#1: Good Pricing Is Free Money
A few weeks ago, we published 15 thoughts about pricing for the new year — 2015. A lot of people read the article, and so I thought I’d expand on a few of the topics and give them their own posts.
Let’s start with the first one: Good pricing is free money. This means that if you’ve paid little or no attention to how you set prices, or if you’ve done it mostly based on costs or based on what you’ve done before or what other people are charging for “similar” shows, you’re in luck. A small amount of focused thought and effort will pay off big time.
How big? My estimate, based on both real examples I’ve seen and some academic studies on the subject, would be 15 to 20%. If, for example, you sell $1,000,000 worth of tickets a year, you should reasonably expect to sell $150-200k more per year with no other changes.
Before we go any further, I have a question for you: Does that matter to you? Does such a number move the needle for your organization?
While you’re thinking about that, remember that these added sales come against virtually no added costs on your part, so if your $1,000,000 organization breaks even and you sharpen your pencil on pricing, your organization doesn’t break even anymore. It makes a couple hundred thousand dollars a year. Even if you’re a nonprofit, those are resources that can be committed to mission.
Why is this true? It’s because pricing that’s been done by convention or by thinking about cost is bound to be at least somewhat mismatched to the thing that’s really important, which is what people want to pay. That’s really the correct target, but if you’re not aiming at it, you’re probably not going to hit it. At least, not most of the time.
For some shows, some sections, some nights, you’ll be either too high or too low compared to what potential ticket buyers think, and either way, you’re missing out on revenue.
That’s right. If you’re pricing too high, you’re missing out on revenue, too. And while I’m on the subject, you could be too high on some things and simultaneously too low on other things.
And there’s even better news: This phase of improving your pricing is not complicated. It doesn’t take a laboratory full of computers or a Quidditch team’s worth of nerds to do. It mostly involves evaluating where the pockets of tickets are that do and don’t sell well at the current prices and adjusting them. Then you watch what happens and adjust again. Some of this will be intuitive. You’ll know in your gut that a section or a show or whatever is too high or too low, and so you test that theory in reality.
But do it with the goal of hitting the “target” that’s out there, which is to find the right price for the people who might want to buy your tickets.
Free money. 15 to 20%. Who doesn’t want to start the year with that?
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