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Flevy Management Insights Case Study
Pricing Strategy Audit for Spectator Sports Organization

There are countless scenarios that require Audit Management. Fortune 500 companies typically bring on global consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture, or boutique consulting firms specializing in Audit Management to thoroughly analyze their unique business challenges and competitive situations. These firms provide strategic recommendations based on consulting frameworks, subject matter expertise, benchmark data, KPIs, best practices, and other tools developed from past client work. We followed this management consulting approach for this case study.

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Consider this scenario: A leading spectator sports organization is confronting a critical strategic challenge related to audit management of its pricing strategy.

The organization has observed a 20% decline in ticket sales and a 15% drop in merchandise revenue over the past two years, reflecting external pressures such as increased competition and changing consumer preferences. Internally, inefficiencies in pricing strategy and lack of dynamic pricing mechanisms are prevalent. The primary strategic objective is to overhaul its pricing strategy to enhance revenue streams and fan engagement.

This spectator sports organization is witnessing significant challenges in sustaining and growing its revenue base. Initial analysis suggests that the core issues may stem from outdated pricing models and a failure to effectively segment and target its diverse fan base. As digital platforms transform how fans engage with sports, the organization's static pricing strategy appears increasingly misaligned with market expectations and competitive realities.

External Analysis

  • Internal Rivalry: High internal rivalry exists due to the increasing number of entertainment alternatives available to consumers, including digital and interactive platforms.
  • Supplier Power: Moderate, as the organization relies on a limited number of vendors for merchandise, but has several options for ticket sales platforms.
  • Buyer Power: High, with fans having numerous entertainment alternatives and displaying sensitivity to ticket and merchandise pricing.
  • Threat of New Entrants: Low, given the high barriers to entry in establishing a new spectator sports organization.
  • Threat of Substitutes: High, due to the plethora of entertainment options, including streaming services and e-sports.

Emerging trends in the spectator sports industry include the rise of e-sports, increased fan engagement through digital platforms, and a shift towards experiential consumption. These dynamics suggest major changes in industry dynamics, including:

  • Increased fan demand for interactive and engaging experiences, offering opportunities to enhance live events but risking further declines in traditional viewership and attendance.
  • The growth of e-sports and digital platforms as substitutes, presenting both a challenge to traditional revenue models and an opportunity for diversification.
  • Changing consumer spending habits towards experiences, indicating potential for premium pricing strategies on exclusive or enhanced experiences.

The STEEPLE analysis highlights significant technological, social, and economic factors influencing the industry. Technological advancements in streaming and digital engagement platforms are reshaping fan expectations, while economic uncertainties could affect discretionary spending on entertainment. Social trends towards personalized and interactive experiences suggest the need for strategic repositioning.

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Internal Assessment

The organization possesses a robust brand and loyal fan base but struggles with leveraging its assets to meet evolving market demands. Its strengths include a strong brand presence and a dedicated fan base. However, weaknesses in adapting to digital trends and developing dynamic pricing models are evident.

SWOT Analysis

Strengths include brand loyalty and a historical legacy in the sports community. Opportunities lie in leveraging digital platforms for enhanced fan engagement and adopting dynamic pricing to capitalize on high-demand events. Weaknesses are seen in the current static pricing model and slow adoption of digital transformation. Threats encompass the rising popularity of e-sports and alternative entertainment options, along with fans' sensitivity to pricing.

Gap Analysis

The Gap Analysis reveals significant discrepancies between the organization's current pricing strategies and the dynamic, segmented approaches adopted by leading competitors. This gap extends to digital engagement, where there is a clear opportunity to utilize data analytics for more personalized fan experiences and pricing models. Bridging these gaps is critical for sustaining competitiveness and growth.

Digital Transformation Analysis

The Digital Transformation Analysis emphasizes the urgent need for the organization to integrate advanced analytics and AI to inform its pricing strategy and fan engagement efforts. Currently, the utilization of digital tools is suboptimal, hindering the organization's ability to dynamically price tickets and merchandise or to offer personalized fan experiences.

Learn more about Digital Transformation Pricing Strategy Data Analytics

Strategic Initiatives

  • Comprehensive Pricing Strategy Audit and Revamp: This initiative involves a thorough audit of the current pricing strategy, followed by the implementation of dynamic and segmented pricing models. The goal is to enhance revenue while maintaining fan engagement and accessibility. This will create value by better aligning prices with market demand and fan profiles. Resources required include market research, data analytics platforms, and consulting services for best practices in dynamic pricing.
  • Digital Engagement and Fan Experience Enhancement: Launch a platform for personalized fan engagement leveraging AI and data analytics. This initiative aims to deepen fan loyalty and open new revenue streams through targeted offerings. The value creation lies in increased fan spending and engagement. Significant investments in digital infrastructure and talent acquisition for data science and digital marketing are needed.
  • Audit Management Process Improvement: Implement a continuous audit mechanism for real-time monitoring and adjustment of pricing strategies. This will ensure the organization's pricing remains competitive and aligned with market dynamics. The value comes from the agility in responding to market and competitive changes, requiring investments in audit software and training for internal audit teams.

Learn more about Process Improvement Market Research Value Creation

Audit Management Implementation KPIs

KPIS are crucial throughout the implementation process. They provide quantifiable checkpoints to validate the alignment of operational activities with our strategic goals, ensuring that execution is not just activity-driven, but results-oriented. Further, these KPIs act as early indicators of progress or deviation, enabling agile decision-making and course correction if needed.

A stand can be made against invasion by an army. No stand can be made against invasion by an idea.
     – Victor Hugo

  • Revenue Growth from Ticket Sales: An increase in revenue from ticket sales will indicate the success of the new pricing strategy.
  • Fan Engagement Metrics: Increased social media interactions and app usage rates will reflect the effectiveness of digital engagement initiatives.
  • Audit Efficiency: Reduction in time taken to adjust pricing in response to market changes will measure the effectiveness of the improved audit management processes.

These KPIs provide insights into the effectiveness of strategic initiatives in driving both top-line growth and deeper fan engagement. They also reflect the organization's agility in adapting to market dynamics and evolving consumer preferences.

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Stakeholder Management

Successful implementation of strategic initiatives depends on the active involvement and support of key stakeholders, including the marketing team, digital transformation unit, pricing strategy consultants, and the fan community.

  • Marketing Team: Responsible for promoting new pricing strategies and fan engagement platforms.
  • Digital Transformation Unit: Leads the development and implementation of digital engagement initiatives.
  • Pricing Strategy Consultants: Provide expertise in audit and dynamic pricing model development.
  • Fan Community: Their feedback is crucial for refining fan engagement strategies and pricing models.
  • Internal Audit Team: Ensures continuous monitoring and adjustment of pricing strategies.
Stakeholder GroupsRACI
Marketing Team
Digital Transformation Unit
Pricing Strategy Consultants
Fan Community
Internal Audit Team

We've only identified the primary stakeholder groups above. There are also participants and groups involved for various activities in each of the strategic initiatives.

Learn more about Stakeholder Management Change Management Focus Interviewing Workshops Supplier Management

Audit Management Best Practices

To improve the effectiveness of implementation, we can leverage best practice documents in Audit Management. These resources below were developed by management consulting firms and Audit Management subject matter experts.

Audit Management Deliverables

These are a selection of deliverables across all the strategic initiatives.

  • Dynamic Pricing Strategy Framework (PPT)
  • Fan Engagement Digital Transformation Roadmap (PPT)
  • Audit Management Improvement Plan (PPT)
  • Market Segmentation and Fan Profile Analysis (Excel)
  • Revenue Impact Forecast Model (Excel)

Explore more Audit Management deliverables

Comprehensive Pricing Strategy Audit and Revamp

The implementation team utilized the Value-Based Pricing framework to guide the overhaul of the organization's pricing strategy. Value-Based Pricing, which focuses on determining the perceived value of a product or service to the customer rather than historical costs, proved invaluable for this initiative. It enabled the organization to align ticket and merchandise prices more closely with the value fans perceive in attending games or purchasing products. The team embarked on the following steps:

  • Conducted extensive market research to understand the factors contributing to fans' perceived value of attending live games versus alternative entertainment options.
  • Segmented the fan base into distinct groups based on their value perceptions and willingness to pay for various experiences and merchandise.
  • Adjusted ticket pricing strategies to reflect the value different fan segments placed on game-day experiences, including premium pricing for high-demand matches and personalized merchandise offers.

Additionally, the Economic Value to the Customer (EVC) model was employed to further refine the pricing strategy. This model helped the organization quantify the economic value of its offerings to fans by comparing them with the next best alternative. The steps taken included:

  • Identifying and quantifying the unique benefits and costs associated with attending live games versus other forms of entertainment.
  • Establishing a price point that reflects the additional value provided by these unique benefits while ensuring competitiveness.

The results of implementing these frameworks were significant. The organization witnessed a 25% increase in ticket sales revenue within the first year post-revamp, alongside a 15% increase in merchandise sales. This success was attributed to the more nuanced understanding and application of value-based and economic value pricing strategies, which resonated well with the diverse fan base.

Digital Engagement and Fan Experience Enhancement

For the digital engagement initiative, the team applied the Customer Journey Mapping framework. This framework was instrumental in visualizing the complete journey a fan takes from initial interest to post-event engagement, highlighting opportunities to enhance the fan experience at each touchpoint. By adopting this approach, the organization was able to:

  • Map out the end-to-end fan journey across digital and physical touchpoints, identifying critical moments of engagement and potential friction points.
  • Develop targeted digital content and engagement strategies for each stage of the journey, designed to enhance the fan experience and encourage deeper interaction with the brand.

The Jobs to be Done (JTBD) framework complemented the Customer Journey Mapping by focusing on the underlying needs and goals that drive fans to engage with the organization. The implementation process involved:

  • Interviewing fans to uncover the 'jobs' they hire the organization to do for them, such as providing an exciting day out or fostering a sense of community.
  • Designing digital engagement solutions tailored to these jobs, ensuring that every interaction added value and strengthened the fan's connection to the sport.

The combination of Customer Journey Mapping and JTBD frameworks significantly improved fan engagement metrics, with a reported 40% increase in digital platform interactions and a 30% rise in fan satisfaction scores. These frameworks helped the organization to not only understand but also effectively meet the evolving needs and expectations of its fans.

Learn more about Customer Journey Customer Journey Mapping

Audit Management Process Improvement

The organization adopted the Continuous Auditing and Continuous Monitoring (CACM) framework for enhancing its audit management processes. CACM allowed for the real-time assessment of risks and controls, making it an ideal choice for dynamically adjusting pricing strategies in response to market changes. The steps taken included:

  • Implementing real-time data analytics tools to monitor ticket sales, fan engagement, and market trends continuously.
  • Establishing thresholds that triggered automatic reviews of pricing strategies whenever significant deviations from expected performance were detected.

In parallel, the Risk Management Framework (RMF) was applied to systematically identify, assess, and manage the pricing strategy's risks. This involved:

  • Conducting a comprehensive risk assessment focused on the pricing strategy, identifying potential internal and external threats to revenue goals.
  • Developing mitigation strategies for identified risks, including contingency plans for rapid response to unforeseen market changes.

The results from implementing the CACM and RMF were transformative, leading to a more agile and responsive pricing strategy. Revenue volatility was reduced by 30%, and the organization was better positioned to capitalize on market opportunities, demonstrating the effectiveness of these frameworks in supporting dynamic and risk-aware pricing strategies.

Learn more about Risk Management Agile Audit Management

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Key Findings and Results

Here is a summary of the key results of this case study:

  • Increased ticket sales revenue by 25% within the first year post-revamp, leveraging Value-Based Pricing and Economic Value to the Customer (EVC) models.
  • Boosted merchandise sales by 15%, attributed to adjusted pricing strategies that resonated with diverse fan segments.
  • Achieved a 40% increase in digital platform interactions and a 30% rise in fan satisfaction scores through the implementation of Customer Journey Mapping and Jobs to be Done (JTBD) frameworks.
  • Reduced revenue volatility by 30% with the adoption of Continuous Auditing and Continuous Monitoring (CACM) and Risk Management Framework (RMF), enhancing pricing strategy agility.

The strategic initiatives undertaken by the organization have yielded significant positive outcomes, particularly in terms of revenue growth from ticket and merchandise sales, enhanced fan engagement, and reduced revenue volatility. The successful application of Value-Based Pricing and EVC models demonstrates a deep understanding of the organization's value proposition to its fans, leading to a more effective pricing strategy. Similarly, the use of Customer Journey Mapping and JTBD frameworks has evidently improved fan engagement and satisfaction, indicating a well-executed digital transformation strategy.

However, the results also highlight areas for improvement. While revenue and engagement metrics have improved, the report does not fully address whether these increases have translated into long-term fan loyalty or how they compare to industry benchmarks. Additionally, the reduction in revenue volatility, while impressive, suggests that there may still be underlying issues in predicting market trends and fan responses. An alternative strategy could have included more aggressive investment in predictive analytics and machine learning technologies to further refine pricing and engagement strategies based on real-time data and trend analysis.

Given the results and areas for improvement, the recommended next steps include: further investment in advanced analytics and AI to enhance predictive capabilities for pricing and fan engagement; conducting a comparative analysis with industry benchmarks to identify additional areas of opportunity; and developing a long-term fan loyalty measurement framework to assess the impact of current strategies on fan retention and advocacy. These steps will ensure that the organization not only maintains its current growth trajectory but also builds a more resilient and fan-centric business model for the future.

Source: Pricing Strategy Audit for Spectator Sports Organization, Flevy Management Insights, 2024

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