Pricing in Sport Marketing Chapter 8

OBJECTIVES To understand the importance of price and identify price-setting strategies Understand the importance of value in setting a price Identify the steps in setting the price for a product Recognize key issues that can affect pricing in sports

PRICE Price: What is it? Price in Marketing: It’s the amount of money or goods for which a thing is bought or sold. Price in Marketing: Consider the costs of manufacturing, customer’s reaction, perceived value and discounts and allowances

PRICE IN MARKETING Pricing Strategies: Cost oriented price setting Experience curve price setting Target return price setting Leader and bait price setting Psychological price setting Odd-even price setting

PRICE IN MARKETING Pricing Strategies: Price lining Demand-backward price setting Prestige price setting Full-line price setting Complementary product price setting Product bundling price setting

PRICING IN SPORT MARKETING Price and Value: Value is described in two equations: Value = benefits/price OR Value = quality received/expectations

ETHICS AND PRICING Price Fixing Price Discrimination Predatory Pricing

SETTING PRICE Estimating Demand Identifying Restrictions Estimating Cost, Volume and Profit

SETTING PRICE Demand: Elasticity: Cost: The need for a given product in a specific market. Elasticity: The change in demand for a product following a change in price. Cost: Expenditures to produce a product or service and take it to market.

CATEGORIES OF COST Variable Cost Fixed Cost

BREAK EVEN ANALYSIS Determine the contribution margin Contribution margin = selling price-variable costs Reach break-even point Number of unites to break-even = fixed costs/ contribution margin.

KEY PRICING ISSUES Discounts Allowances

PRICE VERSUS COST Price Cost Face value of product (e.g. hockey ticket). Cost All costs incurred by a consumer to get to the product or service (e.g. parking, gas, food).

Questions?