17-1 Chapter 17 Pricing Decisions in Sports Marketing Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

17-2Price What the Buyer Gives Up in the Exchange Process The Fourth and Final Variable of the Traditional Marketing Mix

17-3Elasticity Elastic Demand – Market Exhibits Sensitivity to Changes in Price Characteristic of Most Products When Beef Prices Rise, Consumers Reduce Expenditures on Beef and Purchase More Substitute Products (Such as Chicken or Pork)

17-4Inelasticity Inelastic Demand – Market Is Less Sensitive to Pricing; Purchase Product at Higher Prices –Few (or no) Substitutes – Gasoline –Buyer Not Willing to Forgo Purchase - Textbook –Buyer Not Able to Forgo Purchase - Medicine

17-5 Factors That Influence Price Drop in Box 17.1 Here

17-6 Situational Influences Unusual, Often Short Term Influences, that Impact Consumer Purchase Decisions –Team Is Winning –Move to a New Stadium –Presence of a Visiting Star Player

17-7Costs In Spectator Sports, this Generally Relates to the Team’s Payroll or Appearance Fees Paid to Individual Athletes MLB’s New York Yankees Payroll in 2008 Was $209,081,579 Appearance Fee of Some $2 Million for Tiger Woods to Play in the New Zealand Open Resulted in Major Increase in Ticket Prices

17-8 Competition – Cost of Alternatives for Consumer Baseball versus Football (MLB v. NFL) Baseball versus a Motion Picture Gold’s Gym versus Curves Nike versus adidas Athletic Shoes

17-9 Supply and Demand Surplus Drives Prices Down; Shortage Is a Catalyst for Higher Prices Teams that Sell Out – Lakers, Patriots, Maple Leafs and Cubs – Have Higher Ticket Prices Teams Struggling to Fill the Stands Often Resort to Promotional Pricing

17-10 Marketing Objectives Market Share Objectives Prestige and Image Seeking Higher Market Share, Top Flight Golf Balls Are Sold at Prices Much Lower than Those of the Premium Brands Such as Titleist, Callaway, and Nike

17-11 Legal Considerations Taxes Added to Cost of Products Team “Scalping” MLB’s Chicago Cubs Taken to Court Over Team’s Resale of Desirable Tickets at Highly Inflated Prices

17-12 Consumer Perceptions – “Perception Is Reality” What Consumers Think about the Product Influences Their Perception of Value –Influences How Much They Will Pay –Thus Influencing Price that Can Be Charged –Titleist Golf Balls Command Premium Does the typical golfer know why Titleist is superior?

17-13 Marketing Mix Consistency Price Needs to Work in Harmony with the Other Elements of the Marketing Mix Price Also Needs to Be Consistent with the Target Market Many Marketers of Sports Products Offer Alternatives Featuring Different Prices

17-14 General Implementation Strategies Cost-Plus Markup Promotional Bidding Yield Management Target Return

17-15 Pricing Applications: Spectator Sports Most Commonly Criticized Component of the Strategies Employed by the Marketers of Spectator Sports Fan Cost Index – Average Ticket Price –NFL$72.20 for Most Recent Season –NBA$48.83 –NHL$49.66 –MLB$25.43

17-16 Fan Cost Index Cost for a family of four to attend a game in each city for each of the four major North American Sports Leagues. Includes: –4 average tickets (2 adults & 2 kids) –4 small soft drinks –2 small beers –4 hot dogs –2 programs –Parking –2 adult-sized souvenir caps

17-17 Fan Cost Index (2008 Season) Average for the NFL –$ Average for NFL’s New England Patriots –$

17-18 Pricing Applications: Spectator Sports Season Ticket Partial Season Ticket Price Tiering Variable Pricing

17-19 Pricing Applications: Spectator Sports Value Pricing Promotional Pricing –Discount Pricing –Bundling –Cross-Promotion Discounting

17-20 Controversial Pricing Applications: Spectator Sports Qualifying Payment –PSL –Donation to University Program Bidding Secondary Ticket Market

17-21 Pricing Applications – MLB’s Chicago Cubs NOTE: Price Tiers Variable Pricing (Platinum, Gold, Silver, Bronze) Bidding (CBOE Seats in Red) Value Pricing (Bronze Games) Other identifiable strategies include season tickets, partial season tickets, bundling, bidding, cross- promotion and the secondary ticket market

17-22 Pricing Applications: Participation Sports Supply and Demand Based Pricing Level of Service Variable Pricing Individual Considerations

17-23 Pricing Applications: SASS Traditional Retailing Principles Supply and Demand Value Added through Licensing Value Added through Celebrity Endorsement

17-24 Pricing Applications: SASS Markup –Based on COGS Evident that Prices for SASS Are Influenced by the Set of Factors Discussed for Spectator Sports

17-25 Closing Capsule Many Factors Influence Price Drop in Box 17.1 Here

17-26 Closing Capsule Pricing Policies Are Commonly Criticized –Tickets for New England Patriots NFL Game –Greens Fees at Pebble Beach –Nike Shoes Endorsed by LeBron James –A Beer at a Sports Stadium Any Bargains in that List? Emergence of Secondary Ticket Market

17-27 Closing Capsule Marketers in Each Category of Sports Products Recognize the Presence of Different Market Segments Prices Vary Significantly Depending on Which Segment Is Being Targeted