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

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

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

“You Do”

Article Activity : LAP• You will go to Ms. Farmer’s webpage and under

the 4.07 section you will find the LAP for this unit.

• You will read the LAP and answer the Total Recall on pages 4 and 8.

• You will then come and draw a piece of paper out of a cup. You will take this question and create a poster to explain your answer