Should Your Pricing Leave Money on the Table?
If your ticket prices are getting the very last dime of value from the marketplace, I believe you’ve gone too far.
In the world of pure reason, in which economists and undoubtedly some of my business school economics professors live or at least vacation, the statement that I just made is irrational. There’s no reason not to charge what the market will bear, they’ll say.
And you know what? They’re right! Mostly.
I’ve talked about how people actually sometimes like to pay more, and I’m a believer in both variable and dynamic pricing. Don’t mistake what I’m saying today for some kind of pricing fundamentalism, because that’s not it.
It’s a highly rational, economic argument that I’m making. In the very, very short run, it makes sense to max out the price right to the point where the market will accept it. In the medium and long term, it usually doesn’t because you’ve cashed in all the perceived “value” in your product.
This is a concept called consumer surplus. Too much consumer surplus is a bad idea for a venue. That’s a giveaway, and it’s totally unnecessary. On the other hand, a little margin of consumer surplus is a great marketing tool. It leaves ’em wanting more, and it helps establish that your shows and venue are a great value, even if it’s expensive.
So should you leave money on the table? My answer is very clear: Yes, a little bit, because in the long run it will strengthen the relationship to your ticket buyers and be worth much, much more.