Unit 5: Unit 5: SPORT PRICINGSPORT PRICING

Mr. ElsesserMr. ElsesserSports MarketingSports Marketing

WHAT EXACTLY ARE WE WHAT EXACTLY ARE WE PRICING?PRICING?

In the sport industry, many products need to be In the sport industry, many products need to be priced. 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

WHY IS PRICING CRITICAL WHY IS PRICING CRITICAL FOR SPORT FOR SPORT

ORGANIZATIONS?ORGANIZATIONS?

1)1) Constantly Changing:Constantly Changing: Prices are readily modified for Prices are readily modified for

competitiveness.competitiveness. 2)2) Strong Marketing Tool for Strong Marketing Tool for

AttendanceAttendance Price and attendance have a direct Price and attendance have a direct

relationship.relationship. 3)3) Highly visible in the media and to Highly visible in the media and to

the public.the public.

BASIC PRICING BASIC PRICING FORMULAFORMULA

The central equation for sport pricing in all situations is:

Satisfaction=Benefit-Cost

Example:Example: How much are you willing to pay How much are you willing to pay for the ultimate experience?for the ultimate experience?

EXAMININGEXAMININGCOST VERSUS PRICECOST VERSUS PRICE

Consumer CostConsumer Cost The consumer’s total dollar value for the entire The 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 the The amount of money it takes to create the

product.product.PricePrice The dollar amount the producer charges the The 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 It is important for a producer to keep in mind all the consumer costs involved in mind all the consumer costs involved in appreciating their sport product.appreciating their sport product. How much does it actually cost to go to an NFL How much does it actually cost to go to an NFL

game?game?

VALUE VERSUS PRICEVALUE VERSUS PRICEA product will only be successful when the A product will only be successful when the consumer believes the value to be greater consumer believes the value to be greater than the price.than the price. Example: College TuitionExample: College Tuition

The following elements may affect a The following elements may affect a Product’s Value:Product’s Value:

ConvenienceConvenience AestheticsAesthetics Cleanliness, comfort, securityCleanliness, comfort, security AvailabilityAvailability DurabilityDurability

COMPONENTS OF PRICINGCOMPONENTS OF PRICING

When setting a price, a marketer must take the When 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

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--does va lue= pric e?--op in ions o f friends

--dem ograph ics

T H E C O M P E T IT O R--your p roduc t o ryou r p rice needs

to be be tte r.

ren ta l ag reem entsT V con trac ts

sponsorsh ip agreem entspayro ll cos ts

T H E C O M P A N Y--your own f inanc ia l

s itua tion

pric ing law sgov t. regu la tionspo lit ica l c lim a te

econom y and a tt itude

T H E C LIM A T E--ex te rna l fac to rs tha tthe m ark e te r canno t

con tro l.

T H E 4 C 's O F P RIC E D E T E R M IN A T IO N

TYPES OF PRICING METHODSTYPES OF PRICING METHODS

COST-PLUS PRICINGCOST-PLUS PRICING Base your prices on your own costs, then determine the profit Base 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, then slowly Begin by offering low prices to establish a fan base, then slowly

increase your prices.increase your prices.