Variable Pricing Makes Sense... and Dollars!

A common pricing technique in service businesses is variable pricing. The rationale behind variable pricing is that consumers place different values on consuming based on time service is available or quality. The result is that demand for a service often varies. Some examples include a hotel that has high demand from business travelers during the week charge higher rates on weeknights than on weekends when business travelers are usually not on the road. Or, a movie theater charging $8.00 for an evening showing might only charge $5.75 for a matinee showing because of less demand for tickets in the afternoon. Adjusting the price downward during off-demand times allows capture of some revenues to offset fixed costs. Adjusting the price upward during peak-demand times is a way to reap the full value consumers place on your offering.

The practice is gaining increased use in sports marketing. For example, the Nashville Predators of the NHL have created a 3-tier pricing structure: non-premium, premium, and premium plus. Non-premium games include most weeknight games and represent the base ticket prices. Premium games are weekend games, and premium plus games are the games for which tickets are in the highest demand (4 games against Detroit and season finale vs. St. Louis). Some fans are angry about the new pricing structure, but a business should set prices based on the value of their offerings. Tickets for weekend games and games against Detroit are typically in greater demand. The team has a right to seek out a price premium as long as the market is willing to pay it.

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