SunFest Understands Customer Segmentation

Wednesday, April 29, 2015

SunFest, a multi-day festival is West Palm Beach is famous for music and art. It should also be known for its excellent use of business strategy and customer segmentation.

Though many concertgoers are satisfied with their "standard" tickets, the event organizers also sell a number of upgrades to their more affluent customers. The most unusual? VIPee wristbands. This paid upgrade allows its wearer to access "clean, air conditioned restrooms" - with a guaranteed zero wait time. I mention this not to poopoo the idea, but to praise it.

Many themeparks such as Walt Disney World have demonstrated that special passes can result in significant profits at minimal costs to the park. As SunFest's VIPee's name suggests, some customers are more valuable than others. Affluent customers often make up a small percentage of a firm's customers, but can represent a very significant portion of its profits.

Raising upfront prices might turn away the masses - effectively leaving money on the table. Better to find a way to raise prices for those who are willing to pay. Unfortunately, it's quite difficult for even the best salesman to argue that wealthy customers should pay more for a given good. A far more effective approach is to sell add-ons that will appeal to those who are willing to part with greater sums of money.

Whether an additional fee for reserved seating, backstage passes, or even nicer bathrooms (SunFest offers all three), these upsells can add up for a business owner who needs to maximize his profit. While this strategy can work well, it can also backfire, if implemented improperly. My general advice is to think about items tangential to the actual event. The "standard" ticket holder may feel nickeled and dimed if barred from certain performances, but will feel far less upset about special bathrooms for those willing to pay the higher price.

You can learn a lot about pricing by attending events like SunFest, but it's far more efficient to contact me for a consultation. Of course, folks in the software industry should also consider picking up a copy of my book on how to price software systems.