aperonight/docs/pricing-model-recommendations.md

Pricing Model Recommendations

Current Problem Analysis

Current Model: €1 Fixed Fee Per Order

• Revenue: €1.00 per order (regardless of ticket price)
• Stripe Costs: 1.15% + €0.25 per transaction
• Result: Losing money on higher-priced tickets

Financial Impact Examples

Ticket Price	Current Revenue	Stripe Fees	Net Profit/Loss
€20	€1.00	€0.48	+€0.52 ✅
€50	€1.00	€0.83	+€0.17 ⚠️
€100	€1.00	€1.40	-€0.40 ❌
€200	€1.00	€2.55	-€1.55 ❌

Critical Issue: We lose money on any ticket above €65 (€1.00 - (€65 × 1.15% + €0.25) = -€0.00)

Recommended Pricing Models

Model 1: Percentage-Based (Recommended)

Platform Fee = 3-5% of ticket price

Advantages:

• Always profitable regardless of ticket price
• Scales naturally with event value
• Simple for promoters to understand
• Industry standard approach

Financial Impact:

Ticket Price	3.5% Fee	Stripe Costs	Net Profit
€20	€0.70	€0.48	€0.22
€50	€1.75	€0.83	€0.92
€100	€3.50	€1.40	€2.10
€200	€7.00	€2.55	€4.45

Model 2: Hybrid Model (Best)

Platform Fee = €1.50 + 2% of ticket price

Advantages:

• Higher base fee covers Stripe fixed costs
• Percentage component scales with value
• Better margins on low-priced tickets
• Predictable minimum revenue per transaction

Financial Impact:

Ticket Price	Hybrid Fee	Stripe Costs	Net Profit
€20	€1.90	€0.48	€1.42
€50	€2.50	€0.83	€1.67
€100	€3.50	€1.40	€2.10
€200	€5.50	€2.55	€2.95

Model 3: Tiered Flat Fees

€0-25:   €1.50 fee
€26-75:  €2.50 fee
€76-150: €3.50 fee
€151+:   €5.00 fee

Advantages:

• Predictable fees for promoters
• Simple pricing tiers
• Better than current model

Disadvantages:

• Less scalable than percentage
• Requires tier management

Industry Benchmarks

Platform	Fee Structure	Effective Rate (€50 ticket)
Eventbrite	3.7% + €0.59	€2.44
Universe	2.5% + €0.49	€1.74
Ticketfly	4% + €0.99	€2.99
Recommended	3.5%	€1.75

Implementation Strategy

Phase 1: Immediate Implementation (Week 1-2)

1. Switch to 3.5% percentage model for new events
2. Grandfathering: Existing published events keep €1 pricing
3. Communication: Notify promoters 1 week before change
4. Update pricing display on event creation and checkout pages

Phase 2: Optimization (Month 2-3)

1. A/B Test different rates: 3%, 3.5%, 4%
2. Monitor metrics:
   • Promoter signup rate
   • Event creation volume
   • Revenue per transaction
   • Customer complaints
3. Adjust based on data

Phase 3: Premium Tiers (Month 4-6)

1. Volume discounts for high-performing promoters:
   • Standard: 3.5%
   • Bronze (€5K+ monthly): 3%
   • Silver (€15K+ monthly): 2.5%
   • Gold (€50K+ monthly): 2%
2. Annual contracts with reduced rates
3. White-label options for enterprise clients

Revenue Projections

Current State (€1 fixed)

• Average ticket price: €35
• Monthly orders: 1,000
• Monthly revenue: €1,000
• Monthly Stripe costs: €628
• Net monthly profit: €372

With 3.5% Model

• Monthly revenue: €1,225 (3.5% × €35 × 1,000)
• Monthly Stripe costs: €628
• Net monthly profit: €597 (+60% increase)

With Growth (3.5% model + 20% more events)

• Monthly orders: 1,200 (20% growth from competitive pricing)
• Monthly revenue: €1,470
• Net monthly profit: €842 (+126% increase)

Technical Implementation

Database Changes

# Add to events table
add_column :events, :commission_rate, :decimal, precision: 5, scale: 4, default: 0.035

# Add to users table (for premium tiers)
add_column :users, :commission_tier, :string, default: 'standard'

Fee Calculation Logic

class Order < ApplicationRecord
  def calculate_platform_fee
    event = self.event
    commission_rate = event.commission_rate || 0.035
    base_amount = total_amount_cents / 100.0
    (base_amount * commission_rate * 100).to_i # return in cents
  end
  
  def platform_fee_euros
    calculate_platform_fee / 100.0
  end
end

Promoter Dashboard Updates

• Show fee breakdown on event creation
• Display projected fees during ticket setup
• Add revenue vs. fees analytics
• Export fee reports for tax purposes

Communication Plan

Email to Existing Promoters

Subject: "Important Pricing Update - New Fair Fee Structure"

Key Points:

• Current model loses money on higher-priced tickets
• New model ensures platform sustainability
• Better features and support with improved revenue
• Existing events unchanged, new events only
• Competitive with industry standards

Website Updates

• Update pricing page with clear fee calculator
• Add FAQ about fee structure
• Transparency about what fees cover (development, support, payment processing)

Risk Mitigation

Potential Issues

1. Promoter backlash: Higher fees on expensive tickets
2. Competitor advantage: Other platforms with lower fees
3. Reduced event creation: Promoters may create fewer events

Mitigation Strategies

1. Value communication: Emphasize platform improvements and reliability
2. Competitive analysis: Position as "fair and sustainable" vs. competitors
3. Volume incentives: Quick path to reduced rates for active promoters
4. Feature rollout: Launch new promoter features alongside pricing change

Success Metrics

Financial KPIs

• Monthly recurring revenue growth
• Average revenue per transaction
• Profit margin improvement
• Customer acquisition cost vs. lifetime value

Product KPIs

• Promoter retention rate
• New event creation volume
• Average ticket prices
• Customer satisfaction scores

Conclusion

The current €1 fixed fee model is financially unsustainable and actually costs us money on higher-value transactions. Moving to a 3.5% commission model will:

1. Ensure profitability at all ticket price levels
2. Align with industry standards for competitiveness
3. Scale revenue naturally with platform growth
4. Fund platform improvements and better promoter tools

Recommendation: Implement 3.5% commission model immediately, with grandfathering for existing events and a clear communication plan to promoters.

Fee Collection Method: Industry Standard

Current Approach vs Industry Standard

Current Model (Not Recommended):

Customer pays: €50 + €1 fee = €51
Promoter receives: €50
Platform keeps: €1

Industry Standard (Recommended):

Customer pays: €50 (clean price)
Platform keeps: €1.75 (3.5% of €50)
Promoter receives: €48.25

How Major Platforms Handle Fees

Eventbrite:

• Promoter sets: €50 ticket
• Customer pays: €50
• Eventbrite keeps: €1.85 (3.7%)
• Promoter receives: €48.15

Ticketmaster:

• Promoter sets: €50 ticket
• Customer pays: €50
• Ticketmaster keeps: €5-7.50 (10-15%)
• Promoter receives: €42.50-45

Universe (by Ticketmaster):

• Promoter sets: €50 ticket
• Customer pays: €50
• Universe keeps: €1.74 (2.5% + €0.49)
• Promoter receives: €48.26

Why Deducting from Payout is Better

1. Customer Experience

• Price transparency: Customer sees exactly what they expect to pay
• No surprise fees: Reduces cart abandonment
• Competitive pricing: Easier to compare with other events

2. Promoter Benefits

• Marketing simplicity: Can advertise clean prices
• Psychological pricing: €50 sounds better than €51.75
• Competitive advantage: Not adding extra fees to customer

3. Platform Benefits

• Higher conversion rates: No fee-shock at checkout
• Better promoter adoption: Easier to sell to event organizers
• Industry standard: Follows established practices

Psychological Impact

Adding Fees to Customer (Current):

• Customer thinks: "€50 ticket... oh wait, €51.75 total" 😤
• Cart abandonment risk

Deducting from Payout (Recommended):

• Customer thinks: "€50 ticket, €50 total" 😊
• Smooth purchase experience

Promoter Dashboard Display

Ticket Price: €50.00
Platform Fee (3.5%): -€1.75
Your Earnings per Ticket: €48.25

Communication to Promoters

Before: "Platform charges €1 per order to customers" After: "Set your desired revenue per ticket, we handle the rest"

Example:

• Promoter wants €48.25 net per ticket
• They should set ticket price at €50
• Customer pays €50, promoter gets €48.25
• Clean, simple, industry standard

Competitive Analysis

Main Competitor: €1 Flat Fee

Our main competitor charges a simple €1 flat fee per order. Here's how our models compare:

Hybrid Model vs Competitor Analysis

Hybrid Model: €1.50 + 2% of ticket price
Competitor: €1.00 flat fee

Ticket Price	Competitor Fee	Hybrid Fee	Difference	Competitive Position
€10	€1.00	€1.70	+€0.70	More expensive
€25	€1.00	€2.00	+€1.00	More expensive
€50	€1.00	€2.50	+€1.50	More expensive
€75	€1.00	€3.00	+€2.00	Break-even point
€100	€1.00	€3.50	+€2.50	Much more expensive

Alternative Competitive Models

Option 1: Low-End Competitive Model

Platform Fee = €0.50 + 1.5% of ticket price

Ticket Price	Competitor Fee	Our Fee	Difference	Position
€10	€1.00	€0.65	-€0.35	✅ Cheaper
€25	€1.00	€0.88	-€0.12	✅ Cheaper
€50	€1.00	€1.25	+€0.25	⚠️ Slightly higher
€100	€1.00	€2.00	+€1.00	More expensive

Option 2: Modified Hybrid Model

Platform Fee = €0.75 + 2.5% of ticket price

Ticket Price	Competitor Fee	Our Fee	Difference	Position
€10	€1.00	€1.00	Equal	✅ Competitive
€25	€1.00	€1.38	+€0.38	⚠️ Slightly higher
€40	€1.00	€1.75	+€0.75	Break-even
€75	€1.00	€2.63	+€1.63	Much more expensive

Competitive Strategy Recommendations

1. Value Differentiation Approach

Since we'll be more expensive on higher-priced tickets, focus on premium positioning:

Value Proposition:

• "We're not the cheapest, we're the most complete"
• Advanced analytics dashboard
• Real-time sales tracking
• Professional promoter tools
• Superior customer support
• Platform reliability and sustainability

2. Market Segmentation Strategy

Target Market Positioning:

• Competitor: Best for small, simple events (€10-30 tickets)
• Us: Best for professional events (€40+ tickets) with serious promoters

3. Hybrid Competitive Approach

Tiered Offering:

• Basic Plan: Match competitor at €1 flat fee (limited features)
• Professional Plan: Hybrid model with premium features
• Enterprise Plan: Custom pricing with full feature set

4. Volume-Based Competitive Response

Free Tier Strategy:

• First 3 events per month at competitor's €1 rate
• Volume discounts for high-activity promoters
• Loyalty rewards for long-term customers

Marketing Positioning

"Choose Your Business Model" Campaign

For Simple Events (Under €40):

• "Need basic ticketing? Our competitor works fine"
• "Pay €1 flat fee for simple events"

For Professional Events (€40+):

• "Serious about your business? You need serious tools"
• "Fair percentage-based pricing"
• "Advanced analytics, marketing tools, priority support"

Brand Positioning Statement

"We're the Shopify of Events - Built for Growth"

This positions us as the premium option for serious promoters while acknowledging the competitor's advantage on small events.

Implementation Recommendation

Given the competitive landscape, we recommend Option 1 (€0.50 + 1.5%):

Advantages:

• Competitive on low-priced tickets
• Still profitable at all price points
• Better positioning against main competitor
• Appeals to both small and large event organizers

Financial Impact:

• Lower fees on tickets under €33
• Competitive fees on tickets €33-66
• Premium pricing on high-value tickets justified by features