I’m back on the clock after a two-month holiday that took me all over the east coast of the US…or mostly Miami and Palm Beach.
So, I’m going through some stuff I’d been holding onto.
I’m in Milwaukee for my Brand Management class to the second-year MBA students at the Kelley School of Business. So this article about Bruce Springsteen’s pricing from HBR stuck with me.
I break it down for y’all to share some pricing lessons…especially for theatre, arts, and team folks.
There are 7 takeaways in the article:
- Customers don’t like being surprised by prices.
- Don’t be afraid to challenge pricing myths
- You don’t have to grandfather prices in for long-time customers
- Low prices can devalue a product
- Expectations from high prices exist
- Stated willingness to pay is likely wrong
- Your profit isn’t your customer’s concern
I like this one because it allows me to teach a few lessons that hit the primary/secondary/platforms with some new ideas.
I. Customers don’t like being surprised by prices:
- This highlights the battle about “all-in” pricing. We’ve heard many stories over the years about sticker shock from seeing the price after fees so we know this is true.
- The flip side is that you can turn your “all-in” pricing into a benefit like the Ticketmaster $25 all-in promotion or TickPick’s “No Hidden Fees”.
II. Don’t be afraid to challenge pricing myths:
A few of my favorite in tickets:
- Discounts help drive demand.
- Trying to set your prices according to other properties or events in your town.
- There’s a “market” price.
First, discounts don’t drive demand.
They pull demand forward at best…
In tickets, what discounts have done is train customers to wait for the best deal.
This is why so many ticket purchases happen later in the sales cycle than ever before.
The data used to show a bump in sales a week out and another that started around 72 hours before a show. With the time 3-6 days out flat.
Now that hump on last-minute sales doesn’t happen until the last 24 hours…and it keeps creeping later and later.
Second, what everyone else sets as their price doesn’t matter.
Your price is yours and should be based on your market, your research, and the value you create.
Third, there’s no “market” price.
The secondary market has done a great job of reaching new customers using digital marketing tools.
This has come at the brand equity of teams, shows, events, venues, etc. because now everything is a commodity that fluctuates based on whether or not it is “hot” or not.
If you let the “market” set your price, you’ve given up on being a marketer and you are a commodity.
III. You don’t have to grandfather low prices in for old customers:
You don’t owe anyone a low price if the value you are providing is much, much higher.
Especially when it is something like a concert with an artist that tours once every few years.
Where you have to be careful here is when you are price-setting for ongoing relationships that exist year to year because raising prices is hard. There is also an advantage to keep customers and capturing more of the lifetime customer value.
But if you are pricing really low and it isn’t your business model, you don’t have to continue that practice.
IV. Low Prices Can Devalue a Product:
Remember the Dave pricing formula:
Price = Perceived Value
If you sell your tickets, services, etc. at low prices, people can and will expect that there might be something wrong with your product.
Don’t believe me?
Think about how many times you’ve seen “successful” introductory pricing schemes turn into full-price successes…
I’ll wait, but I won’t hold my breath.
V. Expectations of High Prices Exist:
When I stay at the Four Seasons, I expect more.
When I’m at a Yotel…I don’t expect as much because I’m basically just staying there long enough to take a shower and sleep.
When I spend money on a “premium” seat at an event: the expectation changes.
How are you going to manage the expectations that high prices create?
Y’all think I’m tough?
Ask your customers if your idea of a “premium” experience is really “premium” to them.
VI. Stated Willingness to Pay Is Usually Wrong:
I’ve done a ton of pricing research over the years.
One thing is certain, you have to take feedback on what people will pay with a grain of salt.
Your best way to figure out what people will pay is to do some sort of quantitative research like the Van Westendorp Pricing Survey or, if you’ve got the money, a conjoint study.
I used to think people were more likely to underprice their offers, but I’ve seen it split over the last decade where some stuff is way overpriced and sits until it has to be discounted, creating the doom loop of discounting.
Or, stuff is underpriced too much.
VII. Your Profit Isn’t Your Customers’ Concern:
No one cares about whether or not you are making money on a sale. They only care about the job you are doing for them and/or if they are getting value for the price they are paying.
This is why being market-focused matters so much.
You need to know what people value, need, and want. And, get an idea of the alternatives that they are considering when they buy tickets from you.
Also, you need to get a ballpark idea of the price people will pay or the value they ascribe to the event or game you are selling.
If you price according to the profit you need and people ain’t buying…that’s on you.
Not on your customer.
Honestly, they don’t care about your profits.
I’m in Milwaukee teaching my brand management class this week! Let me know if you are around.
A Few Links:
- Next Crisis is Office Buildings: I did some research about travel patterns around the US and found that a lot of commuter trains were still down 40% in major cities. I also found that the average commute had gone up over 10 minutes for folks driving. If your building is downtown or in a city center, consider the implications of these travel patterns. Or, any travel patterns because they have definitely changed and you’ll need to work to get people to make the decision to come to you in a different way now.
- Darren Rovell asks if Messi in Miami is “Fool’s Gold”? It is definitely a moonshot move, but what will the long-term impact be? I’m with Corey Leff on the need to grow American stars that fans can invest in. As I told Asli Pelit, these sky-high ticket prices look great, but what is the real sale price? And, will the demand be there after this initial bounce?
- Jacob Feldman has a fan growth equation: I’m going to think on this a bit more…I did a workshop in Melbourne called “Fans For Life” that I might reprise in 2023-2024.
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