Happy Meals and Ticket Sales
This week the Sports Business Journal reported that Major League Baseball teams dramatically increased their use of in stadium giveaways in the 2010 season in the face of drastically reduced consumer spending and the worst economic conditions since the great depression. According to SBJ, Major League Baseball clubs combined for 719 giveaway dates this season, a 16 percent increase over 2009 and a 25 percent jump compared with 2008. Meanwhile, the City of San Francisco banned free toy giveaways in "unhealthy" kids meals. Why? Because premium "giveaways" work! While consumers and lawmakers will debate the merits of government intervention and regulation of fast food kids' meals, few can argue against the effectiveness of premium items - a.k.a. giveaways - whether to sell a "Happy Meal" or a ticket to a sporting event.
What's a premium?
Premiums are items that are given away for free in exchange for a consumer action (buying a kids' meal or a ticket to a sporting event) . McDonalds introduced the Happy Meal in 1979 and currently sells 2.5 million per year. In addition to boosting fast food sales, Happy meal toys are sought after by kids and collectors alike and include games, watches and figurines with tie-ins to popular brands like Star Wars, Hot Wheels, Barbie, Batman, Avatar, Spiderman and others. Other major fast food chains and smaller independent chains and restaurants alike use toy premiums to promote children's meals.
Sports marketers have traditionally used premiums to increase sales for lower-demand games such as weekday games and games against lower drawing teams. Premiums are an integral part of sports marketing in all professional sports but with 81 home games and large capacity stadiums, Major League Baseball is truly "The Bigs" when it comes to sports premiums. The Sports Business Journal reports that Baseball teams have used premium giveaways from bobbleheads and caps to lunch tins, backpacks and per promotions to sell excess ticket inventory. Incremental ticket sales revenue goes directly to the bottom line and an incremental attendance increase means increased parking and concession revenue. The Sports Business Journal reports that professional teams are now including giveaways for weekend and higher demand games where there are much smaller revenue gains from tickets sales. The reason is that aside from the aforementioned revenue increases, premium items also create stadium atmosphere and provide a traditional source of advertising at a relatively low cost per impression. Sports marketers now view premium items for more than their ability to move the ticket sales needle and as an integral part of experiential advertising, creating a memorable event that builds brand awareness and loyalty. Often times, the cost of the premium item is shared or paid for by a sponsor such as an insurance company, health care provider or bank looking to reach a large targeted audience, increase its brand recognition and co-brand with professional team. Not only can they market directly to fans in attendance, they also can extend their brand exposure to a much larger television audience and often choose high visibility items such as T shirts, banner signs and caps for that very reason.
Why professional sports teams are hooked on premiums?
Sports teams are unique in that they have a combination of very high fixed costs and finite and expiring revenue potential. Each game is a scheduled event that is going to happen whether the seats are empty of filled and facility overhead, player salaries and other expenses are largely fixed expenses regardless of gate attendance. If 10,000 $40 seats aren't sold for a game, that's $400,000 in ticket sales revenue plus additional concession revenue that is lost forever. As a result, teams are highly motivated to sell excess inventory and rather than devalue ticket prices by discounting, they use premium giveaways to add value, boost sales and simultaneously promote their brand and improve the fan experience. In an era with ever-more competition for sports consumers including home theater and 3D television, sports premiums aren't going away… and guess what… neither is the Happy Meal.
Questions and Answers
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