Develop a foundational knowledge of PRICING to understand its role in
marketing
4.07
IDENTIFY FACTORS AFFECTING PRICING
and PRICING ISSUESOF SEM PRODUCTS
FACTORS AFFECTING PRICING OF SEM PRODUCTS
• LEAD TIME• MARKET DEMAND– How much of a product customers will buy at a certain price
• MARKET SEGMENTATION (TARGET MARKET)• SMOOTHING– Dividing product into different segments:
• Time: Pay more money for “Prime time”• Place: Pay more money for Court-side seats and less for nosebleed
• RESPONDING TO COMPETITORS– Non-price: Charge higher prices than competitors for unique product– Price: Encourage sales with lower prices than competitors
MARKET DEMAND
PRICE ELASTICITY: – Measure of how sensitive customers are to changes in
price• Gauges relationship between market demand and price
– INELASTIC DEMAND • Price changes have little to no impact sales
– ELASTIC DEMAND • Small price changes have big impact on sales
Ticket Demand
RESPONDING TO COMPETITORS
• 2 Types of Pricing Strategies:
– PENETRATION PRICING • Setting prices lower than the competition
– Used to introduce a new product or to encourage maximum participation
– SKIMMING • Setting prices higher than the competition
– Used to keep new competitors out of market or promote “high-class” image of product
PRICING ISSUES• COST
– Cost of production for good/service• If cost more to produce an event then revenue from ticket sells prices = have
no business
• VALUE– What are the PERCIEVED BENEFITS to consumers?
• Unique perception of each person• PERCEIVED BENEFITS:
– TANGIBLE: Physical benefits (i.e.: Buying a surfboard with an ankle-band)– INTANGIBLE (i.e.: Buying a surfboard to spend time with friends at the beach)
• OBJECTIVES– What are the goals of the good/service?
• Do you want it to seem “high class” or affordable?• What type of attendees do you want?
DIFFERENT PRICING OBJECTIVES
Company-Focused Competitor-Focused Customer-Focused
•Pricing products to ENHANCE THEIR IMAGE
•COVERING COSTS •CREATING PROFITS
•OFFER LOWEST PRICES
•Offering the MOST DISCOUNTS
•Offer “FAIR” PRICE IN CONSUMER’S MIND
Kid Rock
TICKET PRICING STRATEGIES
• SCALING THE HOUSE– Pricing tickets differently based on• Location of seat• Time of purchase
– YIELD-MANAGEMENT PRICING • Maximize revenue with venues with limited capacity
– Venues with limited seating price tickets differently to have greater revenue potential
Dynamic Ticket Pricing
http://www.youtube.com/watch?v=gSXqF1h_Dx4
Should the NFL jack ticket prices up to eliminate secondary market?
• Elastic and Inelastic Worksheet• Pricing Match-Up