Author: Christopher Lee

  • Limit of 4 or Limit of 8? How anchoring affects the things we buy.

    Consider the following scenario:

    You go to the store to buy soup. You notice that cans of soup are marked down from $.89 to $.79. Below the price is fine print that says “Limit of 4.”. You make your choice and head to the register.

    Now the question is…does the purchase quantity limit (ex. limit of 4) influence how many cans you buy?

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  • What is Consumer Behavior?

    When discussing marketing and my interest in consumer behavior, I am often asked “What is consumer behavior?”. I typically respond with something like “consumer behavior is the study of how consumers behave, why they behave in certain ways, and how they respond differently in various situations”.

    Consumer behavior (also known as consumer psychology) is a fascinating field that digs into the what, why, when, how, and where of marketing. Rather than focus on definitions of consumer behavior,  let’s look at the types of questions one can ask about marketing and consumer behavior.

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  • 3 Sports Business Lessons From NASA’s Curiosity Broadcast

    Tuning in to the NASA live broadcast of the Curiosity mission was both a lesson in space exploration as well as marketing and business for a few reasons:

    1. Simplicity

    I connected to the NASA live stream based on a link going around Twitter and immediately saw the broadcast. No apps. No clicking to authorize my service. No calling my cable company to upgrade my cable. One click and I was watching a live stream of one of the more groundbreaking  space expeditions in our nation’s history. It was a very simple process to watch a historic moment.

    Beyond that, NASA (and others involved) even branded a segment of the flight known as the “7 Minutes of Terror”. I’m not a rocket scientist. I don’t know many aeronautical terms. I do know that “7 Minutes of Terror” sounds like 7 minutes of a space exploration that I should probably be tuned in for though. NASA took a complicated Mars landing process and simplified it into something that may intrigue consumers: “7 Minutes of Terror”.

    2. Social Proof

    Social proof is the idea that people are influenced by the actions of others as they assume it is the recommended behavior for a given situation. The USTREAM feed (as all of their feeds do) showed statistics about the number of people watching. NBC has done that on a few live streams I have seen but not on others (such as the Canada vs. USA soccer match). While some may think this is a bad thing, the NASA site to view photos crashed, but they addressed this on air by explaining there were too many people watching. Similar to the famous infomercial line “if phone lines are busy, please call back again”, it hints that viewing photos (and the broadcast) is the recommended behavior.

    3. Transparency

    The broadcast was surprisingly transparent to the point of live interviews with important members of the Curiosity team and video of the control room. Given the transparency, it led the public to create nicknames for  various people (such as “Mohawk Guy”)  in the control room. The broadcast brought in experts, who were part of the mission, to explain aspects of the mission. Responses weren’t canned, prepared, etc…it was simply raw emotion and excitement for the world to see. There were hugs. There were tears. NASA opened the door to allow the public a glimpse of how the entire process works. While sports broadcasts often show the players, it was essentially the equivalent of a live stream from the dugout, bullpen, general manager suite, and stadium operations room.

    Takeaway 

    One argument is the financial models (NBC paid $1.8 billion for Olympics & Curiosity cost about $2.5 billion) and magnitude of the events (sporting events versus space exploration) are different and thus comparisons aren’t fair. That’s not the point though. The NASA broadcast, which had built in psychological components, could work in sports business too.

    • What if sports organizations simplified the ticket buying or viewing process?
    • What if sports teams shared the number of viewers watching the game or the number of tickets sold in real time?
    • What if teams opened the door just a bit more to allow fans a better glimpse of the sports and team process?

    Let me know what you think in the comments.

  • College Athletics By The Numbers: A Deeper Look at Profitability

    A recent NCAA report stated that only 14 of the 120 athletic programs in the Football Bowl Subdivision made money. The Football Bowl Subdivision (FBS) includes all BCS conferences (PAC 10, SEC, Big 10, Big 12, etc) so odds are your favorite athletic program is losing money.

    12% of college athletic programs are profitable.

    Which college athletic sports are profitable?

    According to the NCAA study, only two sports were reported by any university as being profitable:

    • Football
    • Men’s Basketball

    Let’s take a closer look…

    • Football
      • There is a lot of discussion about football keeping athletic departments alive. Yes, football is one of only two sports (men’s basketball being the other) that ANY university reported as being profitable. At the same time, however, only 57% of football programs reported being profitable.  Thus the other 43% of football programs are still part of the problem.
    • Men’s Basketball
      • As the only other profitable sport that any university reported, men’s basketball is also considered an important aspect of keeping college athletics alive. Once again, however, keep in mind that roughly 57% of men’s basketball programs reported being profitable, so there is a large percentage of men’s basketball programs losing money.

    How do college athletic departments MAKE money?

    Three items account for over 50% of revenues:

    • Ticket Sales (17%)
    • Alumni/booster donations (27%)
    • NCAA/conference distribution (14%)

    How do college athletic departments SPEND money?

    Two items account for over 50% of expenses:

    • Salaries and benefits (32%)
    • Scholarships (Grants In Aid) (25%)

    In case you are curious, here are a few other items as a percentage of total expenses:

    • Facilities maintenance and rental (13%)
    • Team travel (7%)
    • Recruiting (2%)
    • Equipment/uniforms/supplies (3%)
    • Game expenses (4%)

    The median expense per student athlete in 2009 was $76,000.

    How much does a college athletic program cost each university?

    Average assistance that each university gave to the athletic department was $10.2 million.

    How do we improve college athletics moving forward?

    There isn’t an easy answer although simple math tells us that a start would be to reduce costs and increase revenue. As witnessed by Cal’s initial decision to cut five sports, universities are less willing to keep athletic programs alive so it’s time for college athletic programs to be self sustaining.

    Decrease Spending

    While salaries and scholarships aren’t necessarily easy to reduce as they are driven by outside factors (salaries of competing positions, tuition costs, etc), the data indicates its the first place to look in terms of reducing costs. This could come in the form of fewer staff members per department/team, lower salaries for staff members within college athletics, or cutting athletic programs. As someone who has worked in sports business, I recognize sports already has low salaries (particularly lower level positions) but I recognize that in order for college athletics as we know it to continue changes need to be made. In my experience, there are opportunities for college athletics to become more efficient. What if conferences became responsible for marketing individual teams instead of the universities athletic departments? Or media rights were handled at the conference or NCAA level instead of the individual institution? I recognize a large percentage of expenses for salaries are on the field in the form of coaches so perhaps there need to be guidelines for coaching salaries in college athletics? Is it time to re-evaluate the scholarship model? Reduce scholarships? Offer various levels of scholarship based on academic standing, performance on team, etc? .  Cutting expenses is always a tough task full of difficult decisions (see Cal), so I welcome any ideas in the comments.

    Increase Revenue

    The report doesn’t explicitly state what “NCAA and conference distributions” are but presumably its an athletic programs cut of any revenues generated by the NCAA or conference on their behalf (TV, radio, etc). What are some other ways to increase revenue? There is talk that a football playoff would generate significantly more revenue but is that the answer? What about individual conferences forming their own network (similar to Big 10 network)?  Will that generate enough revenue for athletic departments? Can other sports generate significant fan interest? I think the15,896 people who showed up to UC Santa Barbara to watch a college soccer game say yes.

    What do you think? I’ve really enjoyed reading the debates regarding college athletics and cutting sports programs so I welcome any ideas, or comments you have. What are some solutions for college athletics? Is there even a problem?

    Sources:

    NCAA Study: http://www.ncaapublications.com/productdownloads/REV_EXP_2010.pdf

    http://www.themaneater.com/stories/2010/8/31/mu-athletics-one-14-ncaa-programs-turn-profit/

  • NBA Draft and Effects on Playing Time

    I recently came across a study on the NBA and effects on playing time. The study conducted by Berkeley professors Barry Staw and Ha Hoang, analyzed playing time in the 1980’s over a five year span following the NBA draft. Professor Staw analyzed factors including on court performance, trades, injuries and draft position. What did he find?

    “…teams granted more playing time to their most highly DRAFTED players and retained them longer, even after controlling for players’ on court performance, injuries, trade status, and positions played.”

    Where a player was selected in the draft was a “significant predictor” in minutes played over the entire five year span that was studied. In addition the draft position effect was “above and beyond” any effects on player’s performance, injury, or trade status. Put simply, players were given more minutes based on where they were drafted.

    How significant was the effect on minutes played?

    Based on a 24 team league (average used in the study) being picked in the second round resulted in 552 fewer minutes in the following year. That is equivalent to sitting on the bench for 47 extra quarters, or almost 12 games!

    One might argue that increased playing time makes sense in the season immediately following the draft, but draft order continued to influence playing time up to and including a player’s fifth year in the NBA. Not only did draft order effect playing time, but the higher a player was drafted the less likely he was to be traded and the longer his career lasted.

    Pyschological influences

    While the study focuses on escalation of commitment and sunk costs, the psychological phenomenon known as irrational escalation is in play as well.  Irrational escalation occurs when people justify increased investment, based on prior investment, despite new evidence showing that decision was probably wrong.  The NBA study illustrates this principle as players were given more playing time based on their draft order (and contract) even when their performance might not have justified such an action.

    So what does this all mean?

    We often hear management and coaches talking about playing their best five players, or looking at roster changes objectively, but based on this study that isn’t necessarily the case. Whether we realize it or not, management decisions in sports are subject to psychological pulls just like decisions in our own daily lives. Further research and education on the topic can help sports organizations overcome these type of decisions.

    What do you think about draft status impacting playing time? Would you have guessed it influences minutes played even five years later? Does this surprise you?

  • MLB Innings Pitched By Height

    A while back Adam Foster of Project Prospect sent out a tweet wondering how height impacts success and longevity as a pitcher. Adam is focused on minor league baseball prospects and thus was curious how height impacts a pitchers chances of “making it” and how long they last in the major leagues.

    My first instinct was to look at average career innings by height but found the total innings pitched by height to be very interesting.

    6’2″ pitchers have combined to throw more innings than pitchers of any other height. I looked at average career innings pitched by height, but didn’t see any staggering data that would dispute the above graph. Since it can be hard to distinguish relativity in the above graph, I also looked at % of total innings pitched by height.

    Note: Updated chart to visualize the results is coming soon.

    The percentage chart seems to put things in perspective. 92.2% of the innings pitched since 1960 have come from pitchers 6’0″ or above. 92.2%! It is even more interesting when considering that the average male height is 5 foot 9 1/2 inches. 99.3% of total innings pitched have come from pitchers 5’10” or taller.

    What do you think of the results? Why are taller pitchers responsible for more innings in Major League Baseball? Taller pitchers throw with more velocity? Are more physically intimidating on the mound? Let me know what you think in the comments!