This post is from CNBC sports producer Tom Rotunno:
There's been a lot of buzz over the New York Knicks decision to sell discounted tickets at Costco . The team is selling tickets in the 300 level of Madison Square Garden at a discount of 40 percent, excluding four blackout dates.
The Knicks aren’t the first team to offer tickets at the wholesale discount retailer. It’s certainly an interesting concept (Insert your own joke about two gallon jugs of mayo here). It’s also a way to get the team on the minds of consumers in an unexpected place. There’s just one problem. A flat discount on prices is generally a bad idea.
If a company offers a strongly branded product for 40 percent off the suggested price, it sets up a perception in the customer’s mind that the product should be offered at that lower price all the time. Over time, the brand is degraded and loses its perceived value. Once you go discount, its tough to go back.
The Knicks were once considered one of the crown jewels in the NBA. Then came Isiah Thomas. Thomas was fired as coach and president of the Knicks after a 56-108 record on the bench and a disastrous five-year tenure as architect of the team. These dismal results (not to mention a sexual harassment suit) took the shine off the franchise.
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The Knicks are now in the business of selling hope. They just hired a coach in Mike D’Antoni who is known for one of the most exciting styles in the game. A "shoot first-ask questions later" offense that's a known commodity in the NBA and a fan favorite. If D’Antoni turns around the team, no doubt they’ll be turning fans away from the Garden. But don’t think fans accustomed to discount prices won’t grumble when they have to go back to paying full price. Discount tickets might temporarily put fannies in the seats but the psychology of consumer pricing says you’ve damaged the perceived value of your product.
Instead of discounting prices, teams are always better off providing consumers with an extra. That’s why “All You Can Eat” ticket deals work so well. The fans think they are stealing (3 hotdogs, two popcorns and 2 sodas AND a ticket for $40!) and the team is happy that they just sold a $6 seat (that otherwise might have remained empty) by throwing in $3 worth of concessions. Minor league teams survive on the “value added” proposition every day. The Washington Wizards host “Singles Night”, giving fans the chance to mingle with other singles.
The Cleveland Cavaliers have a “McFamily Night” package that includes four Cavaliers tickets and four McDonald’s Meals starting as low as $72 - or $18 per person. The LA Kings give discounts on tickets for those riding Metra trains (having lived in LA, trust me, partnering with public transportation is thinking WAY outside the box. Free car washes might have been a better idea).
Maybe the Knicks can partner with another company to create a “value added” proposition at Costco. Maybe a company with a product that's a natural fit while watching basketball. Hmm. Anyone have the number for Dale and Thomas Popcorn? Oh wait. Never mind.
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