Episode #0108 - Should you charge more for beer at a stadium than a liquor store?

Pricing College Podcast

In today's episode, we want to look at a news article that appeared today, 8 September 2022. I think it almost suggests that more people should listen to price in college because I suppose fundamentally it looks at some of the most very basic pricing thoughts or strategies that I think that anyone in business or even the media should know. So, I think I'll just give a brief intro to it. On a radio station, 2GB in Sydney, the presenter Jim Wilson grilled the pub entrepreneur Justin Haimes on the new Allianz stadiums beer prices and said that they're too expensive because they were more expensive than in the largest bar and discount off license store or bottleshop as they call them in Australia. So I think we just want to look at that and discuss what we can draw from it.

It was an interesting one because I suppose the radio host, Jim Wilson was trying to act as the voice of the customer. In some way was trying to sort of accuse Justin Haimes sort of, like, overpricing the beer at the stadium. In a way overcharging because he knew we had a captive audience that couldn't go anywhere else. And often, in pricing, you hear that sort of that fear, that sort of allegation being cast upon the pricing manager and also the reason for discounting. Oh, we think we're overcharging our customers and therefore, its price overrides in the system and discounts occur and go down, more and more until one asked, “ what is the right price as we undersell offers?” So interesting in that way. They thought it was representing the voice of the customer giving examples that the customers thought the beer and the hot dog were way too expensive. Why was it $9 I think the base price of $9.50 and he was charging $10.20? And how extortionate that was for his beer. In Australia is supposed to be in every man's type of beer. It's the standard drink and he was weighing that is way too much for that the average punter to pay. Especially I suppose in a way that they're paying for the football prices that what they're going to see it's not a cheap night. You can hear the justifications and they're fair. I suppose in response Justin Haimes was like saying “well, the cost of operations for my business to be able to supply the stadium, the production, the staff involved, is not similar to that of Dan Murphy”. It's a different business model. Dan Murphy's is the like a supermarket for sort of fairly standard drinks, very different business model. But what I thought was interesting is that they both resorted to justifying the prices by looking at the cost. Justin Haimes was like applauded for his response there, but I thought it was quite limited. Who cares what his cost of operations is? Should customer care? Surely he should have been justifying the higher prices by the value it brings to the customer, and neither of them went there. I think though, that Jim Wilson, the radio presenter was trying to get, that you shouldn't charge based on willingness to pay. But I don't think he had a thorough understanding of the principles of pricing to be able to say that quite clearly to Justin Haimes. But I just thought it was really interesting how they just both devolved into the age-old oak cost, or different business models a bit limited. So I didn't think it was a great response.

I suppose it highlights a lot of the very low-grade journalism that I suppose Australia has and, and other countries. I think if people are asking dumb questions, you're gonna get dumb answers. I think we've seen that certainly through COVID and over the last number of years. I think society is yeah, it's almost like people are just scoring points with ridiculous questions and you won't get a good answer. There's certainly not going to be any intellectual rigour with these debates. Look, I think clearly, anybody in the right mindset will understand that if you go to a fancy restaurant, if you go to the Ritz Hotel or the fancy hotels like Carlton or fancy hotel names, clearly you're gonna pay more for a drink, a gin and tonic etc than you would in a dive bar. There's cater to different establishments. There's a different value being provided. This new football stadium is being built. I think it's the one in Moorpark that replaced the old city football stadium. And I think clearly like a billion dollars or more spent on this facility. It's to be the best and the brightest and to attract international acts, and international sporting events. To create an atmosphere of the real off-market, a real great night out international standard. I don't know if I agree with the bulldozing of a perfectly fine stadium and rebuilding another one on the same site. But I think they're competing. They're not just competing now with Satan in Sydney or Australia. They're competing with facilities in North America. People to talk about some of these big American football stadiums or the Tottenham Hotspur Stadium in London, where they're trying to attract international events, international concerts. Justin Haimes doesn't run dive bars. He runs the Maryville Chain and they own those upmarket and fancy establishments in Sydney. They're not selling fancy drinks. Is it drinks they're selling or is it an experience? Is it exclusivity? What is the value they're selling? And those are the questions that I suppose you want to look at. The question I suppose you could ask is, Is that the right person to be? Is that the right style and value to be selling drinks? What is a football stadium in theory, whereby traditionally at least football, different versions of football were the everyman sport? That everyone could go bring their kids and have a beer whatever it was a social sizzle you noticed cheap and accessible. Is there an incongruence there that Copiah valid point, but like at the end of the day, once you bring in a fancy of market business, such as that don't expect to get Hungry Jacks or it's not just selling a hotdog at the back of a truck. So, what is the value we're selling? What is the value people are buying? There's a whole number of questions that aren't even being acknowledged that they exist, let alone discussed.

So the stadium itself could have more of a premium pricing strategy. Life in Sydney is good, it's sort of trying to increase it's in a nice area of town. It's very exclusive and they're just trying to align with the city and where it's going in the future. Then you've got the customer, the fans who maybe travel quite a few miles out from suburbs into the city. May have a completely different lifestyle. Don't have that type of spend, but they frequently go to like football, and they're surprised. So there's a dissonance there between his business strategy, their market, and the customer. Have they looked into that segmentation? Or, are they just trying to hope and migrate people into that sort of more premium pricing strategy by just dazzling them with a great shiny new stadium or a large ray of drinks and food that potentially they don't want? They just want the standard. They don't care as much maybe for the more premium lagers and ales. You're right, it could be the choice of vendors, and the business strategy potentially is misaligned with the market. The people that are going are average families. They're thinking it's hard enough to pay for the tickets because those ticket prices are going up, as we've discussed before as well up and down using dynamic pricing. And now on top of this, we've been given this premium pricing strategy for an offer that we don't want. Now, this could be all signs that trying to educate the customer about this new business strategy, or it could be dragging them into it. It's kind of a difficult one to discuss now. Because families are under huge amounts of pressure with interest rates, increasing inflation, food prices increasing and now even leisure prices or just doing something, with your family, everything's just going up. So it might be the wrong timing. But in terms of this particular article, I would have liked to hear the justification for a higher price point is about the value it delivers to customers. The convenience of having a nice beer at the stadium has the option to have a beer and a lovely burger as you sit to see your favourite team play. I mean, for some people, they're willing to pay for it, for others they're not. They'll just bring their flask bottle of water and the sandwiches, I suppose. I mean, that's a segmentation of sorts, but a total disregard for if, let's say, Jim Wilson was speaking on behalf of the customer. Whether it aligned with your business strategy or not or whether you agree with it as a business leader, it doesn't matter. There's an element of truth and untruth in everything that we hear. And it should be recognised that potentially, willingness to pay isn't as high as they thought. So what are they going to do to change that? That'd be an interesting transition plan. Maybe change their assortment, change their range, maybe change the menu, who knows? But hopefully, a radio presenter will ask better questions and maybe speak on behalf of the customer in a more educated fashion.

I'm going to disagree on this I think he answered it in the best way for him. The 2GB is not a shock jock station but as a talkback tends to be a little bit right-wing, tends to be popular, and tends to know at all journalists want to who have a certain core audience who likes to complain about the world. Again, that's a little bit that's just my personal views. There's some good stuff on it too, from time to time. But realistically, if you're trying to hold yourself up, Jim Wilson, as the populace, the everyman that champions of the people, like I don't know if Haimes coming on and talking about the value. The listeners on that show probably aren't his audience. They're probably not the people who will be buying drinks on Saturday night at the nightclub or one of these other bars. And so I suppose it's a political protect yourself. Maybe writers to defend themselves. He's not there to educate because clearly, that's not something he can do. He clearly understands value, he is doing very well and understands the value of hospitality. You know, is that the argument of the discussion that this show wants to have? I think you're probably better off arguing along these lines. You're not going to sell any more products, so I think it's better to get out of that ambush by playing the game that they want you to play. Fair enough he is completely legitimate costs would be infinitely different. They're not even chalk and cheese. It's just a completely different life form from running quite a bit of supermarket for alcohol versus a fancy place that sells drinks for football games and concerts. So his point is completely valid. I think he clearly understands the value of stuff. I think he clearly understands segmenting his market. I think those are sort of my views on it. I don't think just sort of highlights a little bit of like some of the common in some certainly in businesses that people think everyone thinks they have a pricing view, and this is what happens, people think they know everything about pricing, when in some ways that don't even know the first thing. You have to get that lightbulb moment where you can move this person from. They want is very uneducated communication to something that's starting to move them along the line to be educated on the topic that is an expert environment. But again, I say who's running the multimillion-dollar business as Jim Wilson or is it Justin hammers?

I suppose it can be a bit typical sort of response that we hear in boardrooms all the time. Like, if you're going to talk to customers, you're going to appeal to them and make them think differently, especially if you've got a different business strategy than using the old my cost structure versus your cost structure leads to that. I'm just thinking about procurement here. It's like, “oh we think your prices are too high or show me your costs”. Okay, my business model is completely different. So I've got a different cost structure so I will show you. Even that was the devolution of the conversation. He was going to show the radio presenter what it was like to run a business in a stadium. I mean, there's like opened up costings. Again, it's a bit tedious. I mean, I actually would like to change the conversation, and break it up a bit. Tell us what is the value here. What are the benefits we're gonna get? Re-educate me on something positive, like, yeah, I want to know why. It's great to go out and have that extra good experience. You tell me you're gonna give me an even better experience. Well, great justify that but that's not only justification is a good marketing opportunity. It just removes the stale sort of conversation around costs. And going back to that it just makes the experience the same old. So actually, we're talking about experience in the stadium. It's all so the price is based on your experience as a business owner, implementing and delivering this service to me I don't care I want this to be about me. I'm willing to pay a higher price if you're telling me that it's going to be exceptional. Is it exceptional? So I think I disagree with you on this one. I think any opportunity is a great opportunity to market and especially based on value because it's always positive. If it's not positive, then you've got something to worry about. And if you're not going to talk about it, the fans will find out and the customers will find out soon enough.