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Pricing

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  1. Pricing HSS 3000/5263 Sport Marketing Dr. Brian Turner

  2. Basics of Pricing • Vast range of product elements that require pricing • Tickets • Hard and soft goods • Memberships • Concessions • Information • Signage

  3. What is Price? • “… statement of value for a sports product” • Value is the central tenet of pricing • Price is a critical element of the sport marketing mix

  4. Determinants of Pricing -Internal Factors • Other marketing mix variables • Costs

  5. Determinants of Pricing -Internal Factors • Costs • Satisfaction = • Cost vs. Price • Fan Cost Index (FCI) • 4 average price tickets • 4 small soft drinks • 2 small draft beers • 4 hot dogs • Parking for 1 car • 2 game programs • 2 adult-size hats

  6. Determinants of Pricing -Internal Factors • Organizational Objectives

  7. Determinants of Pricing -External Factors • Consumer demand • Elasticity of demand = • Elastic demand • Inelastic demand • Unitary demand

  8. Determinants of Pricing -External Factors • Estimating Demand • Economy • Competition • Others • Legal issues • Technology

  9. Differential Pricing Strategy • One of the most common practices • “… selling the same product or service to different buyers at different prices” • Second-market discounting

  10. New Sports Product Pricing • Penetration pricing • “… pricing in the lower range of expected prices, in the belief that an elastic market exists and the lower price will increase the quantity purchased.” • Skim pricing • “… pricing high in the expected range of prices, in the belief that demand is price inelastic”

  11. New Sports Product Pricing • Production capacity • Rate of technological change • Barriers to entry • Economic conditions • Desired image

  12. Psychological Pricing Strategies • Prestige Pricing • Reference Pricing • Odd-Even Pricing • Customary (or Traditional) Pricing

  13. Cost-Based Pricing Strategies • Break Even Analysis • Fixed Costs (FC); Variable Costs (VC) • TC (total cost) =

  14. Cost-Based Pricing Strategies • For 10,000 soccer balls Break Even Point

  15. Cost-Based Pricing Strategies • Cost-Plus Pricing • Costs + Desired Profit = Price • Target Profit Pricing

  16. Price Adjustments • Price Reductions • Risky • May associate multiple price reductions with inferior product quality • May associate price reductions with price gouging • May “wake a sleeping dog” • Makes it more difficult for the consumer to establish a frame of reference for the true price of the product • Price increases

  17. Price Adjustments • Price discounts

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