Essay on Singapore F1 Pricing Strategy

3856 Words Nov 30th, 2014 16 Pages
Executive Summary

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 first ever night race. It is, however, too late
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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

Introduction
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.

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