According to the US Bureau of Labor Statistics, the inflation rate for the year ended May 2021 is 5.0%. This increase created major jumps in prices consumers are being charged for many items in a number of industries. You have probably noticed these higher prices as you fill your gas tank, visit a restaurant, update your wardrobe, or visit the grocery store.
Side note- for the premium sellers reading- as businesspeople it is our job to understand how this inflation is impacting the business we are pursuing.
I read a very interesting article last week titled, Beware of ‘Shrinkflation’, Inflation’s Devious Cousin, which discussed a trend in consumer products as a result of the country’s growing inflation. The premise is simple. Rather than raise prices on a product, the company selling it reduces the quantity provided for the cost. As the article points out, it can seem like a devious practice when the shrinkflation shows itself in the repackaging of consumer goods and no one likes the price of their oh-so-needed vacation doubling.
It goes against everything you learned in your ECON101 class where supply always impacts the price a person is willing to pay. But there have to be examples where the shrink is beneficial, right?
Take premium seats for example. For years we have been peddling them as a full package of every event (outside of a few marquee affairs if you read the small print of a premium contract) because we loved the certainty of the guaranteed revenue. Businesses would oblige us knowing that their prospects would love to come their favorite artist’s concert or a basketball game against a hated rival and would painfully swallow the other fodder that would be included on an arena’s event calendar.
If they were not so sure it made sense, we felt we had the logic to convince them taking on that unwanted inventory made sense. We sellers loved the an arena’s 150 event calendar because it brought the cost of an average ticket per event down. Robotically, we would whip out our calculators (or the calculator app on our phone) to show that:
Cost of the Suite
$200,000
Tickets per event
16
Number of events
150
Price per ticket
$83.33
The problem with this sales logic is that it assumes the customer valued each event that we put in front of them- even when we know they did not. The truth is that we are devaluing our product by including the things that the customer does not want. Before you disagree, try to think about what is going through an executive’s head who is staring at 16 digital suite tickets for your next preseason game. I cannot imagine you would highlight that feeling on your next renewal call.
What if we completely flipped the script. What if we used the knowledge we have of our consumer bases and built packages that fit the ways that we know they would most effectively utilize our premium spaces. We could no longer be event-driven, just results-driven.
Along the way, we could drive more revenue. It certainly feels like customers are willing to pay more for what they want as we crawl out of our figurative holes and see the world again. The COVID events that did not include corporate entertaining in many of our buildings, showed that wealthy individuals have a greater appetite for pieces of the premium pie as they found their way into the suites companies left vacant. As we move forward, there are ways to make premium work for everyone.
For example: we could shrink our packages to include less but ask our customer to pay more. Why would they do that? Because they are only getting what they can most effectively use. No more events that diminish the value proposition for the premium space, only additive elements.
Imagine if we took some of our suites and split the events up. Businesspeople- we know you do your best work during the week spending time with clients and prospects- take all the Monday through Thursday events. Wealthy individuals who have learned that premium is a great place to spend time with their friends and families in a VIP manner take weekends when personal schedules are most compliant. It is almost like we are recreating the old ticket sales miniplans in a more sophisticated way and with a greater per-event price jump.
Things that are sprinkled on the calendar as “fillers” – make them available by request only. Everyone only gets what they can effectively use. If an organization really still want all the events coming to the arena, be happy to sell them a traditional package. As long as it is what THEY want, not what you are using some faulty math to prove makes sense.
Happier customers. Opportunity for more revenue. Less math in public. Certainly sounds like the right path ahead to me. If you need help crafting your new plan, please let us know.
Happy selling!