(sm) springfield norester maximizing revenue in minor league.pdf

8/18/2019 (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

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;'1*8'((


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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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o $3,800 budgeto 10000 postcardso 625 responses

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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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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



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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)

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)*++

, -*. &$/0*&

1$/0*& 12-* " ,5 ,5 ,( ,6 ,78 ,79

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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

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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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Will Nor’easters

breakeven?

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C


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Revenue from

Tickets?

Consumers (1/4)


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Ticket Revenue (4/4)


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Revenue from

Concessions?

Concession Revenue Per Sea


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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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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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Can we generalize the insi

(sm) springfield norester maximizing revenue in minor league.pdf

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