This case reveals the importance of conjoint and bundled pricing approach in sporting memberships case study.
Questions for Discussion
- What does the experience described in this case suggest about the concept of value and how this is assessed by different people?
(Note: It might be helpful to consider this question with reference to the work of Valarie Zeithaml.)
- Discuss the appropriateness of the club’s use of bundling and other potential pricing options.
- Consider the concept of yield management and whether it has any potential application in this context.
Notes to guide Discussion
Valarie Zeithaml proposes that customers define value in one of three ways:
(1) Value is low price
(2) Value is whatever I want in a product or service
(3) Value is the quality I get for the price I pay
The case study reports on the attitudes of three membership groups:
- Standard Members
- Full Club Members
- Concourse Seating
- Full Club Members
- Grandstand Seating
In the light of the conjoint results reported in the case it could be argued that all 3 groups define value in a way that is consistent with definition 2 or 3 as provided by Zeithaml, but most likely the 2nd of these.
Therefore, one line of discussion could focus on why this. As opposed to the other 3, is an appropriate definition of value in this context and why. As well as implications arising from adopting this definition.
The case also demonstrates
- that members are not equally price sensitive, and
- that each membership group places different degrees of importance on different preferences.
Consequently, this suggests that each membership group’s assessment of value – i.e. what is valuable to them can be differentiated. This, and why this is so, presents a second line of discussion that can be pursued with reference to the definition of net value provided in the text.
It may also be beneficial to discuss
- factors likely to contribute to a sense of diminished or negative net value on the part of each membership group, and
- other initiatives that the club might consider with the aim of increasing each group’s sense of value.
Some of the advantages of adopting a bundled pricing approach include:
- The price increase is no longer linked solely to ticket entry
- The price increase could be marketed conjointly with value-added membership
- The value-added component of the bundle could be shown to be grounded in benefits
meaningful to members
- It served to enable a higher price rise than had been possible in past years
- It appeared to play a contributing factor in reducing membership churn
- It also appeared to be instrumental in encouraging Standard members to upgrade
- It served to improve the club’s revenue base and cash flow
Other pricing options that may have warranted consideration include:
- Pricing each of the value-added components of the bundle independently so that members had the option of availing themselves of only those most desired. This approach need not preclude the offer of one or more discounted packages as well.
- Discounts to encourage ‘early bird’ subscription renewal and to incentivize extended renewals (2 years +)
- Premiums to encourage and reward referred subscriptions
- Ticket price differentiation related to the appeal of particular matches
- Scaled ticket prices related to seating location
Yield management does have relevance in this case in at least 3 respects:
- With the aim of minimising the number of empty seats at each game because of subscribers not being able to attend or on-sell their tickets and, correspondingly, generating an improved return on otherwise unused seats.
- With the aim of encouraging impulse attendance by non-subscribers and, thereby, improving the return on seats not allocated to subscribers.
- With the aim of improving the return on merchandise, food and beverages sold and consumed at each match.