DJ Joshua van Aalst

For my MBA degree I have been studying business management at MIT University. Since my experience prior to MIT was partially in the nightlife industry, running the events management company Josh and Friends, my studies have focused on how to run a successful night life business.

Over the course of articles in this section, I am going to share some of what I have learnt and discuss how it can be applied to nightlife businesses.

Lets start with a discussion on setting the price of entry at events.


Current Pricing of Nightclub Entry

In the world of consumer events i.e. nightclub or festival events, entry prices are currently set using the cost plus method. How does this work?

Cost Plus Pricing

The event manager first picks a venue with a specific capacity or sets a capacity for the event and then picks a venue that fits that desired capacity. Lets say the event manager wants to throw a 1,000 person event. The event manager would set a ‘safe’ target break even. That could range from 30% to 90% of venues capacity. Normally this percentage is set based on prior experience. For this example, lets set the break even at 50% i.e. 500 ticket sales. The event manager then creates a pro forma (proposed) budget for the event. This normally includes 4 major costs:
r />• Promotions including marketing and advertising
• Entertainment including DJs and live acts
• Production including lighting and sound
• Miscellaneous including venue costs and staffing costs

A good event manager will attempt to ensure there is a balance between these 4 major cost pools. Why does a good event manager want to do that? Because an event with the best DJ in the world that is not promoted will not drive attendance, vice versa an event with fantastic promotion and awful DJs will discourage people from attending in future.

Once the event manager creates the budget he simply divides the budget by the number of ‘safe’ patrons in attendance to get the ticket price. Lets say our budget is $50,000 for a 1,000 person event with a ‘safe’ break even of $500 payers, then the ticket price would be $100 per ticket.

Finally the event manager makes minor adjustments to the ticket price using either basic pricing theory i.e. charging $99 rather than $100 or comparative pricing i.e. a competing event is charging $89 per ticket, therefore we should match their price even if it means our break even is now slightly higher than the ‘safe’ percentage of 50% that was set.