This article in the Wall Street Journal describes how Kid Rock is changing the business model for his upcoming tour. He is lowering the price for almost all of the seats to $20 and in exchange will begin receiving a cut of the concessions.
As all new business models should be, this may be a win-win-win. A win for Kid Rock. A win for the fans. And a win for Live Nation Entertainment who owns or operates the venues where he will be playing.
Win for the fans is easy to understand. Lower ticket prices mean more people can afford to go.
How is this a win for Kid Rock and Live Nation? This only happens when overall revenue goes up, and that is a strong possibility. In 2009, Kid Rock sold 17,000 tickets in Chicago. This year he has already pre-sold 28,000. Los Angeles sold out in 9 days and St. Louis sold out and wants another show. It looks like $20 tickets will bring in many more fans.
Kid Rock also wins because many people who were “dragged to the show by a friend” become fans. This builds his fan base.
What pricing lessons can we learn from this?
1. Business models are about pricing. You should regularly rethink your business model. When you create a new model where everyone wins you have the potential to change an industry.
2. Don’t forget about complementary products. Think of “share of wallet”. In years past, Kid Rock would fill a venue, bring people in, so other people can make money selling them parking, beer or t-shirts. If you have the attraction, you have potential to make money on everything. In fact, you can lower the price of your main item to attract buyers for your complementary products.
3. Think about the lifetime value of a customer. If Kid Rock creates new fans he will potentially make money from them in the future.
It’s always fun to watch a high profile pricing experiment. The question is, are you thinking about your pricing? Are you rethinking your business model? With the pace of change today, someone may soon change the business model in your industry. Will you lead that change or hope to catch up?
Mark Stiving, Ph.D. – Pricing Expert, Speaker, Author
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