Transcript Pricing

Sports and Entertainment Marketing
 Businesses
struggle with this same
questions everyday.
 “How
much will someone pay for ______?”
 Pricing goes by many
• Tuition for college
names:
• Interest on a loan
• Fee for a service
• Toll for a roadway
• Rent for an apartment
• Fare for a bus or train ride
 Price:
• the value placed on the goods or services being
exchanged
 Price
helps a company determine its
profit or loss
 Each
item sold carries a price….
• Sales revenue = items sold x sales price
• Profit or loss = cost of goods – company
expenses
 Price
is one of the 5 P’s
 Must
make sure the price of their product is
acceptable for their target market
• Example: A bicycles company makes a wide range
of bicycles:
 Lower priced bike sold at Wal-Mart – for value-oriented
customers
 High end bike sold at specialty bike shop – for serious
bicyclists
 Several
factors affect pricing decisions:
1. Consumer perceptions
2. Demand
3. Cost
4. Newness of product
5. Competition

Prestige pricing:
• based on customer perception
 many consumers believe that the higher the price, the better the
quality

Odd-even pricing:
• pricing goods with either an odd or and even number to
match a product’s image
 Odd - $25.99 – Bargain
 Even - $100 – More expensive

Target Pricing:
• pricing goods according to what the customer is willing
to pay
 Manufacturers estimate the target price and work backward to
determine what retailers should charge

If a product is in high demand and low supply
then the price will be high
• Example:
 Capitals Tickets
 when team is performing poorly ticket prices drop
 when team is performing well ticket prices go up

Companies can generate this themselves by
offering a “limited edition” of a product
• Example:
 UGG Boots only releasing limited amount of sparkly UGG
boots at Nordstrom and their stores
 All
businesses are out to make a profit!!
 The
price of the product will always be
more than what it costs to manufacture it
 Markup:
• the difference between the retail or wholesale price
and the consumer cost
 Cost-plus:
• pricing products by calculating all costs and
expenses and adding desired profit
 Introduction
 Skimming
Stage of Product Life Cycle
pricing:
• price the item very high to recover the costs of
development
OR
 Penetration
pricing:
• price the item below the competitors to create
immediate demand
 Businesses
find out what competitors are
charging
 Price
Competition:
• compete based on price
 set their price lower
 Non-Price
Competition:
• compete based on non-price
 quality, service, relationships
1.
Profit Objective
2.
Market Share Objective
3.
Special Pricing Strategies
 Company
may have an objective to earn
a higher profit
 Costs
& expenses may increase, but price
of item cannot increase
• Surcharge may be added to product
 Example: user fee added to ticket sales
 Market share:
• The percentage of the total sales of all
companies that sell the same type of product
 In
order to raise market share, company
may lower their price
• Example: Gatorade may have an 80% market
share, which means that its sales represent 80%
of all sports drinks sold by all sports-drink
companies.

Price Lining:
• selling all goods in a product line at specific price points
 Example: selling warm-up suits at 3 prices: $39, $59, $79

Bundle pricing:
• selling several items as a package for a set price
 Example: hood/tee combo in School Store (saves $20)

Loss-leader pricing:
• pricing and item at or below cost to draw customers into the
store
 Example: XM Radio ad

Yield-management pricing:
• pricing items at different prices to maximize revenue when
limited capacity is involved
 Example – arena seats (better seats are priced higher to increase
overall revenue)
1.
Discounts and Allowances
2.
Regulatory Factors
 Discounts:
• May be offered for:
 Buying larger amounts
 Buying before popular season
 To get rid of older merchandise
 Allowances:
• Reductions taken from the quoted price
 Example: Trade-in
 Price
fixing:
• competitors conspire to set the same price
 Predatory
pricing:
• setting a very low price in order to drive
competitors out of business
 BOTH
ARE ILLEGAL
Both are Illegal
 Students
will review case studies and
apply Pricing Strategies