order to make sure that seats don’t go unsold while also making sure that they don’t give out unnecessary discounts (Warriors Go On Offense to Fill Seats, Wall Street Journal, Feb 6).

The team looks at data generated by Ticketmaster as well as resale-market sites like StubHub, and pores over weather forecasts and ticket sales from competing entertainment in the Bay Area.

The Warriors examine, for example, how much ticket buyers historically paid for a Tuesday night contest against the Houston Rockets versus a Friday night game against the Rockets. This helps the team predict how much it can charge for tickets without curbing demand. In some scenarios, price-points can change hourly, part of a growing sports-business practice adapted from airline bookings known as “dynamic pricing.”

The Warriors also use data when planning to move the last unsold seats for a game with an online offer. The team will take its 200,000-person email list and break it into chunks, testing different times, different subject lines and different links in the body of the message to gauge what brings the quickest response.

“We’ll send 100,000 messages 10 minutes after a victory, and 100,000 the next day,” says Mr. Schneider, 33 years old, now in his 11th season with the Warriors. Data on response time, tickets sold and the price point for each ticket tier will determine how the team tailors future pitches.

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Now at Disneyland: Mouse vs. Scalpers

How do you make sure customers take advantage of a promotion the way you want them to take advantage of it?

The question comes up at Disneyland. The Mouse people are currently offering a deal that allows park goers to get a break on multiple visits. Specifically a 3-Day Park Hopper pass lets customers visit multiple parks over three days. The days don’t have to be consecutive but you have to use the second two days within two weeks of using the first day. If you really want to spend a lot of time at Disneyland, this is actually a pretty good deal. An adult three-days pass goes for $220 while a one day pass goes for $125. (For those under nine, the comparable numbers are $205 and $119.)

Now there is clearly a problem here in that if two families split a three-day passes with, say, the Jones going one day and the Smiths going the next, they would come out ahead even if the third day went unused. If Smiths and Jones can recruit a third family, they’ve got an even better deal. Of course, a stumbling block in making this happen is transaction costs. If the Smiths and Jones live on the same cul-de-sac, maybe then coordinate this deal easily. However, if the Smiths are flying in from Chicago, it is much harder for them to take advantage of this deal — unless a middleman steps in to help broker the deal. And this just what is happening (Disneyland fights multiday pass abuse by photographing holders, LA Times, Jan 9).

Disney has been struggling to stop several ticket brokers in Anaheim from buying multiday park passes and then “leasing” or “renting” them to visitors for individual days.

The scenario works like this: A ticket broker buys a three-day “park hopper” pass for $205 and rents the ticket to three guests for $99 a day. The broker makes a profit of $92, and the guests, who would otherwise pay $125 for a one-day “park hopper” ticket, save $26 each.

Disneyland prohibits visitors from sharing multiday passes, but the practice does not violate local laws.

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Priorities on the Beltway: Big Data and variable tolling

Slate has an article that asks an intriguing question: Who Really Benefits From “Big Data”? (Dec 27). That’s clearly something of a loaded question. Big Data is currently everyone’s favorite answer for everything. The ability to leverage vast amounts of data for new insights and improved decisions holds a lot of promise. There are also many success stories of firms creating new markets or improving profitability or providing great value to customers to back up claims and bolster expectations. Big Data has remade baseball with an emphasis on new statistical measures and has allowed Netflix to suggest the perfect next movie to watch.

Those examples sound great. Of course, consumers may be less enthusiastic about one of the longer standing examples of Big Data, airline revenue management systems. While these have been around for a couple of decades,they bear the hallmarks of Big Data applications. They are built on careful data analysis to forecast how systems will evolve and seek to replace intuition with frequent, reasoned decisions. These decisions may not necessarily be optimal but they clearly balance costs and benefits and can be improved over time. I’m not sure that customers love revenue management systems the way they love Netflix recommendations. Although revenue management systems are just as responsible for some sweet deals as they are over for extravagantly priced tickets, people tend to focus on the latter. Consequently, if you ask who benefits from Big Data and lead with revenue management systems as an example, I would venture that many customers would be leery of embracing Big Data.

So what example does the Slate article go with in thinking about Big Data? Lexus Lanes on the DC Beltway!

Advances in real-time data acquisition, processing, and display technologies means that it is possible to design a toll road that can continually change prices to control how many cars are on the road and how fast they are going. These “hot lanes“ have just been opened along a part of the Washington, D.C., Beltway, the 10-lane, traffic-infested artery that to normal humans is a metaphorical boundary between the real, outside-the-Beltway world and the weird, political one on the inside. (For those of us who live around Washington and must drive on it, however, the Beltway is very concrete indeed, a daily flirtation with delay and frustration, homicidal instincts, and death itself.)

At a cost of $2 billion, a private sector partnership (which gets to keep the tolls) has built a 14-mile-long, four-laned section of highway, parallel to the main lanes of the toll-free Beltway, and has guaranteed to the state of Virginia that it will always keep traffic moving at no less that 45 mph along its length. They do this by continuously monitoring the number of cars (which must be equipped with EZ-Pass transponders) and their speed, and by raising toll prices as necessary to keep the number of cars on the road at a level that will allow the speed to stay at or above the guaranteed minimum. The dynamic toll prices are displayed on huge signs near the entrances to the smart-highway lanes, so drivers get to decide at the last minute whether they want to spend the money to go faster or not. As the traffic on the toll-free Beltway lanes gets worse, some drivers will be willing to spend more to go faster. The worse the traffic is, the more they’ll have to spend. (In the early days of this new technology, numerous accidents were caused by drivers trying to decide how much they were willing to pay, but no doubt this initial problem will sort itself out as people get used to driving-while-economically-rational.

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The Yankees versus the open market for tickets

StubHub and Major League Baseball have just renewed their agreement that make the eBay the official reseller for most of MLB’s teams. As Businessweek tells it, this has to date generally been a good deal for both sides (Why the New York Yankees Cry Foul Over Ticket Prices, Dec 11).

The league first joined with StubHub in 2007 through its Advanced Media wing, known as BAM. The marriage worked reasonably well. Ticket holders selling through StubHub could ask any price they wanted. And ticket buyers could access that market on team websites alongside the primary box office. StubHub skimmed about 23 percent off every transaction and sent more than half of that back to BAM, according to SportsBusiness Journal. The league, SBJ reported, has been reaping roughly $60 million a year from the arrangement. (BAM spokesperson Matthew Gould declined to comment on that figure.) Baseball helped StubHub recruit buyers and sellers. In return, teams profited twice from the sale of a single seat.

The interesting part here is that the deal only cover most of the league. Three teams — the Cubs, the Angels, and the Yankees — have opted out.

The trouble is that baseball teams have to worry about the feelings of season ticket holders. Paying $40 for a seat and then watching the one next to it sell for $2 can lead to some awkward questions when it comes time for buyers to renew. And according to ticket search engine SeatGeek, about two-thirds of Yankees tickets that sold on the secondary market last year went for below face value. “We believe there are serious issues with the StubHub relationship,” Randy Levine, Yankees team president, told the New York Post in June. “We are actively reviewing more fan-friendly alternatives for next year.” Translation: We want price floors. …

An unnamed source at the Yankees told ESPN that the team will be announcing a deal with Ticketmaster that is “more favorable to season-ticket holders.” Stubhub spokesperson Glenn Lehrman says the teams have “decided to create their own marketplaces.” It’s likely all three will employ systems like those used by many NBA and NFL teams, setting a limit on minimum prices.

Is the Evil Empire right? Are price floors really better for season ticket holders?

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Apple replaces queues with a lottery

Apple products have a tendency to generate buzz with fanboys eager to line and wait and wait to get whatever new product on its launch date. This routinely happens in the US and other countries. But not in China — as least not for the iPad mini (Scalpers Lay Siege to iPad Mini in Beijing, Wall Street Journal, Dec 7).

The release of Apple Inc.’s iPad Mini on Friday at its flagship store in Beijing was missing the massive and unruly crowds reminiscent of some the company’s previous product launches in China, but scalpers were still out in force despite rules making it tougher for them to buy most of the stock.

Apple is requiring Chinese customers to participate in an online lottery one day in advance to buy the wifi-version of the iPad Mini at its seven retail stores in China. Those selected, however, are limited to two iPad Minis each and must bring photo identification.

The Cupertino, Calif. company instituted the iReserve system in China after a near-riot occurred during the release of the iPhone 4S in January, leading police to seal off part of the flagship store in Beijing’s high-end Sanlitun Village mall. The state-run Xinhua news agency later blamed the chaos on a clashes between rival groups of scalpers vying to buy up as much of the stores limited supplies of the device as possible.

So is a lottery a better than a queue to ration limited supply?

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