Contemporary Marketing 16th Edition by Louis Boone,David Kurtz

Exercise 7

You might not be a skier or live anywhere near a mountain. Perhaps your idea of fun leans more toward sun, sand, and waves. But as a marketer, you can appreciate the seasonal nature of a small ski resort like Ski Butternut that's tucked away in the Berkshire Mountains of western Massachusetts How do marketers approach pricing objectives and set prices for a recreational experience that is vulnerable to the whims of weather, climate, overall economic shifts, and the cost of everything from electricity to labor-not to mention the changing incomes and lifestyles of consumers? Ski Butternut has been in business for more than 50 years, which means that its owners have solved at least some of the pricing puzzle. Matt Sawyer, director of marketing at Ski Butternut, puts it this way: "Our customers are looking for a great value. They're willing to be loyal if we treat them correctly."
Ski Butternut takes both sides of this equation-great value and loyal customers-into consideration for its pricing objectives. Sawyer readily points out that, while Ski Butternut is a forprofit company, the mountain doesn't realize a profit every winter. "Weather plays a huge role," he says. "You don't know whether you're going to be profitable until the end of February." Running a ski resort involves huge up-front costs and a lot of uncertainty. Target-return objectives for the ski school or holiday periods may melt with an early thaw. Ski Butternut managers must try to project a typical operating budget and find ways to make a profit as their customers enjoy their time on the slopes.
Plenty of ski resorts dot the New England landscape, which puts Ski Butternut in competition for consumers' recreation dollars. So Ski Butternut offers value to customers, hoping to capture market share and increase the volume of skiers on its slopes. The mountain offers value pricing to everyone, with special attention to first-time skiers, families, and season pass-holders. In order to boost the number of skiers who hit the mountain during the week (reducing gridlock on the slopes during weekends), Ski Butternut sets its Monday-Friday lift ticket price at $25. Unlike other mountains, Ski Butternut doesn't offer special deals, such as a "half-price Tuesday" or "ladies' Wednesday." Sawyer believes that customers prefer this straightforward approach to pricing. "It's easy to understand, it's predictable," he explains.
To attract more skiers and snowboarders to the mountain, Ski Butternut offers first-timers a learn-to-ski package for $75, which includes a lift ticket, lesson, and rental equipment (if purchased separately, these three items would total $135). The offer is good every day, all season-no blackout periods for weekends or holidays. "We want people to come when they can," explains Sawyer. For the second visit, skiers can purchase a $100 package ($35 off). "This price point allows people to get exposed to the sport," notes Sawyer. The mountain also offers midweek ski-and-stay packages for $45 per person/per night-a great deal especially when compared to some of the larger, more glamorous resorts.
Kids and families are a special focus for Ski Butternut, which has created several special programs for them. For example, fifth graders ski free Sunday through Friday when accompanied by a paying adult (and children who have never skied before get a free firsttimers' package). Ski Butternut targets this group, because it's the optimum age to get started, experience success, and continue with a lifetime of skiing or snowboarding. Because New England is home to a number of colleges and universities, Ski Butternut offers a $20 discount to college students, giving them a reason to get outside and ski-and become loyal Butternut customers.
Sawyer points to season pass-holders as one of Ski Butternut's most important customer segments. With a $275 price tag and a breakeven point of only five visits, a Ski Butternut season pass represents huge savings to regular skiers. In return, those skiers spend dollars on food, lessons, and other mountain services. Once they've spent the money for the pass, they tend to ski at least 10 to 15 times during a season. "That's great because they are the strongest wordof- mouth advertising we're going to find," acknowledges Sawyer.
Finally, Ski Butternut boosts its volume by offering special rates to groups under its "You Serve, You Save" program, along with Boy Scouts and preregistered ski clubs. Members of the military, police officers, firefighters, and EMT professionals (and their families) receive discounted packages when they make advance reservations. "We want to give them an incentive and say thank you," explains Sawyer.
Questions for Critical Thinking
1. Ski Butternut avoids pricing to meet the competition. Instead, it focuses on the value that it creates for customers. In your opinion, why is this a successful strategy?
2. What factors might determine demand elasticity for Ski Butternut's offerings?