By Jim McCarthy Apr 19, 2011 1 comment

Dynamic Pricing at TM

As you might have read, TM/Live Nation is rolling out a form of “dynamic pricing” in the near future. This is not at all surprising, as it’s been discussed and rumored for quite a while.

But it does give me an opportunity to say a few things about dynamic pricing that we’ve covered before, but which always (and perhaps now especially) need to be remembered:

1. Dynamic pricing and variable pricing are NOT the same thing. The difference is that dynamic pricing means prices that change. To clear that up further, I made this short video a few months back. Take a look:

2.  Dyanmic Pricing is not something you just jump into.  As Barry Kahn, the CEO and architect of the algorithms behind Qcue’s dynamic pricing software, said here on Live 2.0, “Do you have historical data you can import into your formulas? How does a Saturday night differ from a matinee or a weekday event? Not just how it has affected sales in the past, but how it truly effects demand so that you can anticipate the response to a price change.”  In other words, the depth of your analysis and analytic rigor counts.  If you’re not up for that challenge, it might be safest to stick with variable pricing.  Why?

3.  Consumers are going to react to your dynamic price changes.  It’s not necessarily going to be a bad reaction, but, as Kara Larson said here on Live 2.0, “ignore the little voice that says that no one will notice, or that people are used to prices changing. For the sake of your comfort and your customers’ trust in you, be prepared to simply and non-defensively explain the change.”  As Kara says, there are reasons for the change.  Just explain them.

4.  There IS data on the impact of dynamic pricing.  It’s not magical, but it does have value.  I don’t seem to be able to put my hands on the data behind this at the moment, but I’ve seen in a couple places that dynamic pricing (on top of a reasonably scaled house) can have a 5% impact on revenue, which ain’t too shabby.  On the other hand, it’s not going to save you from oblivion either, if you’re facing oblivion.  The bigger issue, in my view, for most shows is awareness and interest.  Pricing doesn’t even become a factor until people know about your show and care enough to entertain the possibility of buying a ticket.  Just remember that.

To generalize, there seem to be two kinds of reactions that live entertainment marketers have to the idea of dynamic pricing.  Either they get dollar signs in their eyes like a cartoon character at the thought of wheelbarrows full of free money or they proclaim the end of civilization.

Neither of these is even remotely true.  Dynamic pricing is not a magic box that ensures sell outs nor is it a tool that makes it unnecessary to be a good marketer or a good programmer.  Instead, it’s a way to correct pricing as the market tells you more about what it thinks through its behavior.  In the absence of good discipline and management of Revenue Per Seat, it can also be just another randomly applied tool that has no or even negative net impact.

So as it becomes more and more real, remember to use it wisely!

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    1 Comment

    • Kara Larson

      Jim, thanks for the shout-out; may I remind your readers that dynamic pricing can be simple, easy-to-manage and add 5+% to the bottom line when done well, and time-consuming, frustrating, and deadly to your relationship with customers when done badly? Having worked through the kinks in several implementations, I can assure everyone that without doing enough analysis of your sales data to understand demand, you cannot successfully price dynamically. It doesn’t have to be long and complicated, but it does need to be thorough on some important points and well thought through. If anyone needs help getting started, contact me at artsknowledge@gmail.com