Sprinfield nor'Easters

2. Given the survey’s results, design a pricing scheme for the Springfield Nor’easters’ first season in order for a financial break-even. Explain how you derived the pricing scheme and list all assumptions made.

Based on the survey, we used the survey result to calculate the break-even revenue we need to achieve and further calculate how much ticket sales are required in order to break even.

According to Exhibit 1 from the case, we know the estimated annual operating expenses for Springfield Nor’easters (see below). Among the total fixed expense, players salaries and cost of bats and balls are paid by major league team, so these costs are not included to Springfield’s expense since they only sell tickets for minor league team.

Expense |   |   |

Players Salaries | 887,000 | (Paid by Major

League Team) |

Bats and Balls | 22,500 | |

Uniforms | 8,000 |   |

League Dues | 175,000 |   |

Staff Salaries | 124,000 |   |

Office Expenses | 110,000 |   |

Team Travel | 455,000 |   |

Marketing Research

& Mailing List | 4,879 |   |

Ads, Sales, and marketing | 175,000 |   |

Total Fixed Expenses | 1,961,379 |   |

Other than total fixed expense, Springfield will be able to obtain college finance support, sponsorship and advertising income to cover some expense. With this information, we can calculate the expected break-even revenue. (See below)

Total Fixed Expense | 1,961,379 |

College Financial Support | -21,000 |

Sponsorship & Advertising | -25,000 |

Players Salaries | -887,000 |

Bats and Balls | -22,500 |

Expenses after Adjustments | 1,005,879 |

(Expected Break-even Revenue) | 1,005,879 |

Because the game revenue mainly comes from two components – ticket sales and concession sales, so if we know how much people are willing to pay for concession, then we are able to calculate the ticket sales.

Using the data provided in the survey, we can calculate the expected concession sale per...