The dynamic pricing innovator Sean Kelly, founder of Vatic (dynamic pricing for performing arts and ticketed venues) takes us through his top 10 tips to make your pricing targets work effectively.
There is nothing magical about 70% (or 75%, or…). Set capacity targets that reflect your actual load-in of patrons. Ask yourself the question, “What is the turning point in our venue?” Or more properly, what is the turning point for this performance in our venue. The turning point might be different depending on the night of the week and the title.
2) Why only raise prices on the final 30% of the house?
By the time you get to 70%, there’s very little time left, and therefore limited upside potential.
3) Just because a particular title doesn’t achieve 70% capacity, doesn’t mean that you aren’t able to increase prices
Just as there are some titles for which you will sell lots of tickets, but at a relatively low average ticket, there are also niche titles, that while they may not excite a broad-base of patrons, do have some very devoted fans, who will expect to pay a bit more for this special occasion.
4) Is capacity the right metric?
Most organizations use revenue as their #1 key performance indicator. Consider changing to revenue targets to trigger your price increases.
5) Price increases should scale proportionally
A $10 price increase on a $19 ticket is close to a 50% increase – and likely to inspire sticker shock. A $10 increase on a $300 ticket is about a 3% increase. So, you’ve now jacked prices up on your most price-sensitive patrons, and barely raised them on the folks who are the least price-sensitive. Scale your increases so that they have a proportional affect. If you raised that $19 ticket by $1, then proportionally, you would raise the $300 ticket by $15.78 (I’d round it to $16).
6) Blockbusters should have prices raised on a majority of the inventory
If you know something is going to sell well, set triggers to start earlier, so you can capture more revenue.
7) What if you arrive at 70% later than expected
Let’s say you’ve set your capacity target at 70%. But when do you normally hit 70%? That time frame matters. If you have arrived late, is now really the best time to raise prices, when you are technically behind on your trend line?
8) Prices shouldn’t just go up
Say you get to the final 10% of your capacity, and sales slow significantly? This likely means you are down to the dregs of your seats (upper balcony, restricted view, orphans, etc). If you’ve consistently raised prices, these seats are probably now overpriced. You need to have a way to bring ticket prices down if it’s warranted.
9) Don’t let human bias derail your decision-making
The number one debilitating factor for dynamic pricing is our own belief that we know what is best. We get scared if prices go higher than we think they should. Conversely, sometimes we are too concerned about maintaining brand value, and don’t allow prices to move down to where they belong. At the end of the day, we don’t buy tickets (we get industry comps!). Patrons know what is best, our pricing should reflect what they are trying to tell us.
10) Trend lines
A highly effective alternative to triggers is to create a trend line. Then, pay close attention to how your sales are going against your projection. Are you ahead or behind? And just as importantly, how are you pacing? Are sales increasing in comparison to the trend line, or are they slowing down? Sales pacing is an important indicator of patron demand.
Sean Kelly is the founder of Vatic, a software company specializing in dynamic pricing for performing arts and ticketed venues. www.vatic.tech
First published on LinkedIn.