Pricing your event is a tough nut to crack. You’ve got to price high enough to cover your expenses, and low enough to attract a crowd. And even if you’re consistently selling out, the right price can be the difference between stellar and “so-so” profits. So what’s your strategy?
Many organizers use a “cost-plus” strategy to price their events. It’s simple: you price above your costs. If your event costs $100 a head to throw, and you’re looking for a 10% profit margin, you price at $110. Case closed.
Unfortunately, this commonly used strategy overlooks a very crucial element: your attendees.
If your attendees don’t think your event is worth $110, they won’t pay it — to them, it’s irrelevant that you paid $100 to produce their experience. On the other hand, if your attendees think your event is worth $150, you’re leaving money on the table.
So how do you find your pricing sweet spot? Through value-based pricing — a strategy that puts attendees in the center of the equation. Here’s how it works.
A Value-Based Pricing Strategy
There are three parts to a value-based pricing strategy: perceived value, the actual price, and the cost per ticket for the event.
Perceived value is what the customer thinks they will get out of your event. Here it is perception, as much as reality, that drives the transaction.
The actual price of your ticket. This can be greater or less than the perceived value. Ideally, the actual price is as close as possible to the perceived value (without going over). When the actual price is below the perceived value, you’ve created “surplus” value for your attendees.
The per-ticket cost of putting on your event. This completes the triad of value-based pricing.
Taken together, these three components give you a full picture of the underlying economics of your event.
As shown in the value-based pricing model above, your customer is comparing perceived value and price — and you’re using your cost per ticket to determine the baseline price for breaking even.
If the customer’s perceived value is higher than your ticket price, then your customer will decide to purchase. And if your cost per ticket is lower than that price, you will make money. Everybody wins.
While value-based pricing is a little more complicated than other strategies, it allows you to design the best long-run economic model for your event. You’re earning a profit, but you’re also creating happy customers.