Sign Up Now

Try VenueWize For Free at Your Next Event!
Get Started For Free


Monday, 20 June 2011

How Profitable Are My Event's Guests?

The Pareto Principle, or 80/20 rule states that 80% of results come from 20% of sources. In marketing terms this means that 80% of revenue comes from 20% of customers. Sometimes this extends to 90/10, and 95/5.
For social events such as nightclubs, where there is a balance between alcohol sales and door entrance fees, the Pareto Principle makes things interesting. This also applies to other social events with a similar balance of expenditures for attendants and guests, such as corporate socials with high margin alcohol sales.

First I must differentiate between the 20% of guests and the 80% of guests. 20% of your event’s guests result in 80% of your event’s revenues. For nightclubs, this also means that 20% of guests purchase 80% of the alcohol.

Note that the graph above compares the “value” of guests compared to the time into the event. The “value” of guests is not only profitability, it is rather profitability and other factors that result in other guest’s profitability. For example, in this case, a guest coming into the club for free at the beginning of the night who does not purchase any alcohol throughout the night has high value, as they are filling the venue’s dance-floor and getting the party started- which results in other guests coming in and purchasing alcohol. However, if this same guest came into the club much later on in the night, his or her value would be much lower, as at this point the dance floor and venue is already packed with people, so he or she is adding less and less value as time goes on. This is in a sense, diminishing value, as time goes on.
Now, for the 20% of guests who purchase 80% of the liquor, they are bringing the same value into the venue no matter at what point of the event they enter the venue. This is because it is assumed that the value they are bringing with them is constant alcohol purchases throughout the night.

So how can this information be used? Very simple. Providing guest lists at the beginning of the event brings in valuable guests, and making these guest lists expire after a certain amount of time ensures that these guests only enter when they are “valuable”. This feature is available on VenueWize. At the same time, it is critical to identify the 20% of guests who purchase 80% of the alcohol. VenueWize is working on a recognition system so that your door manager can do just that, from his iPhone.