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Symphony Orchestra Case Study

John should implement Proposal 3 to start a new series. This would result in a loss of $100 in the first week but profits of $4,400 each subsequent week as the new series brings in incremental income of $4,300 per week. Proposal 1 to sell discounted student tickets could also be implemented to generate an additional $600 profit per week. The long term profits from starting a new series outweigh the initial one-time loss and Proposal 3 has the highest total potential profit.

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653 views3 pages

Symphony Orchestra Case Study

John should implement Proposal 3 to start a new series. This would result in a loss of $100 in the first week but profits of $4,400 each subsequent week as the new series brings in incremental income of $4,300 per week. Proposal 1 to sell discounted student tickets could also be implemented to generate an additional $600 profit per week. The long term profits from starting a new series outweigh the initial one-time loss and Proposal 3 has the highest total potential profit.

Uploaded by

Brandon Elkins
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Symphony Orchestra Case Study

1. What is the total weekly profit for each proposal? Which proposal should John consider
implementing?
Proposal 1 – Student tickets is outlined in Exhibit 1. It demonstrates that the incremental
income from selling discounted student tickets is $600 and a total profit of $700. Proposal 2 –
Matinee Repeat is outlined in Exhibit 2. It demonstrates that the incremental income from a
matinee show is $150 and a total profit of $250. Proposal 3 – New Series is outlined in Exhibit 3.
It demonstrates that the incremental income from a new series in the first week is -$200 and a
total profit of -$100. However, each following week the incremental income would be $4,300
for a total profit of $4,400. This results in a profit, after the first week, of $4,400 for the second
series plus $1,200 for the sale of discounted student tickets of $600 for each show, for a total
profit of $6,600.
John should take on the new series, suffering a loss in the first week for the greater good
long term, and also sell student tickets for the shows that don’t sell out. If it’s an either-or
situation, then just take on the new series. If he doesn’t have deep enough pockets to suffer a
first week loss, then he should go with proposal 1 and sell discounted student tickets.

2. Discuss the strategic implications for the decision you have chosen. Apart from the
dollars are there other factors that John should consider about the option?
The implications of adding a new series would be increased scheduling complexities,
managing additional staff (concessionaries and musicians), increased marketing costs, and
overall managerial costs (bookkeeping, payroll). I would imagine there would be little difficulty
facilitating and accounting for the sale of discounted tickets to students. Having two series and
providing a good experience to customers would likely bring other benefits. Opens the
opportunity for the same customers wanting to see both shows and more total patrons to
provide good press.
The second series won’t increase the weekly rent (fixed costs), so its margins when
adding an additional show increase substantially. Both shows are also not projected to be at
capacity. Having two shows increasing the number of student discounts that can be sold. Even if
the projected number of students that may attend decreases by having two, the incremental
income is still positive due to existing fixed costs.

EXHIBITS
Exhibit 1 – Proposal 1 – Student Tickets
Proposal 1 - Student Tickets
   
Incremental Patrons 200
Price Per Ticket $4
Revenue $800
   
Cost program + ticket ($200)
   
   
   
Incremental Income $600
Total Profit* $700

*Total profit = incremental income + current profile


profit being $100.

Exhibit 2 – Proposal 2 – Matinee Repeat


Proposal 2 - Matinee Repeat
   
Matinee Attendance 700
Price Per Ticket $6
Revenue $4,200
   
Cannibalization - Ticket Sales ($1,500)
Program+ Ticket Cost - Give Back* $150
Program+ Ticket Cost - Matinee ($700)
Cost Per Performance ($2,000)
   
Incremental Income $150
Total Profit $250

*Give back ticket sales 150*$1 for cannibalization of evening


performance
Assumes no rehearsal cost for same series
Exhibit 3 – Proposal 3 – New Series
Proposal 3 - New Series
   
New Series Attendance 800
Price Per Ticket $10
Revenue $8,000
   
Cannibalization - Ticket Sales ($1,000)
Program+ Ticket Cost - Give Back* $100
Program + Ticket Costs ($800)
Cost Per Performance ($2,000)
Rehearsal Costs ($4,500)
   
Incremental Income - 1st Week ($200)
Incremental Income - Each Following Week** $4,300

*Give back ticket sales 100*$1 for cannibalization of evening


performance
**Added back rehearsal costs to 1st week incremental income

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