Thursday, July 18, 2013

Dodgers Lead MLB In Fan Support / Brand Equity

Thanks to Mr. F for calling this link out, which cites the Emory Goizueta (gesundheit!) Business School in looking at the "brand equity" of sports teams. Within MLB teams, this study found the Los Angeles Dodgers are tied with the Boston Red Sox among MLB teams for having the best home sports fans. But wait, the ranking isn't all positive:

For our MLB brand equity analysis, we use a “Revenue Premium” method. The intuition of this approach is that brand equity adds a premium to team’s revenues that goes beyond what would be expected based only on team quality and market size. To accomplish our analysis, we use a statistical model that predicts team revenues as a function of the team’s winning rates, division finish, market population, payroll, and stadium capacity. We use this model to predict each team’s expected revenue. To measure the quality of the team’s fan or brand equity we compare the forecasted revenue with estimates of actual revenue. The key insight is that when a team achieves revenues that greatly exceed what would be expected based on team performance and market size it is an indication of significant brand equity / fan support. The reported results cover the past 5 seasons worth of data.

Our analysis finds some expected, and some surprising results. We discover that the Red Sox and the Dodgers tie for having the “best” fan bases. These teams are followed by the Cardinals, Giants and Cubs. It is the next team on the list that first raises some eyebrows, as our model rates the struggling Houston Astros as having the 6th best fan base. At the bottom of the list we have the Kansas City Royals, Miami Marlins, Chicago White Sox, Detroit Tigers and the Anaheim Angels. The bottom five are also likely to cause debate and angst among Angels and Tigers supporters.

So why are the struggling Houston Astros rated above the Detroit Tigers? Over the last five years, Detroit has averaged about 2.8 million fans per year compared to about 2.4 million for the Astros. But according to the Team Market Report the Astros have priced their tickets about 12% higher. The end result is that the revenues of the two teams are fairly similar. The key difference is that Detroit’s revenues are driven by a 53% winning rate compared to the Astros rate of about 43%. Based purely on the quality of the clubs and adjusting for market size, we would expect that Detroit’s revenue would far exceed the Astros. The fact that they don’t suggests that the Astros’ have the larger and more resilient fan base. A similar comparison can be made between the Angels and the Dodgers. Over the five years of data examined, the Angels won 56% of their games versus about 52% for the Dodgers. But despite this difference the Dodgers still drew more fans (~ 300k per year) and had much higher ticket prices.

So this study "measures" fan fervor by looking at expected winning percentages versus ticket revenues. And the Dodgers bias positively because they still continue to draw, despite having mediocre winning percentages of late.

I don't think I'm feeling very good about this #1 ranking.


rbnlaw said...

And remember fans, much of that data collected was in the McCourt years, meaning not only are we blindly loyal to our team; we will suffer fools gladly.


Steve Dittmore said...

I'd offer the following comment toward this academic study:

The primary factors which create brand equity (from Aaker, 1991) are: perceived quality (consumer judgment of a product's overall excellence relative to its intended purpose); brand awareness (familiarity of the consumer with a particular brand); brand associations (mental connections a consumer makes with a particular brand); and brand loyalty (ability for a brand to attract consumers and to keep them).

As @rbnlaw notes, brand loyalty appears to be biggest factor in the case of the Dodgers. This is also illustrated through the inelastic demand for tickets based on attendance.

What the authors of this study did (for better or worse), in my opinion, is eliminate the psychological involvement of fans and look merely at numbers. In doing so, they make the assumption that the two are directly and implicitly connected. They overweight market factors, and ignore personal factors. Assumption is large market = greater ability to generate revenue from suites, club seats, higher ticket prices, etc. (as they admit with Astros who charge 12% more than Detroit).

This was fun. Thanks for the post Sax! Today without baseball seems terribly long.

spank said...

P. Ditty

Steve Sax said...

Professor Dittmore, that's why we love ya!

MR.F said...

You're welcome!

Orel said...

Great stuff, Steve. Thanks for the note.

Dusty Baker said...

Woo hoo! We're in first place!