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Unit 5 - Pricing of Sports

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Sports Marketing Notes on Unit 5: Sports Pricing

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Unit 5 - Pricing of Sports

  1. 1. Unit 5:Unit 5: SPORT PRICINGSPORT PRICING Mr. ElsesserMr. Elsesser Sports MarketingSports Marketing
  2. 2. WHAT EXACTLY AREWHAT EXACTLY ARE WE PRICING?WE PRICING? In the sport industry, many products need toIn the sport industry, many products need to be priced.be priced.  Examples would be:Examples would be:  Hard or Soft Goods  Equipment/Apparel  Tickets  Memberships  Concessions  Information  Newspapers/Magazines, Cable & Satellite Service  Signage  Billboards, other types of sponsorship  Advertising  Broadcast Rights
  3. 3. WHY IS PRICING CRITICALWHY IS PRICING CRITICAL FOR SPORTFOR SPORT ORGANIZATIONS?ORGANIZATIONS? 1)1) Constantly Changing:Constantly Changing:  Prices are readily modified for competitiveness.Prices are readily modified for competitiveness. 1)1) Strong Marketing Tool for AttendanceStrong Marketing Tool for Attendance  Price and attendance have a directPrice and attendance have a direct relationship.relationship. 1)1) Highly visible in the media and to theHighly visible in the media and to the public.public.
  4. 4. BASIC PRICINGBASIC PRICING FORMULAFORMULA The central equation for sport pricing in all situations is: Satisfaction=Benefit-Cost Example:Example: How much are you willing to pay forHow much are you willing to pay for the ultimate experience?the ultimate experience?
  5. 5. EXAMININGEXAMINING COST VERSUS PRICECOST VERSUS PRICE Consumer CostConsumer Cost  The consumer’s total dollar value for the entireThe consumer’s total dollar value for the entire entertainment package.entertainment package.  Includes travel, concessions, tickets, parking, etc.Includes travel, concessions, tickets, parking, etc. Producer CostProducer Cost  The amount of money it takes to create theThe amount of money it takes to create the product.product. PricePrice  The dollar amount the producer charges theThe dollar amount the producer charges the consumer.consumer.  Profit= (Price - Producer Cost)Profit= (Price - Producer Cost) It is important for a producer to keep in mindIt is important for a producer to keep in mind all the consumer costs involved inall the consumer costs involved in appreciating their sport product.appreciating their sport product.  How much does it actually cost to go to an NFLHow much does it actually cost to go to an NFL game?game?
  6. 6. VALUE VERSUS PRICEVALUE VERSUS PRICE A product will only be successful when theA product will only be successful when the consumer believes the value to be greaterconsumer believes the value to be greater than the price.than the price.  Example: College TuitionExample: College Tuition The following elements may affect aThe following elements may affect a Product’s Value:Product’s Value:  ConvenienceConvenience  AestheticsAesthetics  Cleanliness, comfort, securityCleanliness, comfort, security  AvailabilityAvailability  DurabilityDurability
  7. 7. COMPONENTS OFCOMPONENTS OF PRICINGPRICING When setting a price, a marketer must take theWhen setting a price, a marketer must take the following components into consideration:following components into consideration:  Production CostsProduction Costs  Market ConditionsMarket Conditions  Supply/Demand, State of EconomySupply/Demand, State of Economy  Competitors’ Prices and ProductsCompetitors’ Prices and Products  Organizational ObjectivesOrganizational Objectives  Profit goalsProfit goals  Product or Event FrequencyProduct or Event Frequency  Football Game vs. Baseball GameFootball Game vs. Baseball Game
  8. 8. PRICE DETERMINATIONPRICE DETERMINATION --Who determines the price of a sport product?Who determines the price of a sport product? T H E C O N S U M E R --d o e s v a lu e = p ric e ? --o p in io n s o f frie n d s --d e m o g ra p h ic s T H E C O M P E T IT O R --y o u r p ro d u c t o r y o u r p ric e n e e d s to b e b e tte r. re n ta l a g re e m e n ts T V c o n tra c ts s p o n s o rs h ip a g re e m e n ts p a y ro ll c o s ts T H E C O M P A N Y --y o u r o w n fin a n c ia l s itu a tio n p ric in g la w s g o v t. re g u la tio n s p o litic a l c lim a te e c o n o m y a n d a ttitu d e T H E C L IM A T E --e x te rn a l fa c to rs th a t th e m a rk e te r c a n n o t c o n tro l. T H E 4 C 's O F P R IC E D E T E R M IN A T IO N
  9. 9. TYPES OF PRICINGTYPES OF PRICING METHODSMETHODS COST-PLUS PRICINGCOST-PLUS PRICING  Base your prices on your own costs, then determine the profitBase your prices on your own costs, then determine the profit you desire.you desire.  Most commonly combined with one of the other methods.Most commonly combined with one of the other methods. GOING-RATE PRICINGGOING-RATE PRICING  Charge what your competitors are charging.Charge what your competitors are charging. DEMAND-ORIENTED PRICINGDEMAND-ORIENTED PRICING  Survey consumers to see what they are willing to pay.Survey consumers to see what they are willing to pay. PEAK-LOAD PRICINGPEAK-LOAD PRICING  Change prices according to seasonal demands.Change prices according to seasonal demands.  EX. Tailgating and camping supplies rise during Football season.EX. Tailgating and camping supplies rise during Football season. PENETRATION PRICINGPENETRATION PRICING  Begin by offering low prices to establish a fan base, thenBegin by offering low prices to establish a fan base, then slowly increase your prices.slowly increase your prices.
  10. 10. TYPES OF PRICINGTYPES OF PRICING METHODSMETHODS COST-PLUS PRICINGCOST-PLUS PRICING  Base your prices on your own costs, then determine the profitBase your prices on your own costs, then determine the profit you desire.you desire.  Most commonly combined with one of the other methods.Most commonly combined with one of the other methods. GOING-RATE PRICINGGOING-RATE PRICING  Charge what your competitors are charging.Charge what your competitors are charging. DEMAND-ORIENTED PRICINGDEMAND-ORIENTED PRICING  Survey consumers to see what they are willing to pay.Survey consumers to see what they are willing to pay. PEAK-LOAD PRICINGPEAK-LOAD PRICING  Change prices according to seasonal demands.Change prices according to seasonal demands.  EX. Tailgating and camping supplies rise during Football season.EX. Tailgating and camping supplies rise during Football season. PENETRATION PRICINGPENETRATION PRICING  Begin by offering low prices to establish a fan base, thenBegin by offering low prices to establish a fan base, then slowly increase your prices.slowly increase your prices.

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