Maximising revenue from existing channels, such as registrations, is a task race organizers spend surprisingly little time on. Most instead find it easier to focus on reducing costs or adding new revenue streams to their events.
Although any effort that improves the overall economics of a race is worth considering, optimising what’s already there should be the first concern for any event organiser.
So in this feature we will look at tiered pricing and how to implement a pricing strategy to maximize your registrations revenue.
What is tiered pricing?
Tiered pricing is the use of price tiers (different price levels over time) to optimize registration revenue subject to a number of constraints. These constraints might be your maximum participant number, existing participant interest, the registration market rate for your race etc.
Let’s say you have 500 places to fill in your Half Marathon, 6 months to do it in and you already have 150 keen prospects in your mailing list. How do you set your registration price – and adjust it as you go along – to keep everyone happy while making the most from your registrations?
That’s what we’re here to find out. Read on.
Components of a tiered pricing strategy
Any tiered pricing strategy relies on three key components:
- A solid understanding of “fair” market price. This is the starting point – the anchor. You want to understand what most people are willing to pay for a race like yours.
- An ability to hike prices as demand increases.
- An ability to lower prices demand decreases.
Between them, these three components provide all the tools you need to steer your registrations towards maximum revenue: fair price provides the overall benchmark and hiking/lowering prices provide the levers for managing demand over time.
Implementing a tiered pricing strategy
Ok, this is all a little bit too theoretical though. So let’s return to our Half Marathon example: 500 places to fill over 6 months. What do you do?
Establish fair price
First, you look at similar Half Marathons and other data to determine a “fair” market price for your registration fee.
From the many Half Marathons you find, focus on peers: races of similar character, scale, pedigree and reach. You will know who your peers are, if you’re honest and realistic in assessing your own race.
Now let’s assume that from the events you look at you determine that people should be prepared to pay around $100 to enter a race like yours. Great – that is your starting point. Our objective will be to build a strategy that will – on average – yield more than $100 per participant by managing demand and creating incentives for the right participants at the right time.
But, how can we hope to extract more than $100 with tiered pricing?
The answer lies in realising that not all of your participants are willing to pay the same price for your race. Some participants would want to look for a bargain and pay less, whilst some would be happy to pay more, either because they absolutely love your race or because they don’t want to commit early.
The aim of a tiered pricing strategy is to get enough participants registering for more than the $100 benchmark price to raise overall revenue above the level a flat pricing strategy would achieve (i.e. the $100 per participant).
Fix your late bird
Because no-one has so far successfully pulled off a registration price hike mid-registration (let us know if you have, we’d love to speak to you!), we start by setting our standard price at a premium to the $100. Say, $140.
The $140 is the price someone will have to pay to enter your race at the last stage of registration: the late-bird price, so to speak. Not all people will register at this price, but a good many will.
The late-bird price is there for two reasons:
- Make your early-bird price look good. This is the level on which our early-bird discount will be taken. So a higher price here means a better discount for early registrations. This is also the level we’ll use to run tactical discounts towards the end of the registration period, so having this higher again helps.
- Compensate you for receiving money later. By the time your standard price kicks in you would have spent handsomely on your event and taken on more commitments. So if you’re giving people the option to wait until this late whilst you take on all the risk of uncertain registration numbers, they have to compensate you for it.
With your standard price set, you now need to sell the bulk of our tickets.
Set your early birds
Your early-bird period is the earliest, and often longest, stage in your registrations process. This is where you offer incentives so people will register early at a reduced price.
Early-bird offers help create a sense of urgency in participants looking for a bargain and should help close a large portion of your registrations. And that is good for a number of reasons:
- You can gauge interest early and make adjustments to your marketing if necessary
- You receive money early, so you can start covering purchases without borrowing from yourself or others
- You can plan better, as you get better insights into your resource requirements early
Depending on the type of event you run, you will be hoping to sell between 30%-60% of your tickets during your early bird period.
A successful early-bird strategy opens with a significant discount early on and gradually increases price every couple of months or so towards the standard (late-bird) full price. For our example, you would open somewhere around $90 and increase from there to $110, then $125, then full price.
Two more tips will help you make the most of your early bird pricing:
- Always limit early-bird places. That way if you end up setting your early-bird discount too high (i.e. early-bird price too low) there is a cap to the damage you can cause to your revenue.
- The stronger the interest for the race the fewer early bird places you should make available. Don’t sell your race out cheap. If there’s interest willing to pay higher prices, clinch the bare minimum in your early bird and carry the rest into the higher pricing tiers.
Push/pull at full price with selective discounts
Once you have entered the late early-bird (e.g. $125) and late-bird ($140) stages, you should ideally have sold the bulk of your places but still have plenty to go. This last stage of registrations takes a bit more active management.
During this phase, you are doing two things at the same time:
- Converting people at full price. For example, people that have shown strong interest in the race and have not yet registered, subscribers to your mailing list etc. These sales will secure premium revenue at way above the $100 benchmark.
- Offering targeted discounts to select groups. There are still people, even at this late stage, looking for a bargain. These sales will help you move the remainder of your tickets.
So, how deep should your targeted discounts be? As it happens, not all that deep. You should aim to go as low as your early bird, but that’s it.
To avoid compromising future races, don’t offer discounts outright. Instead, try offering discounts through incentives or as prizes in competitions. Consider one of the following:
- Buy 1 get 1 Half Price (or similar) deals. This is an effective 25% discount per entry, gets you two places sold instead of one and sounds great to people looking to race with a buddy.
- 25%-30% discount codes for existing registrants. Similar to the above but aimed at people who have registered already.
- Set up a competition and give away 50%+ discounts or 1-2 free places as prizes. This is a very effective strategy that can generate a ton of interest for your race online (some of which will translate into full-price sales), as well as shift race tickets.
Adding it all up
Ok, so how did we do?
Well, we sold some places at anything between $90 (below our $100 benchmark) to $125 during the early bird period. People who were happy to commit early and grab a bargain, did just that.
Then, we sold some places at $140, hopefully, as many as possible. People who really wanted to do the race but, for whatever reason, didn’t want to commit early, paid a premium for the flexibility.
Finally, we used some discounts ranging anywhere between $90 – $110 to shift whatever places we had left at a very attractive level relative to the standard registration fee. All in all, we should have ended up well above the $100 we were aiming to make through flat pricing and kept everyone happy.
Now, you won’t get everything 100% right the first time round. That’s ok. You’ll still get more things right than wrong – and the whole point is to try things out anyway. Keep an open mind, make a plan and don’t be afraid to approach the problem afresh every year.
Get a head start
Subscribe to our fortnightly Race Directors Tips newsletter for more great tips on planning, organising and growing your race!