This report focuses on the use effective pricing strategies to maximize profits from F1 ticket sales. We believe this to be an important objective for the F1 management given high costs of hosting the F1 race each year. Effective pricing strategies can help to recoup the cost of the race and possibly even generate revenue for the organizers. The first part of this report focuses on the effectiveness of existing price strategies such as perception based pricing, price discrimination, bundling and discount management. Our analysis suggests that the F1 tickets in Singapore are wrongly priced as it fails to capture perceived benefits such as having a city track and being the ...view middle of the document...
Price discrimination and market segmentation 6
3.1. Early bird pricing strategy (EBPS) 6
3.2. Pricing by Willingness-to-Pay (WTP) 7
3.2.1. Corporate Clients 7
3.2.2. Average users 7
3.2.3. Informed Patrons 9
3.3. Quantity Discrimination 9
4. Bundling 9
4.1. 3 Day Passes (Grandstand and Combination) 9
4.2. Hotel Packages 9
5. Discount Management 10
6. Volume Hurdle Calculation 10
7. Future Suggestions 11
7.1. Bundle 3-Day Pass with Airlines and/or Local Attractions 11
7.2. Yield Management 12
7.3. Strengthening of Segmentation Hedging 12
7.4. Overbooking Strategy 12
8. Bibilography 13
F1 in Singapore: The World’s First Night Race
In 2008, Singapore decided to host the F1 Grand Prix but with a key differentiating factor – the race will be held at night. This decision was made to boost tourism (FOM CEO Bernie ECCLESTONE, 2008) in Singapore. The race was anticipated to significantly increase tourism revenue. In addition, the night race would boost Singapore’s global profile. It is estimated that 250,000 tourists visit Singapore each year during the race weekend, bringing in more than SGD 100 million per year.
It is, however, extremely expensive to host the F1 race. The fixed cost is estimated to be $100 million per race (Harper, 2012). This is in addition to the initial fixed cost incurred in 2008 when the race first started. Hence, it is imperative that the F1 management maximizes revenue from F1 ticketing sales and accurate pricing strategies have to be implemented to capture the greatest customer value.
Leaving aside indirect benefits through increased tourism revenue and publicity, this paper will focus on current pricing strategies used for F1 ticket sales. The paper will evaluate:
the pricing difference between Singapore and other F1 venues,
the effectiveness of price segmentation to maximise revenue,
the use of bundling strategy and discount management to increase sales, and finally
the use of versioning strategy .
Pricing the Singapore Grand Prix
Singapore’s pricing for 2013/2014 compared with other non-night race city: are Singapore’s night race prices higher than those of other cities?
The Singapore F1 Night Race is an evolutionary product as it is a variation of a well-established product (day races). Two unique features - the nightscape and the use of a street circuit – distinguish Singapore from the other venues. But is this distinction sufficient to justify higher prices vis-à-vis other race venues?
Higher prices will only be justified if there is greater perceived benefit for a night race, which can be revealed using a price-to-benefit map (PBM). However, PBMs are only useful within a specific market segment as having too many target markets create too much dispersion, making it impossible to identify the accurate price-to-benefit. Our group identified two distinct segments for F1 tickets: average fan and wealthy clients. The following are ticket prices for the...