Pricing Your Event to Sell - Tiered Pricing
In light of today's economy more and more venues are looking into alternative means to generate revenue for their events. As the economy worsens consumers are looking
to cut spending on items they deem as unnecessary and one of the first ways to tighten your belt is to eliminate entertainment dollars. Instead of heading out for a
night on the town people are beginning to stay away from spending a ton of money and either finding other means to entertain themselves or not going out at all. This,
however, does not mean that they would not attend your event; it simply means that you need to put the right price in front of them. So how do you do that?
One simple suggestion to be made that can help increase ticket sales without giving away the house is tiered pricing. Tiered pricing is one way to maximize revenue and keep seats filled that would otherwise remain empty. If you have a 100-seat house and have been selling tickets for $20 you have the ability to generate $2,000 per show. Assuming that you are not selling out every show (if you are, then you may not need to read any further!) lets say that over the course of a run you average 50 sold tickets per show. Your Revenue Per Seat is $10.00. (You get revenue per seat by taking the tickets sold times the cost per ticket divided by the total number of seats in the house - TS x CPT / TS = RPS).
If you use tiered pricing you could keep the front 75 seats at $20.00 per ticket. These seats would be for your current subscribers or people who attend your shows on a regular basis. These higher priced tickets are also going to be purchased by people who want to know where their seats are and that want to have good seats.
So now you have 25 seats to apply a tiered pricing strategy to. Lets take the back 25 seats and offer them for $10.00. With this price point lets say that you were able to sell 13 seats at the lower price. Your Revenue Per Seat would increase as follows
50 seats @ $20.00 = $1000.00
13 seats @ $10.00 = 130.00
Total Revenue for this performance would equal $1,130.00
Thus your total revenue Per Seat would be $11.30. How did we get to this number? Tickets Sold (TS) x Cost Per Ticket (CPT) / Total Seats (TS) equals your Revenue Per Seat (RPS).
So essentially by selling a select amount of tickets at a lower price could increase your RPS by $1.30 per seat. Sounds easy right? It is. The problem is that venues sometimes have a harder time grasping the benefit of marketing their shows in this way as they think that it somehow cheapens the experience of the night or the company in general. The reality is that using this type of pricing strategy can greatly increase your bottom line over the course of time.
It is important to remember that all live entertainment has expiring inventory. Meaning that once this show/event is over you will never have the opportunity to re-sale that seat which becomes lost revenue. Unlike a restaurant that does not sell a steak on Tuesday but can turn around and sell it on Wednesday or Thursday, live entertainment tickets left unsold are lost revenue. Why leave these seats empty when you have the opportunity to offer them at a smaller price, which will ultimately benefit you in the long run?
On the same note, by offering these seats at a lower price you are also opening up the market by attracting people who may never pay $20.00 for your event but would give it a shot for half the price. They are getting the same experience, and because they might have never been to such an event, will not know the difference of sitting in the back vs. having a seat up front. Tiered pricing is great for the venue because it allows you to market your event to a much larger demographic, and it's great for the customer because it takes away some of the risk involved with trying something new. Surely a win win for everyone.