18-1 chapter 18 pricing decisions in sports marketing mcgraw-hill/irwin©2007 the mcgraw-hill...
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18-1
Chapter 18Chapter 18
Pricing Decisions Pricing Decisions
in Sports Marketingin Sports Marketing
McGraw-Hill/Irwin ©2007 The McGraw-Hill Companies, All Rights Reserved
18-2
PricePrice
• What the Buyer Gives Up in the Exchange Process
• The Third Variable of the Traditional Marketing Mix
18-3
ElasticityElasticity
• Elastic Demand – Market Exhibits Sensitivity to Changes in Price
• Characteristic of Most Products
• When Beef Prices Rise, Consumers Reduce Expenditures on Beef and Purchase More Chicken
18-4
InelasticityInelasticity
• Inelastic Demand – Market Is Less Sensitive to Pricing; Purchase Product at Higher Prices
• Few (or no) Substitutes – Gasoline
• Buyer Not Willing to Forgo Purchase - Textbook
• Buyer Not Able to Forgo Purchase - Medicine
18-6
Situational InfluencesSituational Influences
• Unusual, Often Short Term Influences, that Impact Consumer Purchase Decisions
• Team Is Winning
• Move to a New Stadium
• Presence of a Visiting Star Player
18-7
CostsCosts
• In Spectator Sports, this Generally Relates to the Team’s Payroll or Appearance Fees Paid to Individual Athletes
• MLB’s New York Yankees Payroll in 2006 Was $194,663,079
• Michelle Wie Reportedly Paid $1,500,000 to Play in the Casio World Open in Japan
18-8
Competition – Competition – Cost of Alternatives for ConsumerCost of Alternatives for Consumer
• Baseball versus Football (MLB v. NFL)
• Baseball versus a Motion Picture
• Gold’s Gym versus Curves
• Nike versus Converse Athletic Shoes
18-9
Supply and DemandSupply and Demand
• Surplus Drives Prices Down; Shortage Is a Catalyst for Higher Prices
• Teams that Sell Out – Red Sox, Packers, Lakers, Red Wings – Have Higher Ticket Prices
• Teams Struggling to Fill the Stands Often Resort to Promotional Pricing
18-10
Marketing ObjectivesMarketing Objectives
• Market Share Objectives
• Prestige and Image
• Seeking Higher Market Share, Top Flight Golf Balls Are Sold at Prices Much Lower than Those of the Premium Brands Such as Titleist and Nike
18-11
Legal ConsiderationsLegal Considerations
• Taxes Added to Cost of Products
• Team “Scalping”
• MLB’s Chicago Cubs Taken to Court Over Team’s Resale of Desirable Tickets at Highly Inflated Prices
18-12
Consumer Perceptions –Consumer Perceptions –“Perception Is Reality”“Perception Is Reality”
• What Consumers Think about the Product Influences Their Perception of Value
• Influences How Much They Will Pay
• Influences Price that Can Be Charged
• Titleist Golf Balls Command Premium
18-13
Marketing Mix ConsistencyMarketing Mix Consistency
• Price Needs to Work in Harmony with the Other Elements of the Marketing Mix
• Price Also Needs to Be Consistent with the Target Market
• Many Marketers of Sports Products Offer Alternatives Featuring Different Prices
18-14
General Implementation General Implementation StrategiesStrategies
• Cost-Plus
• Markup
• Promotional
• Yield Management
• Target Return
18-15
Pricing Applications:Pricing Applications:Spectator SportsSpectator Sports
• Most Commonly Criticized Component of the Strategies Employed by the Marketers of Spectator Sports
• Fan Cost Index – Average Ticket Price– NFL $58.95 for Most Recent Season– NBA $45.92– NHL $41.19– MLB $22.21
18-16
Pricing Applications:Pricing Applications:Spectator SportsSpectator Sports
• Season Ticket
• Partial Season Ticket
• Price Tiering
• Variable Pricing
18-17
Pricing Applications:Pricing Applications:Spectator SportsSpectator Sports
• Value Pricing
• Promotional Pricing– Discount Pricing– Bundling– Cross-Promotion Discounting
18-18
Pricing Applications:Pricing Applications:Spectator SportsSpectator Sports
• Qualifying Payment– PSL– Donation to University Program
• Bidding
18-19
Pricing Applications:Pricing Applications:Participation SportsParticipation Sports
• Supply and Demand Based Pricing
• Level of Service
• Variable Pricing
• Individual Considerations
18-20
Pricing Applications: SASSPricing Applications: SASS
• Traditional Retailing Principles
• Supply and Demand
• Value Added through Licensing
• Value Added through Celebrity Endorsement
18-21
Pricing Applications: SASSPricing Applications: SASS
• Markup– Based on COGS
• Evident that Prices for SASS Are Influenced by the Set of Factors Discussed for Spectator Sports
18-23
Closing CapsuleClosing Capsule
• Pricing Policies Are Commonly Criticized– Tickets for New England Patriots NFL Game – Greens Fees at Pebble Beach– Nike Shoes Endorsed by LeBron James– A Beer at a Sports Stadium
– Any Bargains in that List?
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