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Case 1

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• Published : March 6, 2015

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Case 1: The Springfield Nor’easters:
Maximizing Revenues in the Minor Leagues

Q1. Review the case details Exhibit 5 “Survey Questionnaire and Response Distributions” and Exhibit 6 “Buckingham’s pricing matrix worksheet.” Complete filling in the pricing matrix worksheet for Exhibit 6 as taking the role of Larry Buckingham.

The Table 1 illustrates Larry Buckingham’s price matrix.
Table 1: Larry Buckingham’s price matrix
Ticket Type
\$ Per Ticket

2
4
6
8
10
12
14
Single Ticket
0%
2%
5%
13%
31%
27%
22%
5-game Ticket
1%
2%
3%
19%
36%
34%
5%
20-game Ticket
1%
7%
23%
28%
25%
15%
1%
38-game Ticket
18%
26%
20%
14%
11%
10%
1%

Q2. Given the survey’s results, design a pricing scheme for the Springfield Nor’easters’ first season in order for a financial break-even. Explain how you derived the pricing scheme and list all assumptions made.

According to the survey’s results and data analysis, the pricing scheme we launched was as follows (Table 2): Table 2: Price Scheme Game to attend

1-Game
5-Game
20-Game
38-Game
Price Per Game
for Bleacher Seat
\$10.00
\$8.00
\$6.00
\$4.00
Price Per Game
for Grandstand Stand
\$11.00
\$8.80
\$6.60
\$4.40

The analyzing process was based on some fundamental assumptions: The attenders do not have specific preference between these 38 games. The price they pay for admission do not relate to they consumption in premium ticket and concession. The weighted average of concession represents the actual preference in concession consumption. In terms of a price range, we select the median to simplify the analysis, for example, we use \$13 to represent the price range \$11-\$15. 1. Price Determination

The first priority principle to determine the specific price is this kind of price is able to drive the maximal revenue to the Nor’easters, and the basic logic to design the prices for different segment is the same, so we just take the example of 5-game Ticket to show that. Exhibit 1&2, 3&4, 5&6, and 7&8 reveal the determination logic of one-game ticket, 5-game ticket, 20-game ticket, and 38-game ticket, respectively.

Total revenue consists of two parts: tickets and concessions consumption.

To begin with the ticket income, refer to the Exhibit 3. The first step is calculate the number of audience, the total population in the city of Springfield is 55,338 in 2008, and the Question 7 in the survey shows that if a minor league baseball team came to the city, there is 11% of them probably would subscribe to a 5-game package, in other words, there are 6,087 audiences may attend (55,338 times 11%). Then, in Question 9, we investigate the targeted audiences’ preference and sensitivity on different price segments, the result is, for instance, if we set the price at \$8, 94% of our spectators could accept and afford at this price level. There is another assumption, there are always going to have some percentage of no-shows on advanced sales tickets, and from one-game ticket to season ticket, the attendances are assumed as 100%, 97%, 95%, and 90%, individually. Thus, the actual number of people to show up the 5-game ticket is 5,550 (6,087 multiples 94% and multiples 97%). The third step is to calculate the total revenue from tickets, which is quite straightforward, simply use the attended population (6,087) times the proportion of audience at \$8 segment (94%), and times the show-up percentage (97%) and the game number (5), so the total ticket revenue is \$228,878 if the 5-game ticket price is \$8.

The second part in the total revenue is the income from concessions profits. The Question 13 in the questionnaire reveals that 24% of the spectators expect to spend nothing on snacks, souvenirs, and arcade games. While 11% want to spend less than \$8, 45% wiling to consume \$6-\$10, and 36% would spend \$11-\$15 on...