Indians lower beer prices a dollar, threaten to overturn entire sports business paradigm

This is interesting:

The Cleveland Indians are making the cost of a 12-ounce domestic brew $4 at every home game.

For perspective, according to fancostexperience.com, the average price of a beer in Major League Baseball last season was $6.10 with the highest price at $8.00 for a beer to watch the Miami Marlins (lose)…

Cleveland did not stop at beer. Hot dogs go from $4.50 to $3.00, charging only $1.00 at 15 specific games. Most other food items will see a 25 percent price cut.

It’s interesting not just because it’s a rare example of a team with a new(ish) stadium choosing to lower concessions prices (beers were previously $5 in Cleveland) in order to draw fans, nor because it shows that even articles about Cleveland Indians beer prices can’t resist digs at how awful the Marlins are, but because of this article by Baseball Prospectus editor Ben Lindbergh, wherein he descibed how the Indians “applying some of the same principles to marketing as the game’s new breed of progressive GMs has to Baseball Ops.” For starters:

The Indians gave the company five years of historical data (2007–11) on attendance, ticket sales, and promotions, and ThinkVine used it to generate an agent-based model (as opposed to a more traditional econometric, or regression-based approach) that would help the team develop a “base probability” that an Indians fan would attend any given game. That base probability can then serve as the foundation of a forecast for attendance with one or more additional draws. In theory—and, King is confident, in practice, too—the model allows the Indians to quantify the effects of “exogenous factors” (team performance, weather, competing events, the Cleveland economy, etc.) and isolate the impact of marketing techniques.

I know we’re all used to thinking of sports franchises as money-hungry evil Machiavellian blood suckers, and they are (though economists still aren’t all in agreement on the blood thing). But sometimes they do things just because they’re dumb, whether it’s setting ticket prices so high that nobody sits in the good seats or giving Mike Hampton $121 million. Is it possible that jacking up food prices to beyond the point of ridiculousness is one of those?

According to Indians VP for marketing Alex King, maybe. Among his findings from the ThinkVine survey: dollar hot dog days were the biggest draw, even better than bobblehead giveaways. (Though fireworks nights did better at getting people out to the park when the team was losing.) And the most profitable promotions were cap giveaways, since caps can apparently be made for next to nothing, and everybody likes getting caps — as a result, you pretty much won’t be able to go near an Indians game this year without somebody shoving a cap in your hands. (Not mentioned in Lindbergh’s article: Caps are also a great form of free advertising.)

Now, there’s no guarantee that even if this “sabermetric” marketing catches on, it’ll be good for fans: It’s just as likely that teams will start identifying bargains they don’t need to be offering, and eliminating them. Or, it could just mean the end of six-dollar beers. Either way, though, it has the potential to change the economics of sports, so it’s well worth keeping an eye on.