I have a chapter on dynamic pricing in my old book. In a nutshell: dynamic pricing is where the seller adjusts the current price upwards or downwards based upon the most recent information on market conditions. This is not the same as a cinema having discount Tuesdays, since it will offer that each week as a result of known factors about the demand for tickets. Dynamic pricing is where you make changes on the go, where the price change might be up or down, depending.
I suggested in the book that while airlines and hotels are pretty good at this, for arts organizations it will be less successful, because a falling price might suggest that ticket demand is low because of unfavorable word-of-mouth and reviews. If Southwest cuts the fare for this Saturday’s flight to Baltimore, it is not telling me that there is new information about Baltimore that is reducing the demand for flights; I will treat it as random. Even if a sports team cuts the price for the last games of the season, having had many disappointments and been mathematically eliminated from the playoffs, the cut in price is not conveying news to potential buyers, who are already aware of the team’s struggles. But cutting the price for the second week of Springfield Community Theatre’s production of Cat on a Hot Tin Roof might be something of a warning.
Today I learn from the most valuable blog Lawyers Guns Money that Wendy’s is looking to adopt dynamic pricing:
Wendy’s is looking to test having the prices of its menu items fluctuate throughout the day based on demand, implementing a strategy that has already taken hold with ride-sharing companies and ticket sellers.
During a conference call earlier this month, Wendy’s CEO Kirk Tanner said that the Dublin, Ohio-based burger chain will start testing dynamic pricing, also known as surge pricing, as early as next year.
Well, I don’t know about you, but if I see a fifty percent drop in the price of a Baconator from the day before, I might just suspect that my local is sitting on an awful lot of bacon they really need to move, right now. And so, in multiple senses, I’m not buying it.
Dynamic pricing in the arts is such a tricky subject! While it works for airlines and hotels, applying it to event tickets or even fast food could change consumer perceptions in unexpected ways. Interesting read—curious to see how this plays out!