Purple Pricing<\/a>\u201d during the 2012-13 men\u2019s basketball season. The ticketing method, a variable pricing strategy best described as a \u201cmodified Dutch auction\u201d system, is now being used as a mechanism to drive ticket revenue for other university athletic departments.<\/p>\n\u201cNorthwestern operated with an archaic ticket pricing system,\u201d NU Athletics Director of Communications Paul Kennedy said via email. \u201cNearly every seat in the venue for every game was sold at the same price point, one that was undervalued for most games and severely undervalued for high-demand events.\u201d<\/p>\n
Solving from within<\/h1>\n
The athletic department stayed within its own university community in attempting to fix the problem. Sandeep Baliga, a professor at Northwestern\u2019s Kellogg School of Management, worked with Jeff Ely, a professor in the NU Economics department, to create an alternative ticket pricing strategy for the athletic department.<\/p>\n
Purple Pricing functions by setting an initial ticket price well above face value. Many fans will purchase tickets at this initial offering rate, while others will wait and respond as the price gradually decreases with game day approaching. Demand on the secondary market is the biggest determiner of just how far these prices will fall, or if they do at all, Baliga said.<\/p>\n
\u201cThey wanted to do something new and we had several proposals for them,\u201d Baliga said. \u201cNorthwestern is a research university which is all about innovation, and the ticket office reflected that. They picked the most innovative one.\u201d<\/p>\n
The final, most critical piece of Baliga and Ely\u2019s strategy: Fans will be reimbursed the difference between whatever they paid for the ticket and the final price. So if a fan immediately buys the $125 ticket and then watches the final price end up at $90, there will be a $35 rebate headed their way.<\/p>\n
\u201cOur solution, from a revenue perspective, works incredibly well for high-demand games,\u201d said Baliga. \u201cHigh demand, limited supply \u2013 that\u2019s where we are going to do really well.\u201d<\/p>\n