The Economics of Supply and Demand

Sports and Entertainment Marketing© Thomson/South-Western

Chapter Chapter Chapter Chapter

The Economics of Supply and Demand 9.1 Supply and Demand 9.1 Supply and Demand

9.2 Pricing Strategies 9.2 Pricing Strategies

9.3 Market Conditions 9.3 Market Conditions

9

Chapter 9Slide 2


Winning Strategies

Wheaties cereal discovered by accident first featured star was fictitious Lou Gehrig was first actual star featured many athletes make it a career goal to be

featured on the box in 1999, women in sports were featured

Cereal Stars

Chapter 9Slide 3


Lesson 9.1

Supply and Demand

Goals Explain the relationships between

supply, demand, and price. Discuss the government’s influence on

pricing.

Chapter 9Slide 4


Terms law of demand law of supply scarcity equilibrium price fixing bait and switch price discrimination

Chapter 9Slide 5


THE LAWS OF SUPPLY AND DEMAND demand

the relationship between the quantity of a product that consumers are willing and able to purchase and the price

Chapter 9Slide 6


businesses that use resources to develop products and services

supply the relationship between the quantity of a

product that producers are willing and able to provide and the price

producers

Chapter 9Slide 7


Price-Demand Relationships

law of demand an inverse relationship

when the price goes up, demand goes down when the price goes down, demand goes up

Chapter 9Slide 8


Price-Supply Relationships

law of supply when the price goes up the supply

produced goes up when the price goes down the supply

produced goes down

Chapter 9Slide 9


Scarcity

scarcity consumers have limited money to spend producers have limited resources to use

for production

Consumers and producers must decide how to use their limited resources to meet unlimited wants and needs.

Chapter 9Slide 10


Equilibrium

equilibrium the point where the supply and demand

curves intersect indicates the best quantity and price for

goods and services

Chapter 9Slide 11


Chapter 9Slide 12


Concerts in the Spotlight

Concert prices can be set high. limited supply high demand

If demand is high enough, supply can be increased by adding a second show.

Chapter 9Slide 13


How does price affect demand?

Chapter 9Slide 14


GOVERNMENT INFLUENCE ON PRICING private-enterprise system

based upon independent decisions made by consumers and businesses

Chapter 9Slide 15


The U.S. government has an influence on prices charged for merchandise directly and indirectly through antitrust laws, taxation, and various consumer protection laws.

Chapter 9Slide 16


Benefits of Competition

monopoly where one business controls the entire

market

Antitrust laws encourage competition and help avoid monopolies.

Chapter 9Slide 17


Taxation

Taxation can be used by the government to encourage or discourage sales.

Chapter 9Slide 18


Illegal Pricing

price fixing when related businesses conspire to

charge high prices illegal in U.S.

Chapter 9Slide 19


when a product that is advertised at a great price is “out of stock”

salesperson tries to sell customer a higher-priced alternative

advertised prices cannot be misleading price discrimination

occurs when one individual, group, or business is charged a higher price than others purchasing the same product or service

bait and switch

Chapter 9Slide 20


List three ways the government influences pricing.

Chapter 9Slide 21


Lesson 9.2

Pricing Strategies

Goals Discuss pricing strategies used by

businesses to increase sales. List five steps for determining price.

Chapter 9Slide 22


Terms operating expenses markup price lines loss-leader pricing

Chapter 9Slide 23


PRICING CONSIDERATIONS

price the amount that customers pay for

products and services

Chapter 9Slide 24


the process of establishing and communicating the value of goods and services to customers

operating expenses all the costs associated with running your

business markup

the amount that is added to the cost of an item to cover operating expenses and allow for a profit

pricing

Chapter 9Slide 25


many companies offering the same product customers do not recognize major differences in the

brands the market will drive the prices low as businesses

compete for consumers’ business

market price determined by laws of supply and demand if not sufficient to cover costs and allow for a profit,

the business will cease production of the product

pure competition

Chapter 9Slide 26


Pricing Policies

one-price policy all customers pay the same price for a

product

flexible pricing policy allows customers to negotiate a price

within a range

Chapter 9Slide 27


distinct categories of merchandise based upon price, quality, and features

geographic pricing allows pricing variations based upon

geographic location

price lines

Chapter 9Slide 28


A Variety of Pricing Strategies

Psychological Pricing creating an illusion for customers

Prestige Pricing higher-than-average pricing targets customers seeking status and

quality

Chapter 9Slide 29


when a supplier provides a lower price to a customer who buys a high volume of product

Promotional Pricing offering customers an incentive to get them

in the store two-hour/ 50% off sale

Volume Pricing

Chapter 9Slide 30


the willingness to take a loss on the reduced prices of selected items in order to create more customer traffic

special event promotion associates a special sale with a major event

Loss-Leader Pricing

Chapter 9Slide 31


coupons on products that customers can mail in for a refund

depends upon further action by the customer

multiple-unit pricing a volume based discount

trade-in allowance giving a store your old product when purchasing a

new product usually results in a discount on the new product

purchase

rebates

Chapter 9Slide 32


List and describe five pricing strategies to increase sales.

Chapter 9Slide 33


DETERMINING THE PRICE

There are five steps to determining the price to charge for a product or service.

Chapter 9Slide 34


2. Determine the cost of the product or service.

3. Estimate consumer demand for your product or service.

4. Study the competition.

5. Decide on a pricing strategy.

1. Establish the price objectives.

Chapter 9Slide 35


List the five steps for determining price.

Chapter 9Slide 36


Lesson 9.3

Market Conditions

Goals Define the business cycle and describe

its impact on sports and entertainment. Discuss the importance of monitoring

consumer trends.

Chapter 9Slide 37


Terms business cycle inflation shoulder periods

Chapter 9Slide 38


IMPACT OF THE BUSINESS CYCLE business cycle (economic cycle)

the ups and downs of the economy

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Chapter 9Slide 39


Chapter 9Slide 40


Expansion

expansion the upside of a business cycle

peak highest point of growth in the economy

Chapter 9Slide 41


Contraction

contraction the downside of a business cycle recession or depression

inflation when prices for goods and services rise

faster than consumer income

Chapter 9Slide 42


Business Reaction

trough lowest point of contraction

recovery economy shows signs of improving

prosperity the period of business expansion following

recovery

Chapter 9Slide 43


Seasonal Cycles

For some businesses, demand fluctuates with the seasons.

high season the season with the highest demand

low season the season with the lowest demand

Chapter 9Slide 44


periods of moderate demand

Sports and entertainment marketing strategies must be developed to help even out the fluctuations created by changing seasonal demands.

shoulder periods

Chapter 9Slide 45


What is inflation and how does it contribute to recession?

Chapter 9Slide 46


IMPACT OF CONSUMER TRENDS Trends are dictated by

television revenue sponsors consumer demand

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Chapter 9Slide 47


Retro Television

Retro show fans like to relive the good old days and recall positive memories of growing up watching the stars in the sitcoms.

Popular show reruns are inexpensive to show on television.

Chapter 9Slide 48


Game Shows

There are game show channels that rerun old favorites.

New game shows are being produced to meet demand.

Chapter 9Slide 49


Audience Ratings Speak

Television networks cannot afford the risk of having viewers switch channels to watch a more exciting show on a competing network.

Some series do not last more than six airings due to flat ratings.

Chapter 9Slide 50


Socio-Culture Issues

Socio-culture issues include trends in customer attitudes lifestyles opinions demographics

Assessing consumers’ ever-changing needs and wants is the bottom line for the success or failure of a product or service.

Chapter 9Slide 51


Why must sports and entertainment marketers pay careful attention to consumer trends?

Chapter 9Slide 52


PERFORMANCE INDICATORS EVALUATED Demonstrate an understanding of the

economic challenges facing television network programming.

Demonstrate critical thinking and problem-solving skills.

Chapter 9Slide 53


Describe advertisements that will attract the attention of your target market.

Develop a strategy to encourage viewers of the Price Is Right to watch the bowl game.

Describe promotions appropriate for the target market that will result in increased ratings for the bowl game.

Chapter 9Slide 54


THINK CRITICALLY

1. How have the number of bowl games affected the television ratings for the games?

2. Why are the scheduled date and time of the game important factors for ratings and promotions?

Chapter 9Slide 55


4. How can an association be made between the game show and the bowl game?

3. Why should television networks pay attention to the programming scheduled around the game and on competing networks when making decisions?

Documents

The Economics of Supply and Demand