This five-part series explores the value-based pricing model’s inner workings and breaks down the model’s most basic elements. The model focuses on competition and cost like other models do but also factors in an often overlooked aspect of your events – the customer. You will also see how this model can maximize your revenues and deliver an experience your customers won’t soon forget. In the first part, we cover the basics of the model. In parts two and three, we look at how the value-based pricing model reveals gaps, increases value, and how the prices should guide the cost. Finally, in parts four and five, we put the value-based pricing model into action and look at determining your ticket types and setting and increasing prices. Our primary goal throughout the series is to break down these various parts to make you comfortable implementing this model into your events.
We have covered many things in the past few months regarding the value-based pricing model. We looked at the key components, increasing perceived value, identifying gaps, calculating costs, and identifying various ticket types available to us. After all of this, we are ready to cover our final topic – setting and increasing prices.
Setting the Initial Price
I wish I could tell you this was the easiest part of this entire process and that the perfect price to set is x dollars. Unfortunately, this isn’t the case. Setting the initial price can be quite tricky, but don’t be discouraged if you don’t guess the “perfect” price right off the bat. Even with all your research, you’ll continuously learn and adapt based on your customers’ responses. Even when you land on that “perfect” price, there are many factors in that play that can make your price too high one day and too low the next. So, we always need to be looking at pricing as a series of adjustments and optimizations.
However, you have to make an educated guess to get you started. Think about the typical customer for each of your ticket types. Based on your research, what is your best guess at their willingness to pay? For example, let’s say that based on our research, our best guess for the general admission ticket type is $20, but how confident are we? Let’s add and subtract 20% from our guess. Are we confident that $16 is too low or that $24 is too high? Go with where your confidence lies. If you are reasonably confident that your most eager customers will instantly buy at $20, then go with $20, but don’t just go with $20 arbitrarily. If you are unsure and lack confidence in all prices, you can always start lower and work your way up as ticket sales progress.
Increasing the Price
Increasing prices leading up to an event isn’t some new, revolutionary idea, but there are many reasons for doing it. People who buy your tickets early are more likely to recruit on your behalf, meaning the earlier they buy, the more time they have to recruit. You may also gain early visibility into your event’s attendance and increase your perceived value. As the price goes up, people see more perceived value.
Like many things we have talked about, how you increase your prices is entirely up to you and your imagination. Maybe you increase the price after certain ticket types sell out. Perhaps you just do it on a set date and increase based on your ticket sales. Stronger sales mean a more considerable increase, and weaker sales mean a smaller increase, which gives you real-world feedback on your perceived value. You can also use additional strategies like early bird and on-site sales to provide more incentive for attendees to purchase tickets.
Early Bird Tickets
Early bird tickets generally offer the most considerable discount possible to attendees, and it creates urgency and buzz around the event. We want to reward attendees who buy before the deadline or motivate them to commit earlier. You can even add additional perks to incentivize people to buy. Again, it is entirely up to you, but the early bird strategy isn’t long term. You’ll want to set a specific period (i.e., first week) or limit it to a certain number (first 50 tickets). If everyone can get it, we lose the urgency and buzz we are trying to create. It is a no-cost solution that produces revenue earlier, which you can invest back into the event if necessary.
On the other end of our timeline, we have the on-site sales, but should you be able to get a ticket at the door for the same price as someone who bought their ticket a week ago? Of course not! If people are showing up at your door, they’re willing to pay more, and there is nothing wrong with letting them know that. If they want to come to the event but don’t like the higher price at the door, they’ll buy in advance, and as you increase your prices over time, you always put the on-site price next to the current price. Putting the prices side by side shows them what they will pay if they wait and incentivizes them to purchase faster.
That’s it! That’s all there is to value-based pricing. Pretty simple, right?
In all seriousness, this can all seem complicated, but that doesn’t mean you can’t do this. Just remember to conduct research, experiment, refine your strategy, let price determine your cost, and be creative. This strategy can have many moving parts once in place, but you don’t have to do everything under the sun your first time using this strategy. You need to be active and engaged, but that will be difficult to do if you are overwhelmed with the number of ticket types. You can easily start small with this and expand, but regardless of plan size, the value-based pricing model is all about maximizing revenues by giving your customers the value they want at the price they want.
Jordan Busboom is a Technical Services Assistant at Indiana State University’s Hulman Center. He received degrees from Indiana State University in Music and Mathematics in 2018.