Sports and Entertainment Marketing

 Businesses struggle with this same questions everyday.  “How much will someone pay for ______?”

 Pricing goes by many names: Tuition for college Interest on a loan Fee for a service Toll for a roadway Rent for an apartment Fare for a bus or train ride

 Price: the value placed on the goods or services being exchanged

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

 Price is one of the 5 P’s  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

 Several factors affect pricing decisions: 1. Consumer perceptions 2. Demand 3. Cost 4. Newness of product 5. Competition

 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  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

 If a product is in high demand and low supply then the price will be high Example:  Capitals Tickets  when team is performing poorly ticket prices drop  when team is performing well ticket prices go up  Companies can generate this themselves by offering a “limited edition” of a product Example:  UGG Boots only releasing limited amount of sparkly UGG boots at Nordstrom and their stores

 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: the difference between the retail or wholesale price and the consumer cost  Cost-plus: pricing products by calculating all costs and expenses and adding desired profit

 Introduction Stage of Product Life Cycle  Skimming pricing: price the item very high to recover the costs of development OR  Penetration pricing: price the item below the competitors to create immediate demand

 Businesses find out what competitors are charging  Price Competition: compete based on price  set their price lower  Non-Price Competition: compete based on non-price  quality, service, relationships

1. Profit Objective 2. Market Share Objective 3. Special Pricing Strategies

 Company may have an objective to earn a higher profit  Costs & expenses may increase, but price of item cannot increase Surcharge may be added to product  Example: user fee added to ticket sales

 Market share: The percentage of the total sales of all companies that sell the same type of product  In order to raise market share, company may lower their price Example: Gatorade may have an 80% market share, which means that its sales represent 80% of all sports drinks sold by all sports-drink companies.

 Price Lining: selling all goods in a product line at specific price points  Example: selling warm-up suits at 3 prices: $39, $59, $79  Bundle pricing: selling several items as a package for a set price  Example: hood/tee combo in School Store (saves $20)  Loss-leader pricing: pricing and item at or below cost to draw customers into the store  Example: XM Radio ad  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)

1. Discounts and Allowances 2. Regulatory Factors

 Discounts: May be offered for:  Buying larger amounts  Buying before popular season  To get rid of older merchandise  Allowances: Reductions taken from the quoted price  Example: Trade-in

 Price fixing: competitors conspire to set the same price  Predatory pricing: setting a very low price in order to drive competitors out of business  BOTH ARE ILLEGAL Both are Illegal

 Students will review case studies and apply Pricing Strategies