Sports and Entertainment Marketing © Thomson/South-Western ChapterChapter The Economics of Supply and Demand 9.1 Supply and Demand 9.2 Pricing Strategies 9.3 Market Conditions 9

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 2 Winning Strategies Wheaties cereal discovered by accident first featured star was fictitious Lou Gehrig was first actual star featured many athletes make it a career goal to be featured on the box in 1999, women in sports were featured Cereal Stars

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 3 Lesson 9.1 Supply and Demand Goals Explain the relationships between supply, demand, and price. Discuss the government’s influence on pricing.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 4 Terms law of demand law of supply scarcity equilibrium price fixing bait and switch price discrimination

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 5 THE LAWS OF SUPPLY AND DEMAND demand the relationship between the quantity of a product that consumers are willing and able to purchase and the price

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 6 businesses that use resources to develop products and services supply the relationship between the quantity of a product that producers are willing and able to provide and the price producers

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 7 Price-Demand Relationships law of demand an inverse relationship when the price goes up, demand goes down when the price goes down, demand goes up

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 8 Price-Supply Relationships law of supply when the price goes up the supply produced goes up when the price goes down the supply produced goes down

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 9 Scarcity scarcity consumers have limited money to spend producers have limited resources to use for production Consumers and producers must decide how to use their limited resources to meet unlimited wants and needs.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 10 Equilibrium equilibrium the point where the supply and demand curves intersect indicates the best quantity and price for goods and services

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Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 12 Concerts in the Spotlight Concert prices can be set high. limited supply high demand If demand is high enough, supply can be increased by adding a second show.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 13 How does price affect demand?

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 14 GOVERNMENT INFLUENCE ON PRICING private-enterprise system based upon independent decisions made by consumers and businesses

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 15 The U.S. government has an influence on prices charged for merchandise directly and indirectly through antitrust laws, taxation, and various consumer protection laws.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 16 Benefits of Competition monopoly where one business controls the entire market Antitrust laws encourage competition and help avoid monopolies. Competition allows laws of supply and demand to set the prices Businesses get new ideas and improve their merchandise based off competition

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 17 Taxation Taxation can be used by the government to encourage or discourage sales. Increasing taxes (such as on alcohol or cigarettes) causes the price to go up, thus discouraging sales. Reducing taxes encourages production and sales. Companies will give companies tax breaks as an incentive (Ex. Producing ethanol as an alternative fuel source).

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 18 Illegal Pricing price fixing when related businesses conspire to charge high prices Example: All fast food companies agree to sell hamburgers for $12. Forces the consumer to have no options illegal in U.S.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 19 when a product that is advertised at a great price is “out of stock” salesperson tries to sell customer a higher-priced alternative advertised prices cannot be misleading price discrimination occurs when one individual, group, or business is charged a higher price than others purchasing the same product or service Allow reasons include: differences in distribution costs to different locations, volume of sales, etc. bait and switch

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 20 List three ways the government influences pricing.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 21 Lesson 9.2 Pricing Strategies Goals Discuss pricing strategies used by businesses to increase sales. List five steps for determining price.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 22 Terms operating expenses markup price lines loss-leader pricing

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 23 PRICING CONSIDERATIONS price the amount that customers pay for products and services

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 24 the process of establishing and communicating the value of goods and services to customers operating expenses all the costs associated with running your business markup the amount that is added to the cost of an item to cover operating expenses and allow for a profit pricing

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 25 many companies offering the same product customers do not recognize major differences in the brands the market will drive the prices low as businesses compete for consumers’ business market price determined by laws of supply and demand if not sufficient to cover costs and allow for a profit, the business will cease production of the product pure competition

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 26 Pricing Policies one-price policy all customers pay the same price for a product flexible pricing policy allows customers to negotiate a price within a range

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 27 distinct categories of merchandise based upon price, quality, and features geographic pricing allows pricing variations based upon geographic location price lines

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 28 A Variety of Pricing Strategies Psychological Pricing creating an illusion for customers Prestige Pricing higher-than-average pricing targets customers seeking status and quality

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 29 when a supplier provides a lower price to a customer who buys a high volume of product Promotional Pricing offering customers an incentive to get them in the store two-hour/ 50% off sale Volume Pricing

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 30 the willingness to take a loss on the reduced prices of selected items in order to create more customer traffic special event promotion associates a special sale with a major event Loss-Leader Pricing

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 31 coupons on products that customers can mail in for a refund depends upon further action by the customer multiple-unit pricing a volume based discount trade-in allowance giving a store your old product when purchasing a new product usually results in a discount on the new product purchase rebates

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 32 List and describe five pricing strategies to increase sales.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 33 DETERMINING THE PRICE There are five steps to determining the price to charge for a product or service.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 34 2.Determine the cost of the product or service. 3.Estimate consumer demand for your product or service. 4.Study the competition. 5.Decide on a pricing strategy. 1.Establish the price objectives.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 35 List the five steps for determining price.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 36 Lesson 9.3 Market Conditions Goals Define the business cycle and describe its impact on sports and entertainment. Discuss the importance of monitoring consumer trends.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 37 Terms business cycle inflation shoulder periods

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 38 IMPACT OF THE BUSINESS CYCLE business cycle (economic cycle) the ups and downs of the economy

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Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 40 Expansion expansion the upside of a business cycle peak highest point of growth in the economy

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 41 Contraction contraction the downside of a business cycle recession or depression inflation when prices for goods and services rise faster than consumer income

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 42 Business Reaction trough lowest point of contraction recovery economy shows signs of improving prosperity the period of business expansion following recovery

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 43 Seasonal Cycles For some businesses, demand fluctuates with the seasons. high season the season with the highest demand low season the season with the lowest demand

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 44 periods of moderate demand Sports and entertainment marketing strategies must be developed to help even out the fluctuations created by changing seasonal demands. shoulder periods

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 45 What is inflation and how does it contribute to recession?

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 46 IMPACT OF CONSUMER TRENDS Trends are dictated by television revenue sponsors consumer demand

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 47 Retro Television Retro show fans like to relive the good old days and recall positive memories of growing up watching the stars in the sitcoms. Popular show reruns are inexpensive to show on television.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 48 Game Shows There are game show channels that rerun old favorites. New game shows are being produced to meet demand.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 49 Audience Ratings Speak Television networks cannot afford the risk of having viewers switch channels to watch a more exciting show on a competing network. Some series do not last more than six airings due to flat ratings.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 50 Socio-Culture Issues Socio-culture issues include trends in customer attitudes lifestyles opinions demographics Assessing consumers’ ever-changing needs and wants is the bottom line for the success or failure of a product or service.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 51 Why must sports and entertainment marketers pay careful attention to consumer trends?

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 52 PERFORMANCE INDICATORS EVALUATED Demonstrate an understanding of the economic challenges facing television network programming. Demonstrate critical thinking and problem- solving skills.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 53 Describe advertisements that will attract the attention of your target market. Develop a strategy to encourage viewers of the Price Is Right to watch the bowl game. Describe promotions appropriate for the target market that will result in increased ratings for the bowl game.

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 54 THINK CRITICALLY 1.How have the number of bowl games affected the television ratings for the games? 2.Why are the scheduled date and time of the game important factors for ratings and promotions?

Sports and Entertainment Marketing © Thomson/South-Western Chapter 9 Slide 55 4.How can an association be made between the game show and the bowl game? 3.Why should television networks pay attention to the programming scheduled around the game and on competing networks when making decisions?