Thursday, October 15, 2009

What's the (Price) Point?

I don’t usually ask questions that I don’t know the answer to but in this I case will. Because, frankly, I would argue that the events industry as a whole does not have a firm sense of what the optimal price to attend an event is. As discussed in the last post, part of this is the variety of events in the mix. But not defining (or understanding) what price would maximize an event’s profit margin (as a function of price and attendee volume) is leaving money on the table.

Historically, a point at which a typical event price emerged. For a two-to-three day event organizations charged approximately $1,195 to attend a 2.5 event in 1995. I don’t have any visibility as to how this came about, and can’t comment on it. The issue, and the point of this post, is that from that point, there has not been a slew analysis placed on pricing strategy across the industry. I’ve seen and heard of many organizations, in the course of planning events, base pricing on:
  • A need to deliver margin (“We need to generate $XYZ more revenue – let’s increase prices $100!”).
  • Comparative/competitive landscape (“ABC Conferences upped prices – so let’s do the same”).
  • Just because-ism (“We didn’t increase prices last year – let’s increase them this year”).
None of which comes anywhere close to promising that you are maximizing the profit margin attainable.

Calculating the optimal price – and/or price increase – is inarguably challenging due to the variables in play. Specifically, the number of attendees you draw also impacts sponsor satisfaction. So if you do some serious number crunching and determine that increasing prices $300 increases your profit margins BUT decreases your attendance by 10% (the decrease in volume offset by the increase in revenue) is all well and good … but asking your sales manager to explain that to their exhibitors is a different story.

I’m not going to detail price point calculations here – Google lists many options for free calculators. A key element these calculators require, however, is the price elasticity of your event/product – or, knowing the answer to the question “if I raise my price by X it will impact attendance by Y.” There are free tools available to calculate this as a “what if” scenario as well, but to truly answer this question, pricing needs to be tested on a continued basis - even and especially within one event; variations in topic, audience, and calendar are all variables which would impact analyzing two different events at two different price points.

Overall, strategic pricing holds various functions in an events organization – different prices addresses different level audiences and communicates a level of value proposition. But in the context of the overall events environment, event marketing managers need to know and guarantee that the product they are marketing is being sold at the price which delivers the highest value to the organization. And this is based on understanding the impact of price changes to overall attendance. Learning and knowing this will go a long way towards increase profitability – and adding to your value in the organization.

Good luck!


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