Why You Should Care About Per Capita Revenue

Posted by , Oct 03, 2011 0 comments



Amelia Northrup

Usually when organizations consider their ticket sales, they look mainly at total revenue. After all, revenue is what keeps an organization running, and total revenue is the 50,000-foot view of how well an organization is doing.

However, when considering how to optimize ticket sales, calculating and analyzing per capita revenue becomes a critical measurement.

Yes, “per capita revenue” sounds boring, complex, and technical, but stick with me—the reality is that it allows you to zoom in and see how tickets are selling on a season-by-season or show-by-show basis and that’s actually pretty useful.

What is per capita revenue?
In layman’s terms, per capita revenue is the average price paid for a ticket. It can be calculated for an individual performance, a series of performances, or an entire season. You can also break it out by group tickets, single tickets, or subscription/membership purchases.

How is it calculated?
The formula for calculating per capita revenues follows: Per Capita Revenue = Total Sales Revenue/Total Unit Sales

And (most importantly) why should you care?
To get the most out of your pricing strategy, you should anticipate demand for a given show or series. In other words, you want to get maximum revenue for every show, whether it’s a “hot” show that can command a premium price or a not-so-popular show that needs a little price stimulus to fill the house.

That’s all well and good, but how do you tell which shows are hot and which are not?

Everything you need to know is in your sales histories—those detailed reports that track the number of tickets sold and the revenue associated with each paid admission. Per capita is the proverbial “canary in the coal mine” when considering whether your pricing strategy is working for you.

Consider the case of “Typical Theatre Company” in the graph. Typical Theatre, a client of TRG Arts, diligently tracked the number of tickets sold and associated revenues for one full season. TRG developed this graph showing the relationship between per capita revenue and the number of tickets sold per show.

What this chart tells us is that the more tickets were sold for a show, the lower the average price paid (or per capita revenue) was. But wait. Per capita revenue should rise as demand rises, right?

Reason tells us that an arts organization should be making more money per person as a performance gets closer to selling out. Here, however, per capita revenues are decreasing as we sell more seats, which means we’re missing out on potential revenue.

So, why would this be happening? Per capita revenue might drop as total sales volume rises because of some combination of factors, including:

Inventory management: Depending on where the premium priced and cheap seats are, per capita revenue will vary based on the order and manner in which your box office sells tickets. When the theater starts to fill up, people start buying further and further back, which is usually where the cheaper seats are in the house. By making smart decisions about where to place price sections and controlling when seats are released to go on sale, you can curb dropping per capita revenue and reverse it.

Discounting: How much and when an arts org discounts tickets affects per capita revenue as well. If your organization is not tailoring its discounting to how “hot” the show is, you may gain sales volume (good), but on cheap seats (not so good).

Many organizations fall prey to “week-of-show” panic, offering deep discounts as the performance draws nearer, so per capita revenue take a nosedive during the time when ticket sales traditionally surge. Organizations that habitually offer deep discounts near to the show’s opening train patrons to buy later and pay less.

Comping: Many organizations will “paper” their house, or offer complimentary tickets to try to make it look fuller. Nothing drives down per capita revenues like frequent and extensive comping.

The bottom line on per capita revenue:
•    Per capita revenue is a valuable diagnostic tool. The facts you need are readily available. It’s worth the time it takes to pull unit sales and associated revenue into a spreadsheet or chart to assess how your pricing strategy is working for you.
•    Use your sales histories to understand and anticipate which programs are going to be blockbusters—or not. You may hope sales will happen in a certain way but studying the data is the only way to be certain.
•    Start thinking about how your performance space is scaled and how you are filling seats or space in exhibits for each show date. Remember that good inventory management can improve the perception of success, as well as lead to greater revenues over time.

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