The Springfield Noreasters: Maximizing Revenues in the Minor Leagues The Springfield Noreasters Executive Summary Springfield, Massachusetts

is the new location for the Noreasters Class A minor league baseball team. The Noreasters baseball team chose Springfield because of the advantage of having the distance from any major league game venue. The owner of the team, Jimmy Mercante, needs the Noreasters to bring in enough revenue to be able to run itself, other than some fixed expenses that are paid by their affiliate major league team. This team is looked at for being a development ground for youth players. To make a decision on pricing, a survey was completed, but achieved a relatively low response rate. Although an optimal pricing plan can be arrived at from survey responses, the problem is due to the very low responses rates, the survey results carry little statistical credibility. Therefore, what appears to be a marginal break-even for the first season of play could easily turn into a sizable loss. If it turns out that the percentage of people not participating in the survey actually are not interested in a minor league game, for whatever reasons. Larry Buckingham, Noreasters Marketing Director, can take further steps in increasing the awareness of the new team by running a campaign to accomplish publicity among local residents, highlighting the fun facts and family. Buckingham should run a shorter survey allowing it to be easier for people to respond and take time to collect the responses. Once the credible responses are recorded, Buckingham can then move forward in validating the price point measurements upon being done with the analysis in the first data survey. If the results show net profit after fixed and variable costs, it could hold a huge launch in selling season tickets for next fall. Bob Cortez, President and General Manager, is right when it came to Buckingham needing to work with the artist to finish the logo design, otherwise no publicity campaign could start. Its important to create and start some kind of brand awareness for the Noreasters among the locals to even have the chance in selling tickets. Problem Statement The Noreasters are a new small town Class A minor league baseball team. The owner, Jimmy Mercante, would like for the team to bring in enough revenue from ticket and concession sales to cover the operating expenses for the first year and break-even. However, the city of Springfield is experiencing a trend of manufacturing job losses, and consequently a drop in the average income of its residents. It is then the Marketing Director, Larry Buckingham for the Noreasters, who has to carefully design a price plan that would entice the residents to follow and enjoy minor league games over college games. The problem is setting up a price point for individual games and season ticket prices that are not to expensive to attract price conscious Springfield residents. If the prices are too high residents will either not go to games or they will not spend the extra money on food and merchandise and as a result would be not bringing in the needed revenue for the team. Situational Analysis

To better understand the problem, it is necessary to take a better look at the market situation that might affect a minor league team in a small town like Springfield. SWOT Analysis The SWOT analysis is used to identify the internal strengths and weaknesses of being a Class A minor league team and external opportunities and threats for operating in a remote location in a low income area. The initial level looks at empirical data available from league sports association surveys, stories by sports reporters in local newspapers, and informal suggestions provided by managers of similar teams in other cities. Noreasters pricing SWOT:[pic] Strengths It is evident from news reports and existing research surveys that even though Springfield is a new team, in general it has certain strengths. According to Cespedes, Winig and Lovelock, state The teams, located in small and mid-size cities as well as the suburbs of large cities were considered player development programs where young players were expected to hone their skills in progressively challenging minor league classesA, AA, and the highest, AAAon their way up (the players hoped) to the major leagues (p.2). Weaknesses Due to the Noreaster being such a new minor league team and not having played a single game has caused a lack of dedicated fan following base, as well as any value to its brand. Therefore, the team has little premium pricing power if any over the next best alternative, college games. Opportunities Although there has been a decline in Springfields manufacturing sector, thereby slowing down the real estate and labor market has helped several small businesses seeking opportunity in the area. The service sectors, such as Healthcare and Financial are proving to be a boost in the local economy. The increase in the local economy could result in an increase in the demand for big game enjoyment among locals. Ideal opportunity for residents living disposable incomes in service sectors is having a minor league team, considering the nearest home of any big league team is 90 miles from Boston. Approximately 60% of the households in Springfield comprised families with children younger than 18 years of age (Cespedes et al, p.2). Threats The average income has dropped since the city of Springfield lost many of its high earning residents. 25% of the households are below the poverty line and residents are

generally cost conscious. The lack of transportation and low-income families are factors that affect sporting event attendance. The national research shows higher TV spectatorship than attendance on field, a trend that might be more pronounced within Springfield, given the socioeconomic condition. Therefore, the ticket prices have to be low enough to be affordable for the people, and the concession sale also is lower. This all needs to be factored in while arriving at an estimate of total revenue. Analysis of Demographics The survey that was conducted proves to be a major tool in modeling any of the alternatives of single, multi-game ticket prices, and season tickets. Research questions included in the survey provides major inputs to the decision by indicating the effect of demographics on attendance to game and sale of concession. Based upon the survey response, 38% of residents consider themselves a baseball fan. Responses also indicate that around 28% of the population have attended a professional baseball game last yearbe it college, minor league, or major league. Analysis of Survey Validity The ideal sample population chosen for the survey is relatively higher income families with interest in sports and having youth less than 18 years taking part in sportsrelated events. However, Springfields target customer base is youth 18 years, the sampling is reasonably uniform. However only 625 responses out of 10,000-targeted sample could be recorded, therefore causing considerable non-response error creeping into any conclusion that can be derived from the survey. The responses to the questions around price point of tickets would provide a good estimation of what price could maximize revenue, however the total revenue calculated should take into account a considerable margin of error. Quantitative Analysis Based on the survey results 31% of people said they would pay $10 to attend a single game. A multi-game package of 5 tickets is $10 per ticket at 36%. Half season tickets for 20 games are $8 at 28%. A full season ticket for 38 games is $4 at 26%. These stats also include what is expected per person to spend on snacks, souvenirs and arcade games. The survey shows that for each game 8% of people will spend nothing, 11% would spend at least $5, 45% would spend $6-$10, and 36% would spend $11-$15. Alternatives Based on the analysis, there could be four alternatives that are worth evaluating. The alternatives along with their costs and benefits are shown in the figure below. The first alternative would be to sell only flat price tickets, with no premium for grandstand seating.

 Single Game: $10 per ticket per game 5-Game: $10 per ticket, total $50 for ticket book Half-Season (20): $8 per ticket, total $160 for ticket book Full Season (38): $4 per ticket, total $152 for ticket book Second alternative would be to differentiate between bleacher and grandstand seats and sell grandstand at a 25% premium over bleacher seats. Therefore, prices will be as follows: Single Game: $10 per bleacher, $12.50 for grandstand 5-Game: $50 per ticket booklet, $62.50 for grandstand Half-Season (20): $160 per ticket booklet, $200 for grandstand Full Season (38): $152 per ticket booklet, $190 for grandstand The third alternative is a variation of the second one, with grandstand prices marginally over bleacher prices, only at 10% more. Single Game: $10 per bleacher, $11.00 for grandstand 5-Game: $50 per ticket booklet, $55 for grandstand Half-Season (20): $160 per ticket booklet, $176 for grandstand Full Season (38): $152 per ticket booklet, $167.20 for grandstand The fourth alternative is to do further research, design a shorter survey, and find out innovative ways to reach people, with a common goal of increased responsiveness, in order for the survey results to hold more credibility and less chances of error. [pic] Evaluation of Alternatives When evaluating among four proposed alternatives several criteria for evaluation have to be taken into consideration. The criteria used are listed as follows: 1. The team has to generate enough revenue to at least cover the fixed and variable costs, in other words break-even in the first season that it starts playing games.

2. The pricing plan needs to aim for maximum occupancy level in the games. This will not only generate additional revenue in the concession sales, but also help increase the popularity and help build the fan base for the Noreasters. 3. Ticket prices need to be affordable and in doing so should be compared to major league baseball games but also to other professional games, movie theatres, etc. 4. Due to the Falcons, a junior league hockey team, is leaving town, any action taken by Noreasters has to try to capture the fan base left behind by the Falcons. Depending on the criteria, these four alternatives presented above are shown in a decision matrix, to determine how each alternative fits the criteria. |Alternatives |Flat Ticket Pricing Pricing |More Publicity & Research| |Chance of Breaking Even |Low | |Maximize Occupancy Level |High | |Affordable Ticket Prices |High | |Attract Falcons Followers |High | Recommendation It is clear from the evaluation that none of the first three options poses a high chance of breaking even, which in return can attribute to low penetration of the survey. Even though a 10% premium pricing, occupancy level and concession sales could be maximized, estimated profit is at the borderline of breaking even, when measured using the survey data. Since there is a huge margin of error, in a worst-case scenario, Noreaster could end up losing substantially, at least the first year. A publicity campaign, combined with innovative ways to reach people would not only create more interest, but it will also help the team management better understand the wants of people. This also will help understand what they are willing to pay for entertainment of major baseball closer to home. Conclusion Since it is only January, there is still enough time before the decision has to be finalized in June. The first action the team could take is to set up tables in shopping malls, in front of sport arenas and community centers, dress up the tables with the Noreasters logo and distribute advertisement with a few sample survey questions on the back. This would ask people how willing they are to replace the hockey experience with baseball. The survey questionnaire will be a pre-paid post-card which people can drop off at any post |25% Premium Pricing |Low |Low |High |High |10% Premium |High |High |High |High

|Medium |High |High |High

office. Brand awareness of the home team would start and increase the credibility of responses. If further data is collected, it will reinforce information gathered from the first survey and the team could go ahead with the pricing model as highlighted in Alternative #3, and make a marginal profit in the very first year with greater confidence. Reference: Cespedes, F., Winig, L., & Lovelock, C. (2009). The Springfield Noreasters: Maximizing Revenues in the Minor Leagues. Harvard Business.

Executive Summary In Springfield Noreasters case study, Larry Buckingham is the marketing director for the Nor'easters, a class A minor league baseball team in Springfield, MA. As any other profitseeking business the objective of this sports club is to sustain a viable business by making profit, at least brake-even in the opening season. The two major sources of revenue for Noreasters are ticket and concession sales. Larry conducts market research to gain knowledge about potential customers and their willingness to attend Noreasters games on different ticket price levels. The results of the survey and other information collected by various sources help Larry to develop a pricing strategy for the Noreasters ticket and concession sales. This paper evaluates the data yielded from the market research, presents two alternative pricing strategies and states the strengths and weaknesses for each. Finally, this paper concludes with a set of recommendations from the alternatives discussed. According to the evaluation of survey data, the information provided in the case and assumptions made, at least 50% of the Springfield population need to attend at least one game throughout the season for Noreasters to break even. However, although not fully reflective of the whole population due to limited sample size, the survey data states that only 39% of Springfield residents are willing to attend games. Noreasters will have to escalate this to above 50% level by conducting marketing and communications actions or consider establishing itself in some other city. I. Background Larry Buckingham is the marketing director for the Noreasters, a new Class A minor league baseball team in Springfield, Massachusetts. Since they just opened their offices, the team will not play a game until their first season starting in June 2009, 18 months from now. Larry is responsible of establishing the correct pricing strategy prior to season start to maximize revenue and at least break-even in the teams first season. Although ticket sales will generate the largest portion of the revenue, attendance is also relevant in generating revenue from concession sales such as snacks, souvenirs, arcade games etc. Springfield, having lost its higher income residents during the last 50 years, is a city of limited financial means. Although the economy is recently reviving by the entry of service industry, 25% of families still live below poverty line. Residents of Springfield are rarely exposed to sports events due to lack of professional clubs and the frugal nature of its citizens. The ones, who are willing to pay and watch a game, drive somewhere else in MA.

Buckingham wants to conduct a market research study which would help him develop a pricing strategy for the Noreasters ticket and concession sales. He starts his research by analysing the existing data from a national research conducted in 2005 by the League Sports Association and confirms that families with school age children are more likely to attend sporting events. The research also showed that only 8% of those surveyed attended a professional baseball game that year. Buckingham is informed by a local sport reporter that high entertainment value provided to customers, who consist of sports fans, college students and families with school age children, is the key for high attendance. He also knows that college students rarely show up at sports events due to high ticket prices and lack of transportation. Buckingham decides to conduct his own market research to collect primary data specific to this market apart from the secondary data he collected from LSAs out-dated comprising major league data which is of no use for him. The primary data source Buckingham chooses to use is conducting a survey. His research objective is to predict how many people would come to see the Nor'easters and how much to charge them. In order to prepare the survey questions and gain some insights he speaks with 6 counterparts who work for other minor league teams in north eastern US. Buckingham designs the survey to ask both demographic and specific pricing questions as well as about sports attendance habits. He sends postcards to 10,000 recipients, whose contacts are bought from Springfield census tracts and 4 sports related organizations, to direct them to the website where they can complete the online questionnaire. Despite the $500 motivational incentive drawing the response rate is small (625 out of 10,000) which Buckingham believes that it is a decent sample of the population. Key findings from the survey are as follows: * The customer profile: Potential customers are equal likely to be male or female and not necessarily baseball fans. The majority of them are between 26 and 35 years of age with children 5 to 16 years old (34% have no children in this age range and no children at all). They have an annual income between $22,500 and $75,000 and are fairly educated (72% are high school graduate and above). * A significant majority of the respondents never attended a sports game. Only 39% said they would attend one or a few games per year. * The pricing questions show that customers are willing to pay between $10 and $14 for a single ticket which is the biggest market according to the survey results as mentioned above. The larger the ticket package, the more discounted the customers expect the price to be. Most customers are not willing to pay more than 10% for premium seating. 81% of the respondents stated that they would spend between $6 and $15 on concessions. II. Problem/Issue Statement It is stated in the case that club owners run their teams as sustainable businesses which make profit. The Noreasters is no difference. The business objective of the club is to generate revenue which at least breaks even with the total costs in the first season. The primary issue is to develop a business strategy which fulfils the business objective of generating enough income to initially break even and sustaining profitability in the mid to long term. As income is generated through ticket and concession sales, the issues revolve around creating a pricing strategy, structuring of multiple-ticket packages and achieving maximum concession sales with high attendance.

The secondary issue related directly to Larry Buckingham is to conduct a thorough market research to gain enough insight to be able to make a decent decision on ticket pricing and overall perspective of the target audience. Larry wants to learn how to price tickets and concessions. III. Price Analysis What considerations should the Noreasters take into account in establishing a pricing policy? There are two major sources of revenue for Noreasters apart from minor revenue generators such as corporate sponsorships, financial support from the city and nearby colleges and advertising (stadium banners). These are ticket and concession sales. The revenue will highly depend on the ticket price level, the discounts offered for multi-gamepackage and season tickets and the attendance as this affects concession sales. Noreasters should take into account the following considerations: * Other activities such as movies, bowling etc. create competition. Seat prices should not be considerably higher than the ticket prices for these activities. On the other hand, the fact that Springfield lacks more professional sporting events (there is only the Falcons) meaning less competition for the Noreasters than some other major cities. * How much money are customers willing to pay for single, multi, half season and full season tickets? How much discount should be offered on non-single tickets? * Rate of attendance and how much each spectator would spend on concession * Noreasters should not forget about the fact that the locals of Springfield have a smaller annual income than the national average and therefore are price sensitive. * The ticket prices must be high enough in order to distinguish the Noreasters from the college teams, not to leave money on the table and prevent no-shows but also low enough to discourage fans driving to Boston. Plus, many customers use price as an indicator of quality. Ticket Pricing Plan and Variations by Package Type In his survey, Buckingham asks for specific price information which is subjective and not necessarily 100% reflective of a customer's resistance point to a given ticket price. The responses he received may not indicate what the real maximum is that the customers would pay. In experience, respondents of surveys tend to declare higher prices than they are actually willing to pay in order not to appear cheap. Additionally, there is an additional parking fee expense of $4 which is not mentioned in the survey and probably not considered by the respondents. The median price the prospective spectators are willing to pay according to the survey results is $10.84 for a single ticket. With the above assumption of respondents declaring higher prices in surveys, it is reasonable to set Noreasters ticket price a little lower than this. The local college teams (non-professional) charge between $5 and $6 for a single ticket per adult. As a professional team, Noreasters ticket price should be set higher than this to distinguish from college teams in terms of perceived brand equity. A high price delineates a better product in peoples' perceptions. Movietickets.com suggests that an adult movie ticket costs $10.75 and a child ticket costs $7.75 in Springfield. Taking into account above statements, it is chosen to set the price for a single ticket to $10. This group mainly includes families, which have the relatively highest income compared to groups like students and senior citizens.

As mentioned before, it is suggested that high entertainment value provided to customers is the key for high attendance. For high entertainment the right atmosphere is crucial which can be created by young and enthusiastic supporters cheering for their team throughout the game. Therefore a special price should be set for students, who have the most limited financial means, to attract them to the games. It is chosen to be $8. The overall pricing strategy should also include generous discounts for certain categories such as children and seniors on tight budgets as well as fairly cheap season tickets. The price for the child ticket is chosen to be low, $7, because families with children will consume more concession goods, and that is a target group Noreasters wants to attract to the games. $9 for a seniors ticket is appropriate. The single ticket prices for different spectator segments are discounted for multi game, half season and full season tickets proportionally. As the majority of the customers are not willing to pay more than 10% for grandstand seating, there is no incentive to set different price for these seats. They can be served in a first come first serve fashion, which is a fair carrot stick to sell the tickets as soon as possible. As mentioned in key survey findings, only 39% of the respondents said they would attend one or a few games per year. Since young/old female and male alike, all Springfield population are potential customers so that 39% of the population (55,338) is assumed to come at least once in a season. However, as 25% of the population is below poverty line, 39% of the remaining 75% of the population is the real target figure which is 16,187. 81% of the people are willing to spend more than $6 on concessions with a 36% more than $11, so it is assumed that $9 is typical of what the spectators will spend in average. Respondents of the survey are expecting to pay less if they buy multi, half season and full season tickets, so that these have to be priced accordingly. The median price respondents are willing to pay for 5-game-tickets is only marginally smaller ($10.16) than the single ticket price ($10.84). Therefore, the price of these is set as $9.5. Again, taking into consideration the median prices, the half season price is determined as $8 per game and the full season price as $6 per game. This is also in-line with the statement in the case which informs that 40% or more discounts are offered on season tickets by the other minor league baseball teams. With these prices 80% of the respondents who declared they would attend a single game will actually attend if the single ticket price is 10$. Similarly, 75% will attend 5 games if the multi game package costs 9.5$ per game. This percentage is 79% for half season and 56% for full season respectively. Again, survey data is used to establish to determine the distribution of ticket types. 21% of 39% who declared to attend the games only once is 54%. Similarly it is 28%, 13% and 5% for 5-game tickets, half season subscription and full season subscription, respectively. As suggested by the demographics of Springfield and the survey data, it is assumed that 50% of the spectators will be families with children. 20% will be senior people above 56, another 20% will be single men and women and the rest 10% will be students. It is assumed that the average family with children between 5 and 16 of age is consisted of the father, the mother and 1 child according to survey results. Even though minor league teams enjoy financial support from major league teams to cover their expenses such as players salaries and materials (bats and balls), the Noreasters needs to cover all other operating expenses including league dues, staff salaries, office expenses,

team travel, market research & mailing lists and advertising, sales & marketing which total $1,051,879. The stadium is provided by Springfield College in exchange of parking revenue so that the club will not pay any stadium lease. Apart from that a total of $46,000 is collected as financial support and in sponsorship. Variable costs are the costs of concessions. Net profit/loss/break even scenario The break-even point for any business activity is defined as the level of sales at which neither a profit nor a loss is made on that activity - that is, where total revenues are equal to total costs. In our case, the business objective is to generate at least revenue of $1,439,284 (total fixed $ variable costs) to break even in the first season. The calculations are provided in the appendix under Scenario 1. Unfortunately, under given circumstances and assumptions made it is not possible for Noreasters to break even in the first season. According to scenario 1, total revenue generated by ticket sales, concession sales and sponsorships equals to $1,205,519. With the total cost of $1,439,284, Noreasters closes its first season with a loss of $233,766. IV. Alternative pricing strategy and evaluation The revenue can be increased by setting higher ticket prices which would jeopardize sales due to the tight financial situation of Springfield residents. The real bottleneck for ticket sales is the potential attendance to the games by the locals. Only 39% of the respondents declared that they would attend the games. However, this percentage can be increased with an effective marketing strategy. If Noreasters can communicate effectively within its advertising and marketing budget, it is possible to pull this figure to 50% before the games begin in 1.5 years. In order to realize this, Noreasters should liaise with the local schools, sports associations and press to increase attention and awareness of the public towards professional baseball. Higher coverage in local media and encouragement from schools, sports associations and local government authorities to attend sports activities can increase interest towards Noreasters virtually for free. Apart from that, distributing promotional materials prior to games, invitations to Noreasters trainings, organizations held with the players mingling with the public can also help creating awareness. And finally, Noreasters can also increase its revenue by finding more sponsors, selling stadium banner ads and jersey ads. Scenario 2 is prepared with the figures of scenario one. According to the calculations conducted (please refer to Scenario 2 in the appendix), attendance rate needs to be increased from 39% to roughly 51% in order to break even in the first season. The strength of scenario 1 is that it is conservative in terms of setting prices. Reasonable pricing is implemented in order not to drive away customers. However, it cannot generate enough revenue to break even. Scenario 2s strength is that it unfolds to what level the attendance rate should be increased. Its weakness, however, is that it bears the risk of failing to increase the attendance. VI. Recommendations The two scenarios prepared for Noreasters first season financials suggest that there are two main means of creating and maintaining a sustainable business (making profit). One of them is to increase ticket prices, which is not a recommended strategy due to highly price sensitive nature of Springfield residents. The second one is increasing the attendance above 50% - 52% threshold. This to some extent depends on Larrys efforts to promote the team and leverage the awareness and interest towards Noreasters. However, there is always the

risk that the public refuses to attend games for several reasons such as lack of time, lack of transportation, lack of interest to any sports etc. which are fairly out of Noreasters influence. Considering the situation now, I would suggest Noreasters not to initiate unless they are confident enough that they can increase attendance, lower fixed and variable costs, seek out for more sponsors and advertisers or find a way to ease transportation to the stadium. Noreasters should always keep in mind the reason why Falcon is considering leaving the town. APPENDIX The Springfield Noreasters: Maximizing Revenues in the Minor Leagues Case Analysis

Grace Chan 996834207 Date Submitted: November 4th, 2010 Date Due: November 4th, 2010 1. (5 points) What are the decision problems and research problems for the survey conducted (Exhibit 5)? Decision Problems:

* How should we price and package different types of tickets to properly maximize received revenues from different types of consumers? * How price sensitive are our target consumers? Who are our target consumers? Research Problems: * How does the demographic of the Boston area affect attendance for sporting events? * Do people have any interest in watching minor-league baseball, and if so, is this factor affected by other aspects such as demography (i.e. age, income, etc.)? * What are the consumption patterns of consumers in terms of trade offs between pricing of tickets, structuring of multiple-ticket packages, revenue yield from concessions? 2. (10 points) Evaluate the survey in Exhibit 5: Was the questionnaire designed properly? Discuss information collected, design of individual questions, and survey structure. The information collected from this survey was able to directly address several questions from that apply to the research problems (see Figure A). From this we can derive that overall, in Springfield (assuming that the sample is representative of the population), 38% of residents do have some interest in baseball, but only 28% of the residents have ever attended a professional baseball game. Out of this only 17% of the population have attended at least one minor-league game in the last 2-3 years, however 39% of the residents would be willing to attend at least one game if a minor league baseball team ever came to Springfield. Insight about grand stand tickets was also collected, indicating that 72% of the population is not willing to pay more than a 10% premium over regular bleacher seats for a grand stand seat, hinting that there may be no opportunity to explore in terms of multipriced seating. Another insight that can be drawn from the survey is that 81% of those who attend a game would be willing to pay $6 or more on various concessions per person. 56% of those surveyed were female and 66% of those surveyed lived with at least one child between the ages of 5-16, which may indicate that child-ticket pricing may be exploited. In addition, the sequence of questions did follow the typical qualifying questions, warm-ups, transitions, difficult and complicated questions, and finally, classification & demographics questions order. However when it came to the willingness-to-pay for the different types of tickets themselves, there are some problems that Buckingham did not foresee when distributing this survey. One of the major problems was with how the pricing question was presented. First, the question itself was worded in a way that made little intuitive sense: asking the customer what they would be willing to pay per game, instead of asking their maximum willingness-to-pay (e.g. someone who is willing to pay $10 for a game would be willing to

pay $4 as well.) Next, the categories of people indicating their willingness-to-pay are also not very clear. There is no way to distinguish who is willing to pay a certain price for a certain type of ticket. For instance, if someone had indicated they were willing to pay $10 for a single game ticket, but earlier stated they would to subscribe to a 38-game full season, the answer they provide for prices regarding single ticket games, 5-ticket games, and 20ticket games becomes useless, and distorts the actual prices people are willing to pay for these tickets. In addition, the categories for the answers utilized block numbers, giving people the option to choose certain prices, but noting in between (e.g. the category $4 and $6 is available but any price between $4 -$6 is not an option and data is not collectable for this category). In addition, the minimum range for prices was listed as Less than $4 providing a range that could go from $0 - $4 and did not gather meaningful data about these consumers. There were also some irrelevant questions, such as #3 - $6 (Questions concerning sports overall: too broad, not specific for baseball.) and #17 (Education information) that added no value to the survey. 3. proper? (6 points) Evaluate the survey in Exhibit 5: Was the sampling strategy

Buckingham had chosen to mail out 10 000 postcards inviting the recipients to go online and fill out the survey. These 10 000 postcards were mailed out to 2 pools of people: the first 5000 being general members of the Springfield community taken from a census, who earn an income above the poverty line. The second list of 5000 names was obtained from sports-related organizations in Springfield who were asked to supply a random sample of names from its database. Buckingham had stated, however, that he wanted to attract all types of individuals to view the games. Not simply just sports enthusiasts and families of those who were playing, but also casual fans and people who show up for pure entertainment. Yet when choosing his sample, 50% of those selected came off of a list of people known to enjoy sports and have previous experiences attending sporting events or have children enrolled in sports. With a heavier weight on sports fans, this potentially distorts the information collected from the survey in regards to sports attendance rates and willingness-to-pay for sporting events. As seen in Exhibit 5, the survey was completed by a marginally larger amount of females than males, in addition to several parents of young children. 4. (20 points) Based on survey results, design a ticket-pricing plan for the Noreasters first season. You may use Exhibit 6 as the template to work your analysis. (Please refer to Figure B) Based on the survey, the following optimal prices for tickets are $10 for one-game tickets, $40 for five-game tickets, $120 for 20-game tickets, and $228 for full season tickets. The average person will spend $8.56 per game. With this model, the ticket prices are set at a reasonably low price, within the typical minor league range of $6 - $26, but still above the college prices ($5 - $6) to give it some prestige. The price for a single game also rivals the price of close substitutes for entertainment like going to the movies. If we assume that the sample is, indeed, representative of the population, we

can use the survey data to calculate projected profit. Ticket revenue is calculated by multiplying the dollar amount received per ticket sold by the number of tickets bought. Concession revenues is calculated by taking the number of tickets bought per category, multiplied by the number of expected games they will attend and finally multiplied by the amount one person is expected to spend per game ($8.56). Donations received total to $46 000. Fixed expenses amount to $1051879, after deducting subsidies made by the major league. Overall, the Springfield Noreasters are expected to turn a profit of approximately $118705.10 if all the assumptions made are valid. 5. (9 points) If you have access to survey data, suggest three cross-tabulations you may want to create. Explain how these three cross-tabulations may help address research questions. Results from Question 7 (If a minor league baseball team came to Springfield, is it likely you would) vs. Question 8 - 10 (If you were to attend a _____ game, what would you be willing to pay?) As mentioned above, there are problems with the way the data from the survey is presented, as it is ambiguous which sets of users are giving input about the different prices per category. Potentially, someone who said they would never attend a game could have answered that they would be willing to pay $8 per game for a 38-game ticket, yet when tickets actually go on sale, they would not purchase at all, distorting our analyses. If we were able to cross-tabulate items such as those actually willing to purchase a ticket and their different willingness-to-pay for each price level, it would allow Buckingham to determine more realistically how much people are willing to pay and discover their underlying price sensitivities. (Question 14, 16) Age/Number of children and whether they would be willing to attend a minor-league game in Springfield for baseball (Question 7) This helps uncover patterns between the demographic of the sample and their different purchasing patterns and in addition, helps distinguish different segments of potential customers. There may be some correlations between the age of an individual and how often they would attend a game, which could then lead to insights about the typical income an individual in any age category earns and implications about how much they would want to pay for a ticket. For example, those that are young adults may be too busy to attend a full season of minor league baseball but may want to attend a couple games once in a while with friends and could act as a potential target market. In addition, patterns can also be uncovered between individuals with children in their families and the number of games that they are interested in attending. What type of ticket they want to purchase (or based on price) versus how much they expect to spend at one game on concessions As mentioned in the case, Buckingham did want to uncover information about the importance of concession sales as a percentage of revenues for a minor-league team. Crosstabulating these two categories can correlate purchasing habits between the number of games any individual may attend, and how much they feel is appropriate to spend on concessions per game. As a result, this can also help uncover insight about trade-offs between concession sales and ticket pricing: if individuals have a low willingness-to-pay per game but indicate high consumption patterns for concessions, Buckingham can develop

a plan that will offer cheaper seasonal ticket prices, at the expectation they will be spending more money on the location. The same could happen in reverse. APPENDIX FIGURE A Question | | Decision or Research Problem Addressed Question Category 1 | Screener 2 | Screener 3 | | | Do people have any interest in watching minor-league baseball? | | Do people have any interest in watching minor-league baseball? | |

Do people have any interest in watching minor-league baseball, and if so, is this factor affected by other aspects such as demography (i.e. age, income, etc.)? | Warm-up | 4 | Do people have any interest in watching minor-league baseball, and if so, is this factor affected by other aspects such as demography (i.e. age, income, etc.)? | Warm-up | 5 | Do people have any interest in watching minor-league baseball, and if so, is this factor affected by other aspects such as demography (i.e. age, income, etc.)? | Warm-up | 6 | Do people have any interest in watching minor-league baseball, and if so, is this factor affected by other aspects such as demography (i.e. age, income, etc.)? | Warm-up |

Do people have any interest in watching minor-league baseball, and if so, is this factor affected by other aspects such as demography (i.e. age, income, etc.)? | Transition | 8 | How should we price and package different types of tickets to properly maximize received revenues from different types of consumers? What are the consumption patterns of consumers in terms of trade offs between pricing of tickets, structuring of multiple-ticket packages, revenue yield from concessions? | Difficult and Complicated 9 | |

How should we price and package different types of tickets to properly maximize received revenues from different types of consumers? What are the consumption patterns of consumers in terms of trade offs between pricing of tickets, structuring of multiple-ticket packages, revenue yield from concessions? | Difficult and Complicated 10 | |

How should we price and package different types of tickets to properly maximize received revenues from different types of consumers? What are the consumption patterns of consumers in terms of trade offs between pricing of tickets, structuring of multiple-ticket packages, revenue yield from concessions? | Difficult and Complicated 11 | |

How should we price and package different types of tickets to properly maximize received revenues from different types of consumers? What are the consumption patterns of consumers in terms of trade offs between pricing of tickets, structuring of multiple-ticket packages, revenue yield from concessions? | Difficult and Complicated 12 | |

How should we price and package different types of tickets to properly maximize received revenues from different types of consumers?

What are the consumption patterns of consumers in terms of trade offs between pricing of tickets, structuring of multiple-ticket packages, revenue yield from concessions? | Difficult and Complicated 13 | |

How should we price and package different types of tickets to properly maximize received revenues from different types of consumers? What are the consumption patterns of consumers in terms of trade offs between pricing of tickets, structuring of multiple-ticket packages, revenue yield from concessions? | Difficult and Complicated 14 | |

Do people have any interest in watching minor-league baseball, and if so, is this factor affected by other aspects such as demography (i.e. age, income, etc.)? How does the demographic of the Boston area affect attendance for sporting events? Who are our target consumers? | 15 | Do people have any interest in watching minor-league baseball, and if so, is this factor affected by other aspects such as demography (i.e. age, income, etc.)? How does the demographic of the Boston area affect attendance for sporting events? Who are our target consumers? | 16 | Do people have any interest in watching minor-league baseball, and if so, is this factor affected by other aspects such as demography (i.e. age, income, etc.)? How does the demographic of the Boston area affect attendance for sporting events? Who are our target consumers? | 17 | | Classifications and Demographics | Classifications and Demographics | Classifications and Demographics

Do people have any interest in watching minor-league baseball, and if so, is this factor affected by other aspects such as demography (i.e. age, income, etc.)? How does the demographic of the Boston area affect attendance for sporting events? Who are our target consumers? | 18 | Do people have any interest in watching minor-league baseball, and if so, is this factor affected by other aspects such as demography (i.e. age, income, etc.)? How does the demographic of the Boston area affect attendance for sporting events? How price sensitive are our target consumers? Who are our target consumers? | Classifications and Demographics | | Classifications and Demographics

FIGURE B

In order to approach this question, I had to make some simplifying assumptions to make the model work: * Sample is truly representative of population * Those who said they would attend a game are indifferent about which game they attend during the year * Assume that the percentages of prices that people are willing to pay for different types of tickets will apply to the percentage of the sample interested in buying the ticket. Number of Springfield Residents Interested in Purchasing Tickets | Not attend at all attend 5 games | Only attend 20 games | Only attend 38 games | | | Only attend 1 game | Only

33756 | 11621 | 6087 | Numbers are calculated by multiplying the corresponding percentages in survey question #7 by the population of Springfield (55 338). Tickets Ticket Type | | Less than $4 | $8 | $10 | $12 SINGLE TICKET | Percentage that would attend | 100% | 100% | 98% | 93% | 80% | | Revenue Per Ticket | $<4 | $4 | $7.44 | $8 | $5.88 | $3.08 | | $5.88 | 49% | 22% | $14 | | $4 | $6 | 2767 | 1107

5-GAME TICKET | 99% |

| Percentage that would purchase | 100% 97% | 94% | 75% | 39% |

5%

| | Revenue Per Ticket | $<4 | $3.96 | $5.82

| $7.52 | $7.50 | $4.68 | $0.70 | 20-GAME TICKET SEASON| Percentage that would purchase 100% | 99% | 92% | 69% 1% | | Revenue Per Ticket | $<4 | $3.96 | $5.52 | $5.52 | $4.1 | $1.92 | $0.14 | 38-GAME TICKET SEASON| | 41% | 16% | |

Percentage that would purchase 100% | 82% | 56% | 36% | 1% | Revenue Per Ticket | $3.36 | $2.88 | $2.20 | $1.32 | | $ < 4 (If set at $3.99) | | | 22% |

11%

$3.28

$0.14 | Summary of Optimal Ticket Prices & Projected Revenue | Optimal Price Per Game Purchase | Revenue per Ticket Single Game Ticket | $10 | 80% 11621 = $92968 | $8 | 94% $37.6 * 6087 = $228871.20 | | $7.52 * 5 = $37.6 | | $8 | $8 * 5-Game Ticket| | Total Revenue | | Percentage that would

20-Game Ticket

$6 or $8 (Note: there is no information for how much demand there would be for $7, so for simplification purposes, I chose to use $6) | 92% | $5.52 * 20 = $110.40 | $110.40 * 2767 $305476.8 38-Game Ticket | $6 | $127.68 * 1107 = $141341.76 | Total Ticket Revenue | | | | 768 657.76 | Concessions Expected amount to spend on concessions = 0.08 * 0 + 0.11 * 2.5 + 0.45 * 8 + 0.36 * 13 = 8.56 (Numbers per category are derived by taking the average between the range, e.g. between $6 and $10 is 8.) Concession Revenue assuming each person spends $8.56 per game they attend | One Game Purchaser | 5-Game Purchaser Game Purchaser | 38-Game Purchaser Number of people interested in purchasing | Total | | 11621 | 6087 | | 20| 56% | $3.36 * 38 = $127.68 |

2767

| 1107 | | | 80% * 11621 = 9296.79 |

Number that will actually purchase 94% * 6087 = 5721.78|

92% * 2767= 2545.64 | 56% * 1107 = 619.92 | | Number of games each individual will attend | 100% * 1 = 1 | 97% * 5 = 4.85 | 95% * 20 = 19 | 90% * 38 = 34.2 Total Concession Revenue | 79580.52 414022.89 | 181482.82 Total Concession Profit | | | | | 39% * 912631.65 = 355926.34 | | 912631.65 | | 237 545.42 | | |

Donations Financial support received from the City of Springfield and 3 nearby colleges = $21 000 Funds received from local businesses for sponsorships and advertising = $25 000

Fixed Expenses Players Salaries Bats and Balls | $22 500 (Subsidized) | Uniforms | $8 000 | League Dues | $175 000 Staff Salaries | $124 000 Office Expenses Team Travel | $455 000 Market research & mailing lists Advertising, sales and marketing Total Fixed Expenses | $1 961376 Total Fixed Expenses Less Subsidies | $1051879 | | | | $4 879 | | $175 000 | | $110 000 | | | | $887 000 (Subsidized) |

Projected Profit Add: Ticket Revenue = $768657.76 Add: Concession Profit = $355926.34 Add: Donations = $46 000

Less: Fixed Expenses = $1051879 Net Profit = $118705.10