4.07 Develop a foundational knowledge of PRICING to understand its role in marketing

IDENTIFY FACTORS AFFECTING PRICING and PRICING ISSUESOF SEM PRODUCTS

FACTORS AFFECTING PRICING OF SEM PRODUCTS LEAD TIME MARKET DEMAND How much of a product customers will buy at a certain price MARKET SEGMENTATION (TARGET MARKET) SMOOTHING Dividing product into different segments: Time: Pay more money for “Prime time” Place: Pay more money for Court-side seats and less for nosebleed RESPONDING TO COMPETITORS Non-price: Charge higher prices than competitors for unique product Price: Encourage sales with lower prices than competitors

MARKET DEMAND PRICE ELASTICITY: Measure of how sensitive customers are to changes in price Gauges relationship between market demand and price INELASTIC DEMAND Price changes have little to no impact sales ELASTIC DEMAND Small price changes have big impact on sales

RESPONDING TO COMPETITORS 2 Types of Pricing Strategies: PENETRATION PRICING Setting prices lower than the competition Used to introduce a new product or to encourage maximum participation SKIMMING Setting prices higher than the competition Used to keep new competitors out of market or promote “high-class” image of product

PRICING ISSUES COST VALUE OBJECTIVES Cost of production for good/service If cost more to produce an event then revenue from ticket sells prices = have no business VALUE What are the PERCIEVED BENEFITS to consumers? Unique perception of each person PERCEIVED BENEFITS: TANGIBLE: Physical benefits (i.e.: Buying a surfboard with an ankle-band) INTANGIBLE (i.e.: Buying a surfboard to spend time with friends at the beach) 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?

DIFFERENT PRICING OBJECTIVES Company-Focused Competitor-Focused Customer-Focused Pricing products to ENHANCE THEIR IMAGE COVERING COSTS CREATING PROFITS OFFER LOWEST PRICES Offering the MOST DISCOUNTS Offer “FAIR” PRICE IN CONSUMER’S MIND

TICKET PRICING STRATEGIES SCALING THE HOUSE Pricing tickets differently based on Location of seat Time of purchase YIELD-MANAGEMENT PRICING Maximize revenue with venues with limited capacity Venues with limited seating price tickets differently to have greater revenue potential

Elastic or Inelastic Winter Jacket New Video Game Super Bowl Tickets Socks Toilet Paper Vacation

Elastic or Inelastic Substitutes Brand Loyalty Income Easily available, demand is elastic Brand Loyalty Inelastic Income Small increase – inelastic Large increase – elastic Luxury vs. Necessity Luxury – elastic Necessary - inelastic Urgency