Lower Concession Prices May Backfire

By Scott Francis on Pricing Strategy, Customer Behavior, Discounting / Post a Comment

Mercedes Benz Stadium.jpgThe Atlanta Falcons have established a new concessions pricing strategy for the coming season, and they will have the lowest prices in the NFL.  They are lowering most prices in an effort to be more fan friendly. I am not a scrooge, but I think it is a bad decision. At best, they will make less money.  However, the fan experience may also be worse than they think.

All businesses grapple with the question of whether lower prices would generate enough new volume to increase overall profitability.  For a stadium, I just don’t think the math works.  There are many factors to consider, such as how much incremental demand could there be at lower prices, what substitutes the customers have, how competitors will react, etc.  Let’s think about the potential new volume first. A stadium has a fixed capacity.  If the Falcons sell out, there will not be any new buyers.  New sales will have to come from existing fans buying more food and drink.  Of course, if there are plenty of available seats, the number of buyers could increase.  However, lower ticket prices are the most likely thing to attract new fans, not lower concessions.

The next question is whether the existing fans will buy more food and drink.  The answer is almost certainly yes, but how much more is debatable.  Although concession prices are high at sporting events, stadiums still sell plenty of hamburgers, hotdogs, peanuts and beer.  People complain about the prices, but still buy.  If you doubt that, try to remember the last time you went to a concession stand and did not have a several minute wait.  I can’t remember such a time.  Since people are already lining up and buying plenty of food and drink, they may buy a little more, but I doubt they will purchase significantly more.  And, since the percentage increase in unit volume needed is always higher than the percentage price reduction, I see this costing the Falcons money.

Some would say, “So what?”  Sports owners are billionaires and they don’t need the money.  But the truth is sports are like other businesses – they are competitive.  The owners need to make money to spend on big contracts to attract the best players so the teams can win.  And winning does more to bring fans to the ball park than anything else.  Also, if the Falcons don’t need the money, why did the city of Atlanta need to use taxpayer money to build the new stadium?  Wouldn’t it be better for sports teams to make enough money from people who watch the games, rather than using taxpayer funds?

What if I am wrong and the lower prices do generate substantial new sales?  The first thing the fans will notice is longer lines at the concession stands.  Remember, the lines are already long at these stands, and if there are more buyers, or existing buyers return more often, the lines will get longer.  As the lines get longer, the enjoyment of the fans will decrease.

It will be an even larger problem if alcohol sales increase.  In my observations, the current $8 - $12 prices for beer or wine do not stop the fans from buying the first drink. Those who want a beer or glass of wine simply pay the price just as they would in a bar or restaurant.  The prices may stop some from buying the 2nd or 3rd drink, though.  If lower alcohol prices encourage more people to buy multiple drinks, the number of drunks at the game will surely increase too.  If that happens, perhaps we can expect more fights and other disturbances.  I don’t mean to imply that everyone who consumes multiple drinks will cause a disturbance; but disturbances are usually caused by someone who is drunk, so the pool of potential trouble makers would increase. 

Similarly, what are the implications of more alcohol sales for the roads?  Although the Falcons’ new stadium is served by public transportation (MARTA), many fans will be driving to the games.  If lower alcohol prices do result in more people drinking excessively, there is a high probability of more drunk drivers on the road.  This would be a very small number, but still an increase from the number of intoxicated drivers today.

Don’t get me wrong.  I am like all other patrons – I prefer to pay lower prices for my food and drinks.  I also believe the Falcons management team believes they are taking a noble step with these lower prices, however, the current prices don’t really stop fans from buying what they want as part of the overall game experience.  So, I believe the Falcons move is more likely to cost them money.  However, if I am wrong and concessions sales do increase, the actual game experience could be worse.

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