How To Price an Event: Raising Your Value (and Making More Money!) [Part 3 of 3]

Taken from my blog at https://goformike.com/how-to-price-an-event-part-3-raising-your-value/

INTRO

This is the third and final part of my series on how to build a successful pricing model for your event. In Part 1, I discussed the goals of a solid value-based ticketing strategy and why it’s so crucial to your event. Part 2 dove into the details – namely, how to actually determine the central data point for your entire strategy: What is your event’s actual perceived value? If you haven’t read the previous two articles, I highly recommend you do so before reading on.

Before we jump into this final piece of the pie, let’s revisit our 3 core goals:

GOALS OF A VALUE-BASED PRICING MODEL

1. Your ticket should be priced at or below the perceived value
2. Your festival’s cost-per-fan (overall budget divided by number of attendees) should be below your ticket price. This is your profit margin.
3. Your promotional efforts should focus on maintaining or raising the perceived value

Now that you’ve determined your event’s perceived value, tackling both points 1 and 2 is relatively straightforward: make your average ticket prices at or below market value, and build an event budget with a cost-per-fan below that price point. Point 3 is what we’ll be diving into in this article: What can we do to raise the perceived value of the event? Turns out, the answer is a lot.

While touching on every possible tactic related to pricing psychology and marketing would be exhausting, I want to outline the key areas that relate to festivals and large-scale events. By using these techniques, you can position your event in a more favorable light that will increase your perceived value.

[ “Hooray for Value-Based Pricing Modeling!” – Festival Girl ]

Contents

• Anchoring
• Urgency and Scarcity
• Foot-In-The-Door
• Marketing: Your Strategy, Budget & Brand
• Conclusion

ANCHORING

A key concept to event pricing is that pricing is one-way:  You can only go up. 

Lowering your price after you’ve raised it profoundly hurts your perceived value. Urgency increases as your festival approaches (more on that later), so your pricing should never decrease. You risk devaluing the entire event!

It also punishes your early buyers. If a fan gave you their trust by buying tickets and the price then drops, that trust is shattered. They will certainly wait to buy next year (if they even decide to come back). This is exactly why I almost always discourage discounting your tickets during your main marketing push. You ideally want to focus your efforts on the opposite — how can you reward early buyers?

Related Reading: Discounted Tickets. Just Say No. ?

The good news is that you can take advantage of this concept through anchoring.

Anchoring is a well-studied cognitive bias that is central to consumer psychology: People consistently over-rely on the first (and most easily accessible) information they are given.

You see this every day in retail. A pair of jeans with a tag that proclaims “$99.95 60% Off! Get them for just $40″ seems like a great deal! Mixed with a bit of urgency (“Sale expires today!”) and those jeans start flying off the shelves. In reality, the $100 retail price is completely arbitrary and simply serves as an anchor to make the discount seem like a great value.

[ Anchors away at Tortuga Music Festival. ]

Anchoring is incredibly effective for festivals as well. Remember, you can only go up in price, so how do you do it? This is where the concept of ticket tiers comes in.

Many events already tier their prices, and for good reason. It anchors the price, allowing a reference point for your cheaper tier. For example, if your regular ticket price is $300, an ‘Early Bird’ price of $199 seems like a steal! By anchoring your “regular” ticket at $300, you are suggesting that your festival is valued at that price, and then immediately offering a limited discount.

For festivals that have been around for a while, I always recommend developing price tiers. Early Bird buyers, who are willing to buy before the lineup is even public (for music festivals) are your brand loyalists. They know it’ll be a great event regardless of the details and are just happy to get discounted tickets. This is an excellent segment of fans to study, as they are essentially your early adopters.

When you can’t anticipate demand (new festivals, for example) and need flexibility, consider using graduated pricing. At its core, this is simply avoiding using words like “Early Bird”, “Advance”, “Regular” and instead opting for something more generic like “Tier 1”, “Tier 2”, “Tier 3”, etc.

This gives you a lot of wiggle room, allowing you to start at a lower price point and release price increases/tiers as you start getting feedback from the market.  You can keep going up in price until you have a better handle on what your event’s perceived value is. The downside is that you don’t have a “regular” price to anchor to, which limits how much this strategy affects the perceived value. However, even with graduated pricing, you can do it successfully: Ultra, for example, displays the current and next tier. While this doesn’t have the same effect as displaying the highest price (as you would by showing “regular prices”), they are still anchoring the current price to the next tier.

If you’re worried about giving people such a steep discount through tiering, don’t. Getting people to buy early is worth it: It allows you to generate quick cash flow (after all, you’ve got deposits to pay!), rewards the fans who bought early, and can even lower production costs (since you’re able to project overall attendance better). Plus, these are all fans you won’t have to spend ad dollars on later. In fact, consider the early bird discount an acquisition cost, similar to how you view advertising expenses during the main marketing campaign.

URGENCY AND SCARCITY

Out of every technique in your toolbelt, it’s hard to underestimate the importance of two concepts that should run core to every marketing decision you make: urgency and scarcity. I can’t think of many aspects that have a more direct effect on your festival’s perceived value than these.

Urgency is the belief that there is a closing window of opportunity to get tickets. It is one of the most effective ways to get fans to actually take action and buy. It’s about creating as many “shit or get off the pot” moments as you can. This is why ticket sales increase dramatically the weeks leading up to the event – people feel the most amount of urgency to buy at that point.

So, how do you capitalize on urgency before the event? You create it. As the next pricing tier approaches, the urgency increases to buy the current price point. Put simply, you should be marketing the hell out of that. Every fan should know when prices are about to increase and feel the pressure to buy before the price goes up.

[ Sound the alarms: Buku playing up the urgency before a tier increase. ]

Scarcity has a similarly profound effect on raising perceived value. Tickets that are rare are automatically more valuable. In fact, this is exactly the bet that’s made on the secondary markets. Scalpers regularly are able to sell tickets to sold-out shows for significantly higher than face value due to their scarcity.

The perception of scarcity can be just as powerful as the reality. If the fan thinks there’s a limited amount of tickets that can sell out at any moment, the value of that ticket naturally rises and compels them to buy. You can take advantage of this: As you bump up to the next pricing tier, don’t take the past tiers off your website. Instead, leave them up, but put a large “SOLD OUT” across them (and be sure to message it proudly across all your channels!). If a fan visits your ticketing page and sees all previous tiers sold out, that telegraphs the scarcity of the current price tier and increases the perceived value of your event.

FOOT-IN-THE-DOOR

My wife and I were recently in Las Vegas and stumbled upon a wacky photo studio that dressed you up in old-timey western clothing. We were a few drinks in and it seemed like a great value — the sign said $40 for a 30-minute photo session. So we dolled ourselves up as a cowboy and saloon girl, grabbed prop pistols and money bags, and went at it!

[ Wicky Wicky Wild Wild West (told you they were awesome pics!) ]

When it finally came time to pay, they dropped the bomb: You only get a single printed photofor the $40! We just spent a half hour taking dozens of amazing photos and clearly couldn’t settle on just one. They even showed us all our photos and had us choose our favorites before giving us the final price.

At the end of the day, we chose 3 printed photos for $80! While it was more than I wanted to pay, it beautifully illustrated two related pricing concepts that are very applicable to events.

The first is that you value the things you own more than the things you don’t. Put another way: losses count more than gains. We had dozens of photos already taken, reviewed, edited and selected. They were already ‘ours’ in my mind, so how could we choose only one? The pain of leaving all those photos behind was a powerful motivator to pay more.

You value things you own more than things you don’t. Losses count more than gains.

This idea equally applies to festivals — Since your perceived value of items you own is already naturally high, how do you position it so that your fans already have their tickets in hand? You can’t physically give your fans a wristband and then ask for money later, so what can you do?

This is where the foot-in-the-door technique comes into play: By giving them an easy way to commit early, the decision becomes whether to not go as opposed to whether to go. This is a powerful influence on perceived value, and there are a few approaches you can take to use it.

For one, you can encourage the fan to act as if they are already attending. A common mistake I see is marketers sending informational e-mails (e.g. what to bring, where to park, info about lockers, etc) just to your ticket buyers. Instead, try sending them to your whole e-mail list. These are powerful marketing messages and drive just as many sales as more traditional initiatives. This is because you are forcing the fan to act as if they already going. You want to support that type of thinking throughout your entire campaign — How can you get fans to shop around for hotels, rally their friends, plan their outfits, etc?

The most direct way to use the foot-in-the-door technique to sell tickets is by offering payment plans. Payment plans aren’t just a way for people to split a ticket price into several smaller payments. The true genius behind them is that you are getting people to commit to going much earlier than they would have otherwise. In their mind, just one $99 payment and the ticket is theirs (even if they have 2 other payments to make)! By getting them to commit early, they are highly motivated to complete their payments. After all, they don’t want to give up something that in their mind they already own — the festival ticket.

MARKETING: YOUR STRATEGY, BUDGET & BRAND

While the lineup is the most powerful driver of sales for most music festivals (remember part 2 of the series?), that doesn’t mean you can neglect your marketing!

A savvy marketing strategy is almost entirely about raising the perceived value. Long-time promoter, festival producer, and brilliant marketer John Riccardi (who currently holds a music strategy post at Eventbrite) spelled it out to me the other day: “It doesn’t matter what you are selling. You compete on price or you compete on value, and if you are really good, you do both. That is all of marketing.”

“You compete on price or you compete on value, and if you are really good, you do both. That is all of marketing.” – John Riccardi

What that means is that a strong marketing strategy is one that raises the perceived value of the festival and justifies your ticket price. While how that’s done is beyond the scope of this article (it’s kind of the point of this entire blog), a marketing plan that covers each area of perceived value will have a drastic impact on your bottom line.

For example, take the concept of the overall cost to the fan that was covered in the last article. When you're determining your perceived value, you should look at not just your festival's ticket price, but the overall cost to the fan - hotels, flights, rideshares, food and drink, etc etc. That's the true amount you are asking a fan to pay for your festival!

What do you do with that information? While you should use it to adjust your pricing strategy, you should also use it to adjust your marketing strategy. John elaborated on how you could position it:

“So having gathered [data on the total costs to the fan], you need to then do the same thing you did with your ticket pricing at the very start: Compare these points to competitive festivals. Does it cost $1,000 all-in per fan for someone to attend your event? What about the competition? Are you more expensive or less? A holistic approach is the only approach.”

Or, perhaps, you accept a high total cost to the fan and focus on the convenience it gets you:

“Consider Osheaga or Lollapalooza — You fly into a major airport, stay in a hotel right in the middle of town, and you hop on the metro and arrive right at the festival. So simple.”

There’s a deep interplay between pricing and marketing: A sound marketing strategy that addresses perceived value can keep your ticket prices high and your profit margins healthy.

Similarly, your event’s brand equity has a monumentally important role in your value. While we’ve already touched on this several times in Parts 1 and 2, it is worth repeating: A brand is developed by the festival consistently delivering value year in and year out — a great lineup, a great experience, etc. every single year. Eventually, this builds brand equity and your fans reward you by shelling out more money than they would otherwise.

Related Reading: Q & A: Zen and the Art of Positioning ?

Finally, it’s important to note that a larger marketing budget and a sound strategy can certainly warrant a larger ticket price.

In a technical sense, it allows the higher cost-per-acquisition (CPA) to be offset by the higher revenue-per-order, maintaining the same ROI. More generally, it allows you to invest more in efforts that raise the perceived value and make the fan more comfortable with the premium they are paying for the ticket.

All of this is, of course, easier said than done. The challenge is developing a sophisticated marketing and ticketing strategy while doing everything else you need to do to produce an event. However, it’s worth it. Ultimately, taking the time to zero in on how to raise your perceived value pays dividends. There are significant economies of scale when it comes to festivals and, in most situations, it’s far more profitable for you to put in the effort to raise the perceived value rather than simply lowering your ticket price.

CONCLUSION

Pricing is such a vast and interesting topic, that even 3 articles and nearly 8,000 words barely scratches the surface. Since every aspect of your event is reflected in your ticket sales, it’s impossible to understate how important it is. A fully developed ticketing strategy requires a deep understanding of your event, competitors, the fans, the location, the industry, marketing, expenses, and nearly everything else that touches your festival.

While it’s massively important to do the proper due diligence to find your true value, I caution not to get stuck during the event planning process. You will inevitably come across contradictory and vague data that you will have difficulty making sense of. Once you gather all the information you need, you will eventually need to just do it and make a decision. What you will likely find is all the research you’ve done along the way has helped guide you more than you think.

When festival producers and event planners think of ticketing as merely another ‘box to check’, it always gives me pause. I would even go so far as to say that a lack of attention to pricing strategy is one of the main reasons you see so many festival’s fail. It’s truly the start, and one of the most important pieces, of producing an event. If you don’t take the time to build a stellar pricing model, your event won’t be coming back next year. However, if you do take the time and care, you’re already well on your way to building a profitable, successful business for many years to come.