Gross Potential Means Almost Nothing

"Weightlifting," © 2004 filmingilman, used under a Creative Commons Attribution-NonCommercial-NoDerivs license.

“Weightlifting,” © 2004 filmingilman, used under a Creative Commons Attribution-NonCommercial-NoDerivs license.

Using the same logic as people who measure and manage “gross potential” when it comes to ticket sales, I went to the gym yesterday. I looked at a big stack of weights and, feeling intimidated, guessed that the most I could possibly lift was 250 pounds.

And guess what? I lifted it! In other words, I reached 100% of my gross potential weightlifting.

So I went back today, and feeling confident from past results, I guessed that I could lift 300 pounds.

But I couldn’t. I only lifted 255 pounds, or just 85% of my gross potential. Clearly, I got worse from yesterday to today. Except I didn’t, of course.

I started thinking about this because I was reading an article about a venue (who shall remain nameless) who had seen their share of “gross potential” drop from X% to something less than X. I admit, I was annoyed, because when it comes to gross potential, who cares? It’s a useless and potentially deceptive metric that should be replaced everywhere, right now.

If a venue sets prices, it’s a guess about what the market thinks. If the venue is larger than about 50 seats, there will be (or should be) multiple prices, and if this event occurs over multiple days, weeks or months, with slightly different content, there will be multiple versions of these multiple prices.

In other words, everyone, every time, will be at least partly wrong.

Gross potential doesn’t have any way of reflecting that, and if you use dynamic or even semi-dynamic pricing, it makes the notion of “gross potential” meaningless.

Which is fine, because it is.

Replace it  right now, today with Revenue Per Seat. Compare your actuals to a target based on your initial goals for a show.

Why should you care? If you set gross potential too high, you’re probably going to price too high for the market, and end up short on revenue and patrons. If you set gross potential too low, you’ll probably nail it. Congratulations! You just undersold your venue, but that’s OK because you can just take your super high gross potential number and put it in the bank. Oh, wait. You can only do that with dollars (or pounds or euros or yen, etc.).

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