Download Price: the amount of money paid for a good, service, or resource

Sports & Entertainment
Marketing
Pricing
Welcome to:
The Price is Right!
Price: the amount of money paid
for a good, service, or resource
 Pricing is stating the value of a product.
 Value is subjective.
 The same product can have varying
values to different people.
 Value is unique to each customer
because the benefits of purchasing the
product are based on individual
perception.
Sales Revenue
 Sales Revenue – The amount of money
a company makes prior to expenses and
cost of goods.
 Sales= 1000 baseball bats @ $175 =
$175,000
 It’s not all profit!
COST
 COGS - Cost of Goods Sold – how much the
product costs the distributor
 Ex: How much does Foot Locker (the
distributor) pay for Nike shoes?
 COGS = $90,000
Expenses
 Expenses - Cost of running business
 Advertising
 Utilities
 Rent
 Equipment

Variable costs - expenses that change along with the amount of
production.


Ex: Utilities
Fixed costs - expenses that stay the same no matter how much of the
product is being produced.

Ex: Rent
Income Statement

Footlocker Income Statement
 Sales (1000@ $175)
 -COGS
 Gross Profit
 -Operating Expenses
 Net Profit
175,000
90,000
85,000
60,000
= $25,000
Pricing & Target Market
 What is the target market willing to pay?

Ex: In-line Roller Skates:
 Lower
priced skate = Wal-Mart/Target
 Higher-priced skates = Specialty skate shops
Consumer Perception – relationship of
price and quality in a consumers mind

Prestige Pricing – pricing based on consumer perception.
Businesses will price products above the average price to
attract customers who judge a products quality by its price.

Odd-Even Pricing – pricing products with either an odd
number or an even number to match a products image.



Ex: Odd number pricing, ex: 25.99, suggests a
bargain.
Ex: Even number pricing, ex: 100.00, reflects a
quality item. (Expensive restaurants & clothes)
Target Pricing – pricing goods according to what the
customer is willing to pay. They determine the price and then
make product modifications to ensure that they meet that
price.
Demand – greatly affects pricing decisions.

If a product is in high demand, and there is a
limited supply, its price will be high. (UK
basketball tickets)

Companies may produce a limited edition of a
product so they can price the item high.

Large supply of an item and demand is not high,
dealers may lower prices to increase demand for
the item. SALES!
Demand & Price Elasticity
 Price elasticity gauges the relationship
between market demand and price

Elastic Demand – A change in price will
affect demand
 Golf

clubs, concert tickets
In-elastic Demand – A change in price will
not affect demand
 Gas
prices
Smoothing

Smoothing divides the sport/event
product into different segments for
customers.


Time smoothing involves determining
"prime" and "nonprime" hours for
services. (Ex: Movies)
Place smoothing involves dividing a
sport/event venue into different sections
(Ex: Upper & Lower Arena)
Cost - To make a profit, the price of an item must be
higher than the cost a business paid for it
Strategy #1: Markup Pricing – difference between the retail or
wholesale price and the cost of an item. Markup must be high
enough to cover expenses and ensure a profit.




Footlocker purchases Nike’s for $25.00
To cover expenses and ensure a profit they sell for $49.99
Dollar markup = 49.99 – 25 = 24.99
Percentage Markup = 24.99/25.00 = 100%

Product-line Pricing – setting different markup
percentages for each product so that the average
markup is achieved for the entire line of products.

Ex: Increase one model of skates 25% and another
model 75%. The average markup is 50%.
Strategy #2: Cost-plus Pricing – pricing
products by calculating all costs and
expenses and adding desired profit.

Ex: food service providers at sporting events
determine the salaries of their employees,
the cost of food supplies and rent. Then
they add their intended profit to set the
prices to charge for food.
Newness of the Product

When introducing a new product,
distributors must chose between price
skimming and penetration pricing
Special Pricing Strategies




Price Lining – selling all goods in a product line
at a specific price
Bundle Pricing – selling several items as a
package for a set price
Loss-leader Pricing – pricing an item at cost or
below cost to draw customers into the store.

Ex: Kroger newspaper ads
Yield-Management Pricing – pricing items at
different prices to maximize revenue when
limited capacity is involved.

Upper/lower arena pricing/box seat pricing
Regulatory Factors:
 Pricing is subject to government regulations.
 Sherman Anti-Trust Act prohibits price fixing
and predatory pricing.
 Price-fixing – illegal practice where competitors
conspire to set the same prices.
 Predatory Pricing – setting a very low price in
order to drive competitors out of business.
(Monopolistic competition)