Are you sure the price is right?

How do you decide how much to charge for tickets, when different people can be willing to pay very different amounts for the same experience?

Setting prices is a complex process, because it’s not just a personal interest in what is being offered that affects the decision to buy a ticket. Reasons for attending, venue location, date and time of performance, seat location, and even the time of booking all affect how much people are willing to pay for a particular ticket.

The trick is to understand and respond to patterns of demand so that your ticket prices align with your customers’ perceptions of value.

By analysing box office data to understand demand patterns they have increased ticket yield by 30% and income on average by 35%

Analysis of customer behaviour is what enables pricing decisions to be demand-led. By studying the patterns of behaviour recorded in the transaction data collected by your box office system, you can adjust elements of supply to achieve your objectives.

Armed with this information, sophisticated revenue management tactics can enable your organisation to achieve multiple aims: optimising attendance, maximising income, promoting accessibility, and/or encouraging desirable customer behaviours, such as early booking.

Spreading demand

Simply by offering multiple price bands, organisations can maximise income from those customers who place a high value on securing ‘the best seats’ while still offering tickets to more price-sensitive customers who don’t wish to pay as much.

The Mayflower Theatre in Southampton uses this technique to stimulate demand: when the price of seats in particular areas of the auditorium are showing signs of price resistance, they adjust their prices to make them relatively more attractive. Similarly, varying prices by performance – for example, pricing higher at the weekend than in the week – allows organisations to maximise revenues at times of high demand and encourage attendance at times that are less in demand.

Sarah Lomas, Head of Sales and Marketing at the Mayflower Theatre, uses Baker Richards’ Revenue Management Application to set optimal prices from the outset, when it can be difficult to get pricing right as the price customers are willing to pay varies considerably. The Application also enables them to make to adjustments once a show is on sale.

Sarah explained: “Monitoring and evaluation play a crucial role. By analysing Box Office data post-show, we can apply what we have learned to the next production going on sale. On the basis of this continual analysis, changes to our pantomime pricing over the past three years have levelled out demand across the run, resulting in higher income each year, without increasing the top price and while continuing to offer generous family discounts.”

Dynamic pricing

The practice of adjusting price over time in response to demand can make a big difference to the revenues generated from ticket sales. Dynamic pricing shouldn’t be either ad-hoc or automatic, but flexible so that if you experience unexpectedly high demand for a show, you have a plan in place to respond.

As with all revenue management tactics, there is no ‘one-size-fits-all’ approach, but underpinning any successful dynamic pricing strategy is effective communication. You have a late-booking audience? Dynamic pricing could be used as a strategy for driving people to book earlier, but only if you make it clear to customers that prices might increase over time. You’re then rewarding the behaviour you want – early booking – rather than trying to stimulate demand through last-minute discounting, which teaches customers to wait until the day and book late, knowing they can often get a deal. The added benefit is from the additional financial gains from raising your prices.

Two organisations at very different scales use this approach to great effect. The Mac in Belfast has a simple dynamic pricing strategy which ensures they can maximise income by reacting to demand for the seats in their theatre. Simple and clear messaging has meant that customers are now booking earlier to secure the seat of their choice.

By analysing box office data to understand demand patterns they have increased ticket yield by 30% and income on average by 35%. Using simple mechanisms to trigger price change has led to “audiences being reassured by both accessible prices and a clear transparent strategy, which reflected our brand and values. That may be ‘marketing speak’, but it worked in delivering better income for us and satisfying audiences” said Aine McVerry, Director of Marketing and Communications.

Being responsive

Using dynamic pricing as part of your revenue management strategy gives you more ways and more opportunities to respond to patterns of demand.

Jo Kirby, Director of Marketing at Newcastle Theatre Royal, has used the evidence provided by their box office data to inform dynamic pricing decisions which have generated over £675,000 in additional income over the past five years. Jo has been able to use this evidence in negotiations with promoters, often including different clauses around dynamic pricing that equally benefit both parties.

She said: “Since becoming far more focused on generating income we now rely on dynamic pricing as it means we can do something about hitting our targets rather than hoping. It is the confidence in the data analysis that now means organisations like us can relax and let the data do the talking while we manage our income.”

As more promoters become comfortable with dynamic pricing it becomes increasingly important to be able to demonstrate the incremental income achieved in this way.

Baker Richards’ Revenue Management Application has helped Newcastle Theatre Royal and Southampton Mayflower Theatre to analyse their box office data and increase their ticket revenues. Analysis and monitoring of this kind can really help organisations to make the most of their data – though it is possible to develop revenue management tactics in other ways too. The important thing is to use the evidence from your box office data to drive your decisions and refine your actions.

Rachael Easton is Senior Consultant at Baker Richards Consulting.
www.baker-richards.com
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This article, part of the Making the Most of the Box Office feature, is sponsored by Baker Richards Consulting.