Pricing Secrets Using Event Ticketing Software

• Substantially more revenue for the event organizers
• Significantly higher customer satisfaction for the ticket buyers

Scenario

Remembering high school economics, the demand for a good or service decreases as the price of that good or service increases. Suppose we are selling tickets for a musical, and we are deciding how to price the tickets.  We are in a venue with 900 seats. So, in economic terms, supply is fixed at 900.

Let’s assume the demand curve (quantity of tickets that would sell at different price points) is the following:

That is to say that if tickets were $15, we’d sell out the event. At $20, 700 customers would decide to come, and at $25, only 500 tickets would be sold as that would be the total demand.

General Admission Pricing

With general admission pricing, there is no easy way to assign different prices to different seats. You could create different sections in the venues and have ushers monitor the guests to ensure they sit in the right section, but that is quite labor-intensive, not to mention ackward when you have to tell a guest that they are in the wrong section. So, while you can have different price categories – e.g. Adult/Student – you cannot really have different prices for different seats.

In this scenario, we need to decide on a price of $15, $20 or $25. Looking at revenue, we would see the following alternatives:

• At $15, revenue is $15 x 900 = $13,500
• At $20, revenue is $20 x 700= $14,000
• At $25, revenue is $25 x 500 = $12,500

As shown in the graph below, revenue is the area under the demand line at our chosen price.  At $20, we sell 700 tickets (and have 200 empty seats). If we wanted a full house, we would have to lower the price that everyone pays to $15 and our total revenue drops. 

Similarly, some people are willing to pay $25. They are eager to pay a higher amount for better seats. But again, getting the $25 from that group requires that we raise prices for everyone – reducing the number of tickets sold to 500, and reducing our revenue to $12,500.

What we need is the ability to sell $25 tickets to people who want to pay that and give them better seats, and at the same time, sell $15 tickets to people who are willing to pay only that and give them seats further from the stage. We need event ticketing software that enables that approach.

Assigned Seating Pricing

If we could assign different prices to different seats, we could price, say 300 seats at $25 (the demand curve said 500 people are willing to pay $25, so we are under that), 300 seats at $20 and 300 seats at $15. The demand curve in this scenario says we would sell all those tickets.

So our revenue in that scenario would be $18,000, which is $4,000 more than the general admission scenario – comprised of the following:

• 300 x $25 = $7,500, plus
• 300 x $20 = $6,000, plus
• 300 x $15 = $4,500

With event ticketing software that gives us the ability to assign different prices to different seats, we can more closely meet the demand curve as shown below – leaving less money on the table, while better serving our customers.

Remembering that revenue equals the green area under the demand curve, it is interesting to visually compare this scenario to the general admission pricing scenario.  In the chart below, the dotted area represents the general admission pricing scenario – the $14,000 of revenue. The salmon colored area outside the dotted area represents the additional $4,000 of revenue we obtain with assigned seating pricing.

Of course, no one really knows what their demand curve really looks like, so all these numbers are representative only.  It is certain though that all demand curves look something like the one above – where the lower the ticket price the higher the demand. Some buyers are simply willing to pay more than others.

Therefore, there will always be an economic advantage to using ticketing software that enables differentiated assigned seating pricing. Such pricing also serves ticket buyers better, as discussed briefly below.

Happier Customers with Assigned Seating

Putting additional revenue aside, is this the right thing to do from a customer service and customer experience perspective. Absolutely! Here’s why: Some customers want to pay more for better seats.  Think of family and friends of the key performers. Customers also feel in control when they can select their seats. And the seating process itself on the day of the event is much more orderly.