The fantastic Diane Ragsdale is now blogging on ArtsJournal. And she’s offering a fabulous voice and perspective to essential issues in arts and culture. Her most recent post explores the intent and impact of dynamic pricing for the nonprofit arts, and questions whether a tool designed to maximize yield is essentially inconsistent with the nonprofit frame. Says she:
Let’s call a spade a spade. Dynamic pricing is a method for maximizing profits. The fact that an airline is willing to sell me a cheap ticket in January to some cold and cloudy city doesn’t constitute altruism on its part. Likewise, selling a cheap ticket for a seat in the nosebleeds, or to a show that isn’t moving, is not charity on the part of a nonprofit arts group when that seat would have gone empty at a higher price.
While I’d argue that nonprofit managers should absolutely maximize yield in some initiatives — particularly if it generates essential resources that can be invested in mission, and if it doesn’t negatively impact or distract from mission-related work — I think dynamic pricing is a challenge to nonprofits for many other reasons. Certainly, the profit-seeking conflict is among those problems. But more practically, nonprofits lack the technical infrastructure, decision systems, and even the volume to make dynamic pricing efforts pay off beyond their investment of time and money.
Welcome, Diane! Good to have your voice in the mix.
A nonprofit with an in-house ticketing system can take advantage of dynamic pricing regardless of volume. Investment of time and talent must be amortized over the lifespan of the pricing scheme, which presumably is permanent. Decision making can,and in my opinion should be delegated to front line staff.
A non-profit that fails to maximize its earned revenue fails in its mission to be a responsible steward of contributions from the public.
I clearly am biased here, as I do pricing consulting for a living, but I don’t agree with “nonprofits lack the technical infrastructure, decision systems, and even the volume to make dynamic pricing efforts pay off beyond their investment of time and money.” I’ve seen many non-profits, large and small, have a very positive ROI on their revenue management (defined as raising and lowering prices) efforts using brief team meetings email and Excel spreadsheets. What some non-profits do lack is an understanding of how, and when revenue management can work, and the gumption to try it.
Don’t many nonprofits already engage in some form of dynamic pricing or, at the very least, price discrimination when they price tickets for Friday/Saturday nights higher than prices for mid-week evenings? I don’t see what the big deal is about setting prices over the whole advance sale period at levels that maximize income. If, heaven forbid, a nonprofit arts organization offered a show that was popular enough to provoke scalping, why shouldn’t the organization benefit from those higher prices, rather than the re-seller.
Right now I’m in the process of buying a new car — perhaps the most offensive example of dynamic pricing I’ve encountered (and then there’s the whole gauntlet process). I’m not a fan of dynamic pricing in the nonprofit arts realm. It’s true that it’s very difficult to anticipate demand for some events on some nights, but well documented sales history in a community should serve as a useful guide for pricing future events.
I agree with all the above comments, so I won’t rehash them here. I will simply add that nonprofit arts organizations are not in a position to be blindly idealistic. Yes, it would be nice if we could be altruistic stewards of goodwill, bringing arts to the community regardless of the loss. However, as we all know, ticket sales are significant portion of how we sustain ourselves. We do not have the luxury of 80%-90% government support.
So, until we have massive increases in private, government, or corporate support, I think dynamic pricing is a good idea.
Great discussion! Here’s the reason I “lack…the gumption,” as Steven Roth says, to try dynamic pricing. Particularly in a commmunity of 40,000-80,000 such as Wausau, Wisconsin, I know most of the 1000 or so people who are our regular season ticket customers and donors — who have kept us in business. In their eyes, it’s a personal relationship. And we validate that view by offering them the best prices to buy early and often. Will I frustrate them, retrain them not to buy early, if I fool with prices late in the sale period? My reluctance has little to do with altruism: I don’t want to jeopardize the early-season cash flow that has been the hallmark of our operation for 23 years.
Nevertheless, I’m trying to learn as much as I can about dynamic pricing. I recognize that it’s a significant tool for maximizing revenue. I just haven’t gotten up the gumption to jump out of the airplane yet. What if the parachute doesn’t open?