Dynamic Pricing

The value of tickets can rise and fall...... How, why?

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Half-price arts tickets: deep discounts or new opportunities

Half-price tickets are hot. From the TKTS booth in New York City, to your local arts service organization with a half-price ticket list, the idea of “half-price tickets” activates the brain in an exciting way. First, there is the idea of the huge discount — similar to what you might feel when you say a 0 awesome leather jacket marked down to 0. A steal, right? Then there is the idea that they are limited (and we recommend limiting them) — get them while they’re hot, as they won’t be around long. Two powerful incentives to buy those tickets right now!

Let’s pause for a moment and ask ourselves “what’s the purpose of selling a half-price ticket?”

In my last post, I spent some time talking about advance sales and discount ticketing strategies, as well as how it’s too easy to train the patron to wait for a better deal if you offer large discounts late in the game. I mentioned that “the right thing to do here is create a marketing strategy that offers the most discount to people who give up the most convenience.” It’s enticing and effective to trade one thing for another (in this case, giving up convenience to get a discount back). I think we’ll see this idea of “trading something for something else” pop up again later on.

I also began to talk about discount ticketing, and I’d like to talk a little about some of the group-based buying programs (the half-price ticket program being an old favorite, and new group-purchase sites such as Groupon.com and LivingSocial that have recently come on the scene).

Half-price arts tickets: deep discounts or exposure to new opportunities?

Half-price tickets are hot. From the TKTS booth in New York City, to your local arts service organization with a half-price ticket list, the idea of “half-price tickets” activates the brain in an exciting way. First, there is the idea of the huge discount — similar to what you might feel when you say a $200 awesome leather jacket marked down to $100. A steal, right? Then there is the idea that they are limited (and we recommend limiting them) — get them while they’re hot, as they won’t be around long. Two powerful incentives to buy those tickets right now!

Let’s pause for a moment and ask ourselves “what’s the purpose of selling a half-price ticket?” If opening night is tomorrow night, and you have no tickets sold, half-price ticketing the house is not a good solution, for all the reasons I mentioned in the last post. So what else can we do with it? With a thought-out strategy, I believe that:

  • Half-price tickets are good to move unsold inventory — as long as you limit the number of tickets to a small amount and/or control it in some way.
  • Half-price tickets are a good way to sell obstructed seats — look at Cirque du Soliel… they will often sell a discount ticket for seats that have the tent pole in the view of the patron. If you’re ok with that, they’ll hook you up. Great use of a discounted seat.
  • Half-price tickets theoretically allow people to see experiences they wouldn’t normally go to — for example, a 50%-discounted theatre ticket might push you over the edge to seeing a show that is outside your normal genre of arts events, and you might discover you like it.
  • Half-price tickets theoretically allow people to experience twice as many arts events than they could on their previous budget — if people are devoting twice the amount of time to the arts than they were before, that’s a good thing.

The first two are pretty clear. On the last two, I say “theoretically” because although I’ve heard patrons say they use half-price tickets for these things, I’ve never seen any hard data that proves that they behave in this way. If you’ve got a half-price ticket program running on a strong CRM, let me know and perhaps we can look at the data together and find out.

Additionally, when selling a half-price ticket, you MUST put some mechanism in place to record the patron’s contact info. This might come with selling the ticket (they buy an e-ticket for which you have an email address, for example) or you may need to get it in other ways. Remember that idea of “trading something for something else”? Here, you’re trading profit on the ticket for the ability to market to the patron later on another show.

Super-deep discounts: Groupon and LivingSocial for the arts

There is a lot of buzz about Groupon and Living Social. here in the U.S. (check online for their U.K. urls). If you’ve been out of the loop (hey, welcome back!) you may not know that these services use a powerful combination of time limit, offer limit, and a need to have a certain number of people agree to buy the deal before the deal switches “on” and folks can redeem the highly discounted offers for restaurants, spas, vacation packages, and often, arts events. So you have a natural wish to share these offers with your friends, so you can get the deal yourself. These services move a LOT of offers. Here’s a short video explaining how these services work:

If you do some searches on the web, you can find both positive and negative experiences of those who have placed ads with these services. Just do your homework. Ask others in the arts community who have used these services to tell you about their experience. These services offer a huge amount of exposure at no direct cost, but can often have a high indirect cost (what you’re losing on the sale when the customer redeems the coupon). The exact terms of the deal with these services is up to the two parties, but the rule seems to be you’ll offer something at 50% discount, and the service will take 50% of the sale, leaving you with 25% of original revenue. So, $20 ticket, sold for $10, the service gets $5, and you get $5. $5 instead of $20 is a pretty large drop, so what are you “trading” for here? In this case, it’s profit now for exposure + potential sales later, and there is nothing wrong with that, as long as you understand it going in. Just remember that if the patron is going to get a benefit (lower cost), they should give up some value for it (restricted days to attend? Obstructed seats? Back of the house only? Use your imagination). But doing these with no restrictions can cause real problems as you might imagine. If the service doesn’t allow you to cap the number of offers sold, then you’ll need to design your offering options so there is some way for you to control the fulfillment.

How can your arts event ticketing system help?

Your ticketing system can play a big part in discounting as well. I’m surprised that I don’t see more promotion-code use in online ticketing, where several unique promotion codes are used through different marketing channels so the arts org can track which campaigns are bringing in the most ROI. That’s easy to do… mention the use of one promotion code on Facebook, and use another promotional code on Twitter, or on radio, or on TV. It’s a great way to look at actual ROI on advertising and marketing spend, because it means you’ve actually sold a ticket.

I also really like that some ticketing systems are now allowing you to connect with social media in the middle of the transaction. As part of the checkout process, some systems allow you to share on Facebook and Twitter that you’re buying a ticket to a specific performance, and when the message goes in the newsfeed, it asks your friends if they’d like to buy a ticket to go with you to the same specific performance. I don’t have any data yet on how often this feature is used, but I am seeing it included in more ticketing systems, and I sure like the idea. I think it will be commonplace in all ticketing systems within the year, so if you’re looking at a new ticketing system, make sure it’s on their radar.

Bottom line, there is nothing wrong with changing the price of the ticket to gain other things (trade paying less for buying in advance, trade paying less for giving over your contact information, trade paying more for convenience of last-minute decision making, trade paying more for a premium experience, etc.). Just make sure you’re considering the tradeoff, and including that in your calculations. And above all, experiment, share your results, and learn from any failures, so that you can improve your results over time. For further case studies and discussion on these issues, I recommend you check out the smart work at http://www.thinkaboutpricing.com. They are collecting quite a fine library of articles and know-how on the subject.

If you’re looking for a new ticketing system in the U.S., I’m happy to talk to you and point you in the right direction. Are you reading this post on http://theticketinginstitute.com? Then you already know about the work of my friend Roger Tomlinson who is a whiz at ticketing software selection in the UK and Europe. Additionally, you may want to check out the 2011 Ticketing Software Satisfaction Survey Report from the good folks at Technology in the Arts to see what people are saying about their ticketing systems in the US. Good read.

Happy ticketing!


Ron Evans is an arts marketing and consumer psychology researcher, and principal consultant at Groupofminds.com Arts Marketing Consultants in Sunnyvale, CA, USA. When he’s not guest blogging for us, he helps arts audiences increase their understanding, appreciation, and frequency of attendance through innovative uses of technology. This article was originally published on the Groupofminds.com Arts Marketing Blog.

Ticketmaster adopts Dynamic Pricing

Ticketmaster CEO Nathan Hubbard announced in LA on 18 April a partnership with data analysts MarketShare to introduce Dynamic Pricing to their business model this summer 2011. While it is an obvious move, helping Ticketmaster leverage its deals with mainly sports, rock and pop promoters, and its Live Nation amphitheatres, it ups the war with the secondary market re-sellers.

Long anticipated, Ticketmaster, a Live Nation Entertainment Inc. company has announced in Los Angeles on 18 April that it has formed a partnership with MarketShare, the data analysis software company, to develop a suite of sophisticated dynamic pricing tools to help clients set and adjust prices for their live events. Nathan Hubbard, CEO of Ticketmaster explained: “Efficient pricing is one of the most important and untapped opportunities to unlock value for fans, clients, artists and teams. MarketShare adds to our data and analytical resources that inform our clients on the true value of their tickets, while giving them the flexibility to rapidly respond as that value fluctuates over time.”

The demand forecasting tools and next generation pricing engine will allow sports teams, artists, promoters, and venues to better understand the value of their ticket inventory throughout the entire ticketing process – both prior to, and during the on-sale. The tools will use a wide range of data sources, from historical ticket sales to search and video activity and social media data, allowing clients to see a snapshot of meaningful data that would be otherwise impractical to track.

Ticketmaster has been working with four major sports teams in the US and the Live Nation concert business on dynamic pricing. It is expected to roll it out this summer 2011 across MLB, NBA and NHL as well as concert tours. The company also plans to develop a tool for arts and theatre. “Not every event would be sold that way,” commented the New York Times, “But it would also allow the company to compete more effectively against scalpers like StubHub.com.”

That description “scalpers” sums up the bitter war between the secondary marketing re-sellers, who don’t have sales rights over the original inventory, and Ticketmaster, and other systems and service suppliers, who need to ensure that the maximum income is retained in the artists’, promoters’, and ticketing service providers’ sales channels.

While Ticketmaster sold around 140 million tickets last year, Live Nation attendances were down at its concert venues, and it had already deployed “fee free” purchase days and promotional price packages to shift unsold inventory. While most of the comment about dynamic pricing refers to increasing prices, it is of course a powerful tool for optimising prices to ensure there are fans in the stadia to support the teams or welcome the artists.

The Wall Street Journal pointed out that 2010 was “brutal for the concert industry, with ticket sales plunging 12% despite a modest decline in average prices. Recent price drops follow more than a decade of steady increases, a trend that helped mask fundamental problems.” Nathan Hubbard pointed out that “2010 taught us we have real challenges as an industry: one of them is pricing.” Echoing the frustration of executives throughout the concert industry, Mr. Hubbard said that the best seats appear to be consistently priced below what fans are willing to pay, leading to a multibillion-dollar “secondary market” in which scalpers can reap profits by reselling tickets above face value. At the same time, he told the Wall Street Journal, 40% of concert tickets sit unsold industry-wide, meaning that the ostensibly cheap seats for many shows are simply not cheap enough.

Ticketmaster needs to stay in the van of deploying new technologies to sustain everyone’s business, since its old CEO is back from the dead, Fred Rosen, launching new ticketing company, Outbox, in a joint venture with Cirque du Soleil and A.E.G., Live Nation’s biggest competitor.

StubHub won’t have liked being branded a “scalper” and the EU added misery for the secondary market by issuing a consumer warning about buying tickets for “Sold Out” events from the secondary market. The UKECC is co-funded by the European commission and the Department for Business, Innovation and Skills, and provides advice for consumers buying goods and services. It also deals with cross-border complaints and grievances from European consumers based in other EU countries.

The resale of tickets for sold out events is big business, and with the 2011 annual festival season almost underway there are fears that hundreds of UK and European consumers could, as in 2010, hand over their money but end up with no ticket. Sometimes if tickets are supplied, they are declared void when consumers turn up at the venue. The UKECC has published a leaflet, Can you rely on your festival tickets?, which outlines how consumers could be caught out, offers advice for purchasers, and addresses the question of legal protection. Music fans are also advised to contact the European Consumer Centre for Services for more information.

New York Times report on Ticketmaster Dynamic Pricing: http://www.nytimes.com/2011/04/19/business/19pricing.html

The Wall Street Journal on Ticketmaster Dynamic Pricing: http://online.wsj.com/article/SB10001424052748704821704576271331375934352.html

The Guardian on UKECC warning to consumers about purchasing from secondary re-sellers: http://www.guardian.co.uk/money/2011/apr/13/consumer-warning-ticket-resale-sites

Discount Ticketing – Friend or Foe?

I am  Ron Evans, a researcher in consumer psychology, and the principal consultant for Groupofminds.com in San Jose, California, USA.  I am committed to helping arts audiences increase their understanding, appreciation, and frequency of attendance, through technology. This is my first contribution to The Ticketing Institute, and I hope I will stimulate some lively thoughts about online ticketing, CRM, and the emergence of connected technologies like social media into the arts-attendance experience. 

I have some opinions on discount pricing strategies – a subject I know a lot of people are quite passionate about.

Pricing and marketing arts event tickets isn’t easy.  When faced with the need to “put butts in seats” it can be tempting to do whatever it takes.  I hope to give you some explanations on why some discounting strategies would be a better choice than others, and help you avoid some short-term successes that could lead to long-term problems.

Pricing and marketing arts event tickets isn’t easy.  When faced with the need to simply “put butts in seats” (a phrase anathema to The Ticketing Institute) it can be tempting to do whatever it takes.  In this article, I hope to give you some explanations on why some discounting strategies would be a better choice than others, and help you avoid some short-term successes that could lead to long-term problems.

Picture this. You’re a big supporter of a large cultural music venue, so when you receive an email from the institution that tickets have gone on sale for an upcoming concert, you buy your tickets online straight away. You get your confirmation that you paid the listed price, and since the concert isn’t until a month from now, you go about your business.

Three weeks later, you get an email from the same organization, offering two-for-one tickets for everyone who buys a ticket going forward. But only for people who haven’t bought yet.

Wait a minute.

You bought your tickets early, and now you can’t get the deal.  You call the organization, and they tell you this offer is only for people who haven’t bought tickets yet.  You’re angry, and understandably so.  You think to yourself, “I could really make a scene here and demand that I be given the same offer,” but you probably don’t act on that idea. Instead, you smolder about it and swear to yourself that you’ll never be caught in THAT situation again. Next time, you’ll wait until you get the offer before buying anything.  Sound familiar?  I see arts organizations do this all the time.  And I see the fall-out that conditions the patron’s mind right along with it.

The scenario I just led you through results in a changed patron, and not for the better. It trains patrons to wait until there is a special offer before they commit to buying a ticket. The next show, more patrons will wait, which means fewer tickets sold far in advance, and more perceived need for a “fire sale” of a huge discount near opening in order to sell the seats. It’s a vicious circle, and as a marketing manager, it’s something you should be keeping your eye on. And sadly, it generally creates really bad feelings in your early buyers. It’s the golden rule — as a patron, would you want this to happen to you?

A simple way to get around this? Don’t email offers to people who have already booked.  Either discount for people who buy early on (called “the airline model”) or make the discount available to everybody (even people who have already purchased the tickets — always a good idea).

The airline model of arts ticketing

People seem to generally understand that booking your airline ticket early (3 weeks or more before your fly date) results in getting the lowest fare. The highest fares come if you walk into the airport and say “I want to get on the next flight to JFK.” Not only are you fighting the fact that most of the seats may be already taken, but the airlines know that you’ve waited until the last minute to make your purchase, which is a convenience they think you should pay for via a higher ticket price. If you wait to buy your ticket, you pay more. Pretty simple. But consider the following YouTube commercial from Hotels.com, that actively promotes waiting:

Wow. Training consumers to wait is a really good strategy for hotels.com, as they base their business on last-minute shoppers. Not so good for the hotels if you think about it.

For centuries, many arts organizations have followed a similar model, they’ve just called it something different, and priced multiple tickets together: the subscription. In recent years, most arts organizations have seen a reduction in the number of subscriptions, because people seem less likely to want to commit to being in the theater at a specific time/date far in advance. They want the convenience of making the decision to go at the last minute, just like the guy who wants to fly to JFK TODAY. So why do so many arts groups allow patrons to get on-board today’s flight at a discount?

One reason is the idea that an empty seat is an empty seat, and if nothing has worked up until the day of the performance to fill that seat, do whatever you can to fill that seat. On the surface, it makes sense. But in the long run, I believe it just creates more empty seats.

The right thing to do here is create a marketing strategy that offers the most discount to people who give up the most convenience. Those that buy early get the benefit, and those that wait risk a higher price or a chance the show won’t have any seats left to sell. If you get to the performance date and you still have seats you’re tempted to discount, don’t. It’s better that your regular patrons do not have access to them at a discount at this point. Either let them go unfilled (and realize that you need to work on your early-sales strategy) or give them as comps to middle school kids, as special rewards to donors to bring a friend, or anything else you can think of to get a body in that seat. But don’t reward the people who choose to wait and buy late.

Discounted arts tickets: friend or foe?

I’ll be up front; I generally don’t like discount tickets, unless they are for students/seniors or used as an incentive to try out a new arts genre a patron has no experience with. You’ve worked hard to price your tickets at a level where they are perceived as being a passport to a quality experience — less expensive tickets, handled the wrong way, can really alter the perception of the quality of your event in the mind of the patron. Not to mention discounting the ticket means less money in your account at the end of the day.

Many of you may have heard of the ticket pricing strategy that Ringling Bros. and Barnum & Bailey circus uses — I’ve heard statistics that up to 80% of their tickets are discounted down from some much-higher price, so that people feel that they are getting a really good deal. And I think that is an excellent strategy for the circus. Going to the circus isn’t a high-risk concept — you don’t need to prepare in advance and be knowledgeable about Irish playwrights or the history of the War of the Roses. You just go with your family and watch acrobats and elephants, and you’re entertained.

But most of your regular arts events are significantly different. The patron doesn’t know how it’s going to be, and they’re not sure if they want to spend $25 for a ticket if the show is at risk of not being good. At this point in the buying process, consumers “on the fence” are searching for any kind of assurance that their money will be well spent, and that they will have a good experience. They are looking for a quality indicator. And when you discount the price, you are likely lowering the perceived value of the experience.

Researches have investigated the relationship between price and quality and showed that “consumers use price to infer quality when it it the only available cue” and that “price is used as a quality cue to a greater degree when brands are unfamiliar.” (Lambert 1972). While you have to purchase most of these studies online to read them, I found a great PDF of some sample research online by DPS Verma and Soma Sen Gupta called “Does Higher Price Signal Better Quality.” Break out the coffee on these research reports — they take some concentration.

I much prefer the idea of adding value vs. reducing price. Especially value that doesn’t cost you anything. Perhaps there is a new restaurant that has recently opened near your venue? Odds are they would love the visibility of offering your patrons a discount to dinner before your show. Work something out with them, and you can offer that discount as an added value to people who purchase by a certain date, or purchase a number of tickets as a group, etc. All without reducing either the perceived value of the ticket, or the amount of money you get to take home at the end of the day. But make it available to everybody. The people who bought early should always get the best deal, and should never be left behind.

In the next post, some real-life examples, discussion of half-price ticketing strategies, and exploring how ticketing systems can help you to make some of these options a little easier.

This article was originally published on the Groupofminds.com Arts Marketing Blog.  More on pricing from http://thepricinginstitute.com/ with links to resources