To charge or not to charge? The psychology of free vs. paid events

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I don’t believe in free events. In my experience, not charging for long-form events like hackathons can lead to disaster. Here’s why:

Free events have a 40% no-show rate.

The free events I’ve organized have all had a 25%-40% no-show rate. Charging $5 decreases the no-show rate to ~15%. Charging >=$10 drops it to <5%.

Psychology comes into play.

People are constantly assigning value. They assign value to things they own. They assign value to relationships. They assign value to digital things. They assign value to experiences and memories.

The problem with this – and why you should care as an event organizer – is that “value” is relative. In order to calculate a value, we must compare things with other things.

People think in relative value: they don’t assign actual dollar amounts to things, but instead they rank things as having more or less value than other things.

Events are no exception. When someone is deciding to go to an event, they compare it with all their options. They rank.

As an event organizer, your goal should be to maximize the value that people mentally assign to your event. There are a number of ways to achieve this, but the explicit ticket price you choose gives people a starting point.

Before you and your fellow organizers decide to set the ticket prices at $0 because it “feels” good and you want to make the event “accessible,” please…

 

Consider the following

 

Let’s say there’s another event happening at the same time as yours. The other event is $100. Yours is free. Alex is interested in both events, but Alex is a lucky person and she wins a free ticket to the $100 event. Alex thinks, “If I choose to go to the $100 event and it sucks, I will regret my choice. But if I choose to go to the free event and it sucks, I will regret not using the $100 ticket even more.” So Alex goes to the $100 event and skips yours. Something in her gut tells her that the $100 event is more valuable, even though the cost to her is $0 in both scenarios.

Alex seeks to minimize her regret.

When you set the ticket price for your event to $X, you’re sending a signal that it’s worth $X, and so people assign it a value of $X. If you set it to $0, you are sending a signal that your tickets are worth $0. If you set it to $100, you are sending a signal that your tickets are worth $100.

It doesn’t matter that you raised enough sponsorship dollars to make the ticket price $0. It doesn’t matter that your event is more awesome in a dozen different ways. You told the world that tickets to your event are worth $0. If there was a private market for event tickets, bidding for your tickets would start at $0.

Startup Weekends are $75-$99 not because it cost that much to feed everyone (which it does btw – Startup Weekends are a great value), but because people need to believe that Startup Weekends have value. In reality, most people don’t pay the full ticket price thanks to a discount code or contest. But whether they paid $0, $50 or $99, they are missing out on an event valued at $75-$99 if they decide not to go.

People make these decisions with feelings, not logic. They calculate value in a matter of seconds with limited information. The ticket price on your event’s website is one of the first pieces of information they get.

Free events attract the wrong people.

When someone announces that their event is sold out and I go to their event page and see that tickets are free, I cringe.

If someone gives you their hard-earned money for a ticket to your event, they are investing in your event. They have skin in the game. When they have skin in the game, they show up. They see to it personally that they get value from their investment. They roll up their sleeves and actively participate.

The result is an event full of people who want to be there. The quality of the group goes up, increasing the value of the event itself.

This pays dividends over time as you build your event’s reputation.

When an event is free, people often RSVP just to make sure the event doesn’t “sell out” (“sell out” in quotes here because tickets are free). Often times, they aren’t even sure the event is for them.

This happens at SXSW every year. People use WillCall to RSVP to over 50 events in one click and then go to maybe 3 or 4 of them. I organized a free party at SXSW one year. The RSVP list was >3,000. About 800 people showed up. Many left after just 20 minutes. Planning for food and drinks was tough. We over-ordered and wasted food and money.

Free events deter the right people.

Not charging is a good way to turn away quality people. They know the bozos will show up. They opt instead to go to the other event that costs $100 because the know they’ll at least have one thing in common with everyone there – a willingness to pay $100 to go to a quality event.

Free events are harder to promote.

When it comes to promoting free events, all you can do is spray and pray.

When you charge, you have additional mechanisms at your disposal.

  • You can give away discount codes to make people feel like they are getting a deal. If they have an opportunity to go to a $100 event but pay something less than $100, they feel like they are getting a greater value.
  • You can serenade specific groups of people (think clubs or associations) by giving them special discount codes just for their members.
  • You can run contests and give away tickets. You can’t run a contest and give away tickets to a free event.

Why screening doesn’t work.

“My event is exclusive. There’s no ticket fee, but people have to apply to get in.”

It probably isn’t working for you the way you think it is. Here’s why:

– You cannot adequately judge people by an application. Your biases can work against you to exclude the best. The weird or inexperienced can often bring the richest perspectives. Let them in if they are willing to pay.
– Applications are an unnecessary obstacle that can dissuade the best (and therefore busiest) people.
– Smart people see through the application-as-a-filter and know it won’t lead to a higher-quality event. Any bozo can fill out an application and make themselves seem great.
– Unless your event has been running for years and is widely accepted as top-notch, you’re probably accepting everyone that applies to hit your numbers. If that’s true, there’s no point.

Screening attendees will not increase quality.

Disclaimers:

  • Every event in unique. In some cases, the exact opposite of the above might be true depending on the event. These are just my opinions based on my experience running events like hackathons, Startup Weekends, BarCamps, etc.
  • For shorter events like a 1 or 2-hour meetup, free is probably better. The above applies to long-form events like hackathons, Startup Weekends, BarCamps, etc  – typically 1/2 day events or longer.
  • If you must do an application screening, make the application as short as possible and still consider charging.

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