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Chapter 18
Pricing Decisions
in Sports Marketing
McGraw-Hill/Irwin
18-1
©2007 The McGraw-Hill Companies, All Rights Reserved
Price
• What the Buyer Gives Up in the Exchange
Process
• The Third Variable of the Traditional
Marketing Mix
18-2
Elasticity
• Elastic Demand – Market Exhibits
Sensitivity to Changes in Price
• Characteristic of Most Products
• When Beef Prices Rise, Consumers
Reduce Expenditures on Beef and
Purchase More Chicken
18-3
Inelasticity
• Inelastic Demand – Market Is Less Sensitive to
Pricing; Purchase Product at Higher Prices
• Few (or no) Substitutes – Gasoline
• Buyer Not Willing to Forgo Purchase - Textbook
• Buyer Not Able to Forgo Purchase - Medicine
18-4
Factors That Influence Price
18-5
Situational Influences
• Unusual, Often Short Term Influences, that
Impact Consumer Purchase Decisions
• Team Is Winning
• Move to a New Stadium
• Presence of a Visiting Star Player
18-6
Costs
• In Spectator Sports, this Generally Relates
to the Team’s Payroll or Appearance Fees
Paid to Individual Athletes
• MLB’s New York Yankees Payroll in 2006
Was $194,663,079
• Michelle Wie Reportedly Paid $1,500,000
to Play in the Casio World Open in Japan
18-7
Competition –
Cost of Alternatives for Consumer
• Baseball versus Football (MLB v. NFL)
• Baseball versus a Motion Picture
• Gold’s Gym versus Curves
• Nike versus Converse Athletic Shoes
18-8
Supply and Demand
• Surplus Drives Prices Down; Shortage Is a
Catalyst for Higher Prices
• Teams that Sell Out – Red Sox, Packers,
Lakers, Red Wings – Have Higher Ticket
Prices
• Teams Struggling to Fill the Stands Often
Resort to Promotional Pricing
18-9
Marketing Objectives
• Market Share Objectives
• Prestige and Image
• Seeking Higher Market Share, Top Flight
Golf Balls Are Sold at Prices Much Lower
than Those of the Premium Brands Such
as Titleist and Nike
18-10
Legal Considerations
• Taxes Added to Cost of Products
• Team “Scalping”
• MLB’s Chicago Cubs Taken to Court Over
Team’s Resale of Desirable Tickets at
Highly Inflated Prices
18-11
Consumer Perceptions –
“Perception Is Reality”
• What Consumers Think about the Product
Influences Their Perception of Value
• Influences How Much They Will Pay
• Influences Price that Can Be Charged
• Titleist Golf Balls Command Premium
18-12
Marketing Mix Consistency
• Price Needs to Work in Harmony with the
Other Elements of the Marketing Mix
• Price Also Needs to Be Consistent with the
Target Market
• Many Marketers of Sports Products Offer
Alternatives Featuring Different Prices
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General Implementation
Strategies
• Cost-Plus
• Markup
• Promotional
• Yield Management
• Target Return
18-14
Pricing Applications:
Spectator Sports
• Most Commonly Criticized Component of
the Strategies Employed by the Marketers
of Spectator Sports
• Fan Cost Index – Average Ticket Price
– NFL $58.95
for Most Recent Season
– NBA $45.92
– NHL $41.19
– MLB $22.21
18-15
Pricing Applications:
Spectator Sports
• Season Ticket
• Partial Season Ticket
• Price Tiering
• Variable Pricing
18-16
Pricing Applications:
Spectator Sports
• Value Pricing
• Promotional Pricing
– Discount Pricing
– Bundling
– Cross-Promotion Discounting
18-17
Pricing Applications:
Spectator Sports
• Qualifying Payment
– PSL
– Donation to University Program
• Bidding
18-18
Pricing Applications:
Participation Sports
• Supply and Demand Based Pricing
• Level of Service
• Variable Pricing
• Individual Considerations
18-19
Pricing Applications: SASS
• Traditional Retailing Principles
• Supply and Demand
• Value Added through Licensing
• Value Added through Celebrity
Endorsement
18-20
Pricing Applications: SASS
• Markup
– Based on COGS
• Evident that Prices for SASS Are
Influenced by the Set of Factors
Discussed for Spectator Sports
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Closing Capsule
• Many Factors Influence Price
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Closing Capsule
• Pricing Policies Are Commonly Criticized
– Tickets for New England Patriots NFL Game
– Greens Fees at Pebble Beach
– Nike Shoes Endorsed by LeBron James
– A Beer at a Sports Stadium
– Any Bargains in that List?
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Closing Capsule
• Marketers in Each Category of Sports
Products Recognize the Presence of
Different Market Segments
• Prices Vary Significantly Depending on
Which Segment Is Being Targeted
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