1. Pricing HSS 5263 Sport Marketing Brian Turner

2. What is Price? “… statement of value for a sports product” Value is the central tenet of pricing Price is a critical element of the sport marketing mix

3. Determinants of Pricing - Internal Factors Other marketing mix variables Costs –Fixed Costs (FC) –Variable Costs (VC) –TC (total cost) = FC + VC

4. Determinants of Pricing - Internal Factors Costs –Cost vs. Price Fan Cost Index (FCI) –4 average price tickets –4 small soft drinks –2 small draft beers –4 hot dogs –Parking for 1 car –2 game programs –2 adult-size hats

5. Determinants of Pricing - Internal Factors Organizational Objectives

6. Determinants of Pricing - External Factors Consumer demand –Elasticity of demand = % change in quantity demand  % change in price Elastic demand Inelastic demand Unitary demand

7. Determinants of Pricing - External Factors –Estimating Demand Economy Competition Others –Legal issues –Technology

8. Differential Pricing Strategy One of the most common practices “… selling the same product or service to different buyers at different prices” Second-market discounting

9. New Sports Product Pricing Penetration pricing –“… pricing in the lower range of expected prices, in the belief that an elastic market exists and the lower price will increase the quantity purchased.” Skim pricing –“… pricing high in the expected range of prices, in the belief that demand is price inelastic”

10. New Sports Product Pricing Production capacity Rate of technological change Barriers to entry Economic conditions Desired image

11. Psychological Pricing Strategies Prestige Pricing Reference Pricing Odd-Even Pricing Customary (or Traditional) Pricing

12. Cost-Based Pricing Strategies Break Even Analysis –Fixed Costs (FC); Variable Costs (VC) –TC (total cost) = FC + VC TC = 100,000 + (11.50 X 4,000) TC = 100,000 + 46,000 TC = 146,000 Break Even Point 146,000  4,000 $36.50 per soccer ball

13. Cost-Based Pricing Strategies –For 10,000 soccer balls TC = 100,000 + (11.50 X 10,000) TC = 215,000 Break Even Point 215,000  10,000 $21.50 per soccer ball

14. Cost-Based Pricing Strategies Cost-Plus Pricing –Costs + Desired Profit = Price Must have accurate FC and VC for costs $800,000 (costs + profit)  800 members $1,000 average annual membership Target Profit Pricing

15. Price Adjustments Price Reductions –Risky May associate multiple price reductions with inferior product quality May associate price reductions with price gouging May “wake a sleeping dog” Makes it more difficult for the consumer to establish a frame of reference for the true price of the product Price increases –Cost inflation –Excess demand for the product

16. Price Adjustments Price discounts –Quantity discounts –Seasonal discounts