This article is the second installment in the How to Start A Successful Event series.
When you start an event series or just run a single event, one of the trickiest parts of the event strategy is how much to charge for your event. A part of the answer is that trial and error does play a big part in being able to hone in on the optimal price for your events. Luckily, it isn’t all about experimentation. In this article we’ll also look at some pricing theory to give a more scientific approach to how you decide what the price of your event should be.
In the beginning
If you are just starting to put on events, or if this is one of the first events in an event series you are planning, it is probably a good idea to make the initial events free. Hopeful as we may be about having well attended events, the truth is that it will take you some time to hone in on the most effective strategies to promote your events. Until you hone in on the effective marketing strategies, you will probably have a difficult time getting as much attendance as you hope. To maximize attendance, make the event free and use the free attendees to gather feedback on event quality, how they discovered the event, and to help you spread the word about your event.
Freemium business model
To understand the power of “free” I want to focus on elements of the Freemium business model. The Freemium business model is primarily for the web, but many powerful elements of the Freemium business model can be effectively applied to events.
The freemium business model works well online because it is essentially free to give away digital goods. Most non-web businesses can’t give away physical things, but if you have an event, you can give away extra seats as long as your venue doesn’t hit capacity.
In this article I explain the Freemium business model in more detail, and cover more elements of the Freemium business model that can be used by almost all businesses. http://glowingstart.com/freemium-best-business-model. To briefly sum up some of the core reasons that the Freemium model is so powerful:
- You get maximum people to your business/event/product.
- Some of those people will convert to customers.
- Some of the people who don’t pay can be used for marketing to help spread the word.
- You suffocate your competitors because consumers flock to your free offering, and not the offering of your competitors.
When events should be free
As long as you can generate enough cash per free attendee, it may be reasonable to always keep the events free because that will give you optimal growth. You can monetize your events in these ways that don’t involve charging people to attend:
- Sell maps, guides, books or other information relevant to the attendees.
- Sell products that might be relevant for attendees.
- Ask for donations or “pay whatever you want” model.
- Sell some consulting services or use your event series to get hired.
- Get sponsors for your events.
When events should be paid
If you have no competition and your event is the kind of thing that people will really want to attend, you can get away with charging an unreasonably high price. If you are a business owner, reading the previous sentence was probably music to your ears.
Yes, if you are able to generate demand and offer something that few others can offer, you can charge premium rates. The challenge is that this typically does not last as other people see that you are doing well, and also try to provide the same thing as you do. The main differentiator becomes price, and even though all business owners know not to compete on price, it often happens anyway.
If you compete on price, it is usually a race to the bottom. This is where you can also implement the Freemium business model and suffocate your competitors by making your event free and stealing all of their customers this way.
Price according to demand
There are many kinds of different events. Concerts, workshops, group activities, and large conferences are all events. That makes it very difficult to suggest price by the type of the event because there are so many kinds of events to cover. Instead, let’s focus on the demand for the event.
You must generate demand for your part with your event marketing. Over time, you will figure out how to generate sufficient attendance. One great example of how to amplify demand is to invite amazing guests.
For example, if your event is an evening of music by local amateur musicians, it will generate a certain level of demand. On the other hand, if your event is an evening of music by the Rolling Stones, it would generate a very different level of demand that would generate attendance that is thousands of times larger. As you can guess, the price would vary with the demand for the event. The Rolling Stones can sell tickets for hundreds of dollars, but will only be able to charge a fraction of that for people to listen to amateur musicians.
The same is true for conferences. If you bring together some of the top experts in your industry, they will make your event appear as one of the top conferences in your industry. If you can create that kind of a perception, people will flock to your conference, and it will be easier to charge a premium.
Charging a premium and going after a lucrative audience
Just as in the scenario where making the event free or cheap increases attendance from whom you make a low amount per attendee, this can work in the opposite direction as well. If you price your event at a premium, you will greatly decrease attendance, but it may not matter because the money you make per attendee is far greater. That helps you build a high-end audience that can afford premium prices and isn’t afraid to spend money. Tapping into an audience that isn’t afraid to spend money is ideal because you can always offer more events and more products to sell them in the future. And your sponsors may covet such an audience as well.
Ideal situation for charging
If you can draw a large enough audience to your event that over-populates your venue, you can begin charging for the event. This will help you control attendance size while ensuring that the most interested and potentially lucrative people attend your event. That is amazing for your sponsors and you as the event organizer.
Event pricing geared towards your existing audience
The above points were made with new attendees in mind. Making the event cheaper or free will boost attendance, and increasing the quality of the event will allow you to charge more. But what about pricing your event with your existing audience in mind?
If you have a large enough existing list of people to whom you can promote your events, you can gear pricing towards that group. Since those people already know and trust you, it might be an easier sell to get them to pay more for the event. Many sites like TechCrunch, PandoDaily and other similar sites also run conferences. They are able to promote those conferences to their existing community of readers and paying members (if a particular publication has that option). Those publications are able to charge a premium because the people to whom they are promoting the events already trust their brand as opposed to hearing about them for the first time and being skeptical. Additionally, they typically bring in guests who are industry leaders. That further helps to increase demand for the event.
Be comfortable charging
Many small business owners aren’t always comfortable charging a premium for things. Many people feel guilty for charging a premium or charging at all. If you show discomfort or awkwardness in how you charge and promote your paid events, consumers will see right through that, and the “perceived value” of your event will decrease because if you don’t show confidence in your pricing, that will be a negative sign to potential consumers.
Go through the mental process of acknowledging that your event is worthwhile. First and foremost, make yourself feel comfortable about whatever price you are charging and realize that you will be providing value, and your time and effort are worth the money.
Basic formula for pricing the event
Since events can be so different in nature, there can’t be a single formula that accurately tells you how to price your particular event. But let’s try anyway.
Here is one kind of formula you can try to use.
- The desired profit you want to make + the costs and staff fees will give you a target for total revenue to try to achieve.
- Estimate the revenue you will make from sponsors, selling products or any other non-ticket revenue you think you will be able to generate.
- Subtract #1 from #2
- Divide the result from #3 by the number of people you realistically estimate will be paying attendees. (personally I like to use only 50% - 75% of the number of people I realistically think will attend. This accounts for unexpected problems that almost always crop up)
That will give you the approximate ticket price that you should charge attendees in order to achieve your financial goals for the event.