Double the income, or a double-edged sword? Baker Richards CEO Robin Cantrill-Fenwick examines dynamic pricing advantages and disadvantages for arts, culture, & in-person experience organisations, from revenue to regulations.
Ping! My email notification goes off. Most weeks, a message arrives from a cultural organisation or visitor attraction saying, „We need dynamic pricing, can you help?“ My response sometimes takes them aback. „Yes! But do you really need dynamic pricing, or do you need to make more money?“
Baker Richards has been a proponent of dynamic pricing solutions for nearly two decades, but we take care to ensure it’s the right fit for the organisation we’re working with.
Often, when I get that email – „we need dynamic pricing“ – a little digging will discover that yes, the organisation needs to make more money, but the determination to go dynamic is also driven by perceptions. A sense, picked up through networks and marketing, that dynamic pricing solutions are the latest, smartest, and most powerful timesaving device and the thing that everyone else is using. Driven in part by fear of missing out, organisations can reach a point where they instinctively want „in“. But it’s important to consider any pricing practice in the round.
Weighing up the pros and cons matters, because dynamic pricing, most particularly when coupled with high demand, can be a very powerful revenue booster – and in the right circumstances, that’s why we often help organisations to implement it, to great results.
Finding the right price: a balancing act
The right price is often elusive but incredibly vital. It represents not only what your audience is willing to pay but also must align with your organisation’s financial goals. The key to this sweet spot – where financial viability meets audience affordability – can be found in your historical data.
What have been your best-selling shows, what seats typically sell out first, and what price points are most popular? TRG Arts helps organisations create a scale plan by reviewing multiple years of data to understand audience behaviour unique to your organisation. Leaning on data rather than assumptions allows your team to establish a perfect scale plan that serves as the foundation of your pricing strategy – before dynamic pricing is even executed. Make sure your plan offers various price points to cater to different audience segments, enabling you to meet both revenue and accessibility objectives.
Inventory management: timing is everything
In their work with organisations, TRG Arts‘ consultants also stress the importance of inventory management. A well-executed demand strategy ensures the house fills from front to back and side to side, which means holding inventory back at the on-sale and releasing it slowly as demand rises. Knowing which seats to open when and at what price can significantly impact both your revenue and the audience’s perception of a show’s value and success.
When your venue appears full and therefore successful, it makes the experience feel more valuable for the audience and performers alike. Reviews and word of mouth are still important means of advertising, so perception of success can boost future sales for the current show and future ones by building a positive cycle of audience engagement. When you set the expectation with your audience that prices will rise with demand, you can incentivise earlier buying behaviour and engagement in your loyalty programmes by offering priority access to seats. A dynamic pricing strategy helps you strategically reward the behaviours you want to encourage.
Dynamic pricing: beyond revenue maximisation
Dynamic pricing often carries the tag of being purely about revenue maximisation. While it’s an effective tool for leveraging high demand, its capabilities go beyond that. It can also serve as a powerful tool to foster audience loyalty. Here’s how:
Reacting to demand: When a particular show or area in your venue is in high demand, dynamic pricing allows for incremental price increases. This does two things: it capitalises on the high demand, of course, but it also leaves room for you to offer discounted tickets, creating opportunities for price-sensitive audience segments or allowing you to reward loyal audience members.
Strategic leverage: Dynamic pricing lets you leverage each seat as a strategic asset. By raising or lowering prices based on real-time demand, you can direct traffic to areas that are generally less popular but offer a similar experience. For example, if the front-row middle seats are selling quickly but the seats along the sides are still available, a small price decrease for those areas can incentivise ticket buying in those high-visibility areas that you want filled.
Positive communication: Transparency is essential in the dynamic pricing model. Help your audience understand that early buying behaviour is rewarded, that there is a choice of price available AND, if your scale of house is optimised, that you don’t need to sit at the very back of the auditorium for an accessible ticket price.
Audience loyalty and a dynamic pricing strategy: a symbiotic relationship
If executed strategically, dynamic pricing doesn’t alienate your audience; it builds a stronger relationship with them by providing options. While the top-tier pricing will always garner the most attention, communicating lower price-point availability consistently ensures choice for your audience and allows you to manage and optimise demand.
This creates a win-win situation where you not only maximise revenue during high-demand periods but also offer choice during lower-demand periods. Offering deep discounts to fill a hall trains your audience to wait until the last minute to book if they want to scoop up the best deals. A demand strategy boosted with dynamic pricing will incentivise early booking and the behaviours you want from your audience.
Conclusion: a dynamic pricing strategy for inclusivity and success
Dynamic pricing is not just about squeezing every possible penny from an in-demand show. It’s a nuanced strategy that, when executed thoughtfully, balances revenue generation with audience building and loyalty. It helps you better understand your audience, respond to their behaviour and needs, and make the arts more accessible.
So, the next time you look at your pricing strategy, remember that each seat in your venue is not just a revenue opportunity – it’s also a chance to build a long-lasting relationship with your audience. With dynamic pricing, you can ensure that both your organisation and your audience find the right price, leading to a sustainable and inclusive future for live performances.
When you use data to shape your scale plan, manage inventory carefully, and price with balance, your organisation becomes a place where everyone feels welcome and finds value. That is dynamic pricing at its best: a genuine driver of audience loyalty.
