Create a Pricing Strategy to Get More from Your Guests
Editor’s Note: Whitney Johnson’s articles are provided by BookBottles.
Your customers are the most important part of your business. Without your customers, you don’t have a business. But simply having customers in your door isn’t enough to take your venue to the next level. You need to understand your guests in order to have the highest profit potential each and every night. That’s why it’s important for you to understand your pricing strategy and how it relates to your customer’s purchasing habits.
Here are three areas to focus on to optimize your revenue per guest.
1. Know your inventory
This is the most obvious of the three — pricing your inventory. Take a step back and identify all the areas of your venue you can possibly charge. Drinks and food for sure, but what about cover charge, tickets, drink packages, and tables? In all of these areas, it’s crucial to understand what customers will pay in return for your atmosphere, party, drinks, and food. To do this successfully, focus on these three items:
- Market research. What are the industry trends? What are your competitors’ pricing structures? Is that working for them? Why or why not? Learn from this information to help you determine your own pricing structure so you’re not pricing yourself out of the market.
- Target market. What is your target market’s potential entertainment spend? This means you have to know your audience, and I mean truly know your audience, including their demographic, geographic, and psychographic information. This helps you understand what your target audience is looking for and what they’re willing to pay for a venue like yours. If you price yourself too high, you’ll scare your customers away; but too low, and they might see you as cheap. Read this article to learn more about how to understand your audience at a deeper level.
- Profitability. Always remember the formula r-e=p. That’s revenue - expenses = profitability. Understand your margins relative to pricing. If you’re cutting too far into your margins, look to see if you can stand to increase your prices. Are there other activities you can do to increase your profit potential, such as accepting credit cards at the door to appeal to more guests, using a system to streamline operations and cut down on vendor costs, switching to a different distributor, or even investing an entirely new entertainment concept? Explore your options; sometimes you have to spend money to make even more.
2. Treat guests like individuals
This area isn’t as obvious, and is a huge opportunity for every venue. Nearly every nightclub and bar has an estimate of how many guests walked through their door on a given night. What they don’t know is who walked through their door. They get people in, serve them, and let them walk away without knowing anything about them.
But if you use a digital system to handle every aspect of your door, you’re able to collect data on every type of customer that walks in your venue. And when you connect this to your point of sale system, you’re able to unearth even more valuable information. This means you have a database of all your guests, including their name, contact info, how many times they’ve been to your venue, whether they’re a VIP/guest list/event/general admission customer, how much money they’ve spent, and what their most popular drink purchases are.
Now think about that. With this information at your disposal in the palm of your hand, you get to treat every guest like an individual. Everyone loves to be recognized - everyone. And people naturally spend more when they feel appreciated and recognized. Here are a couple examples to do this well:
- A customer is a regular guest list customer. They come to your venue and you see in their profile they’ve visited your venue every week for the past month. Upsell that customer to a VIP table and provide a complimentary bottle of Champagne as a thank you. This simple gesture is perceived by the guest as a premium, highly personalized level of service. It shows him how much he is valued, and entices him to stay longer, spend more, bring more of his friends, and come back more often. This is how you build loyalty organically.
- You’re hosting an event. You’ve hosted events in the past and used your digital system to build your database. You segment your customer list into a group of people who attended a similar event in the past that spent more than $200 at your bar. Send that group an exclusive invitation to your event before you release it to the rest of the public. They’ll feel like insiders and will naturally establish a deeper connection with your venue. You can also give your biggest spender a complimentary ticket to the event because you’ll know you’ll make even more in bar sales with him.
Treating guests like the individuals they are and catering your experience to their needs isn’t hard. All it takes is a system that captures all your information in one place, your staff to use that system so it automatically pulls necessary information on the guests walking through your door, and your ability to execute on providing that exclusive experience. It’s the little things that make the biggest difference to your guests.
3. Use a pricing strategy for events
This last area to focus on is automated and allows you to make incremental revenue without doing any additional work. For the win! While this is primarily focused on events, you can use this same strategy for an average night by treating every night like an event.
Let’s say you have tickets to sell to your upcoming event. Use an automated pricing strategy to earn more revenue as demand increases. For example, you can have early bird tickets available a month before the event at $50, which changes to advance tickets two weeks before the event for $60, which changes to general admission the week before the event at $70, which changes to door ticket for $80 the night of the event. You can also set your pricing strategy to increase by inventory instead of time, meaning the first 50 tickets are $50, the next 50 are $60, and so on. This incentivizes guests to buy early and also brings more revenue to you for those who don’t.