Sports and Entertainment Marketing Pricing

How much would you pay for tickets to see your favorite football team or musician? Businesses struggle with this same questions everyday. “How much will someone pay for ______?”

All types of businesses use pricing in their business exchanges Pricing goes by many names: Tuition Tuition for college Interest Interest on a loan Fee Fee for a service Toll Toll for a roadway Rent Rent for an apartment Fare Fare for a bus or train ride

price So what is price? Price Price – the value placed on the goods or services being exchanged

Pricing and Profit Price helps a company determine its profit or loss Each item sold carries a price…. Sales revenue Sales revenue = items sold x sales price Profit or loss Profit or loss = cost of goods – company expenses

Pricing and the Marketing Mix PRICE5 P’s Remember that PRICE is one of the 5 P’s target market A company must make sure the price of their product is acceptable for their target market Example – A bicycles company makes a wide range of bicycles Lower priced bike sold at Wal-Mart – for value- oriented customers High end bike sold at specialty bike shop – for serious bicyclists

Pricing Considerations Several factors affect pricing decisions Consumer perceptions Demand Cost Product Life Cycle stage Competition

Consumer Perception Prestige pricing based on customer perception Many consumers believe that the higher the price, the better the quality Odd-even pricing pricing goods with either an odd or and even number to match a product’s image Odd - $25.99 – Bargain Even - $100 – More expensive

Consumer Perception Target Pricing pricing goods according to what the customer is willing to pay Manufacturers estimate the target price and work backward to determine what retailers should charge MSRP MSRP – Manufacturers Suggested Retail Price

Demand If a product is in high demand and low supply then the price will be highExample Capitals Tickets when team is performing poorly ticket prices drop when team is performing well ticket prices go upWHY? Companies can generate this themselves by offering a “limited edition” of a product

Demand As a general rule, demand will be low for higher priced items because less people will be able afford it Example: racing bike, top of the line golf clubs Demand may be inelastic if consumers feel there is no substitute Example: Nike – Air Jordan’s

Cost All businesses are out to make a profit!! The price of the product will always be more than what it costs to manufacture it Markup Markup – the difference between the retail or wholesale price and the consumer cost Cost-plus Cost-plus – pricing products by calculating all costs and expenses and adding desired profit

Newness of the Product Newness of the Product (Product Life Cycle Stage) Introduction Stage Skimming pricing They may price the item very high to recover the costs of development (Skimming pricing) OR – Penetration pricing They may price it below the competitors to create immediate demand (Penetration pricing)

Competition Businesses find out what competitors are charging….. If they want to compete on price they will set their price lower non- price competition If they do not want to compete on price they use non- price competition, basing the competition on quality or consumer benefits

Special Pricing Strategies Loss-leader pricing Loss-leader pricing – pricing and item at or below cost to draw customers into the store (then they will shop and buy other products) EX: XM Radio ad Yield-management pricing Yield-management pricing – pricing items at different prices to maximize revenue when limited capacity is involved Example – arena seats (better seats are priced higher to increase overall revenue)

Discounts May be offered for ….. Buying larger amounts Buying before popular season To get rid of older merchandise

Regulatory Factors Price fixing Price fixing – competitors conspire to set the same price Predatory pricing Predatory pricing – setting a very low price in order to drive competitors out of business ILLEGAL BOTH ARE ILLEGAL

NOW FOR SOME FUN!! The Price is Right!! The Price is Right!!