The Buffalo Bisons are a triple A affiliate of the New York Mets-players on this team are one level below the major leagues where salaries can be huge. In the early days of the team's most recent incarnation, sell outs were very common. Filing 20,900 seats was fairly easy in the early 90's when the stadium was still new and the team was a perennial contender. In recent years the selling effort has become more difficult. Typical attendance is about 8,000 per game. (The following information is a fictional, but realistic, account of the sales plan used by the Bisons.)
The VP of Operations, Michael Salamone, wants to design a sales incentive plan that will reinvigorate the fan babe for the Bisons. He recognizes several realities.
1. Three staff members serve as full-time sales agents. They have two major jobs:
a. Sell tickets to games. Because the Bisons had a weak team last year, projections are that it will be difficult to exceed an average of 14, 000 seats no matter what the plan design is. Further, architecture of the stadium makes sales above 12,000 more challenging because the seats are not as desirable. If last year is any indication, fans will buy less expensive seats, then switch to premium seats that are unoccupied after the game begins. For PR reasons, staff look the other way when this occurs, unless late-arriving fans find their seats occupied. The goal for Mike Salamone is to focus on sale of premium seats, thus reducing the "seat shifting" by fans buying standard and bleacher seats. Statistics for last year are as follows:
Type of Seat Cost to Fan Number of these seats Average paid
Occupancy
Premium $12 6,000 1,500
Standard $ 9 13,000 6,000
Bleacher $ 7 1,900 500
b. Sell advertising-Advertising dollars come from placement of product information throughout the stadium, including on billboards, outfield fences, scoreboards, even dugout roofs. The dollar amount sold last year was $908,013.
2. Increases in advertising sales are dependent on team performance. Team performance drives ticket sales. In turn, advertising depends on number of seats sold.
3. The three staff members are heavily dependent in the total administrative team (7 other individuals) for ancillary activities in the selling event (e.g., they sent out brochures, answer phone queries, provide follow-up information after the initial sales contract, etc.) Mike Salamone wants to have a simple plan for advertising sales that rewards the total group yet still motivates the three sales staff.
Questions
Of the above information, what is the most important in your design of a sales incentive plan for the three sales staff? How does this information affect your plan design?
Your book talks about unit rate plans. Which of these types of plan would you use for sales of tickets? Which plan might be appropriate for sales of advertising? Why?
What factors influence the dollar amount you can pay for increases in ticket sales?