#MondayMotivation: “Break-Even” Price Is Faulty by Design
Looking for a little #MondayMotivation? We’re pulling out past stories that are still just as relevant today. Here’s a pearl from Jim: The Perils of a “Break-Even” Price.
If you’re not careful about the way you evaluate the price at which you need to sell tickets in order to break even, you could be setting yourself up for some big losses.
Here’s how a “break-even” price gets established a lot of the time: somebody, somewhere takes the total cost of delivering a show and divides it by the number of tickets they believe, based on experience, intuition data or whatever, they will likely sell.
For example, the total costs on the show are $10,000, and, based on the last time a similar show came to town, recent sales, the time of year and whatever other information the person might use, they estimate that 250 to 300 tickets in our 350 seat house will sell. To be on the safe side, they assume 250.
Then $10,000 divided by 250 tickets is $40, which they enshrine as their “break-even” price.
Is that correct? …
Check out the rest of Jim’s post: The Perils of a “Break-Even” Price.
- Measure Success Using Revenue Per Seat
- Sometimes People Prefer to Pay More
- Variable vs. Dynamic Pricing