Pricing

1
Pricing

• HSS 5263
• Sport Marketing
• Brian Turner

2
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

3
Determinants of Pricing -Internal Factors

• Other marketing mix variables
• Costs
• Fixed Costs (FC)
• Variable Costs (VC)
• TC (total cost) FC VC

4
Determinants of Pricing -Internal Factors

• Costs
• 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

5
Determinants of Pricing -Internal Factors

• Organizational Objectives

6
Determinants of Pricing -External Factors

• Consumer demand
• Elasticity of demand change in quantity
  demand ? change in price
• Elastic demand
• Inelastic demand
• Unitary demand

7
Determinants of Pricing -External Factors

• Estimating Demand
• Economy
• Competition
• Others
• Legal issues
• Technology

8
Differential Pricing Strategy

• One of the most common practices
• selling the same product or service to
  different buyers at different prices
• Second-market discounting

9
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

10
New Sports Product Pricing

• Production capacity
• Rate of technological change
• Barriers to entry
• Economic conditions
• Desired image

11
Psychological Pricing Strategies

• Prestige Pricing
• Reference Pricing
• Odd-Even Pricing
• Customary (or Traditional) Pricing

12
Cost-Based Pricing Strategies

• Break Even Analysis
• Fixed Costs (FC) Variable Costs (VC)
• TC (total cost) FC VC
• TC 100,000 (11.50 X 4,000)
• TC 100,000 46,000
• TC 146,000
• Break Even Point
• 146,000 ? 4,000
• 36.50 per soccer ball

13
Cost-Based Pricing Strategies

• For 10,000 soccer balls
• TC 100,000 (11.50 X 10,000)
• TC 215,000
• Break Even Point
• 215,000 ? 10,000
• 21.50 per soccer ball

14
Cost-Based Pricing Strategies

• Cost-Plus Pricing
• Costs Desired Profit Price
• Must have accurate FC and VC for costs
• 800,000 (costs profit) ? 800 members
• 1,000 average annual membership
• Target Profit Pricing

15
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
• Cost inflation
• Excess demand for the product

16
Price Adjustments

• Price discounts
• Quantity discounts
• Seasonal discounts