Pricing

1. Pricing Sports and Entertainment Marketing

2. How much would you pay for tickets to see your favorite football team or musician? Businesses struggle with this same questions everyday. “How much will someone pay for ______?”

3. All types of businesses use pricing in their business exchanges Pricing goes by many names: • Tuition for college • Interest on a loan • Fee for a service • Toll for a roadway • Rent for an apartment • Fare for a bus or train ride

4. So what is price? Price – the value placed on the goods or services being exchanged

5. Pricing and Profit Price helps a company determine its profit or loss Each item sold carries a price…. Sales revenue = items sold x sales price Profit or loss = cost of goods – company expenses

6. Pricing and the Marketing Mix Remember that PRICE is one of the 5 P’s A company must make sure the price of their product is acceptable for their target market Example – A bicycles company makes a wide range of bicycles Lower priced bike sold at Wal-Mart – for value-oriented customers High end bike sold at specialty bike shop – for serious bicyclists

7. Pricing Considerations Several factors affect pricing decisions • Consumer perceptions • Demand • Cost • Product Life Cycle stage • Competition

8. Consumer Perception Prestige pricing based on customer perception Many consumers believe that the higher the price, the better the quality Odd-even pricing pricing goods with either an odd or and even number to match a product’s image Odd - $25.99 – Bargain Even - $100 – More expensive

9. Consumer Perception Target Pricing pricing goods according to what the customer is willing to pay Manufacturers estimate the target price and work backward to determine what retailers should charge MSRP – Manufacturers Suggested Retail Price

10. Demand If a product is in high demand and low supply then the price will be high Example Capitals Tickets when team is performing poorly ticket prices drop when team is performing well ticket prices go up WHY? Companies can generate this themselves by offering a “limited edition” of a product

11. Demand As a general rule, demand will be low for higher priced items because less people will be able afford it Example: racing bike, top of the line golf clubs Demand may be inelastic if consumers feel there is no substitute Example: Nike – Air Jordan’s

12. Cost All businesses are out to make a profit!! The price of the product will always be more than what it costs to manufacture it Markup – the difference between the retail or wholesale price and the consumer cost Cost-plus – pricing products by calculating all costs and expenses and adding desired profit

13. Newness of the Product(Product Life Cycle Stage) Introduction Stage They may price the item very high to recover the costs of development (Skimming pricing) – OR – They may price it below the competitors to create immediate demand (Penetration pricing)

14. Competition Businesses find out what competitors are charging….. If they want to compete on price they will set their price lower If they do not want to compete on price they use non-price competition, basing the competition on quality or consumer benefits

15. Special Pricing Strategies Loss-leader pricing – pricing and item at or below cost to draw customers into the store (then they will shop and buy other products) EX: XM Radio ad Yield-management pricing – pricing items at different prices to maximize revenue when limited capacity is involved Example – arena seats (better seats are priced higher to increase overall revenue)

16. Discounts May be offered for ….. • Buying larger amounts • Buying before popular season • To get rid of older merchandise

17. Regulatory Factors Price fixing – competitors conspire to set the same price Predatory pricing – setting a very low price in order to drive competitors out of business BOTH ARE ILLEGAL

18. NOW FOR SOME FUN!! The Price is Right!!