How Not to Discount: Part III
Don’t discount only your lowest-priced inventory.
Today’s example of how not to discount is slightly counterintuitive because it’s easy to associate “discount” with “low price.”
The mistake I’m talking about is only discounting the lowest-priced inventory in your venue. This happens because some marketers are conflating two different things: a low price and a discount from face value. They aren’t the same thing, and they function psychologically to the consumer in very different ways.
A tier of seats that is inexpensive has several purposes, and one of them is to make it possible for people who are interested in what you’re doing but are cash-constrained to be able to come to your show. The benefits to the venue of this are obvious.
The mistake that many marketers make is thinking that the person likely to buy at a discount is the same person as the already-interested, but cash-constrained person.
They are not the same person. The person who comes to you through good discounting practices and the person who buys your inexpensive tickets are two different types of people.
One of those people is a fan who’s just happy to be in the building, and the other is a person who’s evaluating you. One person is already committed; the other is “sampling” your product. In fact, you could argue that your “bleacher bums” are your best fans because they’re willing to sit in the least “desirable” section of the house just to witness the performance/game/etc.
By contrast, most entertainment consumers have absolutely no affinity for what you’re doing. It’s ignorance and apathy: They don’t know, and they don’t care. If, by virtue of some good marketing, you spark an interest in one of these people and part of that is a discount offer, and they actually come to your venue, you can be sure that the whole time they’re there, they will be evaluating whether or not they will come back. They’re making up their mind about your venue while they’re there. The fact that they bought a ticket means very little, and you shouldn’t take it as a sign of affinity or even very much interest. You should take it as a sign that they’re willing to entertain the possibility of affinity, and that’s a valuable first step.
What happens if you only make your lowest-priced section available as part of a good discounting strategy?
First, it reduces the appeal of your offer. Most people don’t want to sit in those sections, obviously, and by limiting it to those, you’ve limited those who’ll consider your offer. So you sell less.
Second, you’re more likely to sell a ticket to an existing customer. The person who’s most likely to sit in the second balcony is a fan.
Third, you’re not really benefiting from the discount as much as you think. A $20 ticket for $10 is good, but a $40 ticket for $20 is a much greater value, and people know it. If you’re going to do a 50% ticket, it should have impact.
Fourth, you’re missing out on a lot of revenue. You have little or no cost basis on these tickets, so if you’re going to have $150 tickets that don’t sell, getting $75 a piece for them is basically free money. A person who’s never been to your venue but is interested in trying it at $75, is a person you want to get to know.
You’re not gaining anything by pretending you only have unsold inventory in those sections. Remember, ignorance and apathy: They don’t know, and they don’t care. They only evaluate the offer and whether or not it’s right for them.
What’s the right thing to do? Offer a range of discounts from a ticket that’s very inexpensive to ones that are the best sections you’re not going to sell out. One of the benefits of this is what I call “switching up.” If your offer has a $10 ticket in it, it will get people’s attention, but when they see that they can get that $100 ticket for just $50, they’ll switch up to that. You’ll sell the $50 before the $10, but the $10 ones are instrumental in getting people thinking about the event.
This is not my opinion. I’ve seen it happen 100 times, and I’ve seen it happen the other way 100 times, too.
The person buying your cheap seats are not the people buying discount tickets from you if you’re doing it right. They have almost opposite states of mind about how they feel about you and very different motivations for buying.