The Springfield Nor’ Easters

The Springfield Nor’ Easters

Situation Analysis

The population of Springfield, MA has a high percentage of lower income families and college students resulting in price sensitive consumers. Therefore, it is important that the offerings of the Springfield Nor’easters will be in alignment with the needs of the local market. By entering this industry we face high bargaining power of buyers, high threat of substitutes, and moderate rivalry (Exhibit 2). In order to break­even in our opening season, appropriate pricing for both tickets and concessions will be our key to success (Exhibit 3). In addition, we must advertise and promote in a way that will appeal to our target customers which are primarily families with young children.

The Springfield Nor’ Easters must decide on the optimum pricing points on single tickets, ticket packages, and concessions to encourage attendance at home games while being able to break even in the first year of operations and if discontinuing operations may be the best decision. Buckingham, marketing director for the Nor’ Easters, conducted a survey of roughly 10,000 people to gage what people were willing to pay. Although the survey only obtained 625 responses (6.25%) it gave Buckingham useful information about people’s willingness to pay.

Quantitative and Breakeven Analysis

Since revenue can be maximized by increasing attendance to the games, it is necessary to calculate prices for each ticket type that cause most people to purchase and attend the game. Based on background information and survey results, the following prices would be advertised for flat-rate ticket sales:

•Single Game: $10 per ticket per game

•Five-Game: $8 per ticket

•Half-Season (20 games): $7 per ticket

•Full-Season (38 games): $6 per ticket

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With the above prices set, the total numbers of tickets are expected 106,007 to be sold, which brings the total ticket revenue of $774,990 per year.

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This estimate is much less than total fixed cost of $1,961,379, given the fact that players’ salaries and equipment are paid for by Nor’easters’ major league affiliate, fixed cost to the team itself is estimated only at $1,051,879.

However, ticket sale is not the only revenue Nor’ Easters can generate. Concession sale is another main source of revenue for the team. According to the data in Exhibit 5 from the survey 81% would spend between $6 - $15 on snacks, souvenirs and arcade games per person for each game they attended. Since 19% said they would spend less than $5, I took the average for all responses and set potential concession’s income at $8 per ticket holder regardless of ticket type—average($0, $5, $6, $10, $11, $15) = $8. A big factor in concession income is the occupancy rate for games based on the “no-show” averages per ticket package. The following occupancy rates were used in the calculations: