Pricing in Sports & Entertainment

How am I influenced?How can I satisfy customers?

Price

Is defined as the value placed on the goods or services being exchanged

Price is important in a business

Because it helps determine a company’s profit or loss

Four P’s of the marketing mix

Many consumers believe that

The higher the price, the better the quality of an item

What do you think?A very good quality product at a low

pricea. May sell better than at a higher

priceb. May sell less than at a higher price

Prestige pricing

Is pricing based on consumer perception

Examples of prestige pricing

BMW 2011535i$50, 475

Odd-even pricing

Pricing foods with either an odd number or an even number to match image

Odd pricing example 25.99 suggest a bargain

Even pricing example $100 reflect a quality

item

Target pricing

Pricing goods according to what the customer is willing to pay

Think, Pair, Share

What price are most people willing to pay for an Iphone app?

Think, Pair, Share

If a product is in high demand

And there is a limited supply,

its price will be a. Lowb. High

Ex. Popular sporting events with a limited number of seats

Think, Pair, Share

Whenever, there is a large supply of an item and demand is not great, dealers may:

a. Raise prices to increase demand for the item

b. lower prices to increase demand for the item

Ex. Retailers may do this at the end of a season when there is still a supply of merchandise that did not sell at a regular price (clearance)

Why can Nike charge high prices and keep demand high?

Brand loyal customers feel there is no substitute for Nike products

Since a business needs to make a profit,

The price of an item must be higher than the cost a business paid for it

Markup Is the difference between

retail or wholesale price and the cost of an item

Ex. $49.99 retail price - $25

cost = $24.99 markup

Cost-plus pricing Pricing products by calculating all costs & expenses &

adding a desired profit

Ex. New Tennis Shoes:

Costs & Expenses: Materials - $20 Research & Design - $30 Marketing - $30 Shipping/Storage - $20

Desired Profit - $100

Recommended Retail Price - $200Nike SB Eric Koston Zoom One

When introducing a new product,

Marketers may decide to price the item very high to recover the costs of development – or they may price it low to create immediate demand for the product

Pricing a new item high is called Skimming pricing

Pricing a new item low is called Penetration pricing

Skimming or Penetration?

Skimming or Penetration?

Non-price competition

Competition between businesses based on quality, service and relationships

Market share The percentage of the total sales of all

companies that sell the same type of product

Ex. Gatorade may have an 80% market share for sports drinks

Price lining

Selling goods in a product line at specific price points

Ex. Warm up suits - $39.99, $59.99, $79.99

Bundle pricing

Selling several items as a package for a set price

Loss-leader pricing

Pricing an item at cost or below cost to draw customers into the store

Yield-management pricingPricing items at

different prices to maximize revenue when limited capacity is involved

Concerts, events, hotel rooms, airplanes

*Better to sell for $1 than to get no money at all

Think, Pair, Share

When the New York Mets have tickets to home games against more competitive opponents that might draw more attendance they should charge

a. More for the ticketsb. Less for the tickets

Pricing Regulations

Price fixing An illegal practice whereby

competitors conspire to set the same prices

Predatory pricing Is setting a very low price in order to

drive competition out of business

Revenue is The total income brought in through

the sales of goods and services

Product placement

The appearance of a product as a prop in a film or TV show in exchange for a fee paid by the product’s advertiser

Ex. BMW paid 15million to MGM to have its cars in the James Bond movies

Ashton Martin DBS

Product Placement

Product Placement

Did you know that:

Most CD’s released by record companies

Do not recover the cost of production and distribution

One successful album May have to pay for 20

unsuccessful albums and make a profit

A local ad broadcasted on a small town tv station at 2 am

Could cost as little as $50 for 30 seconds

Advertising Terms

Reach The number of people

exposed to an advertisement

Frequency and the number of times

they are exposed to it

On average it takes 3 exposures to have a

successful ad

FrequencyExample:

How many times have you seen these commercials?

TV Profits

For producing TV shows, the general rule is

That if a series can stay on for 3 years and or complete production of 60 episodes it is a financial success

The real profits are generated in Reruns because most production

costs have already been paid

Top 10 Most Profitable TV shows

Think, Share

How much do you think that $6 box of popcorn might cost the theater ?

Event Pricing Terms

Draw – size of the audience

Gate – number of tickets sold

Think, share

Which movie had the biggest draw ever?

Who had the largest concert draw ever?