Ticket Buyers Don’t Care About Your Costs

Is your show worth what you're charging? Photo credit: “Theater In Allen Räumen 20.01.2012,” © 2012  Theater der Künste, used under a Creative Commons Attribution-ShareAlike license.

Is your show worth what you’re charging? Photo credit: “Theater In Allen Räumen 20.01.2012,” © 2012 Theater der Künste, used under a Creative Commons Attribution-ShareAlike license.

That sounds a little harsh, but it’s essentially true. When it comes time to evaluate what they are willing to pay to see your show, ticket buyers do not care what you are spending to create that show.

Cost is your problem. Price is theirs.

This is a confusing subject for people, and my goal here is to help more live entertainment and arts marketers face reality as it is on the subject of price and costs. When someone produces an event or show, they have things they have to pay for. These are the costs of the show. On the other side, ticket buyers or potential ticket buyers place a certain value on the experience. This isn’t a hard and fast number, but people tend to have some kind of benchmark or range of prices they’d pay to see a given thing.

Making the price people are willing to pay at least equal or hopefully significantly greater than your costs is the financial goal of any given show.

There are two ways to do this of course: increase the value or decrease the costs.

Notice that I didn’t say “increase the price.”

If you increase the price without increasing the amount that your potential patrons value your show, you may very well end up with less money. On the other hand, if they value it more than they are currently paying for it, this can work really well. (See the recent discussion of when people want to pay more.)

So why don’t costs matter, and am I serious about that?

In the long run, of course, price has to exceed cost, but that’s mostly a function of figuring out how to deliver something great at a cost that allows you some wiggle room or margin.

In the short run, just try raising prices above the price at which people value a given event. You’ll discover how little power you have over buyer behavior then. “Yes, but we had an increase in costs!” The marketplace of consumer sentiment is not moved by such protestations.

Suppose for example you hired Fortune 500 CEOs at their going rate to be the janitorial staff in your building. Not only would your venue cleanliness probably suffer, but this would significantly increase your costs.

Would it increase the value of the show to your audience? Only if they got to watch one of the CEOs struggle with a squeeze mop.

This is a silly example, but it illustrates the reality that many people get the arrow pointing in the wrong direction when it comes to price and costs. Prices cause costs, not the other way around.

If you want to be successful with pricing, or if you’re in charge of the P&L of an organization, however small, you need to come to grips with the reality of this. Understanding it is a major advantage. Misunderstanding it is a major blind spot.

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