The document discusses various topics related to pricing in sports, including: 1) A case study of the University of Michigan lowering student season tickets prices by 37.5% which increased sales from 21,000 to 13,000, demonstrating elastic demand. 2) Factors that influence pricing of sport products including demand, objectives, competition, technology. 3) The importance of pricing as the most flexible part of the marketing mix and how organizations and consumers perceive value differently in relation to price. 4) The consumer pricing evaluation process and examples of fan cost indexes for major sports leagues. 5) Organizational determinants of pricing including break-even analysis and elasticity of demand concepts.

1. If you sell it… they will come?
Pricing

2. University of Michigan
❖ Recently lowered student
season tickets by 37.5% (from
$280 to $175)
❖ Why?
❖ season tickets dropped from
21,000 to 13,000
❖ Team performance
❖ Elastic or Inelastic?

3. What would you pay for a World Series
Ticket? (Giants/Royals)
What would you pay for a
World Series Ticket?
(Reds/Red Sox)

4. What influences pricing
of sport products?
demand
objectives
competition
technology
the other 3 p’s
Income - maximize profit or stay afloat
Sales - market share & growth
Competitive - meet, avoid, or undercut
Social - appeal to the public, offset costs

5. Pricing is important
because…
❖ Price is the most manipulated part of the marketing mix
❖ Easily changed
❖ Effective tool
❖ Highly visible
❖ Consumer: Price is a statement of value
❖ Value —————>
❖ How can a sport marketer ADD VALUE?
❖ Depends on each customer! (or group)
❖ Organization: Price is an assignment of value the organization
places on their product/service
❖ Pricing challenge
❖ Factors that influence pricing decisions
❖ Internal (brand equity, 3 P’s, cost, etc..)
❖ External (environmental forces)
perceived benefits of
sport product
(tangible & intangible)
price of sport product

6. Consumer Pricing Evaluation
Process

7. Fan Cost Index
❖ Four “average-price” tickets
❖ Two small draft beers
❖ Four small soft drinks
❖ Four hot dogs
❖ Parking for one car
❖ Two game programs
❖ Two adult-size caps
Can you guess the top FCI
(team) for each Major League
Sport?

8. MLB:
RED SOX ($350)
YANKEES ($337)
NFL:
49ERS ($641 - up 38%!!)
COWBOYS ($634)
NBA:
KNICKS ($659)
LAKERS ($542)
NHL:
MAPLE LEAFS ($572)
BRUINS ($509)

9. Organizational
Determinants of Pricing
Price should NOT be a direct result of COSTs alone!!!
— A Sport product's value is often SUBJECTIVE! —
(see ch. 12)

10. Break-Even Analysis
Fixed cost (FC) - don’t change per unit
❖ Stadium rental
❖ Taxes
❖ Office equipment
Variable cost (VC) - change per unit
❖ Wages, Sales Commissions
❖ Material costs, energy (heat/AC)
❖ Concession stands
❖ Promotional items
Break-even point = FC / (selling price – VC)
also called: Contribution margin per unit.

11. When are you Breaking
Even…?
❖ Fixed Costs = $100,000
❖ Variable Cost per Unit = $17
❖ Sales Price of Ticket = $38
❖ How many tickets must you sell to Break Even??
4,761

12. Break-Even Analysis

13. Elasticity of Demand
❖ Elasticity of demand [e] =
❖ A measure of how sensitive a market is to price change
(continued)

14. Elasticity of Demand
(continued)
❖ Inelastic: e < 1
❖ A given percentage change in price results in a smaller percentage
change in quantity demanded.
❖ Increase in price will mean increase in profits.
❖ Elastic: e > 1
❖ A given percentage change in price results in a larger percentage
change in quantity demanded.
❖ Increase in price will mean decrease in profits.
❖ Unitary: e = 1
❖ Unitary demand exists when a given percentage change in price
results in an equal percentage change in quantity.
❖ End result is the same as before (so why bother??).

15. Price Elasticity of Demand
Unitary Elasticity
When should I increase my price??
- When it will be viewed as JND
- No viable alternatives exist to increasing costs
(Unbundling, reduce features)
Note: your book’s
graph is WRONG!

16. Elastic or Inelastic?
❖ You are a Group Ticket Sales Manager for the Reds
❖ In 2013 your Avg. group price (15-30 ppl) per game was
$20 per seat. In 2013 you sold 25,000 group rate seats
over the course of the entire season.
❖ In 2014 you had to raise prices. Your new avg. price per
game was $23 per seat. In 2014 you sold 21,000 Group
rate seats over the course of the season.
❖ What is the elasticity of demand?
16% change in D / 15% Change in P = 1.06

17. New Sports Product Pricing
Penetration Pricing - introducing the product at a low initial price relative
Price Skimming - introducing at high price (assumes inelasticity)

19. Trends in Pricing/Ticketing
Sell the same product/service to different buyers at different prices (seat p