What the Romans did for us…

“Everything is worth what its purchaser will pay for it.” You might think that sounds like the economist Adam Smith but the phrase was first coined by the Latin writer Publilius Syrus in the 1st century BC. In other words, as far back as Roman times there was an inherent understanding that what something is worth varies from one customer to another. 

Crucially, for cultural attractions there are many ways to differentiate the value that is on offer to customers and thus justify differences in price

Recognising the truth of this statement is the key to developing an effective pricing strategy. The implication is that it is essential to offer customers a choice of different prices to maximise sales and income. A higher price maximises income from those willing and able to pay more. Cheaper prices mean there is no loss of volume from those who place a lower value on something or have a lower ability to pay for the experience. 

Classical economic theory – the price elasticity of demand – tells us that having a range of prices means you can sell more (a lower price maximises volume of sales) and earn more (a higher price maximises income from those willing and able to pay more). However, offering customers a range of prices to choose from is also important from a consumer psychology perspective. 

The importance of comparisons

Giving customers a range of prices to choose from means they can make comparisons between different options. This is important because people find it hard to judge things in isolation. Instead, we make decisions by comparing relative differences. For example, we might find it hard to decide if £60 for a flight on a Thursday evening is good value. But when we see that the same flight on Friday morning is £125, this influences our perception that £60 is a good price. 

By presenting different price/value trade-offs to a customer, the individual is no longer trying to assess an offer (and whether a price is fair) in isolation. Instead, they are weighing up which is the right option for them.

Crucially, for cultural attractions there are many ways to differentiate the value that is on offer to customers and thus justify differences in price. The key is to find the right pricing strategy in the context of your objectives and what your customers value.

The Roman Baths

The Roman Baths is a scheduled ancient monument, built around Britain’s only hot springs. Managed as a business unit within Bath and North East Somerset Council, it welcomes around 1.2m visitors each year. The profit generated supports the council’s wider work in caring for the most vulnerable members of the local community.

This year, with the help of Baker Richards, the Roman Baths introduced a new pricing strategy. The key objective was to maximise income from admissions, with a secondary objective of managing demand to improve visitor experience and secondary spend. We were also tasked with ensuring the following:

• Visitors continue to feel they have paid a fair price for their experience. 
• The new pricing structure is accessible to as wide a range of audiences as possible. 
• The pricing strategy increases the proportion of web sales.
• The pricing strategy encourages a more even distribution of visitors.

Detailed analysis was undertaken and we identified opportunities to reduce prices, maximising accessibility, as well as increasing prices and varying them in line with demand. Prices were reduced for two-thirds of the year, with the largest price increases applied to just 26 days in 2019.

A new discount was also introduced to incentivise early online purchases. A commitment to access for all means that generous concessionary discounts have been maintained, particularly for families and children, although, as with other prices, these vary in line with demand to incentivise visits at quieter times.

While the financial impact of the pricing strategy will only be fully realised after the peak summer months, Simon Addison, Heritage Business Manager, notes that initial signs are positive: “At the end of May we’re 5.7% up on the calendar year in terms of visitors and 13.9% up for revenue. Web sales have more than doubled and we’ve seen particularly strong growth in children and families – up 36% and 20% respectively. We’ve also seen a slight shift towards weekday visiting from weekends.”

Different contexts

While it is inherently beneficial for all organisations to offer customers a range of prices to choose from, and this applies equally to the pricing of memberships and annual passes as well as admissions, a pricing strategy should always be unique. From museums and galleries to palaces and leisure attractions, the context varies depending on the business model, visitor base, patterns of demand and wider organisational objectives. So, when it comes to pricing strategy, we should listen to the Romans, courtesy of Monty Python’s Life of Brian: “We are all individuals! We are all different!”

In summary, an effective pricing strategy is the opposite of a Roman toga – it should always respond to an organisation’s unique situation and needs, and should never be one-size-fits-all. 

Debbie Richards is Director of Baker Richards.
www.baker-richards.com

This article, sponsored and contributed by Baker Richards, is in a series sharing insights into how organisations in the arts and cultural sector can achieve their commercial potential.