OUT OF BOUNDS – The AFL’S Inconsideration

Published by Andrew Parisi – Student ID 216218192

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AFL boss Gillon McLachlan faces pricing issues

“That will be $14.50 thanks,” says the young lad serving me at the snack bar. I’ve taken my son to see his beloved football team at Etihad Stadium and we’ve ordered two pies and a bottle of water to share. I quickly try and do some maths on the meal, but it’s pointless. The answer equals “way too expensive.”

Fair play umpire!

How do they get away with this? Surely this is illegal, right? Short answer is no. According to Competition and Consumer Act 2010, corporations must adhere to strict resale price maintenance for a minimum price offered to the consumer, but there is no legislation on what the maximum should be. The theory is that charging too much will ultimately lessen competition for that item, so it’s in a seller’s best interest to keep prices low.

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But this theory does not seem to benefit the consumer in a place like Etihad Stadium, where exactly the same food outlet with the same product and price is located every 100 metres as you walk around the stadium. There are alternatives to a footy pie, but they are not cheap either. A ‘gourmet’ roast roll is a mere $12.

It’s tradition

 The AFL might celebrate tradition, but their food outlets are on the cutting edge when it comes to pricing. They ignore the traditional supply and demand model where price increases according to demand. There is high demand at an AFL game, with 40,000 people looking for a quick feed, yet the prices never fluctuate at non peak periods. This is because no real competition exists, so lowering prices isn’t a consideration. Yes, we have our $12 gourmet roll over yonder to satisfy any anti-competition issues, but they are more of a luxury alternative than a genuine competitor.

 Holding the man, umpire!

 Generally, marketers will apply pricing considerations based on customer psychology (Iacobucci, 2012). It is merely a prediction of what they think they can get away with, or what the market can sustain. It seems the footy market is stretched to its limit.

 In the recent years, footy fans have expressed their frustration regarding how expensive a family day out at the footy was, with an 11.7% drop in ticket sales in 2014, compared to the previous year.

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Information sourced from The Age

 

The AFL was finally forced to do something about its declining market and introduced some marketing strategies in trying to get families back. This included $2.50 tickets for children and food pricing being reduced for Sunday games, but footy fans were squeezed at the other end of the market.

GIVING IT 110%

 In 2015, the AFL introduced variable pricing for their tickets whereby each club could increase its ticket price based on the projected demand of ticket sales for that game. Price elasticity gives the club the opportunity to increase profit margin where there is increased demand for tickets, particularly with blockbuster games and at smaller ovals such as Adelaide or Perth. It appears the only real variable is for the club’s marketing team to find the upper price boundary before sales start dropping, and set prices just beneath that.

In reality, the AFL made a very small adjustment to win back their 11.7% market drop. The loss leader incentive of cheap tickets for children and cheaper food only applies to ‘family day’ matches on Sundays. No other sporting code comes close to the market saturation the AFL has, so they have no need to lower prices on other game days to discourage competition. Instead, we see higher prices for blockbuster games and footy pie prices that virtually break the bank.

As long as the AFL reigns supreme in Australia, that’s just the cost of being a fan.

References:

http://www.australiancompetitionlaw.org/law/rpm.html

http://ocw.mit.edu/courses/sloan-school-of-management/15-988-system-dynamics-self-study-fall-1998-spring-1999/readings/economics.pdf

https://www.accc.gov.au/business/anti-competitive-behaviour/anti-competitive-agreements

Iacobucci (2012) Marketing Management. 4th edn. South-Western.

http://www.heraldsun.com.au/sport/afl/fans-tell-afl-bosses-how-to-fix-falling-crowd-numbers-at-etihad-stadium-and-mcg-in-2014/story-fni5ezdm-1226924545361

http://www.businessinsider.com.au/pie-wars-now-melbournes-etihad-stadium-is-cutting-food-prices-for-sunday-footy-2015-3

http://www.afl.com.au/news/2016-02-17/afl-says-ticketing-trial-will-be-favourable-to-fans

https://dash.harvard.edu/handle/1/4589708

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