Objectives determine price which are
- Return on investment
- Capital Gain
- Involvement - possibly altruistic motives?
- Sales Maximisation
- Growth Maximisation
- Utility Maximisation
- (big car/big office/best view)
- Salary Maximisation
- (often within constraints of targets)
- To win trophies/the league
- Play good football/drive good race
- Both lead to
- "good crowd" - good profit/turnover (sales max)
- TV appearances/manager of the month/ head hunted (utility max)
- Getting to a higher division (growth max/salary max)
- Workers objectives - footballers/actors; behind the scene workers
- Value for money
- Fan loyalty (to actors or theatres & clubs, the sport of F1) - can this be exploited by the business?
- Speed of payment
- Safe investment
- Good return
- PR - link to club/theatre - use as corporate hospitality?
- Kudos - being associated with theatre/football/F1
Pricing decisions are made within a
- Competitive context
- Level & intensity of competition will affect price and
- Ability to change price for strategic reasons
Profit Max = Marginal Revenue = Marginal Cost
(MR = MC)
Objectives are one of the determinants of pricing. Therefore the main objectives of Derby County is to maximise profit but although, there exists a salary cap between the players. Therefore all the stakeholders have their own objectives. The motives of managers in Derby C would be winning more games, playing good football leading to a good crowd and getting to a higher league with more TV appearances and finally leading to good profit/turnover. In economic terms this could be defined as "growth maximisation" and "profit maximisation". Similarly workers want a good salary and wages out of their work including security in it. Objectives of customers are good value for money, good service quality, and reliability while suppliers look for speed of payment as well as reliability. Financiers want good investment and good return from it.
Another determinant of pricing includes competition which is described later. Generally pricing decisions are made within a competitive context, as level and intensity of competition will affect pricing strategies of Derby C. Therefore pricing decisions for Derby C are made with its ability to change price for strategic reasons. Appendix _ provides the ticket prices of Derby C.
Average attendance for Derby C is told to be nearly around 26000 which includes its young and older local people and families (Market B). But it was also said that the maximum capacity it reaches in a game tends to nearly around 33500 thus including loyal fans, supportes, corporates and possibly people from high income group (Market A). Based on the above fact price discrimination could be one of the strategies which needs different markets for its product. But the key thing is people cannot shift between those two as there lies different elasticities of demand which could possibly because there is a certain amount of power in the market.
As from the above figure Market A comprises the inelastic demand which denotes a small change in price results in small change in demand. People will still continue to come if the price rises from P2 to P1.Derby C could possibly use market skimming strategies here by charging higher price when product is launched and then later reducing price. While elastic demand implies a large change in demand (from Q2b to Q1b) with the same change in price (from P2 to P1). Strategies would include market penetration by setting price deliberately lower to penetrate market.