Pricing strategies: making the right choice
An article that introduces the most common forms of pricing strategy: Skim, Penetration, Neutral and illustrates how these operate with case study examples from the RSC, Creation Theatre, Bay Chamber Concerts, Norwich Theatre Royal and the Philadelphia Orchestra. Some arts organisations use a combination of these three approaches, while most of the strategy is based around neutral pricing: skim pricing is used for customers willing and able to pay more through premium offers or packages, while low, accessible prices are used to target particular, more price sensitive customer groups, or as part of sales promotions.
Skim, Penetration and Neutral pricing: Which strategy is right for you? When setting pricing strategy, there are essentially three approaches that require consideration. The first of these approaches is known as Skim pricing. This is where you deliberately set your prices high (above the rates that the market might charge) in the knowledge that you will therefore restrict the market for the product.
The opposite of Skim pricing is Penetration pricing. This is where you deliberately set prices below what the market would otherwise charge, so that price becomes the main promotional message (“It’s a bargain!”). So, what happens when you take price out of the equation altogether - when your prices are broadly in line with what the market would charge? This is known as Neutral pricing and most arts organisations set the majority of their prices based on a neutral approach.