- Pricing is the most important button you can push. For every 1% price improvement you get, you gain 10.3% profit on average, most of my research puts the number at 12-13%.
- Discounts will destroy your brand. For every 1% you discount, you lose 40% of your profit.
- Pricing demands research and can’t be done willy nilly.
I told my wife I wanted to become better at getting press when the pandemic started since I could do it from home now.
Fox 5! The Washington Post! Wall Street Journal! The Independent! The BBC! The CBC! ESPN!
I could go on, but even I’m starting to mock myself.
Anyway, my new friends at Fox 5 asked me to talk about ticket pricing for Opening Day and beyond.
And, that comes on the heels of Ken Troupe asking me to talk pricing during his #social4tixsales chat on Twitter.
I’ve become known for my rants on discounts.
Today, I’m going to share a few ideas from my upcoming ebook on post-pandemic pricing because I feel like it is too easy to look at revenue at the expense of profit.
My lens for pricing: It isn’t what you make, but what you keep that matters most. Profits are the ultimate barometer of your pricing success.
I’m going to give you my three big pricing takeaways to gnaw on this morning:
First, pricing is marketing’s moment of truth.
In fact, it is the most important marketing moment you are likely to deal with because it is the point where you capture some of the value you have created for your market.
If you want a proxy for how I’ll judge you as a marketer, let’s look at “The Pricing Gap” which is the distance between the true economic value and the perceived value.
In tickets, we can also add a third number since most people have gotten so wed to discounts that they run their brand into the ground.
COGS should be a floor. The True Economic Value is the ceiling. You should be aiming to get as close to the Perceived Value of your product or service as possible.
Second, pricing demands research.
The perception of your price is just as important as the price itself.
We have to study post-purchase price perception to have a better understanding of what an accurate price is.
You do this using quantitative data because qualitative data is too easy to game. Remember what I’ve told you about people saying they love discounts.
You can also study pricing using tools like trade-off analysis, real-time price experimentation, and the Van Westendorp Pricing Model.
Finally, don’t discount.
Discounts show me you have a bad, or, worse, no strategy.
Discounts are the fastest way to destroy your brand.
When you discount, you open the door in your market’s brain that you are a discount brand and you can’t shut that door for the better part of a decade. 7 years on average, if you want the Cliff Notes.
Why do I bring this up?
Pricing is the biggest issue I see in my research across the industry and across the world.
People really struggle with it and there is a lot of bad guidance on pricing.
Here are some things to hold onto:
- Price is the most important lever your business can push. If you gain 1% on the price, you typically get around a 10% increase in profits. When you discount 1%, you lose 40% of your profit.
- There is a crazy tendency to underprice. In my research across industries, 80-90% of businesses underprice leading to lower revenues, fewer sales, fewer profits, a weaker brand, fixing your price at a lower level, getting into price wars…I can go on.
- Like everything else, pricing is a process.
Price is too important to fall prey to things like “loss leader” pricing for tickets, discounts, or just glancing at what everyone else is doing.
You have to get the price right because it is literally the most important marketing decision you are going to make.