Chapter 18: Chapter 18 Pricing Decisions in Sports Marketing McGraw-Hill/Irwin ©2007 The McGraw-Hill Companies, All Rights Reserved


Price: Price What the Buyer Gives Up in the Exchange Process The Third Variable of the Traditional Marketing Mix


Elasticity: Elasticity Elastic Demand – Market Exhibits Sensitivity to Changes in Price Characteristic of Most Products When Beef Prices Rise, Consumers Reduce Expenditures on Beef and Purchase More Chicken


Inelasticity: Inelasticity Inelastic Demand – Market Is Less Sensitive to Pricing; Purchase Product at Higher Prices Few (or no) Substitutes – Gasoline Buyer Not Willing to Forgo Purchase - Textbook Buyer Not Able to Forgo Purchase - Medicine


Factors That Influence Price: Factors That Influence Price


Situational Influences: Situational Influences Unusual, Often Short Term Influences, that Impact Consumer Purchase Decisions Team Is Winning Move to a New Stadium Presence of a Visiting Star Player


Costs: Costs In Spectator Sports, this Generally Relates to the Team’s Payroll or Appearance Fees Paid to Individual Athletes MLB’s New York Yankees Payroll in 2006 Was $194,663,079 Michelle Wie Reportedly Paid $1,500,000 to Play in the Casio World Open in Japan


Competition – Cost of Alternatives for Consumer: Competition – Cost of Alternatives for Consumer Baseball versus Football (MLB v. NFL) Baseball versus a Motion Picture Gold’s Gym versus Curves Nike versus Converse Athletic Shoes


Supply and Demand: Supply and Demand Surplus Drives Prices Down; Shortage Is a Catalyst for Higher Prices Teams that Sell Out – Red Sox, Packers, Lakers, Red Wings – Have Higher Ticket Prices Teams Struggling to Fill the Stands Often Resort to Promotional Pricing


Marketing Objectives: Marketing Objectives Market Share Objectives Prestige and Image Seeking Higher Market Share, Top Flight Golf Balls Are Sold at Prices Much Lower than Those of the Premium Brands Such as Titleist and Nike


Legal Considerations: Legal Considerations Taxes Added to Cost of Products Team “Scalping” MLB’s Chicago Cubs Taken to Court Over Team’s Resale of Desirable Tickets at Highly Inflated Prices


Consumer Perceptions –“Perception Is Reality”: Consumer Perceptions – “Perception Is Reality” What Consumers Think about the Product Influences Their Perception of Value Influences How Much They Will Pay Influences Price that Can Be Charged Titleist Golf Balls Command Premium


Marketing Mix Consistency: Marketing Mix Consistency Price Needs to Work in Harmony with the Other Elements of the Marketing Mix Price Also Needs to Be Consistent with the Target Market Many Marketers of Sports Products Offer Alternatives Featuring Different Prices


General Implementation Strategies: General Implementation Strategies Cost-Plus Markup Promotional Yield Management Target Return


Pricing Applications:Spectator Sports: Pricing Applications: Spectator Sports Most Commonly Criticized Component of the Strategies Employed by the Marketers of Spectator Sports Fan Cost Index – Average Ticket Price NFL $58.95 for Most Recent Season NBA $45.92 NHL $41.19 MLB $22.21


Pricing Applications:Spectator Sports: Pricing Applications: Spectator Sports Season Ticket Partial Season Ticket Price Tiering Variable Pricing


Pricing Applications:Spectator Sports: Pricing Applications: Spectator Sports Value Pricing Promotional Pricing Discount Pricing Bundling Cross-Promotion Discounting


Pricing Applications:Spectator Sports: Pricing Applications: Spectator Sports Qualifying Payment PSL Donation to University Program Bidding


Pricing Applications:Participation Sports: Pricing Applications: Participation Sports Supply and Demand Based Pricing Level of Service Variable Pricing Individual Considerations


Pricing Applications: SASS: Pricing Applications: SASS Traditional Retailing Principles Supply and Demand Value Added through Licensing Value Added through Celebrity Endorsement


Pricing Applications: SASS: Pricing Applications: SASS Markup Based on COGS Evident that Prices for SASS Are Influenced by the Set of Factors Discussed for Spectator Sports


Closing Capsule: Closing Capsule Many Factors Influence Price


Closing Capsule: Closing Capsule Pricing Policies Are Commonly Criticized Tickets for New England Patriots NFL Game Greens Fees at Pebble Beach Nike Shoes Endorsed by LeBron James A Beer at a Sports Stadium Any Bargains in that List?


Closing Capsule: Closing Capsule Marketers in Each Category of Sports Products Recognize the Presence of Different Market Segments Prices Vary Significantly Depending on Which Segment Is Being Targeted