Case 1 The Springfield Nor Easters Maximizing Revenues In The Minor Leagues

Topics: Revenue, Poverty, Mathematics Pages: 5 (776 words) Published: March 26, 2015
Revenue Management and Pricing
Case 1: The Springfield Nor’easters: Maximizing Revenues in the Minor Leagues Question 1:
Based on the survey, we determine the accumulated percentage of customers’ willingness to pay at each price.

Since the demand differs as the price changes, we want to see by which combination we can maximize our profit. Assuming the population is 100 people, we multiply the accumulated percentage and the price to estimate our revenue:

Therefore we get our initial estimate of our pricing:
Single ticket:$10
5-game ticket:$8
20-game half-season:$6-$8
38-game season:$6
To go further, we want to estimate the average sales of each game. According to the survey, the sample was taken from Springfield census tract of households with income above the poverty level. And by the information given, nearly 25% of families lived below the poverty line, which means the population of the survey is around 55338 x 0.75 = 41504 (people). Additionally, based on question 7 in the survey, we can roughly estimate the sales of each game by the following steps:

figure 3
The estimated seats needed per game is 229+583+1037+747=2596, which is far below our capacity(3600 seats). Seeing that, we are prone to set the price lower to increase sales. In conclusion, the following pricing is a preferable basis:

Single ticket:$10
5-game ticket:$8
20-game half-season:$6
38-game season:$4

Question 2:
Based on Exhibit 1, the actual total cost we need to pay:

Total fixed expenses
$1,961,379
Players’ salaries
(887,000)
Bats and balls
(22,500)
Financial support from colleges
(21,000)
Other sponsorship and advertising
(25,000)
$1,097,879

We then calculate the annual revenue with our answer to question 1 by multiplying (B) and (F) in figure 3: 8716 * $10+ 22825 * $8 + 41500 * $6 + 31540 * $4 = $644,920
Then we estimate the concession revenue based on question 13 in the survey: “How much do you expect to spend on snacks, souvenirs and arcade games, per person, for each game you attend?” Nothing
Less than $5
$6~$10
$11~$15
8%
11%
45%
36%
We calculated the expected amount of money paid for concession per person per game by multiplying the median of each interval and the percentage: $0 * 8% + $2.5 *11% + $8 * 45% + $13 * 36% = $8.555

Then multiply with the total annual attendance and the profit margin: $8.555 * 98648* 39% = $329,134.12
Total revenue: $644,920+329,134=974,054
Apparently, this amount hasn’t reached our breakeven point. We manage to improve this problem by two ways. First, we should increase our ticket sales. Second, we should take certain measures to boost concession sales. (1) Increase ticket sales

In the aim to stimulate the demand, we have set our price at a relatively lower point. The estimated number above is a conservative prediction. Hence, we can foresee a raise of audience after the begin of operation. (2) Boost concession sales

Besides anticipating attendance growth, we manage to design a package bundling one single ticket with certain amount of coupon which can be used to purchase drinks and snacks. The total price will ultimately offer the customer a discount. We are

Question 3:
Here is the current ticket pricing for the Springfield Cardinals:

Diamond Boxes
Ticket price per game - $13.50
Full Season per seat - $945
Half Season per seat - $472
Quarter Season per seat - $243
Field Boxes
Ticket price per game - $7.50
Full Season per seat - $525
Half Season per seat - $262.50
Quarter Season per seat - $135
Dugout Boxes
Ticket price per game - $10.50
Full Season per seat - $735
Half Season per seat - $367.50
Quarter Season per seat - $189

(A)Tickets
Sold
(B)Annual
Seats
Needed
(A*package games)
(C)Seats
needed
Per game(B/38 games)
(D)Attendance
Rate
(E) Adjusted seats needed Per game
(C*D)
(F)Price per game
Single Ticket
8716
8716
229
100%
229
$10
5-game Ticket
4565...
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