(sm) springfield norester maximizing revenue in minor league.pdf
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Sameer Mathur, Ph.D. (Carnegie Mellon)Marketing Professor, IIM Lucknow
The Springfield Nor’easters:Maximizing revenue at Minor
LeagueHarvard Business School Case
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1) How many games were Nor’easters scheduled to play at home?
2) What was the total capacity of the Springfiled College stadium?3) What was the population of Springfield, MA in 2008?4) What was the profit margin from concession sales at the statdium?5) What was the expected game attendance by full season ticket hold6) How much stadium rent did Nor’easters pay Springfield Colleage?7) How many total responses did Buckingham’s survey generate?
THODI SI MATHS8) How much money is needed from ticket sales and net concession infixed costs? (Hint: Review Page 3 & Exhibit 1)9) What is consumers’ cumulative willingness to pay (WTP) by price an(Hint: Prepare a pricing matrix, similar to Exhibit 6)10) Calculate the expected revenue from snacks, souvenirs and arcadperson? (Hint: Review Exhibit 5)
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Quiz: Springfield Nor’eas
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1) How many games were Nor’easters scheduled to play at home? 3
2) What was the total capacity of the Springfiled College stadium? 363) What was the population of Springfield, MA in 2008? 55,338 (p.2) 4) What was the profit margin from concession sales at the statdium?5) What was the expected game attendance by full season ticket hold6) How much stadium rent did Nor’easters pay Springfield Colleage?7) How many total responses did Buckingham’s survey generate? 62
THODI SI MATHS1) How much money is needed from ticket sales and net concession
cover fixed costs? (Hint: Review Page 3 & Exhibit 1)2) Calculate the expected revenue from snacks, souvenirs and arcad
person? (Hint: Review Exhibit 5)3) What is consumers’ cumulative willingness to pay (WTP) by price a
type? (Hint: Prepare a pricing matrix, similar to Exhibit 6)
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Quiz: Springfield Nor’eas
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What are
Nor’easters?
Who is
Larry Buckingha
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Larry Buckinghamo Marketing Director for Nor’ea
Jimmy Mercante
o
Owner of the Nor’easters
Bob Cortez
o
President and GM
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Who are the Players?
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What is the pres
situation?
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Situation Analysis (1/3A class-A minor league baseball team has startedup in Springfield, MA, a year and a half advance ofthe first game
Game dates have already been determined, butpricing decisions remain
A survey has been run with the expectation of
getting insights to help in pricing ‘season’ and‘single’ game tickets
Ancillary issues of concession sales also needevaluation
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Entertainment Industry: Spor
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Situation Analysis (2/3)
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Stadium (3/3)
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Why study thi
case?
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Illustrate the design, implementation, and interpresearch surveys
o Evaluate primary research studies,o Setting research objectives,
o
Questionnaire design,o Data analysis and interpretation.
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Objectives of this Case (
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To use quantitative analysis methods to deve"scaled" pricing strategy for aperishable service that reflects co
costs per production unit (in this case, stadiu
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Objectives of the Case (2
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Understand the relationship between
pricing and its impact on the sa
auxiliary products.
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Objectives of the Case (
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We will focus oTHREE inter-rela
issues
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Evaluate the research survundertaken by the League Sports AssociationLarry Buckingham:
customer profile?pricing?single versus season tickets
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Three Issues
A
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optimal pricing
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Three Issues
B
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Evaluate the research survundertaken by the League Sports AssociationLarry Buckingham:
customer profile?pricing?single versus season tickets
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Three Issues
A
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Insights from thLeague Sports
Associationsurvey?
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Attendance / Exposure (1
!" $%&'( )*+,*-& ./0%1*2 34+5-6 )'1& 7*'+ 89 .24,':
;'1*8'((
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'D E+.0=, 20=40)*F0+ 0G H(%*,+.,)
'"),I"11 J009I"11 '")K,9I"11 !0.
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AQQT AQQT AQQT AQ
Income-level of Audiences
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Education-level of Audiences
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These insights were 3 yearsanecdotal, limited
‘I want to be able to tailor the team’s offeringsknowledge of the local market’
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But..
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Insights fromTelephone
Interviews?
T l h I t i (
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Larry Buckingham conducTelephone interviewsminor league baseball team MarketinDirectors across USA
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Telephone Interviews (
I i ht f I t i
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Insights from Interviews
Season ticket versus Individual ticbuying
Price Seats on par with the competimovies, bowling, other sporting ev
I i ht f I t i
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Insights from Interviews
Concession Sales are crucial
Promote group ticket sales to Little L
teams, summer camps, promote fadays out
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Online Survey
Larry Buckingha
D i Obj ti ? (1/
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Design Objectives? (1/
D i Obj ti (1/5
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Design Objectives (1/5
Ease of data analysis
Clarity in questions asked
Maximum Information Yield for Dec
Making
Q ti (2/5)
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o
Price Sensitivityo
Sports attendance pat
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Questions on (2/5)
P (3/5)
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Process.. (3/5)
How was the surv
conducted?
Process (3/5)
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Process.. (3/5)
Chance to Win $500 restaurant gcertificate
Fill Online / Telephone Survey
Mail 10000 postcards
Budget; Response Rates
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?
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Budget; Response Rates
Budget; Response Rates
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o $3,800 budgeto 10000 postcardso 625 responses
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Budget; Response Rates
Budget; Response Rates
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Budget; Response Rates List Cost, perthousandnames UndeliverabList Source Mail Qty.
Springfield residents, census tract 5,000 $90 250 Minor league hockey team, individual,and season ticket buyers 2,871 $125 97
College football individual andseason ticket buyers 1,380 $125 41
Parents of little league baseball players,2007-08 season
441 $130 20
Parents of girls softball players,
2007-08 season
308 $130 12
Total 10,000 420
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Pretesting (5/5)
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o Pretested 3 times on friends, relbusiness associates
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Pretesting (5/5)
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Insights from thOnline Survey
Larry Buckingha
Purchase Likelihood (1/
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Purchase Likelihood (1/
!"#$%$& () *+,-./ 0+.1&$2334$,. 435 6.17231. 8$1&,$%+&$231
Question Response
Yes No Not su
1. Do you consider yourself a baseball fan? 38% 60%
2. In the past year, have you attended a professional baseball game? 28% 72%
3. During the past two or three years, how often have you Never 1-2 times 3-4 times 5 or mattended a major-league game? 76% 20% 1% 3
4. During the past two or three years, how often have you
attended a minor-league game? 83% 14% 1% 2
5. During the past two or three years, how often have you
attended a college game? 79% 17% 2% 2
Purchase Likelihood (1/
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Purchase Likelihood (1/
X,) 70
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ND EG " =*+0# 1,"5(, I"),I"11 9,"= ."=, 90 -4#*+56,1%P *) *9 1*K,1L L0( [0(1% \),1,.9 0
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)+%8'8(9 1481,+58* &% ' GMQ6'D* R4(( 1*'1%- @K
Willingness to Pay (2/4
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Willingness to Pay (2/4
8. If you were to attend one game, what would you be willing to
pay?
Less than $4
0%
$4
2%
$6
5%
$8
13%
Less than $4 $4 $6 $8 9. If you were to purchase a multi-game package of 5 tickets,
what would you be willing to payper game? 1% 2% 3% 19% 10. If you were to purchase a half-season ticket for 20 games,what would you be willing to payper game?11. If you were to purchase a full-season ticket for 38 games, what
1% 7% 23% 28%
would you be willing to payper game? 18% 26% 20% 14%
Concession Sales (3/4
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Concession Sales (3/4
Nothing
Less than
$5 $6-$10 $11-15
13. How much do you expect to spend on snacks, souvenirs and
arcade games,per person
, for each game you attend? 8% 11% 45%
Demographics (4/4)
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Demographics (4/4)
14. What is your age?
18 or under
1%
19-25
7.00%
26-35
30%
36-4
21%
15. Are you:
Female
56%
Male
44%
Demographics (4/4)
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Demographics (4/4)
None One Two Three
16. How many children, ages 5-16, live with you? 34% 38% 18% 7%
Some high
school
High
school
Some
college College degre
17. What is the last grade in school or college that you completed? 28 28 31 13
18. For statistical purposes only, which of the following broad
Up to
$22,499
$22,500-
$44,999
$45,000-
$74,900
$75,000 and
over
categories represents your household's annual income? 18% 36% 40% 6%
Three Issues
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optimal pricing
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Three Issues
B
How much mone
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How much mone
needed from ticsales and
concessions t
fi d t
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Fixed expensesa
3,.4"#5' 6 78999 :%&;2% -2%' 6 8999 ?(&44 '&@.%' 6 8999 J.(K "4 ?+#.,;4.%@- G 2,.1%#'.(K /",(#.L2(.",' 6 A
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Need to recove
$1,005,87
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Fixed Costs
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Determining thoptimal pricin
strategy fromwillingness-to-p
Pricing (1/7)
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Pricing (1/7)
!"#$%$& ( !"#$%&'()*+, ./%#%&' *)0/%1 23/$,(440
)*++
, -*. &$/0*&
1$/0*& 12-* " ,5 ,5 ,( ,6 ,78 ,79
5%&'64 0%#$4078')*4 0%#$40
9:8')*4 ()6;8,4),3&
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o
31% are WTP $10o 49% are WTP more than
(Exhibit 5, Que 8)
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WTP (2/7)
WTP by Price & Ticket Type
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WTP by Price & Ticket Type
!"#" %&'( )"*+ ,-./0/# 12 )'3*4(+& 5/66/373+** #' 8"9 09 8&/:+ "3; #/:? AG? AA?
Cumulative Willingness to Pa
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g
27 % willing to pay $ 12
+ 22 % willing to pay $ 14! 49 % willing to pay at least $
Determine the total percentageconsumers who are willing tpurchase at each price poin
Cumulative Willingness to Pa
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g
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8 )1
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p!"#$%&' ")$*+, -. #$*/+# #."+ &
0 "+)
1$*/+# 1."+ 2+,,
#3&4 05 06 07 089 08: 085
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9/4%56' :5&;4
+ , +3.78 !&' !&' +-.>/ +>.79 +/.>- 314%56'
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Will Nor’easters
breakeven?
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C
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Revenue from
Tickets?
Consumers (1/4)
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( )
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"#$%&' (#)*'( +,- .,/ ,,01.,
56%78' (#)*'( +2 ,,/ 10-24
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(
!"#$%&
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"#$%&' (#)*'( +,- .,/ ,,01.,
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!"#"$%&'() &%+$) ,- .,/0"#)1 2'$$'/3/)00 &, 4%5 +5 41'.) %/
8 )1
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+,,- ..- .2-
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Ticket Revenue (4/4)
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!"#$%&' )*+ '%)&' ',-+ )*+ &,&)- &"#$%& .%/%*0% 12 &"#$%& &23%
!"#$%&
4 ,5#,*'06%.'
"*&%.%'&%+ "* 7 ,5
"*&%.%'&%+ 4 8"--"*9 &,10 )& &:"'
7 &"#$%&& % 7 '%)&'
!"#$%& !23% ;."#% &"#$%& &23% #,*'06%.') &"#$%& 3."#% ',-+ ',-+
"#$%&' (#)*'( +,- .,/ ,,01., 2-/ 30.34 30.34
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9/, )9"%*(=Z
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Revenue from
Concessions?
Concession Revenue Per Sea
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!"#$"#% '()*+,)) -./001 2"),
Nothing
Less than
$5 $6-$10 $11-1
13. How much do you expect to spend on snacks, souvenirs and
arcade games, per person, for each game you attend? 8% 11% 45%
$0.00*8% + $2.50*11% + $8*45% + $
= $8.56
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Net Income Per Seat (3/
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!"#$"#% '()*+,)) -./001 2"),
39% contribution margin
! Net Income Per Seat
= $8.56 * 39%
= $3.34
Case, p.4
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Breakeven Analysis
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Take Aways From Cas
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o
Can we generalize the insi
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