Dynamic,Pricing,Worked,for,the business, insurance Dynamic Pricing: It Worked for the Airlines, but Can It Work

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Dynamicpricing has become a hot topic for the arts. And it's no wonder,since a few theatres that have begun to test the waters have beenquite successful. Before you decide to delve in, however, there are afew things to know.An Introduction to Dynamic PricingDynamicpricing essentially means that in order to maximize profit, the pricechanges as market demand changes. In the context of theatres, theprice of a ticket is determined by how well seats are selling, howmany of them are remaining, and other variables that affect demand,like the weather and traffic perhaps. Theatres monitorthe house as it fills for each performance and make decisions eachday on whether to adjust prices up or down based on demand.Does it Work? Wheneverthe viability of this type of pricing scheme comes into question,proponents usually point to the fact that it been working for theairline and hotel industries for decades. But, there are threedistinct differences between the airline industry and non-profittheatres:Peopleneed to buy airlinetickets because, in most cases, they have to be somewhere at aparticular time. People don't need to see a show; theatre isconsidered by many to be discretionaryspending. Airlinesare primarily interested in making a profit, while theatres haveother objectives like making arts accessible, educating, or gettinga particular message out and they rely on the generosity ofsupporters who believe in their mission to survive. Airlineshave relatively few competitors, which makes it easy for them tocharge what they like. Theatres, on the other hand, have anabundance of competition. So,the real question is: does it work for theatres? According to ThePricing Institute and Target Resource Group (TGR) there are severalimpressive success stories. Success StoriesTheArts Club Theatre CompanyinVancouver implemented a dynamic pricing strategy, and in the firstyear increased sales by $430,000, about 10%.[1] TheGeffen Playhouseimplementeda dynamic pricing strategy for a production that brought in anadditional $60,000, a 23.5% increase.[1] TheYale Repbrought in an additional $50,000 of revenue for a production usingdynamic pricing, a 37% increase.[1]TheCarolina Performing Arts raisedan additional $50,200 in revenue above the base prices of fourpopular performances by using dynamic pricing.[2]A Cautionary NoteWhilethese numbers are impressive, it is important to note that venturesinto dynamic pricing are still very much in their infancy. Also,success is not determined by revenue alone; there are a number ofother things for a non-profit to consider. For instance: how thispricing scheme will affect accessibility; what is the message youwill be sending to the public; and what kind of relationship youwould be establishing with supporters.Areal issue is brought to light here in the Mission Paradox blog.[3]Consider, for a second, the kind of relationship you have withairlines. The author probes:Rememberthe last time you bought a plane ticket? If you're anything like meit became a sort of game, you versus the airlines. Your goal was toget the cheapest ticket possible. The airlines implied goal was toget you to spend the most they could get... [As a result] most of ushave developed a fairly ruthless attitude towards the industry. Tosave $50 we will switch dates, switch airlines, switch airports,whatever.[3]Obviouslythis is not the kind of relationship you want your supporters to havewith you, especially when you rely on their generous donations tosurvive. A Bit of Advice Ifyou do decide to try dynamic pricing, here are some tips: Bevery cautious about taking it too far. You don't want to lose sightof your mission and undercut your case for support.Makesure that advertising does not give the wrong impression of prices.Supporters will undoubtedly get upset if the price they have to payfor a seat is different than what was advertised. For that reason,you may want to print a price range instead of precise prices ontickets, on your website and anywhere else prices are visible. Youmay only want to apply dynamic pricing to parts of the theatre. Forexample, perhaps you want to leave the best seats in the house at astatic price so they don’t lose their perceived value. Setthe goals that you want to achieve by dynamic pricing and definemetrics of success in advance. Experimentand analyze. In order to find out what works, you may need toexperiment with several price triggers and variable prices. Eachtime you change your method, make notes about it for futureanalysis. Also take note of the costs to administer dynamic pricing,how people attending the theatre like it, and other factors that mayhave an effect on ticket sales and supporters’ overall experience.All of this information will help you determine whether dynamicpricing is successful, and what contributed to its success.Notes[1]Carr, Eugene. The Demanding World of DynamicPricing. March 10, 2010. Available at:http://blog.patrontechnology.com/patronmail_idea_center/2010/03/the-demanding-world-of-dynamic-pricing.html?cid=6a00d8345224a269e2013481d1fc0b970c#comment-6a00d8345224a269e2013481d1fc0b970c[2]The Artful Manager. Is Dynamic Pricing in Your Future? May 18,2009. Available at:http://www.artsjournal.com/artfulmanager/main/is-dynamic-pricing-in-your-fut.php[3]Mission Paradox. ThePerils of Dynamic Pricing (Part 1 & 2). May26, 2010. Available at:http://www.missionparadox.com/the_mission_paradox_blog/ Sumacis a complete, integrated software solution for non-profits thatincludes online ticketing.td p { margin-bottom: 0pt; }p { margin-bottom: 6pt; }For information on Sumac or for more articles published by SumacResearch, visit: Sumac'sWebsite