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#TBF20 Takeaway: Base pricing on resale rather than skewed primary model

Deloitte’s Jose Sanchez cited American investment guru Warren Buffett as he called on event organisers to adopt value-based ticket pricing during a session at this year’s TheTicketingBusiness Forum 2020.

Sanchez, senior external advisor – revenue and commercial strategy (travel, hospitality and leisure) at Deloitte, took a broad look at revenue and pricing optimisation in an enlightening presentation for those set to again launch ‘on sales’ as we head into 2021. Attendees can watch the session back here.

He reminded attendees of tycoon Buffet’s maxim that “the single most important decision in evaluating a business is pricing power. Price is what you pay, value is what you get.”

Sanchez said that investment in pricing optimisation is often low, which hampers revenues and profits as huge efforts are subsequently needed to expand volume or slash costs. He outlined how a increase in average ticket prices of 20 per cent can double income, and has a much greater impact on profitability than the other drivers.

Assessing pricing methodologies, he said most primary ticketing is determined by cost-based pricing, which is the weakest strategy as it focuses simply on the recovery of costs. Value-based pricing, which is deployed by the travel industry and secondary ticketing sector, is at the top of the scale, as it is determined by the value created for customers.

Sanchez suggested that event organisers could learn more about pricing from human fans’ willingness to pay in the secondary market than from the primary market, where he said ‘bots fans’ are responsible for 40 per cent of activity.

He added: “My recommendation is to embrace value-based pricing as the cornerstone to offer the best value to our customers while capturing the highest revenue and profit potential.

“It is a change of perspective as we move from the product and cost as a starting point, to value as our starting point. We should begin with the question ‘what is the greatest value that we can offer our customers?’”

In an in-depth presentation, Sanchez unveiled figures relating to price elasticity which highlighted the potential of a multiple price points model. Using a theoretical example, he showed how revenue could be increased by 44 per cent by offering tickets between $90 to $30 as opposed to a single price of $60.

“Customers and fans are not all the same,” he explained. “We all value services differently.”

Save the date: TheTicketingBusiness Forum 2021 takes place between 21-23 June, 2021…

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