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