The problem with dynamic pricing is that it doesn’t enable organizations to truly understand the needs, preferences and spending propensities of each and every customer they serve. For example, the problem I see with dynamic pricing for baseball franchises is that it relies on a basic set of variables (e.g. weather, starting lineup, etc.) to determine how to price to the masses, instead of focusing on – and pricing to – each customer’s specific needs. Let’s say I want to go to a baseball game on my birthday. Will the dynamic pricing system offer me a discounted ticket (or should it predict that I am more spendthrift on my birthday)? If my favorite pitcher is starting will the system recognize my willingness to pay more and increase my ticket price? If I regularly attend games throughout the season will the system consider my loyalty and offer me discounts to other games? The respective answers are no, no and no. The advantage here clearly goes to scalpers, as they can still adjust and negotiate prices with each customer they interact with directly. However, where I see the limitations of dynamic pricing end, the benefit of revenue optimization begins.

For more information on this topic:

http://blog.sentrana.com/2009/09/02/how-major-league-baseball-can-steal-profits-back-from-ticket-scalpers-using-the-right-pricing-solution/

Joe Smiley
Sentrana

Let's face it, we've all been doing dynamic pricing for years. Every time a show isn't selling well and we discount it, we're dynamically setting the pricing. The difference here is that we are beginning to use the model more smartly.

We do sell perishable goods--a seat with no one in it when the curtain rises has no future value. That some presenters have rolled out variable pricing badly shouldn't keep the rest of us from using the data we have to set prices that match changing demand. Sometimes that will mean lowering prices and sometimes it will mean raising them. Either way, our companies benefit.

A surprising number of companies are engaging in thoughtful, effective dynamic pricing. I have implemented the practice at Carolina Performing Arts with success measured by notably increased revenue for the most popular performances and NO patron complaints. Our current summer season has 4 popular performances in a modestly sized house--dynamic pricing has raised an additional $50,200 in revenue above what we could have made on the base prices.

Dynamic pricing can't be done on the fly--published ticket prices can't suddenly be superceded at the box office window. But you might be surprised at the lack of uproar when you publish a brochure without prices listed. Patrons check the website or call the box office for prices.

In the end, as the someone responsible for revenue at a non-profit an arts organization, I must mazimize the opportunity to pay for what we present. Variable pricing isn't fraud, and isn't unduly taking advantage of poor defenceless patrons. But not doing it leaves money on the table. In the current economic climate, I find it difficult to believe that any company can maintain fiscal health by walking away from potential revenue sources.
Kara Larson
Director of Marketing & PR
Carolina Performing Arts
University of North Carolina-Chapel Hill

In San Francisco every week I receive a listing of discounted prices of all kinds of events from Goldstar - SF Giants, SF Warriors, SF Symphony, Cal Performances, SF Performances, and many local small theater companies. As an arts patron (retired), I'm beginning to question whether or not to subscribe. Is this an issue for others?
Robert Moon

Great conversation - thank you. I am very curious about the transition to the non-profit sector of dynamic pricing. I want to pass your blog thoughts over to M Kaiser and the Kennedy Center folks to get their 3 cents on it too (2 cents is now dynamically priced at 3!)

As an arts administrator, artist, and patron, when I bought a ticket to The Joyce Theater recently (only to see a show I had to see because of personal connections), I was APPALLED when they "dynamically priced" me. First, they were disingenuous/wholly unclear about this policy. Their website and print material never mentioned the possibility of this. They advertised ticket prices with a top value of $xyz. When I got on the phone with the Box Office, suddenly the tickets I wanted were WAY ABOVE $xyz. The Box Office person told me that the performing dance company set the ticket range (but not the policy, which is all the Joyce's idea).

I fully know the need to make $ on a show and that dynamic pricing may be an appropriate response. BUT be honest and clear about it to the public. And two, I ended up paying $65 per ticket FOR A SHOW AT THE JOYCE. This is outlandish,and prohibitively expensive. Modern dance already is a tough sell to most folks. $65 is going to make folks stay home to watch "So you Think you can dance."

That's my 4 cents (oops! it's even more expensive now!)

We at the Alley Theatre are in our third year of using variable pricing. We meet every week and review inventory and raise or lower prices as demand justifies. It has resulted in significant additional revenue in the six figure range each year.

Dean Gladden
Managing Director

We've had success with a limited version of "dynamic pricing" here at Walton Arts Center. I won't go into the details here, but we've made minor adjustments to pricing and policy that have many any price changes we decide to make smooth and seamless. We track customer complaints, and the number of complaints we've had? Zero. And we've been able to close budget gaps and increase earned revenue, thereby allowing us to subsidize the stuff that doesn't sell at a high price. A Win-Win.

Ken, I was indeed talking about the non-profit performing arts. And I agree completely about the commercial theatre's emphasis on selling seats. My first Broadway job was with Cameron Mackintosh's TDI in the early 90's and I've watched the industry move slowly but surely from a marketing culture to a sales culture - or at least toward a more reasonable mix of the two - over the last 20 years.

And maybe the same is beginning to happen in the nonprofit world as well.

I'm a big believer in variable pricing making its way on to Broadway and I wrote about some of the recent steps taken by a couple of big shows on my blog here: http://tinyurl.com/czskhx.

Trevor, I must take issue with this comment:
"But in the performing arts, we're not in the business of selling seats. We're in the business of producing and/or presenting art."

That may be the case for "non-profit" theater, which is supported to donations, grants, as well as ticket sales. But I can tell you that is not the case for Broadway or commercial Off-Broadway. It can't be. If we don't sell seats, we can't run shows. Ticket sales are all we have to keep the shows running, to keep the people employed, and to allow the authors' voices to be heard for as long as possible. That simple.

The "perfect storm" of a show is when we sell seats, and produce challenging art at the same time.

And that's what I'm in the business of trying to do.

Ken Davenport
www.TheProducersPerspective.com

Palm Beach Opera, one of my clients, has been using dynamic pricing (or "on-demand pricing" as they call it) for the past couple of seasons with great success. Basically, when a certain performance goes above a certain percentage of seats sold, the on-demand pricing kicks in and the available seats become more expensive.

Although they were concerned about a possible patron backlash at first, none has been experienced.

Also, another key of it's success is that they no longer publish a complete list of single ticket prices. Subscription and group prices are still published but not the single tickets. This also drives phone and web traffic to the box office to find availability and pricing.

New York's Theatre Development Fund has preached the wisdom of variable pricing for decades now, and it has changed the face of theatre ticket pricing. Its model is both in advance - via mail, and now internet - and day of performance.

At the same time, the controversial practice of some Broadway shows to price tickets in the hundreds of dollars so they can reap the benefits of ticket scalping remains unsettled. It may kill as many shows as it benefits.

Trevor O'Donnell's thoughtful comment that it is the business of arts organizations to make great art is beyond debate. However when I was paid as the marketing person for such organizations, I considered my #1 priority the selling of all tickets, at the best possible prices, to maximize earned income. My development cohorts applauded this notion completely, for without warm bodies in those seats, there is nobody to approach for donations.

Today, as a critic with www.BerkshireFineArts.com, I recognize that there is hardly an artistic problem in the world that couldn't be solved with money - money for more rehearsal time, or different actors and director, a bigger pit orchestra etc.

Dynamic pricing in tickets should always be approached from the standpoint of producing the greatest yield from a limited inventory.

Broadway has been dancing around the idea of dynamic pricing or ‘yield management' for a few years but I'm not sure it's something the arts' business model will be able to accommodate.

To do it successfully, you have to be in the business of selling perishable inventory. Airlines sell seats. Hotels sell rooms. Cruise lines sell cabins. Their inventory is perishable because it has negative value if it goes unsold. And in the world of selling perishable seats for fixed site entertainment, sports appear to be leading the way as revenue concerns overshadow the intrinsic value or market appeal of the games.

But in the performing arts, we're not in the business of selling seats. We're in the business of producing and/or presenting art. Our second priority is fundraising and our third priority is audience development, which is not necessarily the same as selling seats.

Our approach to filling seats is built on a decades-old infrastructure, which is built on a centuries-old business model, which is based on the assumption that our audience members need someplace to sit when they come to our shows. The seats themselves, which would be considered valuable commodities (or potential liabilities) in any other industry, are merely there to accommodate and organize the audience, however large or small it may be.

Jim McCarthy of Goldstar Events writes passionately and eloquently about maximizing the value of unsold inventory over at www.download-not-available.com. Definitely worth a visit.