Sports and Entertainment MarketingPricing Pricing

How much would you pay for tickets How much would you pay for tickets to see your favorite football team or to see your favorite football team or

musician?musician?

Businesses struggle with this same questions everyday.

“How much will someone pay for ______?”

All types of businesses use All types of businesses use pricing in their business pricing in their business exchangesexchanges

Pricing goes by many names:TuitionTuition for collegeInterestInterest on a loanFeeFee for a serviceTollToll for a roadwayRentRent for an apartmentFareFare for a bus or train ride

So what is priceprice?

PricePrice – the value placed on the goods or services being exchanged

Pricing and ProfitPricing and Profit

Price helps a company determine its profit or loss

Each item sold carries a price….

Sales revenueSales revenue = items sold x sales priceProfit or lossProfit or loss = cost of goods – company expenses

Pricing and the Pricing and the Marketing MixMarketing MixRemember that PRICEPRICE is one of the

5 P’s5 P’sA company must make sure the price of their product is acceptable for their target target marketmarket

ExampleExample – A bicycles company – A bicycles company makes a wide range of bicyclesmakes 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 ConsiderationsPricing ConsiderationsSeveral factors affect pricing

decisionsConsumer perceptionsDemandCostProduct Life Cycle stageCompetition

Consumer PerceptionConsumer PerceptionPrestige pricingPrestige pricing based on customer perception

Many consumers believe that the higher the price, the better the quality

Odd-even pricingOdd-even pricing pricing goods with either an odd or and even number to match a product’s image

Odd - $25.99 – BargainEven - $100 – More expensive

Consumer PerceptionConsumer Perception

Target PricingTarget Pricingpricing goods according to what the customer is willing to pay

Manufacturers estimate the target price and work backward to determine what retailers should charge

MSRPMSRP – Manufacturers Suggested Retail Price

Demand Demand If a product is in high demand and low supply

then the price will be high

ExampleExample

Capitals Tickets when team is performing poorly ticket prices dropwhen team is performing well ticket prices go up

WHY?WHY?Companies can generate this themselves

by offering a “limited edition” of a product

DemandDemandAs a general rule, demand will be low for

higher priced items because less people will be able afford itExample: racing bike, top of the line golf clubs

Demand may be inelastic if consumers feel there is no substitute

Example: Nike – Air Jordan’s

CostCostAll businesses are out to All businesses are out to

make a profit!!make a profit!!The price of the product will always be more

than what it costs to manufacture it

MarkupMarkup – the difference between the retail or wholesale price and the consumer cost

Cost-plusCost-plus – pricing products by calculating all costs and expenses and adding desired profit

Newness of the ProductNewness of the Product(Product Life Cycle Stage)

Introduction StageIntroduction Stage They may price the item very high to

recover the costs of development (Skimming pricingSkimming pricing)

– OROR – They may price it below the

competitors to create immediate demand (Penetration pricingPenetration pricing)

CompetitionCompetition

Businesses find out what competitors are charging…..

If they want to compete on price they will set their price lower

If they do not want to compete on price they use non-price competitionnon-price competition, basing the competition on quality or consumer benefits

Special Pricing Special Pricing StrategiesStrategies

Loss-leader pricingLoss-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 pricingYield-management pricing – pricing items at different prices to maximize revenue when limited capacity is involvedExample – arena seats (better seats are

priced higher to increase overall revenue)

DiscountsDiscounts

May be offered for …..Buying larger amountsBuying before popular seasonTo get rid of older merchandise

Regulatory FactorsRegulatory FactorsPrice fixingPrice fixing – competitors conspire to

set the same price

Predatory pricingPredatory pricing – setting a very low price in order to drive competitors out of business

BOTH ARE ILLEGALILLEGAL

NOW FOR SOME NOW FOR SOME FUN!!FUN!!

The Price is Right!!