9-4 the Alltel Pavilion

Topics: Costs, Fixed cost, Management accounting Pages: 2 (675 words) Published: June 21, 2012
Case 9-4
Cost-Volume-Profit Analysis and Strategy: The ALLTEL Pavilion

Andrea Mullens

1) The competitive strategy of the ALLTEL Pavilion is largely focused on differentiation. With no substantial competitors in the geographic region, they are looking to create an “experience” for the audience and thus maintain the sustainability of the venue. They do this primarily through solid Marketing efforts. They are focused on the making the venue and each event as profitable as possible, by making it as highly visible as possible. Working within an established marketing budget of $20,000 per event, the team analyzes demographics, options, and potential ROI in order to make decisions about how to spend this money. Looking beyond each individual event, they are also looking to build visibility for the venue.

However, in this case the strategy of differentiation should not work in a vacuum. Many experienced concert attendees may feel that the venue makes like difference to the experience that the performer brings. It is also wise to consider some cost leader strategies as well. This could be done through a more thorough look at ALLTEL’s SWOT analysis. They have an identified strength in how best to utilize available marketing funds and appear to have a solid process in place for overall execution at the events. However, have they adequately analyzed their opportunities? How many events do they secure each year? Are there substantial gaps? Would a marketing spend that exceeds $20,000 yield a greater return with certain events? Are the present ancillary vendors providing the best return? Certainly with the identified threats of increasing advertising costs and artist costs, there is a need to focus on the controllables within the equation.

2) To calculate the break-even point we must find a way to separate the paying ticket holders and comp ticket holders. * The contribution per paying customer is $40.08 ($26.99+1.91+7.66+3.52) - $3.049...
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