As a community service, disc jockeys from radio station WMKT formed a basketball team to help raise money for local nonprofit organizations. The host organization finds or fields a competing team and charges $5 admission to the game. Money from ticket sales goes to the nonprofit organization.
Ticket sales were disappointing at recent games, averaging only about 300 people per game. When WMKT’s marketing manager, Bruce Miller, heard about the problem, he suggested using sales promotion to improve ticket sales. The PTA for the local high school—the sponsor for the next game—is interested in the idea but is concerned that its budget doesn’t include any promotion money. Miller tries to help them by reviewing his idea in more detail.
Specifically, he proposes that the PTA give a free T-shirt (printed with the school name and date of the game) to the first 500 ticket buyers. He thinks the T-shirt giveaway will create a lot of interest. In fact, he says he is almost certain the promotion would help the PTA sell 600 tickets, double the usual number. He speculates that the PTA might even have a sellout of all 900
seats in the school gym. Further, he notes that the T-shirts will more than pay for themselves if the PTA sells 600 tickets.
A local firm that specializes in sales promotion items agrees to supply the shirts and do the printing for $2.40 a shirt if the PTA places an order for at least 400 shirts. The PTA thinks the
idea is interesting but wants to look at it more closely to see what will happen if the promotion doesn’t increase ticket sales. To help the PTA evaluate the alternatives, Miller sets up a spreadsheet with the relevant information.
a. Based on the data from the initial spreadsheet, does the T-shirt promotion look like a good idea? Explain your thinking.
b. The PTA treasurer worries about the up-front cost of printing the T-shirts and wants to know where they would stand if they ordered the T-shirts and still sold only 300 tickets. He suggests it might be safer to order the minimum number of T-shirts (400). Evaluate his suggestion.
c. The president of the PTA thinks the T-shirt promotion will increase sales but wonders if it wouldn’t be better just to lower the price. She suggests $2.60 a ticket, which she arrives at by subtracting the $2.40 T-shirt cost from the usual $5.00 ticket price. How many tickets would the PTA have to sell at the lower price to match the money it would make if it used the T-shirt promotion and actually sold 600 tickets? Change the selling price in the spreadsheet and then vary the quantity using the analysis feature.