I’m not a big gambler. I’ve been to Vegas a few times, but each time I’ve gone I’ve either lost a little bit or pretty well broke even. By no means is this the result of a sophisticated gambling system; quite the opposite in fact. This is by simply not playing the game.
The reason I don’t gamble all too often is because for me the pain of losing money (and in some cases even the idea of losing money) is greater than the pleasure I get from winning money. Sure I’ve won a few bucks here and there and of course, I wasn’t upset about winning, but when I lost, it stuck with me a lot more.
What I’ve learned recently is that I’m not alone in this feeling. The concept is called loss aversion, which simply means that the benefit gained from a win is less than the pain felt by a loss, and people will generally try harder to avoid losses than to acquire gains. This is not exclusive to money; the concept is universally applicable to anything of perceived value.
The concept of loss aversion is very applicable for marketers trying to encourage their fans to buy tickets early. For teams and events where there isn’t enough demand to create a sell out, having empty seats can be a tough thing to overcome. “Why buy early? I know I can get a ticket the day of.” For the fan in this example, the cost of waiting is less than the benefit of buying early, which results in last minute purchases.
The airline and hotel industries recognize this problem as much as sports & entertainment do. In their cases, both regularly use price to encourage early commitments and purchases. While many people may think that waiting until the last minute will result in lower prices from desperate hotel managers, the opposite is true. Last minute purchases more often than not will come with much higher prices.
For customers who are really interested in buying, price can be a tremendous motivator to purchase. Think of yourself when planning a family vacation. If you know exactly when you’ll be flying and where you’ll be staying, you’re typically better off booking early to take advantage of the price discount. For the airline or hotel, even if this person was going to purchase anyways, having them committed early is much more valuable than the extra dollars lost in discounting (assuming the discount is not too deep). Using price discounts as a way to encourage early ticket purchases is a good first step that Sports & Entertainment organizations can implement, however, there is still more that can be done.
Looking at this challenge from a loss aversion perspective, we know that losses are more powerful than gains. So to encourage a certain behaviour, instead of a price increase, we take something of value away. For example, recently Swiffer ran a promotion with the Toronto Raptors where if you purchased $25 worth of Swiffer product and sent the barcodes in along with a completed form, you would receive one of a limited number of authentic pieces of the original Toronto Raptors court. Being a lifelong Raptors fan and having seen games played on that court back when the team played at the Skydome (now Rogers Centre), I was immediately drawn to this promotion. I bought the product, sent in the barcodes and anxiously waited to see if I would be one of the lucky recipients. Looking back on this experience, I realized that it perfectly illustrates the concept of loss aversion. Because there was a very limited supply of the prizes, and I cared a lot about the prize, it encouraged me to act quickly. The thought of losing out on the prize created the threat of an emotional loss.
The lesson here for marketers of sports & entertainment organizations is that if you can find an item (whether it be a prize or access) that your fans truly care about and want to avoid losing, you can influence behaviour and successfully drive early ticket purchases. You may also find that by applying an emotional loss incentive, that you don’t need to discount price, leading to more revenue. This also allows you to save your price discounts to encourage other behaviours that result in more profit such as buying more tickets, coming to more events etc.
Unfortunately, while the principles behind these strategies are rooted in science, there is no exact science, at least that I’m aware of, on how to apply them. As a marketer, your goal is to understand your fan base as best you can, particularly on what they care about, and then continuously tweak and optimize until you find a winning combination of incentives.