Overvaluing Premium Sales

Venues have gotten much more sophisticated in the last seven or eight years at creating and selling “premium” tickets and ticket packages. I was reading recently about the Seattle Mariners’ successful program to do this recently, and it made me give this issue some thought.

As I’ve said many times on this issue, I’m for it. Provided you don’t punish people for not buying premium and you legitimately deliver a ‘premium’ value, this should be a sustainable and positive way to increase your Revenue Per Seat.

Here’s what I have noticed though. Venues sometimes get more excited than they should about the dollars that come from premium sales than the dollars that come from better management of price on more “normal” sales.

Suppose, for example, you had an 800 seat theater with a “premium” section of about 25 seats. These seats are at a 100% premium to the seats around them (which already aren’t cheap), and so, let’s say they sell for $300 instead of $150. People happily buy them and the people around them still get good seats and pay a lot less.

Score, right?

Sure, absolutely. The incremental revenue on this is 25 times $150 or $3750. That raises your Revenue Per Seat in the house by $4.68. Verdict: good stuff!

Tiering is one way to do it. New tiers that applied to the better parts of existing sections and which raised prices in half the seats by less than $10 would have the same effect.

What would it take to produce the same effect with your non-premium inventory? Suppose the show is strong, but not a stone-cold sell out: 85%, meaning 120 seats are still available. You’d produce the same effect as the premium seats by realizing just $31 from each of those tickets, which sounds pretty easy for a show like this.

The point is that dollars strongly resemble other dollars. People get excited about premium programs because it feels like free money and because it’s pretty fun to be able to say that people are willing to pay top dollar for your event.

But if your main concern is selling out, making more money, and getting more customers, you shouldn’t overvalue (or undervalue) premium sales. After all, you don’t put average ticket price in the bank. You put dollars in the bank.

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