Dep Leppard, $12 Beers and the Expectation Band

Def_Leppard_Sweden_Rock_2008

Last week, I spent my Friday evening at the Saratoga Performing Arts Center (the #1 outdoor music venue in the United States). I blasted the Support Driven Slack with a mind dump soon after, and that’s grown into this Post.

If you’re not in that channel, here’s a screen grab:

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(If you care about hospitality on the internet, you should be in the Support Driven Slack channel.)

I’m tossing around the idea of what I’m calling the Expectation Band. The Big Idea is that in general, we have a band of expectations when it comes to pricing: you can imagine it as the range of prices for an item that neither delights you nor makes you scoff. For a low quality domestic pilsner, it’s probably something like $2 – $5. If a seemingly normal bar on a normal day charged me $6 for a PBR, I’d be put off. It’s too much. It’s outside of my Expectation Band.

We can see how the Expectation Band is necessarily contextual: if I were in Manhattan, or on a cruise ship, or in Erie PA, or on the International Space Station, my Expectation Band would adjust upward or downward accordingly.

Context here is not necessarily geographic – my Expectation Band in my hometown of Saratoga Spring, for instance, shifts upwards during the summertime. When the horse track is running, the town’s population doubles, and we have lots more high end sports cars roaming around. So, parking is horrendous and prices bump up. I adjust my expectations accordingly.

Stick with me here, this is a brainstorm session. Check out this sweet artisan hand-drawn graph, plotting interest against price:

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For the purpose of this discussion, let’s say this is graphing my own interest vs. price of one can of Coors Light. The black lines indicate a general, everyday context. The green lines indicate the context of a Def Leppard concert. The dashed lines represent the Expectation Band for each context. The black and green stars indicate general regions of acceptable prices.

We can see that there’s a shaded area – that indicates the overlap between my day-to-day Expectation Band and my Def Leppard Expectation Band. For me, for a Coors Light, we’ll call it $5. In a regular day I might think that’s a bit high, but at a concert it would seem a bit low. In this way, the same price for the same item in different contexts is illustrated to have different impacts.

The red star is where things get interesting. The red star is where folks scrunch up their faces and say “How much for a Coors Light?” even in a context where they’re expecting to pay more. (At this particular concert that point was $12.00)

The folks knew they were at a Def Leppard concert, there wasn’t much chance of being caught unaware of that. It’s generally accepted knowledge that food and drinks are going to be expensive at concert venues. We can assume that everyone there had appropriately adjusted their Expectation Band upward.

When the price offered is outside the already raised Expectation Band, you’ve failed. You’ve incorrectly assessed your customer’s Expectation Band, and in doing so, you’re leaving money on the table and you’ve made their experience worse.

How do you identify the Expectation Band of your customers? That’s the big question – where is the ideal balance between maximizing revenue and causing your metal-loving music fans to look at beer vendors like they have six eyes?

The answer, I would speculate, is in testing. I am not in charge of vending at an outdoor music venue, but if I were, I would engage in a number of tests, both within-event and between-event, possibly controlling for ticket price and audience age. Offer Coors Light at multiple stands, and have half of them sell for $7 and half of them sell for $12. Keep a record. Check the numbers. Test again.

The current approach, which looks a lot like gouge away, is almost certainly failing to maximize revenue. It is definitely a poor customer experience. Big venues like the Saratoga Performing Arts Center can’t rely on regulars the way that a restaurant or coffee shop can.

Their visitors are by and large single visits, so being able to approach vending in a way that combines hospitality and science could go a long way toward growing both good will and the bottom line.

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