Develop a foundational knowledge of PRICING to understand its role in

marketing

4.07

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• Ticket discounts

• Market segmentation• Top Athletes• Value• Expenses• Production Costs• Discounts• Unsold Tickets “Deadwood”

FACTORS AFFECTING PRICING OF SEM PRODUCTS

1. LEAD TIME2. MARKET DEMAND3. MARKET SEGMENTATION (TARGET MARKET)4. SMOOTHING5. RESPONDING TO COMPETITORS

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 DEMANDWhat will the market bear?How much of a product customers will buy at a certain price?

PRICE ELASTICITY: – Measure of how sensitive customers are to changes in price

• Relationship between market demand and price– 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

3. Market Segmentation• Target Marketing• Discounts to certain age groups• Coupons sent to specific geographic locations

4. 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)

5. RESPONDING TO COMPETITORS

– Non-price: Charge higher prices than competitors for unique product and services

– Price: Encourage sales with lower prices than competitors

• 2 Types of Pricing Strategies:

– PENETRATION PRICING • Setting prices lower than the competition

– Used to introduce a new product – Encourage maximum participation (More people will be involved if price is lower)

– SKIMMING • Setting prices higher than the competition

– Used to keep new competitors out of market– Promote “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 PERCIEVED BENEFITS to consumers?• Unique experience to each person• PERCEIVED BENEFITS:

– TANGIBLE: Physical benefits (Buying a surfboard with an ankle-band)– INTANGIBLE (Buying a surfboard to spend time with friends at the

beach)

DIFFERENT PRICING OBJECTIVES

Company-Focused Competitor-Focused Customer-Focused•Pricing products to ENHANCE THEIR IMAGE

•COVERING COSTS •CREATING PROFITS

•Beating the competition

•OFFER LOWEST PRICES

•Offering the MOST DISCOUNTS

•Offer “FAIR” PRICE IN CONSUMER’S MIND

OBJECTIVESWhat 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?

TICKET PRICING STRATEGIES

• SCALING THE HOUSE– 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!