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)
• PI - Describe pricing issues associated with SEM
products (cost, value, objectives)
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
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Market segmentation
Top Athletes
Value to the consumer
Expenses
Production Costs
Uncertainty
Unsold Tickets “Deadwood”
Factors affecting pricing
of SEM products
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Lead time
Market demand
Market segmentation (target market)
Smoothing/penetration/skimming price
strategies
• Responding to competitors
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.”
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
Effect of Elasticity
• Elastic Demand
• Inelastic Demand
Demand
Price
Price
Demand
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
Market Segmentation
• Target Marketing – fans/brand loyalty, PSL’s
• Discounts to certain age groups – kids free!
• Coupons sent to specific geographic locations
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)
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
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)
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?
Company-Focused
Competitor-Focused
•Pricing products to •Beating the
enhance the image competition
•Covering costs
•Creating profit
•What the
consumer will pay
Customer-Focused
•Offering the most
discounts
•Offer lowest prices •Offer “fair” price in
to gain share
the consumer’s
mind
Ticket pricing strategies
• Scaling the house/arena/stadium
– Pricing tickets differently based on
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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!