#TBT: … Or You Could Do It Right to Begin With

Happy #TBT. To celebrate, we’re sharing an oldie-but-goodie post from Jim: … Or You Could Do It Right to Begin With.

What I liked about this post that I’m linking here: It was interesting to hear about the Bach Choir of Bethlehem’s unusual and, apparently, successful way of pricing to its membership. Here’s a snippet:

“Since 1912 BCB has employed a system of ‘Guarantees’ which give patrons the opportunity to book first and to choose seats according to the number of years they have supported BCB with an annual minimum pledge (in 1994 this was $50). The average (mean) pledge has exceeded the minimum each year and no discounts are offered on ticket prices. The Guarantee pledge is made in advance of the Festival but is not payable until after the Festival. Importantly, Guarantors are not asked to pay the entire amount pledged, but are only “assessed” a percentage, which is based on the actual deficit resulting from the annual Festival operations. Approximately one third of the Guarantors opt to pay the full pledge amount rather than the lower assessment amount. The number of Guarantors who do not honor their commitment is negligible.”

Put differently, you pledge a set amount to be guaranteed seat choice preference. After the organization’s big annual event, they calculate the net financial impact, and if there’s more than expected in the budget, the pledge you have to make to keep your preference status is reduced. The big win, of course, is that many people don’t reduce it because what they’re really doing is supporting the organization with their money rather than just buying tickets to a show.

That is interesting and pretty cool.

What I like less about this post is the lesson the writer of the piece takes away from it. What if, the writer asks, this model were applied to a hard-to-sell show and early ticket buyers were given a refund based on subsequent amazing sales that put the show way over into the black? The author sees this problem: “Those that buy early are often ‘penalized’ as they end up paying a higher price than those that buy later (who are able to find a discounted ticket).”

The reason this happens is that in one or more ways, the organization has failed to manage its pricing well. More to the point, they’ve done discounting wrong. They’re the kind of people (and you probably know some of them) who can’t take off their rose-colored glasses about sales until time has already drawn so short that they have few alternatives left to doing whatever small amount of yield management is possible. They’re the kind of people who chronically discount to their house lists and almost always say the words “last minute” along with the word “discount.”

In other words, they break just about every rule of good discounting.

And that’s an almost certain sign that an organization isn’t managing Revenue Per Seat, but more likely managing something more like Ego Gratification Per Production. That metric is maximized by either having an effortless sellout or employing complex techniques for pretending you’re having one.

I’m always surprised at the Rube Goldberg-ian contortions people will go to in order to avoid simple, well understood, sound practice. I like the BCB’s system because it’s simple and because the “guarantee” pledge is not about getting a cheaper ticket, but about retaining your seat preference for next year. Revenue per seat goes up in the long run because they’re keeping a lot of highly engaged supporters.

My dislike for the suggestions that followed has nothing to do with “leaving money on the table,” but with the fact that it’s convoluted, has no connection to value outside the ticket purchase and, most important, everything you could get out of doing it could be earned, and much more, by applying some fundamentals to your marketing.

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