Seven principles for better dynamic pricing
Capitalism meets responsible business practice: who will win?
This week the National Theatre confirmed to the press its use of dynamic pricing in a limited way, with the goal of offsetting the continued provision of lower-priced tickets against dynamically-priced gains. The admission was controversial, leading to some angry think-pieces and a whole lot of social media heat. I hope the NT’s team took the sage advice of never looking at the comments.
It’s safe to say that accusations of greed on the NT’s part are patently absurd: the theatre is and has always been a charity, its directors’ salaries are comparatively low compared to equivalent salaries for commercial producers at the top of their field, and literally any income the theatre has can only, and does ever only, go towards making art and fostering accessibility and outreach, because that’s the entire purpose of the place.
Nevertheless, it got me thinking about dynamic pricing. Like many of my producing colleagues, I remain convinced that dynamic pricing is the best way for producers and productions to respond to the rising costs of putting on a show while trying to maintain accessible price points for those not able to pay more. There is, however, a difference between dynamic pricing and surge pricing. The former suggests that prices adjust to reflect demand and the best price point to make a sale, the latter suggests greedily pushing up prices to the maximum possible level, making use of the sense of scarcity to force people to pay more. I would class the Oasis saga as surge pricing, quite unrelated to how we usually operate dynamic pricing in theatre. Surge pricing is immoral at best, but I think dynamic pricing has a lot of potential for changing how we plan income.
As I was reminded of when I visited New York recently, over in the States the dynamic pricing model is both much more advanced, and also much more, well, dynamic. Prices rise and fall more readily than they do in London, and there is little to no fixed value for a seat (although producers and theatres do of course have a ‘target value’ for average ticket prices across the house, or in each pricing band). Log on to the same show page three times in a week and you’ll see three sets of prices. This quicker change in pricing day-to-day or hour-by-hour is on the rise in London, but only slowly.
Unlike the models used by larger-capacity venues such as arenas or stadiums, most dynamic pricing in New York is still handled manually rather than automated. And unlike the arenas or stadiums, a large number of tickets sales still take place the ‘old fashioned way’ - either by phone or, more commonly, in person. This gives staff in box offices in New York a little bit of flexibility with what they sell a ticket for - although this varies by producer and theatre group.
So, taking the learnings from New York on board, as well as thinking carefully about the recent controversies around pricing practices, I’ve cooked up my own tips and tricks for dynamic pricing. Below I present to you my seven principles for dynamically pricing well.
1. Prices should be going down as well as up.
Once the curtain rises, any unsold tickets are perished goods. It’s the equivalent of running a supermarket and throwing out stock that’s gone past its use by date.
Supermarkets have long recognised this problem of use by dates by reducing prices in the final hours that a product is available, in an attempt to get rid of it for something rather than nothing. Indeed, many supermarkets will sell stock at a loss because a loss is still better than a total write-off, and they hope it’s offset by other sales.
This concept is very well-understood already in New York. You will find that both at the box office and at TKTS, in the last hours before a show goes up, you can bag yourself a very healthy discount on a ticket if you’re smart.
We do have a TKTS booth in London and it does offer seats on the day for discounts, although the use of the booth is a bit more measured here than it is across the pond, not least because it’s one of many outlets (more on that later), and there’s much less audience focus on it as The Place To Buy Tickets. It’s fair to say, I think, that in London we’re much less determined to get rid of tickets that are about to become wastage just before show time, though, and box offices are rarely empowered to try and sell a ticket on a ‘something is better than nothing’ basis. One of the big differences in New York is that box office assistants are true salespeople who are broadly empowered to try to match a price point to the customer’s ability to pay, rather than treated simply as payment facilitators.
The concept of dynamically adjusting prices down based on the audience member does already exist. We have concessions and group rates, for example. Many theatres have early bird schemes or sponsored-seat schemes where tickets are cheaper for a target audience. These are used less often in the commercial sector, but there’s no reason why it should be that way.
Day seats remain popular in London, although they are largely now digitised. Day seats used well can be a great way to get rid of excess inventory, and this is something that TodayTix in particular has iterated on to great success here. They’re also a valuable accessibility tool for well-sold productions, allowing the ringfencing of some cheaper seats. When used in that way though, they’re rarely targeted, and I’d argue that day seating should be separated from concepts of dynamic pricing and more directly targeted at low-income groups (although that’s an argument for another day).
This is partly because all of these options are ‘under the hood’ forms of dynamic pricing, purposely obfuscated from the main price in an attempt to give a show a particular value. Actually getting day seats can be hard work for an audience member, and the ability to make use of them is limited for someone that lives outside of London or has to be at work when they go on-sale. What we don’t do is cut prices close to show-time to try and get rid of them for any price at all. We could do better at that, and in doing so, maximise sales and fill up the house which gives audiences and actors alike the best experience possible.
And also, simply, lowering prices as well as increasing them is how we convince audiences that it’s not a surge pricing cash-grab.
2. We should have a data-led approach to our claims.
We producers often claim that dynamic pricing enables us to offset lower prices against higher prices. We don’t really have the data to prove it though, even if we are certain it’s the truth. In a digital age, all theatres and productions should be setting targets for how many accessibly-priced tickets are sold, track who they are sold to on a demographic basis, and communicate the results to the public. This will build trust and back up our claims. It’s all well and good presenting reports on an annual basis saying that the average price sold was £X, but we don’t have enough insight into who is buying the cheaper tickets, or how they’re being reached. This leads skeptics to think that it’s because cheaper tickets are the first to sell out and sold to those best able to plan ahead, which usually means people with a more stable living and income situation.
I’d love to see a company do it directly - for every extra £50 made dynamically, £50 worth of savings are given to a target group, for example. This is already the case with some sponsorship schemes at subsidised houses, but could also be more widely applied commercially. (I love a “buy an additional ticket for someone who can’t afford it” checkout prompt, as operated by various theatres in the past).
3. Opaque and complex booking fees and levies only serve to increase audience suspicion - simplify these arrangements.
This is a good note for all pricing, dynamic or static, really, but I think it actually reflects the direction of travel. Audiences hate booking fees and restoration levies, and they hate them even more when there’s two or three of them applied to a transaction in a clumsy or deliberately opaque way. There should be a simple arrangement, clearly communicated, and not thrown onto the basket at checkout. This is one of the things that Ticketmaster did wrong in the Oasis saga that upset so many customers, and it’s easy to resolve. If your booking fee is £1 or 5% because that’s the cost, then it should always be £1 or 5% - not suddenly increase to £5 or 10% because the basket value has gone up so you suspect the customer won’t notice or care. People hate feeling scammed, even if it’s “technically” in the rules, so don’t make them feel scammed.
4. Theatres that operate dynamic pricing should meaningfully consult with producers to set prices.
One of the issues in the UK - which may be an issue in the US but I don’t know enough to know if this is true there also - is the theatre/producer relationship when it comes to pricing. Some theatres, especially regionally, are very strict about setting pricing themselves and managing any dynamic pricing in-house. Some theatres will even do everything in their power to build a wall between box office and producer, insisting communications happen through a marketing or producing office rather than directly. This means that producers don’t have oversight of the prices tickets are being sold to the public for, or how and when they change, and changes can take days or weeks to action. When dynamic pricing is automated, this allows for odd outliers to become headlines that impact the production directly. For producers that are charitable or have a public good element, this is particularly painful, as it can directly ruin reputations and damage charitable objectives.
Theatres, especially regionally, argue that this is because their relationship with their audience is the primary one for selling tickets and therefore they need to control the narrative. They’ll say only they understand their community. Producers will argue that their production’s brand is often stronger than the individual theatre’s, so poor pricing affects the production’s reputation first and foremost. They’ll also insist on transparency or they can’t possibly track the accuracy of sales data.
Both, of course, are right. But if your contract declares that the ticket income is the producer’s and the producer is responsible for bearing all losses of unsold tickets, or for any failure to make sales, then pricing should be at their discretion also.
5. There is no reason for dynamic or premium pricing to have a different commission structure than normal pricing.
Some theatres have a policy that any financial gains made through dynamic pricing are split on a more favourable (to them) structure - sometimes as high as 50/50. The argument levelled is the cost of setting up the processes needs recouping, but this is absurd - not least because never do we producers find out when that money has been paid off. More to the point, producers only have one or two streams of income with which to cover their costs: ticket sales and some (but often not all) merchandise. Theatres continue to operate a broad range of income streams including drink and snack sales, donations, commissions, booking fees and levies, private hires and other events, and they have the benefit of directly charging producers for some of their operating costs too. They would never countenance a conversation about bar sales being split. Further whittling away at the primary source of income for producers is self-defeating and only makes it more difficult for productions to be financially sustainable.
6. Audiences should be informed to understand why prices change, and why the value of a seat is considered variable from performance to performance.
Most audiences understand that what they’re paying for is access to see a live performance, and that that cost varies based on how good the view and/or sound is from their seat. The contention of dynamic pricing is that the value is, in the end, based on the popularity of a particular show, as well as the need of the overall sales figure on a particular night to reach a certain threshold. Audience responses to transparency about costs and why tickets are set at a certain value are almost invariably positive: many organisations or shows have experimented with publishing top-level budgets in programmes and the response is often warm. We talk a big game in theatre about audiences as community, but we don’t often treat them as such unless they pay for expensive memberships or make large donations and come to private events. I strongly believe that more openly discussing with them why something costs what it does will increase the potential for them to be willing to pay more.
On this topic, resales don’t have to happen at the original ticket value, but if a customers’ refund is contingent on a sale being made, communicating with them about how dynamic pricing might be applied can reduce concern later. TodayTix already does this if you return a ticket through the app (or at least, it does in New York - I’ve not tried in London), explaining that you’ll be refunded based on them making a sale but to increase the chances of a sale it might be for less than you paid, in which case you won’t get a total refund.
7. Diverging prices from outlet to outlet increase mistrust, so language is key.
One of the big differences between London and New York is the plethora of retail outlets for purchasing a ticket from in London. The old days of bricks-and-mortar discount booths scattered around the West End are largely gone - although a few remain - but there are many digital outlets. As many of these are operated on a white-label basis it can be quite hard to distinguish them for an audience member - I doubt many audiences realise that Whatsonstage is a TodayTix affiliate, or that TKTS is operated through See Tickets. Nor does that particularly matter until such time as they need a refund.
Generally speaking, producers try to keep tickets at the theatre at the highest available price point (sometimes agents are a few pounds more due to booking fees on face value seats). That allows discreet discounting to take place without giving a sense of devaluing the show at the theatre itself. There is an old piece of received wisdom that once a show starts discounting (or papering, for that matter), audiences will always expect a discounted ticket for the show and it becomes impossible to sell at full price. I think this is largely overstated, and very old fashioned. After all, a very large number of tickets, especially in the West End, are sold to tourists or occasional theatregoers, who are either only in town for a few days or only in the market for tickets once or twice a year.
This concept of the ‘discount’ is also something of a misnomer when we think about dynamic pricing. If you’re pricing dynamically, it becomes very difficult to communicate a ‘discount’ unless there is something to set the presented price against, especially as we’re so attached to saying the ticket is x% off. This is an issue of branding, and I won’t pretend to be a marketing expert, but if the thing preventing true dynamic pricing is the need to say “x% off” then maybe it’s time to experiment with “exclusive price” instead. In any case, consistent language is fundamental.
Dynamic pricing does go some way to solving the “don’t discount until you have to” model anyway because it takes us away from “you’re saving £x on this purchase (cos we can’t sell it higher),” and towards “this ticket costs £x (which happens to be just what you’re willing to pay).” It’s nuanced and complicated, but nuanced and complicated doesn’t mean not worth doing. And it is fundamentally more honest.
So there you have it. Seven principles. I’m sure I’ll think of another ten tomorrow.