comments powered by Disqus

TRG Blog: Analysis from TRG Arts


3 Inventory Must-Dos to Improve Dynamic Pricing

Rick Lester | May 15, 2013 8:10 AM
Chairs set up for a performance at Walt Disney Concert Hall.
Chairs set up for a performance at Walt Disney
Concert Hall. Photo by Dave Herholz via flickr.
I received an email last week from a client who presents touring Broadway shows. The client needed a fast answer about potential prices for a mega-hit show he hopes to add to the schedule next season. 

“Can we possibly charge more than $160 for several hundred tickets to every performance?” he asked. “Can a price that high work in our city? Can dynamic pricing get us that far?”  

 “Sure.  Why not?” was my quick reply. Then I needed answers to a few questions:
  • Would nearby markets get the show first?  
  • Can the show be included on subscription series?  
  • Will the price table provide appealing price points that connect the top price with the bottom?  
  • Do the incentives of the discount plan encourage the right behaviors? 
Finally, the most important question: Who will control our ticket inventory?

Ultimately, data and numbers will rule. But the best pricing strategy is only successful when a great inventory management plan drives it.  This plan must optimize ticket yield (per capita revenues) for every ticket sold—not just the most expensive.  Inventory management also must guide when, to whom, and at what price point every ticket is offered for sale. Without a plan, the patron—not the manager—takes charge of ticket inventory.  

Three fundamentals of revenue management will make or break your prices—dynamic or otherwise. 

1. Inventory management is the juice that drives your scale-of-house plan.

 You must recognize that one fuels the other. Your scale-of-house plan provides the structure for revenue management and balances three important strategic issues: 

  • How many price points will be offered for each performance, 
  • How many seats will be offered at each price point, and 
  • Where will these seats be geographically located in the venue? 

A scale plan cannot, by itself, be responsive to changes in sales patterns or unexpected changes in demand. Dynamic pricing was created to bridge this gap between original scale plans and actual demand. 

Managing inventory allows tickets to be withheld from the market until a moment of maximum advantage, enabling flexibility of response to the real demand for tickets. It sets a launch pad for prices to rise even faster. 

2. The marketplace always acts in its own self-interest.

You must recognize this consumer behavior in your inventory management plan. Without fail, ticket shoppers want the best seats in the house—and then seek the cheapest price for that location. This may not be rational, but it is real. Great marketers learn to make offers that feed irrational demand-driven patron behavior that pushes per capita revenues higher with each purchase.    

Venues that release their entire ticket inventory all at once aren’t getting it right. A single on-sale date allows patrons to satisfy a wide range of idiosyncratic preferences. But unmanaged seat selection leaves empty seats that may be impossible to fill.  

This becomes especially troublesome when those unwanted, now-empty seats are located in highly visible areas. This absence of fannies in seats influences the perception of success. Anything less than the appearance of a full house is both embarrassing and costly. It prevents the heightened sense of demand necessary for prices to dynamically move higher.

Good inventory management insures that seats are sold in the ‘right’ order. Only then will every performance look and feel like a full house while making sure that our price points work for us, not against us.

3. Inventory management supercharges dynamic changes to price.  

You must develop inventory strategies that change price as demand changes and deploy them from the moment tickets go on sale forward.  

Dynamic pricing works best when your patrons perceive that tickets are hard to get. The key goal of inventory management is to create and reinforce a perception of ticket scarcity. That process begins at the start of the sales cycle.  

Too many organizations look at price variance reports and miss early revenue opportunities or mask problems. I recently wrote a post on the risks of looking only at the lift gained from the change in price. Ultimately, it fails to identify any problems with the original pricing plan.  

A smart inventory management plan is the blueprint for controlling every sale—from first to last. It also establishes the parameters for dynamic pricing late in the sales cycle. Managers using best practices for inventory management need only occasional dynamic price changes. Their inventory tools are doing the heavy lifting, taking better care of patrons, and, as a result, making more money.

Should our Broadway presenter make an offer to land that blockbuster show? Yes, absolutely, but only with the right inventory management tools in place long before the show goes on sale.  







print







Be notified of future content like this with eNews.

Sign up for TRG's eNews and you'll be notified when more content like this is posted, as well as getting our latest research, blog posts, and webinar announcements delivered straight to your inbox. Simply fill out the form below:

* indicates required



Marketing is from Mars; 
Development is from Venus

A boot camp for arts marketing and fundraising leaders


Thursday, August 4-Friday, August 5

at the TRG Arts Center for Results in Colorado Springs

Dogs vs. cats. Android vs. iPhone. Alien vs. Predator.

Great rivalries have existed throughout history, yet few are as fraught, epic, and, at times, explosive as that of marketing vs. development at nonprofit arts organizations.

You may say, “We have a great working relationship!”

That’s great. You may like each other (or not), but are you developing patrons together? Really and truly? Marketing and development are responsible for stewarding every step on an arts patron’s journey—from the first ticket purchase to making a planned gift—and every step in between. And, the two leaders are responsible for creating patron-centric culture, moving beyond “mine” and “yours” to “theirs.”

In this boot camp, the arts industry’s loyalty experts will teach you how to optimize your relationship to get revenue and loyalty results next season. 

Learn more




6 Metrics Arts Leaders Should Track

A video series from TRG


 Photo by Gavin Brogan (CC BY 2.0)
What gets measured gets managed. That means your organization sets its priorities as an institution by what you decide to measure. So what are you measuring?

We’ve compiled a video series on the 6 metrics that arts and cultural organizations should be tracking. Watch the videos that apply to your organization, or clear an hour in your schedule and watch them all as you would a webinar.




Watch our latest webinar!

All in: Developing patron loyalty across departments

 Keri Mesropov,
VP of Client Services
 Jim DeGood, 
Director of Client Services

Think audience development is marketing’s job? Think again. All departments play a critical role in retaining and cultivating loyal patron relationships. In this webinar Keri Mesropov and Jim DeGood from TRG’s expert consulting team discuss today’s best practices for creating lasting patron relationships, across departmental silos. We encourage you to attend this webinar with executive leadership and invite colleagues from artistic, development, marketing, and patron services. 

In this free webinar, you’ll learn:

  • About campaigns to build loyalty which involve multiple departments
  • How a sales orientation in the patron services department can buoy loyalty efforts of marketing and development
  • About new research on how artistic programming factors into loyalty
  • How to lead—or manage up—in your organization to create lasting patron relationships

Watch now


Contributors


Jill Robinson
Adam Scurto
Amelia Northrup-
Simpson
J.L.Nave Vincent VanVleet Keri Mesropov