Dynamic Pricing for Event Ticket Sales

A PRIMER TO PRACTICAL DYNAMIC PRICING

There is a lot of buzz in the industry about pricing models. Particularly, dynamic pricing promises to be the holy grail for event promoters. The airlines, hoteliers, even utility companies have been perfecting these techniques for 50 years. What are we missing out on?

You’ll hear many amazing quotes from the proponents.

“Ticket yield increased by 14%, ticket sales increased by 28% and net income by 44%.” – Tim Wood (PDF)

“Tickets were sold at a face value of $65 and $85 through Ticketmaster. Yet the secondary market of ticket brokers found demand could yield as much as $700 per ticket. We determined that over $250,000 in surplus revenue was not captured.” – Louis J Volpano and Volodymyr Bilotkach (case study)

“We added another $21,000 to our bottom line” – Mike Frederic

Realize there are hidden tools orchestrating the power of these pricing models. You need a practical guide to applying these tools and techniques to get big results.

I will finish this article with a dynamic pricing model that is easy to put in place. But, do realize that dynamic pricing is advanced optimization. If you are an early stages event, there are far better things to master. We will see some of those through this journey to dynamic pricing.

You Better Know This

You must apply the basic pricing tools and techniques must before moving forward. I want to show you that supply and demand curves have flexibility. I want to show you the counterintuitives that exist within pricing techniques.

Here are three models that shift our thinking from that of a newbie to that of a professional.

Model 1
I trust you have overcome the thought of pricing low and affordable to reach as many as possible. Model things smarter.

Realize there are low priced events and high priced events. Changing price drastically changes the attendees and not necessarily the amount of ticket sales. It’s not a perfect statement but is a more powerful model than assuming price alone controls ticket sales.

Many believe a low price attracts more people and sells more tickets. So, there must be a sweet spot in which ticket sales increase but revenue is maximized.

Practice paints a different picture. Often as ticket price decreases, attendance remains flat. Similarly, price increases can result in flat attendance. More times than not, slight increases in price result in slight increases in attendance. It’s counter-intuitive, but slight increases in price are often perceived as a slight increase in value.

The point is that ticket price and ticket sales are not as rigid as you might think.

I can show pretty extreme examples of attendance doubling by doubling the price. But this is definitely an anomaly and there were quite a few other factors at play.

Model 2
I want you to understand the considerations in a buying decision:

  • Trust – do I believe the claims these people advertise? Everyone states their event will be the best of the year.
  • Value – I’m different and unique. Will it be valuable or entertaining for me? Is this event special?
  • Price – can I afford this event?

It should be a relief that price is low on the priority list. If you provide trust and value then most will pay great money to attend. Price is not the biggest factor to the buyer. This contrasts the model of pricing low to reach as many as possible. There are other factors at play.

Trust and unique value are very important tools to harness. There is a reason that most department chains offer a no-hassle return policy. It creates an easy and low-risk decision.

This second model creates a counter-intuitive shift. Apply great effort into creating an outstanding experience rather than dropping the price. Increase value and deliver on your promises. You will be rewarded with a great following. Have a look at the measures the WebSummit event takes to create value.

Model 3
Realize that for all intents & purposes we have endless customers. Again, this is not a perfect statement but more powerful than a scarcity model. A scarcity model eventually leads to dropping the price.

This endless customer model allows focus on factors that increase revenue:

  • Exposure – how many people know about our event?
  • Conversion Rate – how many that we reach actually buy?
  • Price – what we charge those that buy?

Realize that our limitations are the eyes and ears that know about the event. Exposure is important and there are endless examples of good marketers outselling bad marketers. Even when the bad marketer has a better event.

Know that converting those we reach to buyers is important to revenue as well. This forces us to target our marketing at the people that do stand to gain.

Without a doubt, the price makes a big difference to revenue. We now know it is not the biggest factor for customers, but it is huge for us. Market conditions are one thing but don’t drop pricing unless forced to.

This third model creates a counter-intuitive shift. The professional shifts thinking from scarcity (dropping the price) to focused and effective marketing. This requires confidence in the ability to deliver a great event.

Your Sales Cycle

You better know your sales cycle. Don’t be a rookie:

“Trust me, we’ll sell out. We have every other time”.

“Relax, most of our sales are in the last month”

Take a data-driven approach. Place faith in the numbers, not in “trust me” statements. The rookie ends up apologizing for an empty house. The professional has management bought into a model and involved in an improvement process.

Gather data from your past events or similar events. This can prove challenging if you do not have access. But the effort is worth it – do what you can. We’ve used airline data to get started until we had our own data. Just be sure the accuracy is understood and don’t bet everything.

You want to know how many tickets you sell per day or month, before the event. You are going to see a curve something like this:

Chart - Dynamic Pricing

You don’t have to nerd it up with a spreadsheet but break down this data into three phases:

  • Stage 1 – Initial announcement (~25%).
  • Stage 2 – No man’s land (~50%).
  • Stage 3 – Whirlwind sales (~25%).

Keep the names cool and the comedy fresh. You want to reap rules of thumb from this data.

“At 200 days (75%) till curtain, we should have 25% of our tickets sold.”

“From the 25% to the 75% time mark we can expect to be 30% to 40% sold out.”

“If on track we will sell 60% of the house in the last 70 days.”

This knowledge and data eases management concerns and brings confidence to the process. It’s hard to argue with simple facts.

The Time To Apply Power

There is a lot of information here. So the majority of organizations have teams working on this level of marketing. If you are going it alone, take your time and gain confidence. Next week we will apply all this to a simple dynamic pricing model; one you can use right away.

Rafiq is the founder of Crowdflow.io and is on a mission to create technology to help organizers sell out great events.