The Journal of Applied Business Research Third Quarter 2008 Volume 24, Number 3 - PDF

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The Effect Of Promotions On Attendance At Major League Baseball Games Anthony G. Barilla, Georgia Southern University Kathleen Gruben, Georgia Southern University William Levernier, Georgia Southern University
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The Effect Of Promotions On Attendance At Major League Baseball Games Anthony G. Barilla, Georgia Southern University Kathleen Gruben, Georgia Southern University William Levernier, Georgia Southern University ABSTRACT The determinants of attendance at professional sporting events come from a variety of teamspecific, game-specific, and stadium-specific factors. Using data from the 2,431 major league baseball games played during the 2005 season, this study employs a multivariate regression model to determine the effect that the previously mentioned factors have on game attendance. The focus of the study is on the effect that promotions, such as product giveaways, have on attendance. The findings of this study indicate that having a promotion at a game increases attendance by about 1,532 fans. The findings also indicate that both the timing of a promotion and the type of promotion is important. Specifically, promotions held on weekends have a much smaller impact on attendance than promotions held during the week, with promotions held on Friday or Sunday having a particularly small effect. In terms of the type of promotion, this study finds that bobblehead giveaways have by far the largest impact on attendance and that several types of giveaways actually have no effect on attendance. 1. INTRODUCTION T he ultimate baseball-related objective of a major league baseball (MLB) team is to advance to the post-season playoffs and win the World Series, but it also has the financial objective of earning an economic profit for its owners. A major league team has several potential revenue sources, such as advertising within the stadium, concession leasing, sponsorships (i.e. naming the stadium), radio and television contracts, and product licensing. The largest source of revenue for most teams, however, is revenue derived from home game attendance. Game attendees purchase tickets for admission into the stadium, but they frequently spend additional money to park their cars in a team-owned parking lot, buy food in concession stands, and purchase souvenirs from vendors inside the stadium. As a result, teams that are more successful at garnering attendance are more likely to earn a larger profit than teams that are less successful at attracting fans to their games. Major league baseball is different than other professional sports, like football, basketball, hockey, and automobile racing, in two important aspects: event status and seasonality. Because baseball teams play a large number of home games (81), fans are less likely to consider each game an event than a NASCAR race or National Football League (NFL) game. Communities that host NASCAR races typically host only one or two race weekends per year. A city that is home to an NFL football team hosts only eight regular-season games per year. NASCAR s or NFL s event status is expected to positively affect attendance at each function. Football fans tend to spend many hours at the stadium tailgating before and after the game. NASCAR is an even larger event because it is a multi-day function where fans set-up campsites at the track and attend qualifying rounds and practices. In addition, the Sunday Nextel Cup race is typically preceded by a Busch Series race on Saturday and a Craftsman Truck Series race on Friday evening. Seasonality is also assumed to have a stifling effect on MLB attendance. Baseball s season, which begins in early April and ends in early October, is longer than most sports and occurs during both warm weather and cool weather months. Because much of the baseball season occurs during the warm weather months, this creates a situation in which many substitute activities compete for fans attention. Although National Hockey League (NHL) 1 and National Basketball Association (NBA) teams also play a relatively large number of home games (approximately 40) during their seasons, much of their seasons occur in the late fall and winter when the weather is not as conducive to outdoor activities. As a result, the availability of substitute activities is expected to have a larger depressing effect on attendance at baseball games than at basketball and hockey games. To overcome the diminishing effect of non-event status and seasonality, many MLB teams use promotions and promotional products as marketing tools to attract a consistent stream of fans to home games throughout the season. These tools involve offering incentives to attend a game. Examples include entertaining the fans with firework shows and concerts or providing product giveaways, where fans attending the game receive items such as baseball cards, bobbleheads, caps, shirts, or magnetic calendars. Using promotions to attract attendees originated many years ago. One of the most imaginative promoters in the history of baseball was the late Bill Veeck who, at various times, owned three different major league teams: the St. Louis Browns, the Cleveland Indians, and the Chicago White Sox. In the early 1940s he owned a minor league team, the now defunct Milwaukee Brewers that played in the old American Association. Veeck, a true marketing genius, did almost anything to get fans in the seats (Brewster, 2004). As an owner/promoter, Veeck drew 2.6 million fans to Cleveland Indians games in 1948, the most in the major leagues that year. The New York Yankees were the only other team to draw at least 2 million fans in 1948 (Baseball-reference.com). As an owner/promoter, he gave away live pigs, beer, cases of food; he put on fireworks displays, staged weddings at home plate, and played morning games for wartime swing shift workers (BaseballLibrary.com). Although baseball s promotional practices have existed for many years and have presumably made a difference on attendance, few studies have heretofore focused on the effect of promotions on attendance. This paper will fulfill this void through its two-fold purpose: 1) To determine which factors affect attendance at major league baseball games; and 2) To determine the strength of the effects. While many factors are likely to affect game attendance, the primary focus of this study is to determine the effect that game-day promotions have on attendance. The two issues are examined using a dataset containing information from the 2,431 regular-season games played during the 2005 MLB season. Because many factors beyond promotions impact attendance, qualitative and quantitative variables are used to measure a wide variety of factors. The remainder of the paper is organized as follows. In the next section the economic and marketing literature related to explaining attendance at major league baseball games and at other professional sporting events is discussed. In Section 3 the data and the development of the multivariate regression models is explained. In Section 4 reports and discusses the regression results. Section 5 provides the promotion implications of the regressions and makes suggestions for marketing managers and other officials involved in planning and scheduling promotions. In the final section the findings are summarized and concluding remarks are offered. 2. THE LITERATURE REVIEW Three approaches have been used in previous literature to estimate the effect that various factors have on attendance at professional sports activities. Some researches used attendance at individual games as the unit of observation (Boyd and Krehbiel, 2003; Bruggink and Eaton, 1996; Burdekin and Idson, 1991; Butler, 2002; McDonald and Rascher, 2000; Paul, 2003; and Price and Sen, 2003); others used average attendance per game for a season over several seasons or over several teams as the unit of observation (Coffin, 1996; Demmert, 1973; Kahane and Shmanske, 1997; Leadley and Zygmont, 2005; Noll, 1974; Pan, et. al., 1999; Rivers and DeSchriver, 2002; Schmidt and Berri, 2001 and 2002; Winfree, et. al., 2004; and Zygmont and Leadley, 2005); and, some used total league attendance over many years as the unit of observation (Schmidt and Berri, 2002). Whitney (1988) asserted that baseball fans tend to view individual games in isolation from other games during the season. If this assertion is correct, then each individual game can be viewed as distinct from other games played by the same team. As such, each game can be legitimately treated as a separate observation. Strikes and lockouts, such as the five strikes in 1972, 1980, 1981, 1985, and and three lockouts in 1973, 1976, and 1990, are likely to affect attendance. Winfree, et. al. (2004) found that in the year of a strike 2 attendance is lower than it would have been in the absence of a strike. Coates and Harrison (2005) reported that the 1972 and 1981 strikes each resulted in a negative impact of 10 to 12 percent; whereas, the strike caused an approximate 24 percent attendance reduction. Their study further revealed that the work stoppages in 1973, 1976, 1980, 1985, and 1990 reduced attendance between three and seven percent. Coates and Harrison also found, similar to Schmidt and Berri (2002), the effect of strikes on attendance has historically disappeared in the season following the strike. Another major determinant of attendance is a team s win-loss record. Those teams with winning records, especially those that win championships, are generally thought to attract more fans than teams with losing records. Scully (1974) and Medoff (1976) reported that winning percentage was positively related to attendance and a team s revenue. Numerous other studies (McDonald and Rascher, 2000; Pan, et. al., 1999; Quirk and El-Hodiri, 1974; Schmidt and Berri, 2001; Winfree, et. al., 2004; and Zygmont and Leadley, 2005) have also found a positive relationship between attendance and the win percentage (or lagged win percentage) of MLB teams. Burdekin and Idson (1991) and Leadley and Zygmont (2005) had a similar finding for NBA teams. Both Demmert (1973) and Noll (1974) reported a positive relationship between attendance and past championships and a negative relationship between attendance and games trailing the division leader. Whitney (1988) reported that winning and being a champion are not interchangeable. In other words, attendance depends more on competitive performance and perceived championship potential than on actually winning a championship. Because of the potential increased sales tax revenues, the recent trend of cities is to lure teams into their areas by building new stadiums. Coates and Humphreys (2005) discovered that new baseball stadiums built between 1969 and 2001 generate an average of 2,500,794 in additional tickets sales over the first eight seasons. They refer to these increases in ticket sales as a novelty effect, which diminishes after eight years. Quirk and Fort (1997) also examined the novelty effect and discovered a 62 percent increase in attendance during the first five years of a new stadium s life. Zygmont and Leadley (2005) and Leadley and Zygmont (2005) also found that new stadiums or new arenas generate additional attendance at MLB and NBA games, respectively. The results of their studies indicated that the positive effect of a new stadium lasts about 15 years in MLB and the positive effect of a new arena lasts about eight years in the NBA. Rivers and DeSchriver (2002) examined the attendance effect in MLB of a new stadium and one that is between two and five years old. The researchers determined that the effects in both situations are positive, with the first effect being much stronger than the second. McDonald and Rascher (2000) examined the effect of a stadium whose age is ten years or less and found a positive effect on attendance. Explanatory variables in past studies have included stadium capacity and other stadium characteristics. Zygmont and Leadley (2005) found that games played in multi-purpose stadiums had lower attendance than games played in baseball-only stadiums, ceteris paribus, and Rivers and DeSchriver (2002) found that stadiums with artificial playing surfaces draw fewer attendees than ones with grass fields. In examining the effect of a stadium s capacity on attendance, Pan, et. al. (1999), found that the attendance/capacity ratio was negatively affected by a stadium s capacity, while Coates and Harrison (2005) and McDonald and Rascher (2000) found that a stadium s capacity had a statistically insignificant effect on attendance. The effect of several game-specific factors, such as the weather, month, and day of the week have also been examined for their effect on attendance. Boyd and Krehbiel (2003), McDonald and Rascher (2000), and Rivers and DeShriver (2002) all found that attendance at major league baseball games is higher for weekend games than weekday games, and that attendance is higher for warm weather games than for cool weather games. McDonald and Rascher (2000) also found that attendance is higher for a team s opening day than for its other games, ceteris paribus. For the NHL, Paul (2003) found that attendance is higher for weekend games than weekday games. Additionally, he found that attendance is higher on opening night than for the remaining games, that it is higher for late season games than for mid-season games, and that it is lower for early season games than it is for mid-season games. Some studies have found that variation in game-level attendance is based partially on competition type, intra- or inter-league and if the game is played with a designated hitter. 1 Evidence indicates that games involving two traditional rivals or two teams from the same division positively affect attendance at MLB or NHL games (Boyd 3 and Krehbiel, 2003; McDonald and Rascher, 2000; and Paul, 2003). Results of studies about which league attracts more fans for intra-league games are contradictory. Domazlicky and Kerr (1990) reported that the American League has better attendance than the National League because of the designated hitter rule. However, McDonald and Rascher (2000) found evidence that when other relevant factors are controlled, attendance at American League games is lower than attendance at National League games. After examining the situation by controlling the day of the week a game is played, Butler (2002) found that inter-league games during the 1999 season had a seven percent higher attendance than intra-league games. The increases were highly dependent on the opposing team. Fan discrimination, or fan preferences for or against players of certain races or ethnic backgrounds, may also affect attendance. McDonald and Rascher (2000), Scully (1974), and Krautmann (1999) all found that the starting pitcher s race influenced attendance at MLB games. Similar results have been found in other sports related areas. Burdekin and Idson s 1991 study of NBA attendance during the through the seasons indicated that a team s racial composition affected its season attendance. In studies of the baseball card market, Nardinelli and Simon (1990) and Anderson and LaCroix (1991) both found evidence that the cards of non-white players sell for less than the cards of white players of comparable abilities. Promotions at baseball games are also likely to affect attendance. McDonald and Rascher (2000) examined the effect of promotions on attendance at major league baseball games. They based their analysis on the home games of six teams during the 1999 season by using three categories of promotions, price discounts, giveaways, and special features. Their findings indicated that promotions have a positive impact on attendance, but the effectiveness varies by promotion category and by team. More specifically, weekend promotions are relatively ineffective compared to weekday promotions, and that promotions at games against rivals are relatively ineffective compared to games against non-rivals. The analysis was based their analysis on the home games of 19 teams during the 1996 season. To account for the type of promotion, a variable that measures the cost of the promotion was included as a proxy for the value of the promotion. They found that attendance at games having a promotion is higher than at games without a promotion and the increase is positively related to the value of the promotion. 3. THE DATA AND THE REGRESSION MODEL The intent of this paper is to develop a model that estimates attendance at individual games, regardless of the particular roles that demand and supply components play in the determination of seasonal attendance. The factors that factors affect attendance at MLB games along with their relative strengths will be determined. The model developed in this section is not used for the purpose of estimating a demand equation for attendance, rather it focuses on the effect that game-day promotions have on attendance. The basic regression model is: (1) Attend i = α + β X i + ε i. Attend i is a vector measuring the number of persons attending the i th game, X i is an independent vector of variables for the i th game hypothesized to affect game attendance, and ε i is an error term for the i th game. The α and β terms represent the intercept and slopes, respectively. The regression is estimated with ordinary least squares 2 using data from the 2,431 major league games played during the 2005 season. 3 Table 1 defines all explanatory variables in the model. Four categories of independent variables are included in the model: 1) variables related to characteristics of the home and visiting teams; 2) categorical variables related to characteristics of the game, such as weather conditions, day of the week, and whether the game is played at night or during the day; 3) categorical variables related to the ethnic background of the home team s announced starting pitcher; and, 4) categorical variables related to the type of promotion, if any, at a particular game. 4 Table 2 lists the promotion categories, which are based on the Promotional Products Association International (PPAI) classifications. Several smaller categories are combined into a single group to reduce the number of promotional variables to a manageable number. 4 Table 1 The Independent Variables and Their Definitions Capacity HTPayroll HT04Attn VTRdAttn D_RainCld D_Cold D_InterLg D_SmeDiv D_Holiday D_SpecDay D_Saturday D_FriSun D_PreMem D_Summer D_Day D_Dome D_Outdoor D_HTSPH D_HTSPA D_HTSPNW D_Promo D_BobHead D_Autogrf D_BBR D_FigSta D_Poster D_Cards D_Textile D_Wearable D_SpGds D_Memorab D_ProOthr Variables Related to Characteristics of the Home and Visiting Teams the capacity attendance of the stadium where the game was played the opening day player payroll of the home team, in millions of dollars the 2004 average attendance of the home team the 2005 average road attendance of the visiting team Categorical Variables Related to Game Characteristics (weather, day, month, etc.) equals 1 if the weather conditions at the game are rain, drizzle, cloudy, or overcast; 0 otherwise equals 1 if the temperature at the game is below 55 degrees; 0 otherwise equals 1 if the game is an inter-league game; 0 otherwise equals 1 if the game is involves two teams from the same division; 0 otherwise equals 1 if the game is played on Memorial Day, Independence Day, or Labor Day; 0 otherwise equals 1 if the game was the first home game of the season, the last home game of the season, played on Mother s Day, played on Father s Day, part of a single-admission double header, or played on September 11; 0 otherwise equals 1 if the game is played on Saturday; 0 otherwise equals 1 if the game is played on a Friday or Sunday; 0 otherwise equals 1 if the game is played prior to Memorial Day; 0 otherwise equals 1 if the game is played in between Memorial Day and Labor Day, inclusive; 0 otherwise equals 1 if the game is a day game; 0 otherwise equals 1 if the game is played in a domed stadium; 0 otherwise equals 1 if the game is played in an outdoor stadium that lacks the ability to close the roof; 0 otherwise Categorical Variables Related to the Home Team Starting Pitcher s Race equals 1 if the home t
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