SEM1 4.07 A - Pricing PE - Develop a foundational knowledge of pricing to understand its role in marketing PI - Identify factors affecting pricing of SEM products (lead time, market demand, market segmentation, smoothing, responding to competitors) PI - Describe pricing issues associated with SEM products (cost, value, objectives)

Why do ticket prices vary? Seat location Market segmentation Performance of the team Top Athletes Popularity of the team/entertainer Value to the consumer Expenses Location of the venue Production Costs Time of the event Uncertainty Opponent Unsold Tickets “Deadwood” Scarcity of tickets Paying for a new stadium PSL’s Ticket discounts

Factors affecting pricing of SEM products Lead time Market demand Market segmentation (target market) Smoothing/penetration/skimming price strategies Responding to competitors

Lead Time Lead Time: The time between customer order and delivery of final product. Sports and Events will often charge less if tickets are purchased ahead of time. Ex: “Purchase concert tickets now for $25 or at the door for $35.”

Market demand Price Elasticity – is the degree to which demand for a product is affected by its price How much of a product customers will buy at a certain price - Relationship between market demand and price Inelastic demand - Price changes have little to no impact on quantity of sales “Need” items - necessity, brand loyalty, urgency of purchase Ex: Milk, Eggs, Super Bowl Tickets, Gasoline? Skimming pricing strategy would work here – high then lower Elastic demand - Small price changes (up or down) have big impact on quantity of sales “Want” items – luxuries, availability of substitutes Ex: I-pod, sports equipment, new clothes Penetration pricing strategy would work here – low then normal

Effect of Elasticity Elastic Demand Inelastic Demand Price Demand

SEM1 4.07 Activity Students work in pairs and create a PPT showing elastic and inelastic products Students must show 2 sports goods & services & 2 entertainment/event goods & services (8 total) On each PPT slide list if the product is elastic or inelastic and the factor affecting why it is Ex: NFL football, elastic due to availability of substitute products Must have 2 sports products that are elastic and 2 that are inelastic – same for event/entertainment

Market Segmentation Target Marketing – fans/brand loyalty, PSL’s Discounts to certain age groups – kids free! Coupons sent to specific geographic locations

Pricing strategy - Smoothing Smoothing - dividing product into different segments: Time: Pay more money for “Prime time” Place: Pay more money for court-side seats and less for nosebleeds (higher seats)

Pricing strategy Penetration - Skimming Responding to competitors – pricing can assist in gaining sales or market share based on how it relates to your competition Non-price: Charge higher prices than competitors for unique product and services Ex: The Panthers can charge what they wish – unique and no competition Price: Encourage sales with lower prices than competitors Penetration pricing Setting prices lower than the competition Used to introduce a new product Encourage maximum participation (More people will purchase if price is lower) Skimming Setting prices higher than the competition (as high as the consumer/market will pay/bear) When a product is new & unique, you can skim the cream and charge higher price Promotes “high-class” image of product

Pricing issues: Cost and Value COST (of the event) Cost of production for good/service Some events have higher production costs VALUE (to the consumer) What are the perceived benefits to consumers? What is the overall value to the consumer Overall value – consumers will look at costs of attending event, parking, concessions, merchandise, etc. Unique experience to each person Perceived benefits: Tangible : Physical benefits (Buying a set of weights to get into shape) Intangible (Buying a set of weights to look good at the beach)

Different pricing objectives What are the goals of the good/service? Do you want it to seem “high class” or affordable? What type of attendees do you want? How much profit do you want to make? Company-Focused Competitor-Focused Customer-Focused Pricing products to enhance the image Covering costs Creating profit What the consumer will pay Beating the competition Offer lowest prices to gain share Offering the most discounts Offer “fair” price in the consumer’s mind

Ticket pricing strategies Scaling the house/arena/stadium Pricing tickets differently based on Location of seat Location of entire section Time of purchase Price is less if purchased further in advance Yield-management pricing Maximize revenue at venues with limited capacity Venues with limited seating price tickets differently to have greater revenue potential Charge more at smaller venues!