Dynamic Pricing Has Evolved. Isn't It Time Your Deals Did Too?

TRG has been a big believer in, and early implementer of, dynamic pricing for many years. I recently came back to a familiar conversation in a webinar with DynamO Pricing and UK venue leaders: technology is moving faster than our deals.

So when dynamic pricing creates new revenue, how do we make sure what each partner puts in is fairly balanced with what each partner gets back?

Before software, dynamic pricing was incredibly manual. Someone in the box office had to study sales reports and fill patterns and work out where there might be room for extra revenue, if they had the time and training to do it at all.

It works, but it is very labor intensive and tended to be conservative and a bit ad hoc. Today, software lets us look at many more performances, read demand in more ways and respond quickly, all within guardrails a venue defines. The labor has gone down, and the cost has moved to a software service.

In most cases, venues’ deals haven’t caught up with that shift.

You’re having the “dynamic pricing” conversation too late

I haven’t come across many venues, particularly receiving houses, that address dynamic pricing at the deal stage. Usually it comes up late in the sales cycle (if at all).

When a show is doing really well, someone asks whether we can take advantage of the high demand and then has to run it past the producer. It becomes a reactive conversation when it should be a proactive one.

Here are some crucial questions we suggest you answer upfront:

“If they are not interested in sharing the expense, then we should not be extending the upside either.”

I know many venues’ deal memos are legacy documents. In so many cases we copy and paste, change some names and dates, and send it off. Unpacking that administrative process takes work, but dynamic pricing and other software are becoming increasingly essential to how venues manage revenue and volume

Venues using software to drive dynamic pricing are seeing averages of 10%-12% uplift; that incremental revenue adds up and deserves to be discussed alongside other pricing and marketing terms.

Pricing is emotional

Even before dynamic pricing enters the picture, conversations about base prices get emotional quickly.

• “I wouldn’t pay that, so no one else will.”
• “We never charge over X dollars/pounds/euros.”
• “If we raise prices, people will stop coming.”
• “Low prices are the most important factor to generate new audiences.”

You’ve probably heard these sorts of statements before. Maybe you’ve even said them yourself. This isn’t about shaming anyone, but it is worth asking a question that goes beyond what we call “anecdata”: what is your sales data actually telling you about how your audiences respond to price?

Dynamic pricing also has a public image problem, thanks to plenty of unethical implementations and bad press. When producers push back, a lot of it comes from feeling that things are happening outside their view or control and to the detriment of audiences.

This is where data and software provide an advantage we didn’t have before. Show producers the dashboards and show them the data, share the reports from your dynamic pricing tool. We can make the invisible visible in a way we couldn’t before. That helps move the conversation away from emotion and toward evidence.

“Dynamic” just means it changes

“Dynamic just means that it changes. If it was all about just price increases, we would call it price increasing.”

It isn’t about surge pricing or any of the other exploitative terms out there. Dynamic pricing is “dynamic” because prices can move in both directions, toward the best possible yield at the best possible volume.

“We are looking for that magical equilibrium between maximum price and maximum volume.”

Lowering prices is the harder call to get right. Before reaching for a late discount, ask whether the problem really is price, or whether the campaign is under-resourced or underperforming.

There are some key questions that can help bring data to a discussion about lowering prices or late discounting:

• Do I still have seats available at my lowest price point? Are my highest-priced seats the only ones left?
• How are we pacing against the target yield? Are there other discounts that could be pulling it down? (i.e. comps, groups, schools, etc).
• When was my most recent marketing activity? How did it perform to drive traffic to our site or box office?
• Was the show previously on pace and has only recently off pace, or has it been lagging behind expectations since before the most of the marketing started?

Crucially, software can help us tell the difference. This is pricing science our sector can and should be taking advantage of. Producers want full houses too, so volume has to be part of this conversation.

Match the effort to the incentive

Your marketing team, box office, website, software and pricing are your revenue engine.

When incentives are shared, venue and producer can push in the same direction. When a partner doesn’t want any part in your pricing practices, you have to think hard about how much of an already stretched team’s time to put behind that show. If the incentive isn’t there, perhaps the effort shouldn’t be there either.

That isn’t about being difficult. It’s about putting our business hats on and using data to show partners where this works, how we’ll share in the success, and how we’ll share in the work it takes to get there.

“There are things that humans need to be doing and there are things that software needs to do.”

Getting that balance right frees your people to build and strengthen relationships with customers, and dynamic pricing may be only the beginning of that. This is a good moment to start building the muscle for new ways of working with our programming partners.

Shared transparency, shared investment, shared upside: that’s where we need to go.

Let’s talk it through

If you’re thinking about dynamic pricing or you already use it and want to work out how it fits into your existing pricing strategy and producer deals, I’d be glad to talk.

We can look at where the revenue upside might be in your programming, how you might structure cost and revenue sharing with partners, improve your discounting practices, and any questions or concerns you have before getting started.