March 28, 2003
What Can You Spell With Four Ps?
Fred Halverson, 1920-2003
On March 16th, Fred Halverson passed away after a long battle with illness at the age of 82. Mr. Halverson is directly and personally responsible for much of the success and happiness enjoyed in life by countless students of Menlo School, and he made a positive impact on my life for which I am forever grateful. He provided guidance and support at a time in my life at which I needed both, and his generosity and kindness will never be forgotten by those whose lives he touched. The world is greatly diminished by his passing, but more enriched by his having ever been with us.
For a long time, I've been trying to find someone who's at or near the top of the ladder in an MLB marketing department to talk to me about some of the unique challenges, opportunities, and practices in marketing an MLB club, and to give a spin-free answer to some of the tougher questions that readers have asked about MLB's policies over the years. On Thursday, I was fortunate enough to talk with the lead executive of an MLB club's marketing department, and they agreed to answer any questions I threw out, so long as I didn't give out their name.
Baseball Prospectus: Thanks for taking the time to speak with us and answer some questions. Let's start with a tough one: Every time ticket prices go up, the letter that goes out to customers always mentions increases in player salaries. Why? Why should there be a connection?
Marketing Director: It's the real world, not an economics class. We all learned that prices are determined by what the market will bear, not by the cost of the items being sold. But in the real world, there really is a connection between what players get paid and what we charge for tickets. That decision usually isn't made in marketing departments anyway. Depending on the team, it could be made in finance, or even by the owner. You keep writing that ticket prices and player salaries aren't related, but they are. If we pay players more, we need to raise ticket prices.
BP: But raising prices might not make you any more money. As price goes up, demand typically goes down, and you might, and should, make less money.
MD: You wanted to know how it works. This is the thinking.
BP: OK. Let's talk about the four Ps. Basic marketing, a la Kotler, talks about the four Ps of marketing--Product, Price, Placement, and Promotion. How do you handle each of these for a ballclub?
MD: (Laughs) Asymmetrically. We had a discussion about this a few years back, where you argued that the most important function of marketing, product development, was impossible for us, because the product is the team on the field. That's not true. We do have control over the products we sell. We can put together a wide variety of season ticket packages--weekends, bundles, hot rivals, strips, whatever. We can't tell Baseball Ops who to draft, or who to play, and we can't shorten or lengthen games, but we do have more control over the fan experience than you think, and that's our product. Our product is not limited strictly to the game on the field.
BP: OK. But it doesn't sound like that's the bulk of what you do.
MD: No, it isn't. We spend a lot of time and effort on promotion. Not just at the game, but community outreach. We're not promoting to adults. Our biggest challenge is customer acquisition, and the customers we want most aren't making the purchase decisions. Their parents are. People hang on to a ballclub for life. You're an A's fan, and I've heard you talk about going to A's games with your mom and dad.
BP: My mom's first Bay Area company was Caelus Memories, and they chartered buses for us to go from San Jose up to Oakland for a ballgame. Reggie Jackson and Joe Rudi homered that day, if I remember right. I think I was eight. I had the white A's pennant for a lot of years, and I still miss it.
MD: And you remember it to this day. And how many A's games have you been to since? How many A's broadcasts have you watched? How many games have you listened to on the radio?
BP: Literally thousands.
MD: Which is why we're willing to work so hard on outreach and promotion. We want young people to come to a game with a bunch of friends and have a great day. If a kid between the ages of six and 15 ends up with a baseball, they're a fan for life, and that's what every business wants--no matter what industry they're in. If I could make one change to the game, it'd be mandatory foul balls into the seats!
BP: What about placement?
MD: Those Ps are really kind of antiquated and dumb. Those things roll together for us. The fan experience can be broadcast on TV or radio, MLB.com has a new web offering that's very promising and could be a tremendous vehicle for the fans and teams both. Those broadcasts aren't just trying to bring ratings in. They've got to work to bring people to the park. That's part of their job. So promotion and placement roll in together. You can't really think about it one way. Breaking it up artificially like that for analyzing misses the point. We concentrate on the fan experience. We want people walking out of the gates smiling, after either a win or a loss, and calling their friends and telling them what a great time they had at the game. We focus on that, not four Ps.
BP: OK, so how do you improve the fan experience if the team's awful?
MD: The game is only a small part of the fan experience. Every team in the majors has tremendously talented and exciting players. The reality is that the difference between the best and worst teams in baseball is much smaller than in other sports. Even the Devil Rays win a third of their games, and almost no team wins two-thirds. But what you can do is pretty obvious--sell the opponent. For years, the LA Clippers have been talking about all the great players that are going to be coming in. Come out and see Magic Johnson! Come out and see Michael Jordan!
MLB promotions are cultural events. A huge number of people collect those pins. Fifty-five-year-old district attorneys circle "Coca-Cola Cap Day" on their calendars and start counting the days. These promotions are great for the teams, great for the sponsors, and great for the fans. I'm not saying that to push them; it's really the truth. The teams improve the fan experience in a way that makes sense fiscally, sponsors reach a large number of people in an inexpensive and durable way, and fans get something that they will literally treasure for a lifetime. You have to understand and respect the emotions that are on the surface here. Macho Steelworkers who have Red Sox stickers on their hard hats really do cry when they see Bill Buckner miss that ball for the thousandth time. Scientific marketing is great, but you need to have some respect for the emotions of the fans.
BP: That's great. Can we talk about differential pricing?
BP: I've heard from another source that MLB's front office has quashed the idea of differential pricing based on opponent for the 2004 season. Can you verify that?
MD: I haven't heard that from New York.
BP: What do you think of the practice? Should teams pay less to see the Brewers than the Yankees? That sort of thing ticks off the fans.
MD: I understand their concerns about those policies. If a team's going to do differential pricing well, it's not going to be based strictly on the opponent. It's been done for years. Weekend games cost more. Weekday nights or takeoff games are inexpensive. A lot of teams do deep discounting one night a week, or offer a deal to kids, or whatever. It's not just based on the opponent.
BP: If I could follow up on an earlier answer of yours. You said that the real world is more complicated than just supply and demand curves. Your answer sounds like it's getting close to a strict supply and demand answer... "More expensive on weekends" is presumably because there's more demand. So here, it sounds like you're using a supply and demand justification for raising prices when you can, but you're also using increased cost of players' salaries as a justification for raising prices.
MD: There's a lot of factors that go into pricing, and most clubs don't price through the marketing department. Costs, demand, availability, opponent, time… it's just not simple.
BP: OK. I don't want to chew up too much of your time, so I want to get to a couple of general things. First, what do MLB clubs do well on the marketing side?
MD: Promotion and outreach. We really love what we're doing, and I think it shows up in what we do. The fans see it. Every person in every community for miles knows who the local baseball team is, and knows a little bit about it. Think about that for a moment. How unique is that for any business? I know you personally don't care much for baseball history, but as much as you criticize us, we protect that history well, and it serves us well in return. And it serves the fans.
BP: What do you need to do better?
MD: How fast can you write things down? We've been trying to figure out how to move into the future for a long time, and we still don't know. We're starting to understand the Internet, and how it fits in with the fan experience. It's a different place. But we have so much to learn in terms of technology, and how to use it to better serve the fans. A few years ago, Borders Bookstores were cutting edge with their technology, and they got passed and spun. We were never that good. We need to learn how to do database and direct marketing more effectively. We have to grab hearts back from NASCAR and the ten million other diversions. We're great at retaining fans once they're involved with the game, but baseball has a different adoption curve than other sports, so that's a challenge.
BP: Biggest complaint you get?
MD: Parking prices.
BP: Do you do any market research?
MD: (Groans) Everyone does some market research. I'm not a big believer in it. We can do surveys and focus groups forever, but the results come out the same. Fans are people, just like you and I. We always want higher quality, more convenience, and more selection for a lower price. Is that really so hard to grasp? Our budget's never big enough anyway, so I don't like to spend any of it hearing that our fans would like us to win the World Series every year. I'd like that, too.
BP: You've got experience in other industries. What's the biggest difference between MLB and other industries?
MD: It's certainly more optimistic.
BP: I don't understand what you mean.
MD: The atmosphere is just better. The tools are the same, the goals are the same, there's still problems, but there's more optimism and energy in baseball. It's hard to describe unless you've been in it. I've seen people leave marketing in baseball to go to another industry for big money, and beg to come back a year later. It's just a great place to be, and there's always something new happening.
BP: I'll end with a softball. Would you recommend MLB marketing as a career?
MD: (Laughs) Not if you want to make a ton of money. But I'm staying until they drag me out kicking and screaming.
BP: Thanks for taking the time to speak with us, and good luck on the new season.
MD: My pleasure, and tell your readers we'd love to see them at the game.