Sports and Entertainment Marketing © Thomson/South-Western
The Economics of Supply and Demand
9
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Sports and Entertainment Marketing © Thomson/South-Western
Chapter 9 Slide 2
Winning Strategies
Wheaties cereal discovered by accident first featured star was fictitious Lou Gehrig was first actual star featured many athletes make it a career goal to be
featured on the box in 1999, women in sports were featured
Cereal Stars
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Chapter 9 Slide 3
Lesson 9.1
Supply and Demand
Goals Explain the relationships between
supply, demand, and price. Discuss the government’s influence on
pricing.
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Sports and Entertainment Marketing © Thomson/South-Western
Chapter 9 Slide 4
Terms law of demand law of supply scarcity equilibrium price fixing bait and switch price discrimination
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Chapter 9 Slide 5
THE LAWS OF SUPPLY AND DEMAND demand
the relationship between the quantity of a product that consumers are willing and able to purchase and the price
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Chapter 9 Slide 6
businesses that use resources to develop products and services
supply the relationship between the quantity of a
product that producers are willing and able to provide and the price
producers
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Chapter 9 Slide 7
Price-Demand Relationships
law of demand an inverse relationship
when the price goes up, demand goes down when the price goes down, demand goes up
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Chapter 9 Slide 8
Price-Supply Relationships
law of supply when the price goes up the supply
produced goes up when the price goes down the supply
produced goes down
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Chapter 9 Slide 9
Scarcity
scarcity consumers have limited money to spend producers have limited resources to use
for production Consumers and producers must decide
how to use their limited resources to meet unlimited wants and needs.
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Chapter 9 Slide 10
Equilibrium
equilibrium the point where the supply and demand
curves intersect indicates the best quantity and price for
goods and services
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Chapter 9 Slide 11
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Chapter 9 Slide 12
Concerts in the Spotlight
Concert prices can be set high. limited supply high demand
If demand is high enough, supply can be increased by adding a second show.
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Chapter 9 Slide 13
How does price affect demand?
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Chapter 9 Slide 14
GOVERNMENT INFLUENCE ON PRICING private-enterprise system
based upon independent decisions made by consumers and businesses
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Chapter 9 Slide 15
The U.S. government has an influence on prices charged for merchandise directly and indirectly through antitrust laws, taxation, and various consumer protection laws.
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Chapter 9 Slide 16
Benefits of Competition
monopoly where one business controls the entire
market Antitrust laws encourage competition
and help avoid monopolies.
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Chapter 9 Slide 17
Taxation
Taxation can be used by the government to encourage or discourage sales.
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Chapter 9 Slide 18
Illegal Pricing
price fixing when related businesses conspire to
charge high prices illegal in U.S.
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Chapter 9 Slide 19
when a product that is advertised at a great price is “out of stock”
salesperson tries to sell customer a higher-priced alternative
advertised prices cannot be misleading price discrimination
occurs when one individual, group, or business is charged a higher price than others purchasing the same product or service
bait and switch
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Chapter 9 Slide 20
List three ways the government influences pricing.
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Chapter 9 Slide 21
Lesson 9.2
Pricing Strategies
Goals Discuss pricing strategies used by
businesses to increase sales. List five steps for determining price.
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Chapter 9 Slide 22
Terms operating expenses markup price lines loss-leader pricing
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PRICING CONSIDERATIONS
price the amount that customers pay for
products and services
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Chapter 9 Slide 24
the process of establishing and communicating the value of goods and services to customers
operating expenses all the costs associated with running your
business markup
the amount that is added to the cost of an item to cover operating expenses and allow for a profit
pricing
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Chapter 9 Slide 25
many companies offering the same product customers do not recognize major differences in the
brands the market will drive the prices low as businesses
compete for consumers’ business market price
determined by laws of supply and demand if not sufficient to cover costs and allow for a profit,
the business will cease production of the product
pure competition
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Chapter 9 Slide 26
Pricing Policies
one-price policy all customers pay the same price for a
product flexible pricing policy
allows customers to negotiate a price within a range
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Chapter 9 Slide 27
distinct categories of merchandise based upon price, quality, and features
geographic pricing allows pricing variations based upon
geographic location
price lines
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Chapter 9 Slide 28
A Variety of Pricing Strategies
Psychological Pricing creating an illusion for customers
Prestige Pricing higher-than-average pricing targets customers seeking status and
quality
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Chapter 9 Slide 29
when a supplier provides a lower price to a customer who buys a high volume of product
Promotional Pricing offering customers an incentive to get them
in the store two-hour/ 50% off sale
Volume Pricing
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Chapter 9 Slide 30
the willingness to take a loss on the reduced prices of selected items in order to create more customer traffic
special event promotion associates a special sale with a major event
Loss-Leader Pricing
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Chapter 9 Slide 31
coupons on products that customers can mail in for a refund
depends upon further action by the customer multiple-unit pricing
a volume based discount
trade-in allowance giving a store your old product when purchasing a
new product usually results in a discount on the new product
purchase
rebates
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Sports and Entertainment Marketing © Thomson/South-Western
Chapter 9 Slide 32
List and describe five pricing strategies to increase sales.
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Chapter 9 Slide 33
DETERMINING THE PRICE
There are five steps to determining the price to charge for a product or service.
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Sports and Entertainment Marketing © Thomson/South-Western
Chapter 9 Slide 34
2. Determine the cost of the product or service.
3. Estimate consumer demand for your product or service.
4. Study the competition. 5. Decide on a pricing strategy.
1. Establish the price objectives.
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Sports and Entertainment Marketing © Thomson/South-Western
Chapter 9 Slide 35
List the five steps for determining price.
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Sports and Entertainment Marketing © Thomson/South-Western
Chapter 9 Slide 36
Lesson 9.3
Market Conditions
Goals Define the business cycle and describe
its impact on sports and entertainment. Discuss the importance of monitoring
consumer trends.
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Chapter 9 Slide 37
Terms business cycle inflation shoulder periods
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IMPACT OF THE BUSINESS CYCLE business cycle (economic cycle)
the ups and downs of the economy
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Chapter 9 Slide 40
Expansion
expansion the upside of a business cycle
peak highest point of growth in the economy
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Chapter 9 Slide 41
Contraction
contraction the downside of a business cycle recession or depression
inflation when prices for goods and services rise
faster than consumer income
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Chapter 9 Slide 42
Business Reaction
trough lowest point of contraction
recovery economy shows signs of improving
prosperity the period of business expansion following
recovery
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Chapter 9 Slide 43
Seasonal Cycles
For some businesses, demand fluctuates with the seasons.
high season the season with the highest demand
low season the season with the lowest demand
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Chapter 9 Slide 44
periods of moderate demand Sports and entertainment marketing
strategies must be developed to help even out the fluctuations created by changing seasonal demands.
shoulder periods
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Chapter 9 Slide 45
What is inflation and how does it contribute to recession?
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IMPACT OF CONSUMER TRENDS Trends are dictated by
television revenue sponsors consumer demand
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Chapter 9 Slide 47
Retro Television
Retro show fans like to relive the good old days and recall positive memories of growing up watching the stars in the sitcoms.
Popular show reruns are inexpensive to show on television.
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Chapter 9 Slide 48
Game Shows
There are game show channels that rerun old favorites.
New game shows are being produced to meet demand.
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Chapter 9 Slide 49
Audience Ratings Speak
Television networks cannot afford the risk of having viewers switch channels to watch a more exciting show on a competing network.
Some series do not last more than six airings due to flat ratings.
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Chapter 9 Slide 50
Socio-Culture Issues
Socio-culture issues include trends in customer attitudes lifestyles opinions demographics
Assessing consumers’ ever-changing needs and wants is the bottom line for the success or failure of a product or service.
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Chapter 9 Slide 51
Why must sports and entertainment marketers pay careful attention to consumer trends?
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PERFORMANCE INDICATORS EVALUATED Demonstrate an understanding of the
economic challenges facing television network programming.
Demonstrate critical thinking and problem-solving skills.
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Chapter 9 Slide 53
Describe advertisements that will attract the attention of your target market.
Develop a strategy to encourage viewers of the Price Is Right to watch the bowl game.
Describe promotions appropriate for the target market that will result in increased ratings for the bowl game.
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Chapter 9 Slide 54
THINK CRITICALLY 1. How have the number of bowl games
affected the television ratings for the games?
2. Why are the scheduled date and time of the game important factors for ratings and promotions?
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Chapter 9 Slide 55
4. How can an association be made between the game show and the bowl game?
3. Why should television networks pay attention to the programming scheduled around the game and on competing networks when making decisions?
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