Analysis of a Case Study

¶ … easters, Springfield's new Class A minor league baseball team had to solve the common issue of earning sufficient revenues from concession and ticket sales that would help fund their jobs in Springfield. The issue was aggravated by knowing that the Falcons, the only other professional sports team in Springfield, would have to leave because they failed to gain enough revenue from ticket and concession sales. The limitations were that only the budget of players' salaries as well as ball and bat expenses were funded by major league teams.

Any and all other expenses, the minor league teams were accountable for and had to pay. Therefore, Nor'easters had to figure out a pricing policy that will them to break-even or make profit in order to raise revenues for their other expenses. If they failed to do so, they would have to follow the Falcons and move out of Springfield. While Buckingham's marketing research plan plus execution of the plan seemed thorough and comprehensive, it did not accomplish the main objective.

Adherence to the seven-step process, outlined in Market Research Notes, failed to yield anything since his research efforts most likely will not accumulate supportive information. The case study does not seem to go through all seven steps, but actually stops after step #5 and before step #6. This meaning his initial examination of the data from the survey, as well as his revisions were left to the imagination. Because of this, there is no way to interpret Buckingham's execution of steps 6 and 7.

That being said, he managed to realize the significance of prioritizing data needs and creating urgency. By keeping Bob Cortez, his boss, focused on the aim of the research, Buckingham was able to conduct comprehensive interviews with other MLB Marketing Directors on his way to understanding the many viewpoints of experts within his field. This then led to the mailing of 10,000 postcards to targeted audiences with a 6.25% response rate amounting to 625 respondents.

This abysmal response rate is not enough to construct a pricing model with and can be looked at in two ways. The first is almost two thirds of all Springfieldians or 60% do not like baseball nor would be interested in local teams irrespective of pricing model. The second is the vast majority of those that did not respond, 93.75%, were not lured by the gains ($500 gift card) to finish the survey. What this means is, these non-respondents could be baseball fans.

They could attend Noreasters' games, but they just did not want to take and finish the online survey. Looking at the information from the respondents however, there are some things that can be taken that may be used to construct an optimal pricing policy. #2 Of the people that responded, 4/5 or 80% stated they would pay more than $10 for a ticket to the game. This is some reassuring information since $10 is towards the higher end of the pricing scale. Non-baseball fans have also shown to be willing to pay more than $10.

Since non-baseball fans are not as dedicated as baseball fans, the optimal pricing policy may lean towards charging as much as $12 for a single game ticket and less for the rest with $10 for single ticket- advance purchase. The last part of the research demonstrates those making between $22,500 and $74,999 make up the biggest majority of baseball fans. These are middle-income families and the survey results proved 3/4 or 76% of the 625 respondents fall into the middle-income bracket. The information lines up well and provides additional incentive to make the ticket prices $10.

With a large season budget of $1.9 million, it is a priority to in the very least, break-even. However, the break-even point is a little over $1 million, leaving some room for risks. Therefore, the optimal pricing policy should be as follows. The first ticket price will be $12 and that will be for a single ticket-day of game. The second ticket price will be $10 and that will be for a single ticket-advance purchase. The third ticket price will be $8 and that will be for a 5-game ticket.

The fourth ticket price will be $6 and that will be for a 20-game ticket. The fifth ticket price is $4 and that will be for a 38-game season. The logic behind this is, the money made back is closest with those ticket prices. For example, a $10 single advance ticket generates an $8 revenue whereas if it was priced at $12 it will make only a $5.88 revenue. Single tickets are usually for those that are not fans of baseball. They may be there to have fun and not really worry about coming back.

They also are most likely to not show or buy at concession stands. Those tickets can be the highest based on research and survey results. The fans that go the most often can get the cheapest ticket price because they will most likely keep buying at concession stands each time they go and attend more games. That being said the overall optimal ticket price is $10 because there will be roughly 80% attendance as well as both an increase in ticket sales and concession sales.

When tickets are bought at $8 for 5 games, that means individuals will be buying roughly $8 worth of concessions five times. The higher priced tickets are solely for those buying $8 worth of concession once. It is the 5-game, half-season, and full-season ticket prices that must remain less than $10 in order to get individuals to keep buying at concession stands and help contribute the majority of the revenue.

Lastly, keeping for example, the 5-game price at $8 there is only a loss of revenue of $.48 versus pricing it at $10 which would lead to a loss of $2.50. When the revenue is slightly higher by keeping it at $8, it makes sense to make that the optimal price. #3 It is always hard to in the very least, break-even the first year. With the optimal pricing plan, Buckingham's profits are expected to pique at $160,488.04.

The calculations were made by first figuring out Springfield's total population that would consider attending a minimum of one game throughout the first year. That amount is 55,338. The next step assumes 21% of the population might attend one game, and 11% would be willing to attend 5 games. The other assumptions are that 5% would be willing to buy tickets for half the season and 2% for the entire season.

Since 80% of the 21% are willing to go if the ticket prices were $10 (slightly more for single ticket purchases), the same rules apply and continue to apply for rest of the pricing package. That means a possibility of 11,621 people attending one game, 6,087 attending 5 games, 2.767 attending 20 games, and 1,107 attending the whole season. Therefore, the revenue generated from ticket sales would amount to $765,258.

Remembering that the majority of the revenue can come from concession stands, one can assume not everyone will buy a ticket and buy at the concession stands, especially for those who purchased a ticket in advance and never went. In order to calculate the amount generated from concession sales, there are three variables Buckingham would have to consider. The first is as mentioned before, the percentage of people who buy a ticket, but are no-shows.

The second is percentage of people who make purchases at concession stands for a certain price. The third is the profit margin made from concession sales. A good example to use is the 5-game pricing produces a 97% chance that people that have bought a ticket will show up. 81% of the people that show up will make a minimum purchase of $6 to $10 in concessions.

Calculating the number with the amount of games attended, plus the number of people within that category, the result will then be multiplied by 39% giving a grand total of $245,048. When taking into consideration the rest of the pricing package and all the ticket prices, the total amounts to an estimated $401,109. When the concession, ticket sales, sponsorship from local businesses, and support from schools and the town are added in, it is a total of $1,166,367.

With the fixed cost amounting to $1,051,879, take that amount and subtract it from $1,105,555 and the net profit is equal to $160,488.04. With the assumption that people are going to attend games and purchase tickets, purchase at concession stands, Buckingham stands to make a profit. Although the no-shows may be higher and people may not be as willing to buy from concession stands, this seems like the most plausible figure. This is especially viable thanks to the survey results. #4 Environmental factors are various and have a way of impacting forecasts.

For example, the opponent may draw in more customers and therefore ticket sales or draw less. The weather is also a big environmental factor as people want to be out when it is sunny and warm versus when it is raining and cold. When a sports team has a famous rivalry and baseball fans feel energized from the two team duking it out, there will be more tickets sold because of increased interest.

However, when there is no rivalry and fans are not even familiar with the opposing team, this will draw less fans in and garner less ticket sales. If the baseball happens to perform well and create substantial rivalry between another team, then they will be able to create a higher level of interest in fans. This of course may go the opposite way and there may be no interest. Regardless, either way will alter the way ticket and concession sales go.

This is something that may be controlled or may not be controlled. It all depends on whether or not.