Chapter 3 The Demand for Sports and Entertainment

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Chapter 3 The Demand for Sports and Entertainment
Economics 204 Sports and Entertainment Economics
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• Markets communication among buyers and sellers
  for the purpose of trading

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• Consumer Theory
• Purchasing Rule
• If MUa/Pa gt Mub/Pb, buy product a
• If MUa/Pa Mub/Pb, stop
• Changes
• Utilities
• Incomes
• Prices
• Stores
• Products

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• Demand
• Definition various amount of a good people are
  willing and able to buy at various prices
• Needs must have
• Wants - optional
• Law of Demand Price increases, Qd decreases
• Diminishing marginal utility as you consume
  additional units of the same item you enjoy them
  less

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• Demand Curve
• Market Demand sum of the individual demand
  curves

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• Determinants of Demand shift the demand
• Willingness
• Tastes and Preferences
• Fads and Fashions
• Advertising
• Technology new and replacement products
• Conspicuous Consumption
• Number and composition of buyers
• Population
• Age
• Gender
• Prices of related goods
• Substitutes Pa rises Qda falls, Demand for b
  rises
• Complements - Pa rises Qda falls, Demand for b
  falls
• Expectations
• Ability
• Income
• Normal income rises, demand rises
• Inferior - income rises, demand falls

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• Expressed as Qd f(Price, Tastes, Number,
  Expectations, Price of others, Income)
• Qd f(P, A, I, Pop, Pc, Ps)
• P price
• A Advertising
• I Income
• Pop Population
• Pc Price of Complements
• Ps Price of Substitutes

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• Demand vs Quantity Demanded
• Demand is the whole curve
• Quantity demanded is one price and point on the
  curve

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• Elasticity measure of consumers response to a
  change in prices or income
• Price Elasticity of Demand
• Formula change in Qd/ change in Price
• Interpretations
• Ed 0, Perfectly inelastic
• Ed lt 1, Relatively inelastic (Necessities)-Medical
  care, food, utilities, public transportation
• Ed 1, Unitary
• Ed gt 1, Relatively elastic (Luxuries)-Restaurant
  meals, vacations, soft drinks, sports and
  entertainment
• Ed ?, Perfectly elastic

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• Total Revenue P x Q
• Elastic Price falls, TR rises
• Inelastic Price rises, TR rises
• Cross Price Elasticity
• Formula Exp change in Qd of A/ change in P
  of B
• Interpretations
• Substitutes Ex gt 0
• Complements Ex lt 0
• Independent Ex 0
• Income Elasticity
• Formula Ey change Qd/ change Income
• Interpretations
• Normal goods Ey gt0
• Luxury Ey gt 1
• Necessity Ey lt 1
• Inferior goods Ey lt

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• Sports Demand
• Has grown dramatically in the last 40 years
• Basketball 905
• Hockey 680.7
• Football 290.5
• Baseball 251.7
• Strong correlation between economic and athletic
  performance

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• Demand and Sports Revenue
• Scarcity in Sports
• Athletic prowess
• Beauty
• Impossibility
• Quality of Teams and Competition
• Absolute difference between leagues
• Relative difference between teams in a league
• Uncertainty of Outcomes
• Commonality common bond among people
• Winning

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• Demand Determinants
• Price
• Tastes and Preferences
• Fan interest
• Quality of the Team
• Disposable income Income that can either be
  spent or saved
• Discretionary income
• Normal goods
• Inferior goods

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• Price of Other Goods
• Complements
• Parking
• Souvenirs
• Concessions
• Substitutes
• Other sports
• Participation
• Spectator
• Movies
• Opera
• Concerts
• Fan Expectations
• Future prices
• Winning
• Population

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• Demand Issues
• Demand for Womens sports is less than Mens but
  growing faster
• Large-market teams win more than small market
  teams
• Larger population base
• Teams in high drawing potential have stronger
  teams
• Teams in low drawing areas sell players to
  stronger drawing teams
• Consumer Surplus Reservation Price Actual
  Price

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• High elasticity fans receive lower prices
• Elderly
• Children
• Daytime games
• Weekday games
• Multiple Ticket Packages
• Personal Seat Licenses
• Revenue
• Within league variations
• Between League variations

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• Music Customers
• Albums ages 12 to 49
• Singles ages 12 to 19

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• Demand
• Determinants
• Tastes and preferences
• Whats in style?
• British rock 60s
• Heavy metal early 70s
• Disco
• Punk
• Alternative
• Rap
• Advertising
• MTV
• Videos
• Special Appearances
• Superbowl
• TV shows
• Radio
• Film
• Income Follows the business cycles of the
  Economy

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Movies

• Movie Customers
• 16 50 73

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• Demand
• Issues for movie going or home video rentals
• Story type
• Stars
• Director
• Promotional Budgets
• Demographics
• Ratings
• Awards
• Reviews

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• Price inelastic
• Price elastic with complimentary goods
• Babysitter
• Restaurant meals
• Parking
• Demand falls from first week

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• Fashion
• Target market (general)
• Females
• Young
• Target market (high end)
• Female
• High income
• Demand issues
• Trends
• Price elastic
• Social events

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• Marketing creation and maintenance of exchange
  relationships
• Marketing mix
• Product
• Distribution
• Price
• Promotion

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• Core Standards
• Distribution
• Marketing information management customer
  information
• Demographics
• Age
• Marital status
• Gender
• Income
• Education
• Ethnic background
• Pricing
• Product/Service management
• Promotion
• Selling
• Financing
• Sports Marketing Using sports to sell products
• Entertainment marketing influencing people to
  spend time and money on entertainment
• Viewing rather than participating
• Ratings number of viewers

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• Sports and Entertainment Economics
• Government
• Taxation
• Illegal pricing
• Price fixing
• Bait and Switch
• Price Discrimination
• Pricing strategies
• Markup MR MC
• Price lines
• Psychological pricing .99 rather than 1.00
• Prestige pricing
• Volume pricing buy bulk from suppliers
• Promotional pricing
• Loss-leader
• Quantity discounts
• Trade-in allowances

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• Price determination
• What is the percentage of profit?
• What are the costs?
• What is the demand?
• What is the competition?
• Determine the pricing strategy
• Profits
• Breakeven what is needed to cover costs
• Utility
• Form physical characteristics
• Time time it is accessible
• Place location
• Possession price
• Risk
• Human theft, dishonesty and incompetence
• Economic changes in the economy

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• Ethics deciding what is right and wrong
• Financial Analysis
• Rate of return
• Balance sheet assets and liabilities
• Income statement revenue and expanses
• Industry group of firms selling a product
• Industry standards guidelines and goals of an
  industry
• Economic market all the consumers who may
  purchase the product
• Target market specific customers
• Market segment consumers in a large group that
  char a characteristic
• Market segmentation
• Geographic
• Demographic
• Psychographic values, interests and lifestyle
• Behavior based attitudes
• Market share percentage of the market
• Customer service

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• Marketing Game Plan
• Strategies
• Marketing plan
• Analysis
• Mission statement
• Marketing information
• Tactics
• Strategy
• Product/service
• Distribution system
• Pricing
• Promotion strategies
• Financing
• Risk management
• Implementation
• Timeline
• Assignments
• Internal communication system
• Selling

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• Product
• Product mix
• Product brand name
• Product extensions warranties
• Product enhancements extras
• Product line group of similar products
• Packaging
• Brand
• Product life cycle
• Introduction
• Growth
• Maturity
• Decline
• Drop the product
• Sell or license the product to another
• Discount
• Regionalize
• Modernize/alter
• Recommit

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• Distribution Channels
• Types
• Live
• Venue place
• Stadium
• Arena
• Theater
• Via media
• Radio
• TV
• Internet
• Delivery
• Market conditions
• Business cycles
• Peak
• Contraction unemployment
• Trough
• Expansion inflation
• Entertainment trends

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• Sports and Entertainment Promotion
• Elements
• Advertising
• Goal
• Budget
• Theme
• Media
• Message
• Schedule
• Measure effectiveness
• Publicity
• Goodwill
• Damage control
• Grass roots common man
• Image

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• Sales promotion
• Consumer sales
• Price reductions
• Price pack deals
• Coupons
• Special gifts
• Contests or games
• Rebates
• Trade sales
• Allowances
• Contests
• Point of purchase displays
• Employee sales
• Personal selling

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• Promotional Planning
• Promotional Plan
• Identify target customers
• Set promotional goals
• Budget
• Promotional mix
• Measure the results
• Sponsorships and endorsements
• Sponsorship underwriters
• Endorsement expression of approval
• Celebrity
• Events

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• Selling Sports and Entertainment
• Sales process
• Preapproach
• Approach
• Demonstration
• Answering questions
• Closing the sale
• Follow up
• Skills
• Know the product
• Know the customer
• Know the competition
• Entertainment demand
• Ticket brokers legal
• Ticket scalpers illegal
• Ticket frenzy
• Group and Corporate Sales
• Group packages
• Special privileges

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• Fashion Marketing Concepts
• Fashion Cycle
• Introductory Phase
• Peak Phase
• Decline Phase

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• Product Mix all the goods an organization sells,
  in fashion it is styles, prices and
  classifications
• Retailers for fashion
• Department stores Dillards and Macys
• Discount stores Target and K-mart
• Off-price stores T.J. Maxx
• Chain stores The Limited and The Gap
• Boutiques Tootsies
• Styles
• Classic traditional with long product lifecycle
• Trendy current style
• Young Designer garments created by designers
  just starting out
• Designer high quality, high fashion sold under
  the designer name
• Couture Original one of a kind high quality
  garment
• Haute couture high fashion individually designed
  handmade original
• Classifications
• Sportswear jeans, sports wear
• Activewear worn while participating in sport
• Careerwear workplace
• Eveningwear special occasion or formal wear

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• Basics of Fashion
• Terms
• Knockoffs copies that appear in about two weeks
• Softlines items made of fabrics or leather
• Forecasters predict trends
• Merchandisers plans styles, pricing and amount
  to be produced
• Channels of distribution path a product takes
  from production to sale
• Economies of scale large volume production
  lowers prices
• Private labels Neiman-Marcus only
• Brand names sold by licensing to stores
• Brand building establishing an identity
• Just in time inventory
• Vendor managed inventory
• Visual merchandising displays, dummys etc.

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• Pricing
• Wholesale to the retailer
• Retail final customer price
• markdown price reduction to speed up sales
• Retail price Wholesale price Markup
• Markup operating expenses profit
• Markup (Retail Wholesale)/Retail
• Categories of price
• Discount
• Budget
• Value-priced
• Moderate
• Better
• Bridge
• Designer
• Couture

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• Fashion Economics
• Overruns manufacturer has produced too many
• Venture Capitalists invest in risky startups
• IPO Initial Public Offering
• Fashion Centers
• US
• Places
• New York
• Runway shows
• Invitation only
• Collection Opening
• Los Angeles
• Chicago
• Atlanta
• Dallas
• Brands
• Tommy Hilfiger
• Calvin Klein
• Donna Karan

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• Promoting Fashion
• Media
• Print
• Broadcast
• Direct Mail
• Cyber

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• Organizing the fashion show
• Determine the purpose
• Determine the theme
• Develop a written plan with timeline
• Schedule location, date and time
• Develop a guest list
• Find
• models
• photographers
• hair
• makeup
• music
• lighting
• sound system
• props
• Develop and send invitations
• Develop and promotional plan
• Press kit
• Develop a script and program

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• Other Events
• Trunk shows
• Fundraisers
• Fashion awards
• Infomercials
• The sale
• Preapproach
• Approach
• Determine the need
• Demonstrate
• Answer questions
• Close the sale
• Suggest
• Follow up