2011 Setting prices for sports & entertainment Price Discrimination Selling Experiences Profit Maximization We sell entertainment. What are you selling? 4 or 5 Fs Selling Experiences (not tickets) FunFeelings Fantasies Friends Family Selling the entertainment experience... Describe a recent experience using all 16 Es. Price Sensitivity Examples Take beverages for example. Describe a setting and occasion for each quandrant. Explain how price sensitive you are for beverages in each setting/occasion. Psychological Triggers Triggers On what side of the brain do we process price discounts? On what side of the brain processes the 4Fs and 4Es of entertainment experiences? Price Lining participantsParticipants: opponent teams tournament or race entrants Timing pre-season, season, post-season weekday vs. weekend; day vs. night Seats: view comfort amenities service Price Lines... set different prices for distinctly different levels of product quality. How would your price sensitivity differ across these quality levels? Give examples. Price discounts The discounts may become permanent (in the minds of consumers). Discounts generate a negative connotation for your brand. You run the risk of alienating your customers who are paying full price. Why should you not offer discounts? What do we learn from Pebble Beach? What are you saying when you discount? Profit Maximization Profit Maximizing Adjust the quantity of seats available, or Adjust the prices of seats To maximize the gap between revenues & costs. We can use equations to estimate prices Profit maximization in the NFL (Brunkhorst and Fenn,2010) Winning Price signaling Population & Rivalry Players Next Seasons Prices Profit Maximization Profit Maximizing Adjust the quantity of seats available, or Adjust the prices of seats To maximize the gap between revenues & costs. Practical application Stadium Per capita income How do these promotions influence price perceptions? Price Discrimination Economically profitable? Segment large enough? Confuse customers? Settting price deals must be strategic to not confuse customers. How does dynamic pricing overcome the problems of discounting? Table 7.1 Conditions for Effective Price Discrimination IssuePrice discrimination works when segments: S ensitivity have different levels of price sensitivity that motivates some fans to search for lower prices. L arge are large enough to warrant different prices. I dentifiable are identifiable so that they can be priced differently. C onfusion are not confused by the different prices. E conomics are economically profitable segments. S eparation are separate enough so that those who pay one price cant exchange the product (or ticket) with those who paid higher prices. If you are forced, at gunpoint, to offer discounts Do not undercut prices paid by season ticket holders for the same seats. 2.Do not mass promote to the public. 3.Do target price-sensitive segments 1-to-1 via your database with an exclusive offer. 4.Do have a sponsor cover the cost. 5.Do make price sensitive fans take action to receive discount. 6.Do learn from your mistakes and read this chapter again before next season. 1.Do not undercut prices paid by season ticket holders for the same seats. 2.Do not mass promote to the public. 3.Do target price-sensitive segments 1-to-1 via your database with an exclusive offer. 4.Do have a sponsor cover the cost. 5.Do make price sensitive fans take action to receive discount. 6.Do learn from your mistakes and read this chapter again before next season.