Dynamic pricing has become a hot topic for the arts. And it’s no wonder, since a few theatres that have begun to test the waters have been quite successful. Before you decide to delve in, however, there are a few things to know.
An Introduction to Dynamic Pricing
Dynamic pricing essentially means that in order to maximize profit, the price changes as market demand changes. In the context of theatres, the price of a ticket is determined by how well seats are selling, how many of them are remaining, and other variables that affect demand, like the weather and traffic perhaps. Theatres monitor the house as it fills for each performance and make decisions each day on whether to adjust prices up or down based on demand.
Does it Work?
Whenever the viability of this type of pricing scheme comes into question, proponents usually point to the fact that it been working for the airline and hotel industries for decades. But, there are three distinct difference between the airline industry and non-profit theatres:
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People needto buy airline tickets because, in most cases, they have to be somewhere at a particular time. People don’t need to see a show; theatre is considered by many to be discretionaryspending.
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Airlines are primarily interested in making a profit, while theatres have other objectives like making arts accessible, educating, or getting a particular message out and they rely on the generosity of supporters who believe in their mission to survive.
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Airlines have relatively few competitors, which makes it easy for them to charge what they like. Theatres, on the other hand, have an abundance of competition.
So, the real question is: does it work for theatres? According to The Pricing Institute and Target Resource Group (TGR) there are several impressive success stories.
Success Stories
The Arts Club Theatre Company in Vancouver implemented a dynamic pricing strategy, and in the first year increased sales by $430,000, about 10%.[1]
The Geffen Playhouseimplemented a dynamic pricing strategy for a production that brought in an additional $60,000, a 23.5% increase.[1]
