SEM A - Pricing PI - Describe pricing issues associated with SEM products PI - Identify factors affecting pricing of SEM products

Pricing issues: Cost vs. Value COST (of the event) – Cost of production for good/service – Some events have higher production costs Cost is ‘objective’ – Cost is constant – Cost is set, it is factual – It “costs” a certain amount to make a product or produce an event.

Pricing issues: Cost vs. Value VALUE (to the consumer) 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) – What is the overall value to the consumer? – Overall value – consumers will look at costs of attending event: parking, concessions, merchandise. Is it worth the money spent? Value is ‘Subjective’ – Unique experience for each person – Based on individual feelings

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

Pricing Objectives Company-FocusedCompetitor-FocusedCustomer-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 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?

Factors affecting the pricing of sports products 1.Lead time 2.Market demand 3.Market segmentation (target marketing) 4.Price Strategies – Smoothing – Bundling – “Scaling the House” – Yield management 5.Responding to Competition – Penetration – Skimming

1. 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.”

2. MARKET DEMAND DEMAND: How much of a product will customers buy at a certain price? PRICE ELASTICITY: – The degree to which demand for a product is affected by its price Changes in price cause a change in demand for the product – INELASTIC DEMAND Price changes have little to no impact on quantity of sales “Need” items Ex: Milk, Eggs, Super Bowl Tickets, Gasoline? – ELASTIC DEMAND Small price changes have big impact on quantity of sales “Want” items Ex: Ipod, Sports Equipment, new clothes

Effect of Elasticity: Elastic Demand Inelastic Demand Price Demand Price Demand 2. MARKET DEMAND

3. Market Segmentation Target Marketing – fan loyalty Discounts to certain age groups – kids free! Coupons sent to specific geographic locations

4. Pricing Strategy (for tickets) 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)

Smoothing Example

4. Pricing Strategy (for tickets) Bundling – Selling tickets in a package (“bundle”) with other tickets or products. Season tickets, group discounts, free or discounted merchandise with purchase.

4. Pricing Strategy (for tickets) “Scaling the house” – Pricing tickets differently based on Location of seat Location of entire section Yield-management pricing – Maximize revenue at venues with limited capacity Charge more at smaller venues! Charge more to make more revenue per ticket.

5. Responding to the Competition Responding to Competitors – Set prices on what the competition is doing 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

5. Responding to the Competition 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)

5. Responding to the Competition Skimming – Setting prices higher than the competition “What will the market bear?” – (How much will people pay?) When a product is new and unique, you can skim and charge higher price Promotes a “high-class” image of product

Videos PSLs Dynamic Ticket Pricing StubHub Fan StubHub Mistake tickets-against-chargers tickets-against-chargers