With changes in customer attitudes and ongoing pressures on arts funding, it's likely that more arts venues will try dynamic pricing in the near future.
Everyone knows that hotels are more expensive on a bank holiday weekend, air travel costs more if you book at the last minute and taxis are a bit pricey on New Year’s Eve. Generally speaking, adjusting prices for products or services based on customer demand is something we all accept.
So why do we feel uneasy about dynamic pricing (or ‘demand-based’ pricing) in an arts context? Partly, it's because we feel the arts should be accessible to all and arts venues are aware that if audiences discover that the venue is using dynamic pricing, it’s likely they’ll call it out as unfair or even discriminatory.
In theory though, the supply-and-demand model applies to tickets sold in the arts sector too. Most audiences are already used to the idea that popular shows cost more and just like customers in any other sector, they always have the choice not to purchase tickets if they feel they are too expensive. With changes in customer attitudes and ongoing pressure on arts funding, it’s likely that more arts venues will try dynamic pricing activity in the near future to maximise revenue. After all, if you can capitalise on the commercial success of hit shows to subsidise their wider operation, then why shouldn't you?
Dynamic pricing might take the form of incremental increases to ticket prices as the event draws closer, reacting to demand by re-banding a seating plan to increase the quantity of top price tickets, or removing concessionary rates from the more popular dates in a run. Whatever the method used, follow these 6 tips to make sure that dynamic pricing works for your venue:
1. Make sure you have priced your events appropriately
Research the market carefully and use your own data to work out the right pricing for the event at your venue. Be sure to review any dynamic pricing activity after the event has happened. The goal is to make subtle changes to pricing in response to demand during the sales process; if you have had to change the pricing significantly during the sales period, there’s a chance you didn't have the pricing right to start with.
2. Set up a working group of key people from your organisation
They should meet regularly to review the sales data for events, identify opportunities to maximise ticket yield in line with planned marketing activity and analyse the success of dynamic pricing activity for past events.
3. Sell everything you can
Make sure you support your dynamic pricing strategies by selling as much ticket inventory as possible to the general public. Are you sure that freelance blogger warrants two comps from the best seats in the house on the last night of the run? If there’s an opportunity to sell standing tickets, make them available on the night, maybe just for students.
4. Beware of ticket allocations
Confirm before you go on sale that your corporate sponsor really will take all of those top price seats. If they have yet to be confirmed, be sure to apply any price increases to allocations in the same way you would any other seats. Have a cut off for ticket returns, particularly from corporates, your press office and visiting companies to avoid being left with unsold top price seats on the night. They are unlikely to sell and will undermine all of your efforts to maximise ticket yield.
5. Remember dynamic pricing isn't just about increasing ticket prices
Don’t just rethink your ticket prices, rethink your complete pricing strategy to maximise the impact of dynamic pricing on your sales. Use subtle demand-based pricing increases alongside other techniques such as thoughtfully recommending related events, up-selling added value packages and providing incentives to encourage customers to spend more.
6. Try to be transparent about your dynamic pricing
To avoid being viewed as unfair, be honest about how you price your events and explain that prices may change. Think carefully about how you reference prices in print and make sure you don’t find yourself in breach of regulations. Make sure your box office team know that you are pricing dynamically and why, because it’s likely that customers will want to talk to them about it. Encourage customers to book earlier to get the best price. Be prepared to explain to someone why they are being charged more than their friend and how that additional revenue supports your organisation.
The debate around dynamic pricing will go on for many arts venues, while others have been doing it successfully for years. Whatever stage your venue is at, always consider it as part of a wider strategy, plan the approach carefully and test it regularly. Keeping an open dialogue with your customers about why you need to do it will go a long way towards demonstrating how you remain accessible and good value for money.
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Paul McGuinness is Head of Client Relations for Spektrix in the UK and Ireland