Coaching Hot Seat Week 3 – Mack Brown and Lane Kiffen

Periodically, we like to do what we call “Instant Twitter Analyses.”  We do these in situations where consumer opinion is the key to understanding a sports business story.  In the case of “coaches on the hot seat” customer reactions are a critical factor.  While sports are a bit different than most marketing contexts, the basic principle that unhappy customers signal a problematic future remains true.

During this college football season we have been tracking fan base reactions to their coaches.  As we all know, there are two prominent programs (USC and Texas) with coaches in trouble.  The point of today’s post is to show how the Twitterverse has been reacting to these two coaches this season.

In the picture below we see the daily negative and positive posts for these two coaches.  The patterns and levels are remarkably similar.  But it does seem that Brown has a few more defenders at Texas (despite having two losses).   In fact over the first three weeks of the season Brown’s percentage of positive posts is 47.8% while Kiffin’s is 45.7%

This data indicates that in the court of public opinion these coaches are both in about the same shape.  We also suspect that an extended hot streak would save both coaches.  Perhaps the most interesting thing about this data is what it says about each job and fan base.  In the past we have ranked Texas as having the most loyal customer base and Forbes has ranked Texas as the most valuable athletic program.  To add to the Texas advantages, it seems that the fans are also a bit less critical.

 

 

 

Why Texas and Oklahoma State are Ahead of Kansas: The Best Fan Bases in the Big 12

One of the more entertaining aspects of producing the Emory Sports Marketing Analytics blog has been emotional nature of the criticisms that we have received.  Our series ranking fan bases has been particularly provocative.

What does the preceding have to do with the Big Twelve?  Some of our critics claimed that our rankings were “silly” because Kansas was not ranked in the Top Ten, while Oklahoma State and Texas were.   We thought that we would take a bit more time with this post to investigate how we could possibly come to this result.

As a starting point, if you had asked us to name the top fan bases in college basketball before we ran the numbers we would have said (in no particular order) Kentucky, Duke, North Carolina, Kansas and Indiana.  In other words, we would have bravely identified the conventional wisdom.  But our goal at Emory Sports Marketing Analytics is to go beyond the conventional wisdom, and to see what the numbers say.

Our emphasis on financial metrics also leads to some complaints.  This is somewhat odd given that we are covering sports that are clearly run like businesses.  It has been reported that Bill Self’s current deal with Kansas will pay him close to $50 million over ten years.  This suggests to us that Kansas very much views basketball through a financial lens.

Getting back to the conventional wisdom, we believe that Kentucky, Indiana, Kansas and Duke have exceptional fan bases.  However, we are not ready to concede that the passion felt by a Kansas fan exceeds that felt by an Oklahoma State or Texas fan.  Rather than rely on the noise created by fan bases, we examine how fans vote with their dollars.  And more to the point, we try to control for the role of on-court success.  While some may view this as crass, if you were the CEO of Apple or Coca Cola would you rather that your customers were highly loyal and willing to pay premium prices or would you rather that your brand was voted a fan favorite in an Internet poll?  The marketing concept that we are exploring is referred to as customer equity.  The basic idea is a brand’s ultimate source of revenues and profits is its customers.  Now a big caveat to this is that by measuring the value of the customer bases we are not controlling for how good of a job each institution does with managing its customer base.

The preceding list provides our breakdown of the Big Twelve.  Texas leads the way followed by Oklahoma State and then Kansas.  So what drives this result?  Over the last decade Texas has reported the largest basketball revenues in the conference followed by Kansas.  Texas’ advantage in revenue is slightly more than 4%.  More importantly, Texas generated this slightly higher revenue while winning around 5 games less per year than the Jayhawks.  Now one can argue that Texas has unique advantages or that Kansas could be generating more revenue, but our analysis is at least based on solid numbers and our dependent measure (revenue premium based brand equity) is an unambiguous term.

The other surprise was the ranking of Oklahoma State.  In this case, Kansas does produce about 25% more revenue than Oklahoma State.  But the Cowboys generated their revenue while winning about 35% less games per year and no national championships.  Both schools have proud histories and legendary past coaches.  What our analysis gets at is what would happen if both teams performed identically.  What would the environment be like at Gallagher-Iba arena if the Cowboys averaged 30 wins per year for a decade and had numerous trips to the Final Four?

(Note: The study examines 2001 to 2011, thus Nebraska, Colorado, Texas A&M, and Missouri are included in the Big 12)

2013 MLB Competitive Balance Forecast

Since the advent of free agency in the 1970s, baseball fans have feared that competitive balance will decrease, and small market teams will become less competitive.  The logic is that large market teams like the Yankees will be able to acquire the best talent and small market clubs like the Pirates or Royals will be noncompetitive.

We have developed a competitive balance forecast for the 2013 MLB season.  This forecast is based on a statistical model of the relationship between the distribution of payrolls across teams and the amount of competitive balance observed in past seasons.  For the analysis, we defined competitive balance in a variety of ways.  A standard measure for competitive balance in the academic literature is the standard deviation of winning percentages in a given year.  This measure would be minimized if each team achieved a 50% winning rate, and become larger when teams show greater variation in winning rates.

The chart below shows the evolution of the standard deviation of normalized payrolls and the standard deviation of winning percentages.   The correlation between these two measures is .25 and a linear regression model suggests that the relationship between payroll dispersion and winning rate dispersion is non-significant.  However, when the dispersion in winning rates is examined at the division; level we do observe a significant relationship.

 

For our analysis, we focus on the range of winning rates.  For example, if a division winner wins 60% of their games, while the last place team wins 40% of their games, then the range would be 20%.   The reason we like this method is because it is easily translated into the common baseball measure of “games back”.  To predict the levels of competitive balance we use multiple measures of the dispersion or variation in payrolls across clubs.  Based on opening day payrolls, we predict that the AL East will be the least competitive division while the AL West will be the most competitive.

Of course, competitive balance or lack of balance is a mixed bag for fans.  If a fan roots for a high payroll, large market franchise, a lack of competitive balance may generally be a positive as the fan’s preferred franchise (sorry Cubs fans) will tend to win on average.  But for the small market teams, a lack of competitive balance can be a dangerous situation.  For further background on competitive balance and its impact on fan loyalty, the following research paper and NY Times OpEd may be useful.

Customer Equity and Player Diversity in MLB

Yesterday, Major League Baseball’s annual report on the diversity of players was released to the media.  The headline finding was that the percentage of African-American players is just 8.5%.  This percentage is much smaller than the NFL or NBA, and is down from 19% in 1995 and 27% in 1975.*

I found the report to be interesting in several respects.  When we started this blog, we began with a focus on brand equity.  Brand equity is the value of a brand like Coke or Apple.  Brand equity is useful because it is linked to customer loyalty, consumer awareness, and it may decrease consumer price sensitivity.  The issue of the diversity of MLB players brings to mind another class of marketing asset: customer equity.  In brief, customer equity is the value of a firm’s customer relationships.  It makes sense to think of customer relationships as economically valuable assets because customers tend to buy repeatedly, and their behavior is often a function of a firm’s marketing decisions.

I mention the topic of customer equity, because customer acquisition, and therefore customer equity can often be impacted by a brand’s current customers.  For example, Cadillac long suffered from being associated with an older demographic.  I even did some research that looked at how MBA program student demographics affected future student enrollment.

While the MBA student research was executed using sophisticated econometric techniques, at the heart of the research is a concept from sociology called homophily.  This is a simple concept that suggests that people often prefer to be parts of groups that consist of demographically similar members.  Player demographics therefore is a marketing issue, since a lack of African-American players could result in fewer African-American fans.  While the issue of lower percentages of African American players adversely affecting fan interest is a negative example of the aforementioned principle more positive examples also exist.  For example, Ichiro increased interest in the Mariners in Japan, and the Chinese-American community quickly embraced Jeremy Lin.  MLB fears that a lack of African-American players will reduce African-American fans, and consequently the future supply of African-American players.  This type of negative feedback effect could greatly reduce MLB’s customer equity in the African-American segment.

However, if I had to hazard a guess as to why MLB is suffering declining interest in the African-American community, I would identify a different culprit.  My conjecture is that MLB’s reliance on a farm system approach rather than a system where major universities develop talent, is the true  problem.  High school athletes are well aware of the lucrative nature of participating in professional sports, and how players like Lebron, Michael, Cam Newton and RG3 transcend being just athletes, and become brands.  These future professionals also know that stardom can be acquired in college or even high school through AAU basketball, or high profile college football recruiting.  Simply put, major college football and basketball offer opportunities for athletes to become stars at an earlier age!

*Note that there has been some criticism of the report’s methodology.  The major concern seems to be that the percentage provided in years like 1975 included all players of African heritage, while the current number only includes US born African Americans.