9-4 the Alltel Pavilion Essays

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Case 9-4 Cost-Volume-Profit Analysis and Strategy: The ALLTEL Pavilion Andrea Mullens 1) The competitive strategy of the ALLTEL Pavilion is largely focused on differentiation. With no substantial competitors in the geographic region, they are looking to create an “experience” for the audience and thus maintain the sustainability of the venue. They do this primarily through solid Marketing efforts. They are focused on the making the venue and each event as profitable as possible, by making it as highly visible as possible. Working within an established marketing budget of $20,000 per event, the team analyzes demographics, options, and potential ROI in order to make decisions about how to spend this money. Looking beyond each…show more content…
So it is $37.03 per customer * The contribution for each comp customer is $10.04= $13.09 (1.91+7.66+3.52)-$3.049. * So, with the assumption that 25% comp customers would attend: 37.03Q + 10.04 (.25Q) = $263,245 (total fixed costs) At breakeven, Q=6,658 paying customers who will be in attendance with an additional .25 x 6,658 = 1,665 comp customers. 3) The breakeven analysis is likely to be more important for a fixed fee performer because the fixed costs are higher (because of the talent cost), and there is a greater risk from poor attendance at the event. The question of whether the Pavilion would prefer fixed fee or per capita performers would vary depending on the popularity of the performer. If they could choose only one type, they should prefer to pay for talent on a per capita basis because the risk is shared with the performer and the low operating leverage would protect from huge losses. However, it should be noted that Alltel would benefit from paying popular artists on a fixed fee basis as the anticipated large attendance would well exceed the breakeven point and become more profitable for the venue. 4) A sensitivity analysis could help Alltel pavilion assess potential risks/rewards associated with changes in costs or sales volume. A What-if analysis would be helpful to determine profits given variations in sales. If the pavilion had a strong inclination as to the draw of a particular artist, this would give them the

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