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SEM1 4.07 A - Pricing

SEM1 4.07 A - Pricing. PE - Develop a foundational knowledge of pricing to understand its role in marketing PI - Identify factors affecting pricing of SEM products (lead time, market demand, market segmentation, smoothing, responding to competitors)

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SEM1 4.07 A - Pricing

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  1. SEM1 4.07A - Pricing • PE - Develop a foundational knowledge of pricing to understand its role in marketing • PI - Identify factors affecting pricing of SEM products (lead time, market demand, market segmentation, smoothing, responding to competitors) • PI - Describe pricing issues associated with SEM products (cost, value, objectives)

  2. Why do ticket prices vary? • Seat location • Performance of the team • Popularity of the team/entertainer • Location of the venue • Time of the event • Opponent • Scarcity of tickets • Paying for a new stadium • PSL’s • Ticket discounts • Market segmentation • Top Athletes • Value to the consumer • Expenses • Production Costs • Uncertainty • Unsold Tickets “Deadwood”

  3. Factors affecting pricing of SEM products • Lead time • Market demand • Market segmentation (target market) • Smoothing/penetration/skimming price strategies • Responding to competitors

  4. Lead Time • Lead Time:The time between customer order and delivery of final product. • Sports and Events will often charge less if tickets are purchased ahead of time. • Ex: “Purchase concert tickets now for $25 or at the door for $35.”

  5. Market demand • Price Elasticity – is the degree to which demand for a product is affected by its price • How much of a product customers will buy at a certain price - Relationship between market demand and price • Inelastic demand - Price changes have little to no impact on quantity of sales • “Need” items - necessity, brand loyalty, urgency of purchase • Ex: Milk, Eggs, Super Bowl Tickets, Gasoline? • Skimming pricing strategy would work here – high then lower • Elastic demand - Small price changes (up or down) have big impact on quantity of sales • “Want” items – luxuries, availability of substitutes • Ex: I-pod, sports equipment, new clothes • Penetration pricing strategy would work here – low then normal

  6. Effect of Elasticity • Elastic Demand • Inelastic Demand Price Demand Price Demand

  7. SEM1 4.07 Activity • Students work in pairs and create a PPT showing elastic and inelastic products • Students must show 2 sports goods & services & 2 entertainment/event goods & services (8 total) • On each PPT slide list if the product is elastic or inelastic and the factor affecting why it is • Ex: NFL football, elastic due to availability of substitute products • Must have 2 sports products that are elastic and 2 that are inelastic – same for event/entertainment

  8. Market Segmentation • Target Marketing – fans/brand loyalty, PSL’s • Discounts to certain age groups – kids free! • Coupons sent to specific geographic locations

  9. Pricing strategy - Smoothing • Smoothing - dividing product into different segments: • Time: Pay more money for “Prime time” • Place: Pay more money for court-side seats and less for nosebleeds (higher seats)

  10. Pricing strategy Penetration - Skimming • Responding to competitors – pricing can assist in gaining sales or market share based on how it relates to your competition • Non-price: Charge higher prices than competitors for unique product and services • Ex: The Panthers can charge what they wish – unique and no competition • Price: Encourage sales with lower prices than competitors • Penetration pricing • Setting prices lower than the competition • Used to introduce a new product • Encourage maximum participation (More people will purchase if price is lower) • Skimming • Setting prices higher than the competition (as high as the consumer/market will pay/bear) • When a product is new & unique, you can skim the cream and charge higher price • Promotes “high-class” image of product

  11. Pricing issues: Cost and Value • COST (of the event) • Cost of production for good/service • Some events have higher production costs • VALUE (to the consumer) • What are the perceived benefits to consumers? • What is the overall value to the consumer • Overall value – consumers will look at costs of attending event, parking, concessions, merchandise, etc. • Unique experience to each person • Perceived benefits: • Tangible : Physical benefits (Buying a set of weights to get into shape) • Intangible (Buying a set of weights to look good at the beach)

  12. Different pricing objectives • Objectives: • What are the goals of the good/service? • Do you want it to seem “high class” or affordable? • What type of attendees do you want? • How much profit do you want to make?

  13. Ticket pricing strategies • Scaling the house/arena/stadium • Pricing tickets differently based on • Location of seat • Location of entire section • Time of purchase • Price is less if purchased further in advance • Yield-management pricing • Maximize revenue at venues with limited capacity • Venues with limited seating price tickets differently to have greater revenue potential • Charge more at smaller venues!

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