Pricing Decisions Case Study on the Springfield Noreasters - Essay Example

Pricing Decisions – Case Study on the Springfield Nor’easters This report will identify the strategic issues and problems faced by the Springfield Nor’easters minor league baseball team. The paper also contains a SWOT analysis for the analysis and assessment of the operating environment of the team. Three alternative courses of actions with their pros and cons will also be mentioned. Based on these alternatives, recommendations will be made which are operational and realistic. Strategic Issues and Problems The Nor’easters had not yet played a single game in the city and their office had opened up recently in the city. The main problem that the team faced was the pricing of the tickets for the matches. The team wanted to maximize their revenues in the minor leagues for which they had to price the tickets very carefully. Only the 25% of the population of total 56,000 residents were under 18 years of age which was the main target market. However, the potential audience of the team was unknown to the marketing director of the team because of which he could not determine the best price for the tickets. Keeping the price too low would decrease the revenue and prices too high would ward off some of the youngsters willing to attend. Another problem that the marketing director had to deal with was that the college students who supported college teams were unable to attend sporting events due to high cost of the tickets and lack of transportation. Analysis and Evaluation Industry The league baseball industry is pretty bleak in the city of Springfield as of 2008. A minor league ice hockey team was about to leave the city because of unimproved revenues over the time. The Nor’easters just opened up in the city and not a single match would be played for another one and a half year by the team. Most of the minor league baseball games in the US are well attended and there are as many as 176 minor league teams in the country. The fans considered the tickets to be affordable as they could closely watch the games. The government was also investing some bucks in the industry which was evident by player development programs and team funding. The marketing director should be delighted to know that the teams which provided value entertainment often had high attendance though the teams were mediocre. This shows that the industry has a great potential for the teams willing to entertain the audience, Market The citizens in the Springfield city can be said to be deprived of the baseball league games as they had to travel to neighboring cities to watch these games. The market is very dilute for the baseball teams as no baseball team for the city exists. The Falcons, a minor league ice hockey team also was planning to leave the city because of low level of sales and numerous unsold tickets. Buyer Behavior It was found in the secondary research that only 8% of the total sample Springfield population in 2005 attended a professional baseball game in that year. Another 23% of the population watched matches on the television. The main problem that the city faced was that no matches were no matches were held in the city and Springfield did not have their own team also. The spirit of the citizens to go to drive to another city to watch the games should be very encouraging for the management. This also shows that the people will be willing to pay high prices to watch games in their city. Organization The Springfield Nor’easters Team was able to gather enough support from the local colleges, restaurants and hotels which would cover the costs of advertising and boost the organization’s revenue. The marketing director is pretty keen of generating the best prices for the games and has invested into a primary survey research also. The data collected from this research will be used to make the pricing decisions. This will not only help in determining the best prices for the tickets, but also increase the attendance. SWOT Analysis of Nor’easters Strengths Weaknesses -The marketing director has a experienced past in the entertainment industry which will help the Nor’easters make good pricing decisions -The Nor’easters will be the only professional baseball team which will gather the support of the whole city and the residents can be expected to watch all the seasons with interest -Limited and obsolete data for the city population was available which could not be relied upon to make priding decisions Opportunities Threats -The Falcons team is leaving the city which will give the residents limited options to watch games -The labor cost in the city is low comparatively as there are only a few manufacturers in the Springfield. This will reduce the expenditure for the team. -25 % of the total 56,000 population was the target market which is considerably large. -Not enough time to make priding decisions which would close out many options to help the decision making for the management -College student population is absent in most of the basketball and football games in the area because of the high ticket cost and transportations issues. The similar could be expected from this population for baseball too. Alternative Courses of Actions 1. The first alternative would be to record the prices of minor league baseball tickets in the cities similar to Springfield. These cities should have the population and demographics similar to the Springfield. The average of these prices can be taken and the price of the tickets is set equal to this average. The advantage of this strategy of pricing would be that the ticket prices of other teams will also be incorporated in the calculation of the prices. This would require very less effort and prices can be calculated quickly. The disadvantage is that this pricing strategy is very risky; the team can be knocked out in the first game if no tickets are sold. 2. The second alternative could be that the prices are set at the minimum most level possible to attract more audience. The price can be set so that the team can break-even in the first few matches. The prices can then be increased if the demand for the tickets is higher than the space available. This would attract most of the target market in the first place and help the team penetrate in the market. However, the strategy has a disadvantage of negative public perception. Once the perception of low price is made in the public, the ticket prices would be difficult to increase. 3. The third alternative for the team is to start it aloof with high priced tickets to create a premium image in the minds of the customer. This would attract a descent crowd than the low-priced tickets strategy and the revenues will also be higher. The main problem however will be that the stadium seats will not be full as the college population and youngsters would not be able to purchase the tickets. Only the population under 18 years of age coming in with their parents and families would be able to purchase the tickets. Recommendations The Springfield Nor’easter Team is recommended to choose the first alternative as it seems the best alternative for the team and the management too. The management is short of time and has to make quick decisions. A lot of time and money has been invested in collecting the data already and the prices have to be announced within a few months. So the best decision would be to take an average of the prices set by the teams in other cities similar to Springfield. The prices can be increased in the future if the Nor’easters feel the demand for the tickets is increasing. The target for the Nor’easters should be that the no seats should be left empty, in other words all the tickets should be sold. Read More