Do you know what it costs to purchase a ticket to fly into space with Blue Origin? No? Well don’t feel bad because no one else knows either; except the Blue Origin sales team and they’re not talking! This article takes a look at what the Blue Origin pricing strategy might be.
What we know so far
In 2018, Blue Origin’s original pricing plans were leaked, at that time the ticket prices were expected to be between $200,000 and $300,000.
In 2021, Blue Origin held a public auction for a seat on the first flight on New Shepard. The auction winner ended up paying $28 million.
We are now in 2022 and Blue Origin has still not publicly announced their ticket pricing. Furthermore, they have been very careful to avoid talking about pricing to the media, and have gone so far as to use NDAs to restrict customers from disclosing the price they paid.
The auction was a hugely successful publicity stunt attracting widespread international media coverage. In addition to driving market awareness on a global scale, Blue Origin used the seat auction as a means to establish their initial ticket pricing and sales funnel. Blue Origin now have: a rough estimate of the size of their Served Available Market (SAM); a prequalified list of high net worth individuals; the starting point ticket price; and insight into what the ticket price sensitivity is.
Price skimming strategy
Companies following a price skimming strategy will offer their new product at a high price to capture customers with the highest desire and ability to pay (i.e. Innovators and Early Adopters). As the demand at that price level declines, a new lower price is set and the cycle continues.
A price skimming strategy works well for new products in a growth market where there is no competition or low price sensitivity – for Blue Origin all conditions currently apply.
Blue Origin is expected to work through the 7,600 auction bidders, offering these sales prospects a “next in line” ticket at the highest price they think the market will bear. Only lowering the price once the demand for tickets at that price starts to decline. Then continuing the cycle again.
The auction set the starting point for a ticket at $28 million. Based on time and demand the ticket price will gradually decrease as shown in the following chart.
Using a price skimming strategy, Blue Origin will be maximizing profit and revenue growth.
Additional information for the curious…
This section provides a rough SAM estimation for Blue Origin. SAM is defined in context in the following diagram.
The auction’s global media coverage was very effective at reaching all possible prospective customers. The CEO of Blue Origin confirmed this at a conference in 2022.
We can see there’s very robust demand.
I think the challenge for Blue at this point is that we’re supply limited.
Bob Smith, CEO Blue Origin
At the same conference Smith announced that they were building additional New Shepard rockets to support demand.
Based on the auction participation information a rough estimate of Blue Origin’s SAM can the made based on the Diffusion of Innovations model, illustrated below.
If we assume the 7,600 auction participants represents only Innovators, the total SAM would be roughly 304,000 potential customers. This estimate it is very high compared to Total Available Market calculations made for the suborbital space tourism market in this article Space Tourism Market Analysis.
If we assume the 7,600 auction participants represents Innovators and Early Adopters, the total SAM would be roughly 47,500 customers.
The rough SAM estimate range would be between 47,500 and 304,000 potential customers.