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Sports and Entertainment Marketing © Thomson/South-Western

The Economics of Supply and Demand

9

Dawson_David Friday, September 3, 2010 12:14:54 PM ET


Chapter 9 Slide 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 9 Slide 3

Lesson 9.1

Supply and Demand

Goals  Explain the relationships between

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

pricing.



Chapter 9 Slide 4

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



Chapter 9 Slide 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 9 Slide 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 9 Slide 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 9 Slide 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 9 Slide 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 9 Slide 10

Equilibrium

 equilibrium   the point where the supply and demand

curves intersect   indicates the best quantity and price for

goods and services



Chapter 9 Slide 11



Chapter 9 Slide 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 9 Slide 13

 How does price affect demand?



Chapter 9 Slide 14

GOVERNMENT INFLUENCE ON PRICING  private-enterprise system

  based upon independent decisions made by consumers and businesses



Chapter 9 Slide 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 9 Slide 16

Benefits of Competition

 monopoly   where one business controls the entire

market  Antitrust laws encourage competition

and help avoid monopolies.



Chapter 9 Slide 17

Taxation

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



Chapter 9 Slide 18

Illegal Pricing

 price fixing   when related businesses conspire to

charge high prices   illegal in U.S.



Chapter 9 Slide 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 9 Slide 20

 List three ways the government influences pricing.



Chapter 9 Slide 21

Lesson 9.2

Pricing Strategies

Goals  Discuss pricing strategies used by

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



Chapter 9 Slide 22

Terms   operating expenses   markup   price lines   loss-leader pricing



Chapter 9 Slide 23

PRICING CONSIDERATIONS

 price   the amount that customers pay for

products and services



Chapter 9 Slide 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 9 Slide 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 9 Slide 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 9 Slide 27

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

 geographic pricing   allows pricing variations based upon

geographic location

 price lines



Chapter 9 Slide 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 9 Slide 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 9 Slide 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 9 Slide 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 9 Slide 32

 List and describe five pricing strategies to increase sales.



Chapter 9 Slide 33

DETERMINING THE PRICE

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



Chapter 9 Slide 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 9 Slide 35

 List the five steps for determining price.



Chapter 9 Slide 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 9 Slide 37

Terms  business cycle   inflation  shoulder periods



Chapter 9 Slide 38

IMPACT OF THE BUSINESS CYCLE   business cycle (economic cycle)

  the ups and downs of the economy



Chapter 9 Slide 39 Dawson_David Friday, September 3, 2010 12:14:54 PM ET


Chapter 9 Slide 40

Expansion

 expansion   the upside of a business cycle

 peak   highest point of growth in the economy



Chapter 9 Slide 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 9 Slide 42

Business Reaction

  trough   lowest point of contraction

 recovery   economy shows signs of improving

 prosperity   the period of business expansion following

recovery



Chapter 9 Slide 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 9 Slide 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 9 Slide 45

 What is inflation and how does it contribute to recession?



Chapter 9 Slide 46

IMPACT OF CONSUMER TRENDS  Trends are dictated by

  television revenue   sponsors   consumer demand



Chapter 9 Slide 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 9 Slide 48

Game Shows

 There are game show channels that rerun old favorites.

 New game shows are being produced to meet demand.



Chapter 9 Slide 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 9 Slide 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 9 Slide 51

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



Chapter 9 Slide 52

PERFORMANCE INDICATORS EVALUATED  Demonstrate an understanding of the

economic challenges facing television network programming.

 Demonstrate critical thinking and problem-solving skills.



Chapter 9 Slide 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 9 Slide 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 9 Slide 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?


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