SEM1 4.07

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SEM1 4.07 A - Pricing
• PI - Describe pricing issues associated with SEM products
• PI - Identify factors affecting pricing of SEM products
https://www.youtube.com/watch?v=G28icMeIVXY
Pricing issues: Cost vs. Value
• COST (of the event)
– Cost of production for good/service
– Some events have higher production costs
• Cost is ‘objective’
– Cost is constant
– Cost is set, it is factual
– It “costs” a certain amount to make a product or
produce an event.
Pricing issues: Cost vs. Value
• VALUE (to the consumer)
• 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)
– What is the overall value to the consumer?
– Overall value – consumers will look at costs of attending event:
parking, concessions, merchandise. Is it worth the money spent?
• Value is ‘Subjective’
– Unique experience for each person
– Based on individual feelings
http://www.youtube.com/watch?v=xziNM_Cbv1c
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
http://www.youtube.com/watch?v=61dIPpRze_o
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Ticket discounts
Market segmentation
Top Athletes
Value to the consumer
Expenses
Production Costs
Unsold Tickets
“Deadwood”
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
to gain share
in the consumer’s
mind
Factors affecting the pricing of sports products
1.
2.
3.
4.
Lead time
Market demand
Market segmentation (target marketing)
Price Strategies
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Smoothing
Bundling
“Scaling the House”
Yield management
5. Responding to Competition
– Penetration
– Skimming
1. 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.”
2. MARKET DEMAND
DEMAND: How much of a product will customers buy at a certain price?
PRICE ELASTICITY:
– The degree to which demand for a product is affected by its price
• Changes in price cause a change in demand for the product
– INELASTIC DEMAND
• Price changes have little to no impact on quantity of sales
• “Need” items
• Ex: Milk, Eggs, Super Bowl Tickets, Gasoline?
– ELASTIC DEMAND
• Small price changes have big impact on quantity of sales
• “Want” items
• Ex: Ipod, Sports Equipment, new clothes
2. MARKET DEMAND
Effect of Elasticity:
• Elastic Demand
• Inelastic Demand
Demand
Price
Price
Demand
3. Market Segmentation
• Target Marketing – fan loyalty
• Discounts to certain age groups – kids free!
• Coupons sent to specific geographic locations
4. Pricing Strategy (for tickets)
• 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)
4. Pricing Strategy (for tickets)
• Bundling
– Selling tickets in a package (“bundle”) with
other tickets or products.
• Season tickets, group discounts, free or
discounted merchandise with purchase.
4. Pricing Strategy (for tickets)
• “Scaling the house”
– Pricing tickets differently based on
• Location of seat
• Location of entire section
• Yield-management pricing
– Maximize revenue at venues with limited capacity
• Charge more at smaller venues!
• Charge more to make more revenue per ticket.
5. Responding to the Competition
• Responding to Competitors –
• Set prices on what the competition is doing
• 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
5. Responding to the Competition
• 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)
5. Responding to the Competition
• Skimming
– Setting prices higher than the competition
• “What will the market bear?”
– (How much will people pay?)
• When a product is new and unique, you
can skim and charge higher price
• Promotes a “high-class” image of product
Videos
PSLs
• http://www.youtube.com/watch?v=xziNM_Cbv1c
Dynamic Ticket Pricing
• http://www.youtube.com/watch?v=61dIPpRze_o
StubHub
• http://www.youtube.com/watch?v=rEQSseLnT1Q
Fan StubHub Mistake
•
http://www.thedenverchannel.com/news/local-news/denver-broncos-fan-mistake-on-stubhubcom-costs-him-nearly-600-to-sell-histickets-against-chargers
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