Pricing Exercise Apr2015

Topics: Wolfgang Amadeus Mozart, Cost, Household Pages: 4 (1247 words) Published: April 15, 2015
SOLID GOLD AND NEW HORIZONS: A PRICING EXERCISE
W. MORRISON ∗
1. Introduction
You have been asked to advise the Lanport Symphony Orchestra (a professional company) as to how they should price two concerts planned for next year. The first concert entitled ‘Solid Gold’ (SG) features the music of Beethoven, Mozart and Mendelssohn. The second concert entitled ‘New Horizons’ (NH) features the music of Stravinsky, Schoenberg, and Cage. Each of the concerts offers ticket-holders admission to a reception (drinks and appetizers) with a guest speaker, prior to the performance. The reception costs are the only costs that can be meaningfully allocated as a cost per audience member (all other costs are assumed to fixed costs). The SG concert will appeal to lovers of popular classics while the NH concert will have more appeal to ‘serious’ classical music lovers and those who prefer more contemporary and potentially dissonant (atonal) compositions.

Howard, the orchestra box-office and marketing manager has provided you with profiles of four representative customer groups and their willingness to pay for the two types of concert. Some of the orchestra’s patrons are the Wolfgang Amadeus Mozart lovers or as Howard calls them, ‘WAMs’. WAMs have a strong demand for “light” classical programs and place a low value on most music composed after 1900. Another identifiable group of patrons are the ‘Melody Lovers’, who like popular classics but are likely to give more contemporary composers such as Stravinsky a try. A third category of patrons are the ‘Boomers’, viewed perhaps somewhat stereotypically as aging professionals who like going out often, but are less fussy when it comes to the actual content of the entertainment. The fourth and last group of representative patrons is what Howard calls the ‘Sophisticates’. This group is on average more knowledgeable about contemporary classical music and includes musicians or consumers who have spent some time studying or playing music....
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