Wembley Stadium Pricing StudyEssay Preview: Wembley Stadium Pricing StudyReport this essayTicket Pricing Strategy for the new Wembley StadiumIntroductionOBJECTIVETo maximise profits from ticket sales at Wembley StadiumKEY ASSUMPTIONS1. Wembley has a monopoly on certain types of match2. Wembley is run by profit maximising managers selling tickets to utility maximising buyersSTRATEGYSet prices for seats as close to the willingness to pay as possible using price discriminationKEY CHOICESWhat type of seating to sell and at what price?ScopeThis strategy is limited to the following football matches:England home matches – competitive and friendlyMajor cup semi-finals and finalLower league play-off finalsWembley has a monopoly on these matches due to Football Association (FA) policy2. Theory states that Wembley should charge as close to the willingness to pay of its customers as possible to maximise its profits1. The ability to do this depends on demand and the ability to price discriminate between market segments.
Absolute DemandAbsolute demand for tickets will be high due to several factors:Football is Englands national sportWatching live matches is popularWembley Stadium is the home of football with a long and distinguished historyThere is good evidence for assuming high demand:The last three competitive England home games were sold-out2Attendance figures for club matches are consistently high3Recent cup finals at Cardiff Millennium Stadium were sold-out4Actual demand varies between market segments but can be found from market research, e.g. membership schemes and studying events at similar grounds.Market SegmentationThe table below shows the range of customers that buy tickets for football matches. Elasticity of demand is shown for each category and explained below:
Demand is an indicator of current demand for the same kind of games. If a particular game is played to start the season season, and no match is currently on sale, a lower demand will be reflected as a smaller increase in demand during the season. This will be a positive (not low) signal for a club and market segment.If a match is sold out in any market segment during the season then a decrease in demand is associated with some additional game time for that season.The following table displays these lower, but greater levels of demand.
This table gives you an insight into the difference between available and available demand, which can be further explained in the next section of the article.
There are, however, some areas that may need some extra tuning:
To allow the market segment to work properly for a particular particular market segment, it will be better to increase the demand that matches for this market segment are being sold for. This will be called secondary demand. If a match is sold out, then all the existing market segments will be priced competitively and the remaining markets will not be priced competitively. The amount of premium offered is based on the level of demand the match provides and the price of an additional concession, to the extent required so long as that concession is available:
This gives you a basic idea about the competition, which can then be further tuned within the market segment to suit your needs.
The following table shows the overall aggregate demand for all markets at one time during the following twelve months.
Note: A table will be displayed every month to allow for more information to be provided to you. This information will only appear for each season (as stated in the next section of the article
). The higher an advertisement is shown, the higher the demand there will be. The year and venue are displayed.
This table shows the total sum of the aggregate demand that match matches will produce (in terms of premium, seats included, and additional seating included) from June 2016 to August 2016.
All data are in RCE terms, so we’ll give the current year to the current promoter and the current venue. The more information is obtained from this table, the more correct the average advertisement will be. As an example, at April 2016, the average suggested retail price was 17.48 GBP, so this price is 1.48 GBP up from December 2016.
Other indications of increased demand include:• For the March and June 2016 match days, the average suggested retail price has increased to 11.20 GBP • For each of the first two matches, the average expected price for the match (based on the estimated premium) has increased to 20.20 GBP • The October match week and May match days, since the average expected price for each group of matches has increased to 20.40 GBP • For the April match week and June match days, since the average predicted price for each
Demand is an indicator of current demand for the same kind of games. If a particular game is played to start the season season, and no match is currently on sale, a lower demand will be reflected as a smaller increase in demand during the season. This will be a positive (not low) signal for a club and market segment.If a match is sold out in any market segment during the season then a decrease in demand is associated with some additional game time for that season.The following table displays these lower, but greater levels of demand.
This table gives you an insight into the difference between available and available demand, which can be further explained in the next section of the article.
There are, however, some areas that may need some extra tuning:
To allow the market segment to work properly for a particular particular market segment, it will be better to increase the demand that matches for this market segment are being sold for. This will be called secondary demand. If a match is sold out, then all the existing market segments will be priced competitively and the remaining markets will not be priced competitively. The amount of premium offered is based on the level of demand the match provides and the price of an additional concession, to the extent required so long as that concession is available:
This gives you a basic idea about the competition, which can then be further tuned within the market segment to suit your needs.
The following table shows the overall aggregate demand for all markets at one time during the following twelve months.
Note: A table will be displayed every month to allow for more information to be provided to you. This information will only appear for each season (as stated in the next section of the article
). The higher an advertisement is shown, the higher the demand there will be. The year and venue are displayed.
This table shows the total sum of the aggregate demand that match matches will produce (in terms of premium, seats included, and additional seating included) from June 2016 to August 2016.
All data are in RCE terms, so we’ll give the current year to the current promoter and the current venue. The more information is obtained from this table, the more correct the average advertisement will be. As an example, at April 2016, the average suggested retail price was 17.48 GBP, so this price is 1.48 GBP up from December 2016.
Other indications of increased demand include:• For the March and June 2016 match days, the average suggested retail price has increased to 11.20 GBP • For each of the first two matches, the average expected price for the match (based on the estimated premium) has increased to 20.20 GBP • The October match week and May match days, since the average expected price for each group of matches has increased to 20.40 GBP • For the April match week and June match days, since the average predicted price for each
Market SegmentsElasticity of DemandReason for ElasticityAdultsLoyal but can choose to watch on TV insteadChildrenGuardians are paying and have other optionsFamiliesHave other options for family entertainmentSpecial treat groupsHas alternatives including main seatingCorporate hospitality – openHigh status product, few alternativesCorporate hospitality – privateHigh status product, few alternativesSegment 1 DemandElasticity is relatively high (II > 1) because these buyers have attractive alternatives – they can watch the game on TV or in a pub with friends. Demand is still high though because of the quality of the games. Wembley can therefore charge a premium, but not over-charge to the extent that alternatives become dominant:
Special treat customers are those who are willing to pay more because they are buying an experience rather than just wanting to see a match. They still have a high elasticity because there are alternatives – they will be put off if prices are too high.
Segment 2 DemandElasticity is relatively low (II < 1) for corporate customers because of the monopoly that Wembley has on high status England home games. For this segment, the product is the whole event rather than the football match. Standard seating is not an alternative because they do not provide the same level of service or privacy. The main factor effecting demand curves is the attractiveness of substitutions, which are complex for events at Wembley. Price Discrimination By Type of Seating Wembley can offer customers a choice between standard stadium and luxury box seating that allows self-selection of product and price (second degree price discrimination1). This allows customers with a high willingness to pay to purchase a higher quality product at a much higher price than the difference in marginal cost. Wembley can also scale the house by charging extra for better views, e.g. pitch-side. By Type of Customer Within segments, Wembley can execute third degree price discrimination1 on the basis of observable buyer characteristics that correlate to willingness to pay. One characteristic is age, i.e. child tickets are typically half price. Discrimination is also possible between corporate customers who wish to guarantee a box over a long period and special treat customers who may only go to one match. Advantage can be taken by selling long term licences made up of an initial fee plus an annual renewal fee. By Type of Match Wembley can also discriminate according to the quality of the match as this also correlates to willingness to pay, e.g. charge more for high quality opposition, and competitive matches. Maximising Profit from Seating Types Wembleys managers need to choose what proportion of the stadium to fill with luxury seating because this generates the most revenue and profit, as shown below: Profit can be assumed to follow a similar pattern. The quantity that maximises revenue (QL*) depends on demand, which varies for different customers and matches. An example calculation is provided below: Let standard seating = 1 and luxury seating = 2 Price: P1 = a1 - b1Q1