how to raise recreation service prices without making people mad virginia recreation and parks...
TRANSCRIPT
![Page 1: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/1.jpg)
How to Raise Recreation Service Prices Without Making People Mad
Virginia Recreation and Parks Society
John L CromptonUniversity Distinguished Professor and
Regents ProfessorTexas A&M University
![Page 2: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/2.jpg)
Reference PriceThe price people expect to pay
for a service.
![Page 3: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/3.jpg)
THEORETICAL GENESIS•Adaptation-level theory•Assimilation-constrast theory
RESIDUAL INFLUENCERS
•Prior Purchase ..experience•Frequency of previous ..purchases•Socio-demographic ..characteristics•Organic psychological ..processes
REFERENCE PRICE
The Genesis of Reference Price and its Applications in the Parks and Recreation Field
![Page 4: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/4.jpg)
THEORETICAL GENESIS•Adaptation-level theory•Assimilation-constrast theory
RESIDUAL INFLUENCERS
•Prior Purchase ..experience•Frequency of previous ..purchases•Socio-demographic ..characteristics•Organic psychological ..processes
NORMATIVE INFLUENCERS
•Equity: Community value ..system•Horizontal equity•Prevailing cultural norms•Communitywide –..personal services ..continuum
REFERENCE PRICE
The Genesis of Reference Price and its Applications in the Parks and Recreation Field
![Page 5: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/5.jpg)
THEORETICAL GENESIS•Adaptation-level theory•Assimilation-constrast theory
RESIDUAL INFLUENCERS
•Prior Purchase ..experience•Frequency of previous ..purchases•Socio-demographic ..characteristics•Organic psychological ..processes
CONTEXTUAL INFLUENCES•Onsite tangibles
•Ambiance•Structure Quality•Staff dress•Level of crowding•Type of clienteles
•Agency environment•Program image•Cost of service production•Threat of service loss•Awareness of service benefits•Use of revenues
NORMATIVE INFLUENCERS
•Equity: Community value ..system•Horizontal equity•Prevailing cultural norms•Communitywide –..personal services ..continuum
REFERENCE PRICE
The Genesis of Reference Price and its Applications in the Parks and Recreation Field
![Page 6: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/6.jpg)
Context 1High-end Restaurant
Major Hotel
Context 2Low-end Restaurant
Context 3Specialist Wine Store
Context 4Supermarket
![Page 7: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/7.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance
![Page 8: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/8.jpg)
Conceptualization of the Zone of Price Tolerance
Median of the reference price
range
Either assimilation or contrast
Either assimilation or contrast
Rejection Rejection
Non-commitment
zone
Non-commitment
zoneZone of Price Tolerance
Assimilation
Bargain Price
Resistance Price
ContrastContrast
![Page 9: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/9.jpg)
Guidelines for Width of Acceptance Zone
• Private sector: 15%-30% below regular price to be effective as a discount– Greater than 30%; not bona fide– 10% for price increases
• Public Parks and Recreation: maybe more scope at the high end because subsidies generate consumer surplus
![Page 10: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/10.jpg)
Activity Existing Price
Low (50% of cost)
Medium (Break even)
High (Going rate)
Yes% $
Yes% $
Yes% $
Swim Lessons $8.00 100 10 92 12 76 15
Youth Swim $0.50 94 .50 84 .75 77 1
Aerobic fitness $12.00 78 14 59 23 38 32
Weight Conditioning
$16.00 55 16 52 22 33 30
Youth baseball $10.00 69 20 72 28 44 35
Tennis lessons $8.00 76 13 86 15 62 20
Preschool classes
$34.00/mo. 74 36 34 50 9 100
Photography classes
$13.00 52 25 53 32 54 40
Adult specialty crafts
$15.00 50 33 36 43 42 50
Youth dance classes
$12.00 68 14 67 20 64 25
Cross country ski
$15.00 44 24 53 34 30 45
Resident camping
$70.00 47 97 53 121 28 125
Whitewater raft trips
$18.00 60 23 22 32 25 35
Acceptance of Price by ProgramParticipants at Three Levels
![Page 11: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/11.jpg)
Proportional Not Absolute Terms
• $10 $15 = $5 increase but is a 50% increase– May be rejected as outside the zone
• $70 $78 = $8 increase but is an 11% increase– May be accepted as within the zone
![Page 12: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/12.jpg)
Implementing Price Increases Consistent with the Latitude of Price
Acceptance
Y
Price
Years
Latitude of price acceptance. No client resistance to these price increases
Price increase at year Y meets client resistance
![Page 13: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/13.jpg)
College Station Water Rates
Usage Old Rate New Rate
0-10,000 $2.22 $2.22
10,000-15,000 $2.22 $2.88
16-20,000 $2.22 $3.54
21-25,000 $2.22 $4.20
26,000 and up $2.22 $4.86
![Page 14: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/14.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance• Relationship pricing
![Page 15: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/15.jpg)
Relationship Pricing
• Consistency within a similarity set e.g. a division: Athletics, aquatics, arts, etc.
• “Outstandingness” of the high and low anchor prices.
![Page 16: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/16.jpg)
High End Outstandingness Impact
A store owner has two camel hair jackets priced at $100 and $150 and finds that the more expensive jacket is not selling. A new camel hair jacket is added and displayed for $250; the new jacket does not sell, but sales of the $150 jacket increase
![Page 17: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/17.jpg)
Which Presentation Will Lead to a Higher Order of Reference Price for Aerobics?
DescendingBootcamp $100Jazzercise $80Yoga $65Spinning $50Aerobics ?
AscendingAerobics ?Spinning $50Yoga $65Jazzercise $80Bootcamp $100
![Page 18: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/18.jpg)
Relationship Pricing
• Consistency within a similarity set e.g. a division: Athletics, aquatics, arts, etc.
• “Outstandingness” of the high and low anchor prices.• Horizontal equity: Treat equals equally.
![Page 19: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/19.jpg)
Relationship Pricing
• Consistency within a similarity set e.g. a division: Athletics, aquatics, arts, etc.
• “Outstandingness” of the high and low anchor prices.• Horizontal equity: Treat equals equally.• Change the relationship context.
![Page 20: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/20.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance• Relationship pricing• Introductory pricing
![Page 21: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/21.jpg)
Introductory Price Decay
After introductory periodIntroductory period
Regular price
Introductory low price
Time, weeks
Sales
![Page 22: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/22.jpg)
Evaluation of Fees, Sample Summer Visitors, Flaming Gorge National Recreation Area
n Mean
% evaluating fee asToo Low About right Too high
Non-annual rec. use pass 289 $5.69 4 74 22
Annual rec. use pass 99 $22.16 - 78 22
Daily river parking fee 170 $4.29 3 58 39
Season river parking fee 12 $20 - 73 27
Camping 358 $50 - 56 44
Red Canyon Lodge 7 $159 - 90 10
Boat rentals 84 $105 1 51 48
Non-season boat slip 28 $54 - 58 42
Season boat slip rental 20 $1,254 - 50 50
Guide services 9 $235 - 70 30
Source: Fix and Vaske, 2007
![Page 23: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/23.jpg)
Entrance Fee Evaluations at Selected National Wildlife Refuges
Sample Size Entrance Fee is:
National Wildlife Refuge Too Low
About Right
TooHigh
Sacramento, CA 290 5 92 3
Aransas, TX 196 4 87 9
Dungeness, WA 404 3 87 10
Chincoteaque, VA 203 12 86 2
St. Catherine’s Creek, MS 98 15 80 5
Balcones, TX 84 4 89 6
Buenos Aries, AZ 167 14 86 0
Piedmont, GA 321 5 88 7
Total 1763 6 88 6
Source: Vaske, Donnelly and Taylor, 1999
![Page 24: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/24.jpg)
Service Area Current Average Price ($)
Most Appropriate Price ($) Price (%) Per Visit Cost of
Provision ($)
Parks, playgrounds,
greenbeltsNo Charge 0 83 4.00
Tennis 5.00 5.00 66 9.00
Swimming 2.00 2.00 72 9.00
Golf 11.00 11.00 53 19.00
Recreation centers 3.00 3.00 68 10.00
Organized athletics 3.80 3.80 62 6.00
Outdoor nature programs 2.00 2.00 67 9.00
Senior Citizen programs 1.00 1.00 68 6.00
Arts facilities or programs 2.00 2.00 62 6.00
Community education programs
2.00 2.00 62 12.00
Programs for people with disabilities
No Charge 0 90 11.00
Perceptions of Appropriate Prices for Existing City Recreation Services
![Page 25: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/25.jpg)
Price ($) %
No charge 16
.75 20
1.25 28
1.75 14
2.25 7
3.00 15
Price ($) %
No charge 5
1.00 19
2.00 33
3.00 25
4.00 4
5.00 14
Perceptions of Appropriate Prices for Two Proposed New Services
Activity A Activity B
![Page 26: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/26.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance• Relationship pricing• Introductory pricing• Price-quality relationship
![Page 27: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/27.jpg)
Price-Quality Relationship
“Setting the right price in services is more than a matter of generating dollars today. It is also a matter of sending the right message about the service. Prices are evidence.” (Berry and Parasuraman 1991)
![Page 28: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/28.jpg)
The Common Law of Business Balance“It is unwise to pay too much, but it is worse to pay too little. When you pay too much, you lost a little money – that is all. When you pay too little you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.”
![Page 29: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/29.jpg)
Scitovszky 1945:
“Few of us can appraise the qualities of an electric iron or of tooth paste, and the frequent introduction of new models and improvements prevents us from relying on experience … More and more, therefore, the consumer of to-day has to judge quality by indices of quality … “mass observation” of one’s friends and their wives shows that more often than not people judge quality by price” (p. 100).
![Page 30: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/30.jpg)
A Traditional Economic Demand Curve and a Price-Quality Demand Curve
120110100
908070605040302010
0 10 20 30 40 50 60
Bridge Class Price ($’s)
Bridge Class Numbers
TraditionalPrice-Quality
![Page 31: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/31.jpg)
“The word ‘cheap’ usually means inferior quality nowadays; and in the United States ‘expensive’ is in the process of losing its original meaning and becoming a synonym for superior quality. Worse still, one of the largest American breweries uses the advertising slogan: ‘Michelob, America’s highest-priced brew!’”Scitovszky, 1945
![Page 32: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/32.jpg)
Why Does Price Quality Exist?(only works if no other cues)
• Past experience is consistent with there being a price-quality relationship. Belief in the saying “You get what you pay for”
• The agency’s higher costs associated with a commitment to high quality
• Avoids the risk that inexpensive services may be less likely to give satisfaction
![Page 33: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/33.jpg)
ST. MARTIN’S WC2 tel BO 071.836.1443ACC 071.379.4444* T 0836.430944AGATHA CHRISTIE’s
The MousetrapWorld’s longest ever run! 40th yearSORRY. No reduced prices at any timeFrom any sourceMon-Sat at 8:00. Mats Tue at 2:45. Sat at 5:00.
![Page 34: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/34.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance• Relationship pricing• Introductory pricing• Price-quality relationship• Service enhancement pricing
![Page 35: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/35.jpg)
Service Enhancement Pricing
Participants are more likely to support user fees when such fees are used to maintain and improve the resource at which they are collected.
![Page 36: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/36.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance• Relationship pricing• Introductory pricing• Price-quality relationship• Service enhancement pricing• Temporal reframing
![Page 37: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/37.jpg)
Temporal Reframing
(i) The use of credit cards
![Page 38: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/38.jpg)
Temporal Reframing
(i) The use of credit cards
(ii)The “pennies a day” approach
![Page 39: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/39.jpg)
Change Value Perceptions
![Page 40: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/40.jpg)
Psychologically Repositioning a Bond Proposal for a New Natatorium
The median home value in the community is $150,000Construction cost of the natatorium $2 millionAnnual property tax payment by an average home owner: $12Annual operation and maintenance cost $100,000 Annual property tax payment by an average home owner $6 Total annual property tax payment by an average homeowner $18 which is $1.50 per month
In most years, there are heartbreaking stories in the local news media of children from this community who have drowned in area lakes. An agreement with the ISD means that every fourth grader in the community will be taught to swim, so lives will be saved.
Invest $1.50 a month and save a child’s life!
![Page 41: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/41.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance• Relationship pricing• Introductory pricing• Price-quality relationship• Service enhancement pricing• Temporal reframing• Sunk cost effect
![Page 42: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/42.jpg)
Sunk Cost Effect
• There is a greater tendency to continue with a program once an investment had been made in it
• At the time of purchase feel compelled to use it to avoid feeling they have wasted their money
![Page 43: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/43.jpg)
Payment Depreciation
Over time, price is discounted so ultimately that the initial service takes on the characteristics of a free service
![Page 44: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/44.jpg)
Health Club Fees: Payment Depreciation
(i) Pay the whole fee once a year
(ii) Pay half the fee every 6 months
(iii)Pay quarter of the fee every 3 months
(iv)Pay one-twelfth of the fee every month
![Page 45: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/45.jpg)
![Page 46: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/46.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance• Relationship pricing• Introductory pricing• Price-quality relationship• Service enhancement pricing• Temporal reframing• Sunk cost effect• Participant adjustment period
![Page 47: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/47.jpg)
Implementing Price Increases Consistent with the Latitude of Price
Acceptance
Y
Price
Years
Latitude of price acceptance. No client resistance to these price increases
Price increase at year Y meets client resistance
![Page 48: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/48.jpg)
Participant Adjustment Period
If there is a price increase outside the latitude of acceptance there is likely to be a decline in use. However, after an initial period of time, users may psychologically adjust to the new reference price and regard it as “acceptable.”
![Page 49: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/49.jpg)
Concept of Participant Adjustment Period
Participant AdjustmentPeriod
Time
![Page 50: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/50.jpg)
Length of Adjustment Period
• Availability of substitute suppliers
• Income level of the client group
• Magnitude of the increase
![Page 51: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/51.jpg)
3 Mitigation Strategies
• If season passes are involved, “grandfather.” Invite early renewal. Core users (20-80 law)
![Page 52: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/52.jpg)
3 Mitigation Strategies
• If season passes are involved, “grandfather.” Invite early renewal. Core users (20-80 law)
• Long time of advance notice
![Page 53: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/53.jpg)
3 Mitigation Strategies
• If season passes are involved, “grandfather.” Invite early renewal. Core users (20-80 law)
• Long time of advance notice• Principle of Dual Entitlement – demonstrate
the increase is fair and not arbitrary
![Page 54: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/54.jpg)
![Page 55: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/55.jpg)
![Page 56: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/56.jpg)
![Page 57: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/57.jpg)
Where the price has traditionally been zero, the implementation of any price often results in a significant attendance decline.
![Page 58: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/58.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance• Relationship pricing• Introductory pricing• Price-quality relationship• Service enhancement pricing• Temporal reframing• Sunk cost effect• Participant adjustment period• Odd pricing
![Page 59: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/59.jpg)
Truncation
A$79 $93
B$75 $89
![Page 60: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/60.jpg)
The Influence of Odd Pricing on Demand
4 8 12 16 20 24 28 32 36 40 44
45
42
39
36
33
30
27
24
21
18
“The price decreases from $45 to $18. But at the “odd” prices of $38, $29 and $19 disproportionately more people participate than at the rounded numbers above them. Thus, 10 people enroll at $40, but this increases to 15 at $39. Similarly, at $30 enrollment is 20 people, but this number increases to 26 when the odd price of $29 is used.
![Page 61: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/61.jpg)
Why No Odd Pricing?
• Deceitful illusion?
• Lack of awareness of its potential
• No tradition – concerns about controversy
![Page 62: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/62.jpg)
Recreation ClassCost increase ($’s per year)
Year Price ($’s)
1 24
2 27
3 29
4 33
5 39
![Page 63: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/63.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance• Relationship pricing• Introductory pricing• Price-quality relationship• Service enhancement pricing• Temporal reframing• Sunk cost effect• Participant adjustment period• Odd pricing• Self-esteem pricing
![Page 64: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/64.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance• Relationship pricing• Introductory pricing• Price-quality relationship• Service enhancement pricing• Temporal reframing• Sunk cost effect• Participant adjustment period• Odd pricing• Self-esteem pricing• Customary pricing
![Page 65: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/65.jpg)
Customary Pricing
•Keep price within the latitude of price acceptance and cut a program’s cost
•Always cut quantity, NEVER quality“The pain of low quality is
remembered long after the joy of low price is forgotten”
![Page 66: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/66.jpg)
A poor salesman sells on price, whereas a good salesman sells on the quality of the product
![Page 67: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/67.jpg)
How important is each of the following factors in your decision to have your child participate in youth sports with the Gloucester (Virginia) Parks and Recreation Department? N=505
Location 3.6
Time of Activity 3.9
Price 3.1
Program Quality 4.3
Coach’s Quality 4.3
Parks and Recreation’s Staff Quality 4.1
Knowing Other Participants in the Activity 2.6
![Page 68: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/68.jpg)
An Illustration of Customary Pricing Applied to a Recreation Class
Year Number of Classes Price
1 10 $50
2 9 $50
3 8 $50
4 7 $50
5 10 $70
6 9 $70
![Page 69: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/69.jpg)
Reference Price Related Pricing Strategies
• Latitude of price acceptance• Relationship pricing• Introductory pricing• Price-quality relationship• Service enhancement pricing• Temporal reframing• Sunk cost effect• Participant adjustment period• Odd pricing• Self-esteem pricing• Customary pricing• External reference pricing
![Page 70: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/70.jpg)
External Reference Pricing
1. Creation of discounts to induce trial or re-engagement with an activity
![Page 71: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/71.jpg)
The Program Adoption ProcessPark and Recreation Agency Service
AwarenessPassive Acceptance of Information
InterestActive Seeking Out of Benefit Information
Evaluation-Maybe TrialMental or Actual Trial
DecisionCommitment to Use the Service
ConfirmationReassure the Correct Decision Was Made
![Page 72: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/72.jpg)
Discount Formats
• Regularly $20; for one week $15
• 25% off for one week
• Save $5 for one week
• Special: $15 for one week
![Page 73: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/73.jpg)
Dollar Amount or Proportion?
• Dollar amount for high priced services
• Percent discount for lower priced services
![Page 74: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/74.jpg)
Consider Truncated Influence!
A$41 to $29
B$45 to $33
![Page 75: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/75.jpg)
External Reference Pricing
1. Creation of discounts to induce trial or re-engagement with an activity
2. Comparative pricing to persuade or re-assure people that an agency’s prices are better than those of its competitors
![Page 76: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/76.jpg)
Comparative Boat Registration Fees
Description Texas Florida Michigan
16’ and under $18.00 $27.50 $10.60
16’ – 26’ $27.00 $43.50 $60.00
26’ – 40’ $36.00 $107.50 $162.00
Over 40’ $45.00 $171.50 $186.00
![Page 77: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/77.jpg)
1994-1995 Hunting & combination License Prices for Surrounding States
StateResident Non-Resident
Small Game General Combination Small Game General
Arkansas $10.50 $25.00 $35.50 $65.00 $185.00
Louisiana $10.50 $21.00 $53.00 $86.00 $160.50
New Mexico $9.50 $43.50 $47.00 $79.00 $348.00
Oklahoma $12.50 $44.75 $53.25 $85.00 $301.50
Texas N/A $18.00 $30.00 $75.00 $205.00
Average (Excluding
Texas)$10.75 $33.56 $47.19 $78.75 $248.75
![Page 78: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/78.jpg)
External Reference Pricing
1. Creation of discounts to induce trial or re-engagement with an activity
2. Comparative pricing to persuade or re-assure people that an agency’s prices are better than those of its competitors
3. Facilitating acceptance of price discrimination
![Page 79: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/79.jpg)
Favoring Local Residents - Surcharges
• A state park agency charges residents $12 and non-residents $15 a night for camping.
• A city charges its residents $20 to play golf and non-residents $25.
• A golf course charges $40 a round on Saturdays, but $50 for rounds started before 10am.
• Registration is $30. If you register late, the fee goes up to $40.
• When campers go to register at a state park the staff response is: “The fee is $12; you don’t have a state parks sticker? Then it is $16; you want a hook up? Then it is $19.”
![Page 80: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/80.jpg)
Favoring Local Residents - Discounts
• The state agency price for camping is $15. Residents receive a $3 discount to $12.
• It is $25 to play golf. Residents receive a $5 discount to $20.
• The Saturday price for golf is $50. A $10 discount is given to those who start after 10am.
• Registration is $40. A $10 discount is given to those who register early.
• “The camping fee at the state park is $19. You are a state resident? Then it is $15. You don’t need a hook up? Then it is $12.”
Surcharges make people mad; discounts make them happy!
![Page 81: How to Raise Recreation Service Prices Without Making People Mad Virginia Recreation and Parks Society John L Crompton University Distinguished Professor](https://reader036.vdocument.in/reader036/viewer/2022062518/56649de35503460f94ada7a5/html5/thumbnails/81.jpg)
Presentation available at:
• http://agrilife.org/cromptonrpts/selected-books-articles-and-presentations/recent-presentations/