How to Price Your Event, Part 2 (of 3): The Nitty Gritty

Taken from my blog ? https://goformike.com/how-to-price-an-event-part-2/

INTRO

This is the second part of a three-part series on building a pricing strategy. In this part, I’ll be diving into the details of how to determine your event’s perceived value. If you need a primer before jumping into the deep end, head on over to How to Price An Event: Part 1 to learn about cost-plus pricing versus value-based pricing.

I left off in the last section talking about the crux of value-based pricing: perceived value. Nail this part during the event planning process and you set yourself up for massive success.

DETERMINING THE PERCEIVED VALUE

If perceived value is defined as how the customer values your event, then how do we determine that? Every individual fan will have a different notion of what a fair price is to them, so where do you start? Fortunately, you can look to a few places to get a good idea of what your pricing sweet spot is. While they are just pieces of the bigger pie individually, when taken as a whole they form the foundation of your event pricing strategy.

(Deliver deep value and your event will reap the benefits. Hey…there’s Waldo!)

Contents

• Comparable events
• The Artist Lineup (For Music Festivals)
• Your Own Ticketing Data
• Fan Surveys
• Total Final Cost
• Fan segments, or who is buying what ticket?

COMPARABLE EVENTS

Looking at the structure of similar events is a great place to start to understand how to price yours — after all, if they are successful then they’ve already done the dirty work of establishing a perceived value! So jump onto their website and head on over to their ticketing page.

Typically, when I pull together a list of festival comps to help with my event ticket pricing, I look at a few things —

• Location
• Dates
• Who the core demographic is (make sure it matches yours!)
• How many artists are playing (for music fests)
• How many people attend
• The breakout of GA/VIP/Super VIP/etc prices
• The tiers of tickets (Early Bird/Advance/Regular/etc)
• How many years the festival has been around (more on this later)
• How many days the event is, and
• The price per day

Pull together a spreadsheet with all that information with 3-4 similar festivals and you’ll start to get a good idea of the general price of your event should be around. It makes intuitive sense — if you are giving the same offerings and experience as a competing festival that charges a $300 ticket, then you should be around that same price point.

This is a very valuable exercise, but be cautious when going through it! After all, you don’t actually know how financially solvent these events were. They may have brought a ton of people through the gates, but lost a lot of money after all was said and done.

You also don’t know how the differences from your event will affect perceived value. A successful event has SO MANY things it needs to get right to work, so you really have to understand how you’re different. For example, an outdoor summer festival in New York would be a total flop in November. That’s an obvious example, but less obvious is a fest getting an artist that blows up overnight and becomes a major draw. That type of success is much harder to replicate regardless of cost structure.

The other big thing to take into account is the event comps lifecycle and brand equity. To put it simply — the more established the festival brand is, the higher the perceived value. This affects price points significantly since eventually, a fan will buy tickets simply because they trust the brand!

The more established the festival brand is, the higher the perceived value.

For example, a carbon-copy of Coachella that pops up overnight simply can’t charge $429 because it’s not Coachella. No matter how similar it is, a new event doesn’t have the brand equity behind it that allows your competitors to charge a premium.

If you are careful to understand these caveats, pulling event comps is a great place to start in determining your price model and build a few base assumptions. From here, you can layer on other data points to flesh it out.

THE ARTIST LINEUP (FOR MUSIC FESTIVALS)

If you are producing a music festival you need to understand what each artist is worth in hard-ticket sales. Your core offering revolves around building a lineup that enough people see value in. This is especially the case with new festivals — your lineup is going to be the #1 thing people judge you on. Sure you can deliver a great experience on-site, but the lineup is what’s going to get people through the gates in the first place.

(Your lineup is among the most important parts of your festival. When in doubt — Book Missy Elliott. Always.)

It’s important not to place a premium on that brand and experience before a majority of people have had a chance to experience it! Eventually, as you build brand equity, you can focus less on the lineup, but if you’re not averaging at least a 33% retention rate on your audience year-over-year, it’s an indication that it is still your lineup that is largely setting the perceived value.

So what do you have to consider when putting together your lineup? This is the time to fire up your Pollstar Pro account and start looking at the stats:

• Average ticket price
• The range of ticket prices
• The average attendance
• The frequency of playing in the market
• Etc.

It’s worth taking the time and effort to do this since it’s so important to truly understand what your main acts are valued at.

When chatting about this with Chris Donohue at See Tickets a few months ago, he elaborated on the concept:

“Headling artists average price per ticket and performance frequency in market impacts consumer purchasing behavior more than most promoters understand. This is more than radius clauses. Every headlining and main support should be assessed by this metric before consideration. In other words, Beyonce plays in Los Angeles every year on an average ticket price of $65 so when she headlines a festival, an LA consumer simply will not pay $250 just to see Beyonce perform a short set with less production.”

What this means is that your lineup as a whole needs to bring a significant amount of value to the fan. This is particularly difficult since there’s an inverse relationship with the strength of a lineup versus quantity. What I mean by this is that someone can buy a ticket to an event only once.  You have to be very careful when booking bands with similar fanbases — it will increase the strength of the lineup and allow you to increase prices, but will also decrease your overall attendance.

For example, if you are booking both Slightly Stoopid and Rebelution for a festival, you are essentially targeting the same fanbase. That means you can certainly charge more since its a stronger lineup, but your attendance might suffer as a result — a fan of both bands might be more willing to pay more, but they can only buy the ticket once.

Conversely, if you book Slightly Stoopid and Snoop Dogg, you might reach a wider audience but have sufficiently less strength to charge a premium since you’re splitting your audience.

Because someone can only buy a ticket once time, you have to account for your headliners being actually worth fewer hard-tickets than a typical concert. Chris explains,

“5 artists worth 10k tickets each won’t sell 50k tickets. It’s quite the opposite and there is substantial data to suggest headliner cannibalism devalues worth to the tune of 40-80%. For instance, U2 is consistently the top billing touring artist in the world yet when they played Bonnaroo, the event and band sold less tickets than a single U2 stadium show. U2’s value was easily diminished by 80% which means they were paid the most yet drew the least on any ratio or cost-benefit analysis. Also, five similar artists, sharing one fan can never equal more than one ticket sold so when you add cannibalism (one person interested in watching 5 bands), five 10K+ headliners are almost always worth a combined decline of 30% in sales versus a 5x in sum of its parts.”

Many promoters simply miss this aspect when putting together a lineup and often times the event suffers because of it. Particularly when you are talking about new festivals, your lineup is one of the biggest contributors to the perceived value and, subsequently, what you can charge for it.

YOUR OWN TICKETING DATA

If you’ve been around for more than a year, an excellent place to look is your past data. This may seem obvious at first, but is a profoundly important data point in your pricing strategy.

When looking at your ticket counts from previous years, it’s important to understand that you are not just looking at absolute values (e.g. the number of tickets sold), but the percentage of overall total tickets sold per day.  What I mean by this is that it matters less how many tickets you ultimately sold, but when they sold.

To illustrate this clearly, let’s assume you sold out of your event’s tickets within the first month of being on sale. That’s amazing news, so give yourself a pat on the back…you nailed it!

But from a pricing strategy perspective…you actually didn’t nail it at all.

Why? Remember from part 1, your greatest potential profit comes from pricing your tickets at the perceived value. If you sell out quick, that actually means that your event tickets are priced far lower than the perceived value. You left money on the table!  Simply put, you could have raised your ticket price, still sold out (albeit slower) and grossed more money.

You don’t want to sell out quick. You want to sell out slow.

A perfectly priced event is one that sells out just as the doors open. If you achieve this, you’ve perfectly balanced sales volume with the ticket price and maximized your earnings. You don’t want to sell out quick, you want to sell out slow.

This is a concept dubbed “slow ticketing.” In a great Billboard article covering how Taylor Swift’s team utilized this concept, Dave Brooks writes:

Higher prices, more consumer choice and no instant sellouts are on the horizon for high demand artists.

One day after Taylor Swift tickets went on sale to the general public and a week after pre-sales, hundreds of tickets for every stop on her Reputation stadium tour were still available on Ticketmaster. While some view the lack of sellout dates as a sign of softness in demand, Ticketmaster officials say they have effectively shifted ticket sales back to the primary market, captured more revenue for the artist and are changing the customer experience for fans.

So what does this mean for your event’s pricing model?

When discussing this with one festival promoter who sold in years past, my first question was “How fast did you sell out?” A sellout a few weeks before the event meant that — when taken with all other factors discussed in this article — he could stand to raise his prices.

On the other end of the spectrum, slow sales in previous years suggest you might not have a ton of flexibility on price. It’d be wiser to keep prices the same and focus your efforts on raising the perceived value through a better lineup, better amenities, etc.

Another area that can be enlightening is looking at the velocity sold at each tier. Meaning, if your advance tier flew off the shelves but your regular pricing was slow, it suggested your perceived value is actually somewhere in the middle. These types of insights help tremendously in shaping your ticket costs, so take the time to truly understand this. Yes, that means firing up Excel and dusting off your Pivot Table skills!

FAN SURVEYS

In a similar vein as your past ticketing data, looking at your past survey data is a simple and effective way to determine how people value your festival. There are few better sources of information than simply asking the people who are ultimately buying the ticket.

For festivals that have been around more than one year, this is simple: I advocate every eventhave a survey sent to ticket buyers. It’s your biggest opportunity to truly get deep, detailed feedback from the people who actually attended the event. While your survey should cover all major areas (operations, sponsorship, production, etc), there are ways to use it to determine your price elasticity.

You want to uncover what people truly value. When asking about their favorite artists, pay attention to trends that come from it — Are people more interested in the headliners? The undercard? What genres are trending? What do people not care about?

Similarly, understand the value in your on-site experience. Questions like “Why did you choose to attend the event?” can be enlightening. One survey I recently did, the vast majority responded along the lines of “Two days of food and music for a great price!” While I was glad that people had a high perceived value of the event, the message to me was clear: I could increase prices a little without necessarily worrying about losing sales volume.

When constructing your survey, you have to be careful to position your questions in a specific way. If asked directly “Would you pay more for the event?” a consumer will almost always go with “No.”  This is bad data since when you ask an opinion directly about pricing people tend to disproportionally go for the cheaper option. It’s a consciously skewed answer to avoid a potential future price increase. Instead of asking whether they would pay more, try to ask questions that give you insight into what that person truly values: The lineup, the food & drink, the experience, etc.

TOTAL FINAL COST

One area frequently not looked at when developing a pricing model is understanding what each fan holistically pays at the end of the event. For a city festival, you have travel, hotels, ride shares, etc to pay for before you even get through the doors! Camping festivals have their own set of expenses, with supplies, tents, food, etc taking a big bite out of fan’s overall budgets. That, plus the money you have to spend money on food and drink on-site, a $250 event ticket can easily become upwards of $1,000 when all is said and done.

It is very important you get a handle on true expenses early during the planning process as it has a big effect on your ticket sales. It’s a great question to ask on your post-festival survey, or even a small pre-festival questionnaire. Additionally, take the time to research and write down all the additional costs that a fan has to pay to get to your festival before you finalize your pricing model.

FAN SEGMENTS, OR WHO IS BUYING WHAT TICKET?

One of the trickiest parts of understanding your event’s value is that each individual person has a different idea of what is considered valuable to them. A college student can just care about the lineup, while someone older is willing to pay a little extra for additional comforts. You can take advantage of this by developing pricing for each of these segment.

In 2013, Neilson did a study looking into why people spent a certain amount on an artist over the course of a year. While the study largely revolved around recorded music, their conclusion was simple and powerful: Fans weren’t spending more on bands largely because they weren’t given an option to do so. You could only spend $9.99 to buy an album regardless of whether you were a casual fan or a superfan. When given the option, these superfans (that made up 14% of all music buyers) contributed 34% of all spending on music! By simply giving those people the option to purchase higher price points via added bundles (merch, exclusive downloads, etc), fans were willing to increase spending on music over the course of the year by two-fold!

This is the same exact concept for events. Instead of assuming value, you can give your attendees various ticketing options and add-ons to customize their experience.  You typically see this in festivals broken out as General Admission, VIP, Super VIP, etc. Indeed, this isn’t a particularly new strategy, but a wildly effective one.

Let’s start with the value-seekers: General Admission buyers.  They are the most price-sensitive of all fans and the most likely to care about the direct value exchange: The quality and quantity of artists versus the ticket price (for music festivals, at least). Since this is the largest group of people attending your event, this again underscores the importance of placing your artist lineup at the forefront.

Regardless of the size of your event, there are always people who would be willing to pay more for additional amenities. Those are the “VIPs” of your event and, when done right, can be a significant source of revenue. I’ve done festivals were VIPs accounted for 5% of overall sales, but a whopping 25% of all revenue!

(Lap of luxury. The VIP pool at Tortuga Music Festival.)

What are VIPs typically willing to pay for? Typically, VIPs look to 3 areas: comfort, access, and convenience. Let’s break them apart one by one:

1. VIPs want comfort. They place a high value on their experience and will pay for it. Deck out your VIP area with lounge furniture, free snacks, beautiful decor, bean bags, whatever. Tortuga Music Festival has an incredibly successful VIP program largely due to the amazing amenities giving VIPs the ultimate comforts — Open bar, premium food, elevated views of the stage, and even a pool on the Super VIP deck that they can sit in while watching the show! Because of that, Tortuga can charge $1,000 per 3-Day VIP ticket and $1,500 for a 3-Day Super VIP ticket.
2. VIPs also want access to areas that other people can’t get to. For a VIP buyer, that usually means a VIP-only section that is near the front of the stage, allowing you superior site lines of the show. For Super VIP, consider allowing them an even more exclusive area that no one else can access, perhaps on the side of the stage.  Buku Music + Art Project in New Orleans cleverly gives their VIP tickets access to exclusive performances. By giving unique access to something that General Admission doesn’t have, and their VIP program is incredibly successful (and seen as a great value) as a result.
3. Finally, VIP buyers want convenience. They will gladly pay to not be packed like sardines amongst everyone else; They want a VIP-only entrance to the festival that allows them to walk right in; They want the convenience of short lines at the bars, food, and bathrooms. You can charge a premium for those conveniences.

The good news about this? They really don’t add any significant expenses to the total cost of the event. Carving out a VIP section effects the budget minimally, but the potential for additional revenue is significant.

This is why it’s incredibly important you truly understand not just your core buyer, but all the different types of buyers you will have.

TO BE CONTINUED IN THE EXCITING CONCLUSION!

Oh yes, there’s even MORE to talk about here. In the final part of the series, I hope to cover how you, an event planner, can affect perceived value through a variety of techniques: Tiering and anchoring, foot-in-the-door, brand equity & event marketing strategies, and more!