Revenue / 10.08.18
Advice and Insights on Implementing Dynamic Pricing in Theatre
Aubrey Stork leads all data-driven marketing and e-commerce activities at Mirvish Productions, Canada's largest commercial theatre production company. Through a blend of data analysis, pricing strategies, one-to-one communications and user-experience optimizations, his role has been focused on maximizing customer value. As such, he has had a proverbial front-row seat to how dynamic pricing has been used in live event spaces and how it will continue to evolve in the years to come.
About one year ago, Mirvish partnered with Digonex, a service that offers dynamic pricing solutions to a variety of businesses. Before that, the company employed dynamic pricing in the more traditional fashion (e.g., moving seats between zones, some degree of raising prices when inventory is low, etc.). One might say Mirvish is a fan of dynamic pricing.
We sat down with Stork recently to discuss his thoughts on the benefits of dynamic pricing, the potential evolution of dynamic pricing and advice for anyone considering implementing dynamic pricing. What follows is our conversation.
INTIX: For those who may be unfamiliar with the term, what is "dynamic pricing"?
Aubrey Stork (AS): Dynamic pricing is the practice of adjusting ticket prices to better reflect their true value as the complexion of a given performance changes (e.g., changing inventory levels, increased/decreased demand, proximity to the performance, etc.). Most in the live event space have always employed some form of this — moving tickets from one price zone to another, increasing prices when inventory is low, reducing prices when demand is low and so forth. However, as technology has matured, so too has this practice. Market value can now be determined in a much more scientific fashion. Prices can be based on demand factors we never would have seen or considered. I've been referring to this brand of dynamic pricing as "true dynamic pricing," given its ability to reflect in near real time a ticket's true value.
INTIX: How is dynamic pricing being used in the "theatre world" to fill seats and ensure the biggest and best audiences?
AS: We're effectively using true dynamic pricing to define a trajectory for every single ticket in all price zone for every single performance into the future. By considering an in-depth history of sales for the given show, other shows in our market, macro-economic data, show-goer ratings, time of year, weather and a slew of other demand factors, we're essentially looking at and recalibrating daily how many tickets are needed to sell each day from today through to the performance to meet our attendance goals. Price through true dynamic pricing is one major lever we’re using to ensure this happens.
INTIX: Mirvish has been working with dynamic pricing through Digonex for about a year now. How has that gone?
AS: We've enlisted the services of Digonex to make more intelligent decisions about the pricing for many of our shows. We've found that with the assistance of the solution, and the economists on their staff behind the scenes, pricing recommendations are being made based on inputs we never would have considered before. As a result, we have seen some incredible success, which in this case can be defined by revenue maximization, attendance optimization or some combination thereof. Ultimately, we’re now able to anticipate scarcity, or lack of demand for that matter, and adjust, rather than react to it when the real opportunity has already passed. We're able to do so within minutes on literally thousands of zones in hundreds of performances each day.
INTIX: Can you share any details on the collaboration and process?
AS: It's been quite smooth. The Digonex team did most of the heavy lifting on the integration with our ticketing software, AudienceView. From there, it was largely about establishing the business rules for our implementation. For instance, we have standard rules like having all our entry level-priced tickets remain static to ensure accessibility. Similarly, we set both upper and lower limits for all zones to ensure prices remain reasonable. We also established things like timing on changes. We don't want someone who is purchasing a ticket to have the price change on them mid-stream, so we've determined a time and a once-a-day frequency for changes where we can mitigate this possibility. We've established the minimum price increment change of $1 in either direction and have established that the hierarchy of prices should always remain intact so "Price 2" will never be higher than "Price 1."
All in all, the implementation process went very well. The fact that their offering extends beyond technology has meant that they've been able to offer fantastic insight into the recommendations being made.
INTIX: What are the benefits of dynamic pricing for the venue operator?
AS: Outside of trying to put fantastic shows on our stages for the world to enjoy, our goals as a commercial theatre company have always been to maximize both attendance and revenue. True dynamic pricing is one tool that allows us to achieve these primary goals more effectively by minimizing the need for deep discounts, which can have a negative impact on a show's credibility. It's helped us better meet our attendance goals while also optimizing the house.
Above and beyond this, we are also always looking for ways to build our Mirvish season subscriber base, encourage our customers to buy their tickets early and buy tickets into performances that need the help, and maintain and grow our email subscriber list. True dynamic pricing addresses all these objectives, as well. With our rollout, we were made to look at and establish business rules that support these things. For instance, our season subscribers are always guaranteed their prices (another reason to subscribe). Our email members always get priority access for every show. With this, the business rules we've put in place ensure that price adjustments aren’t made within this priority window period, thus encouraging early sales. Additionally, in conjunction with a new online ticket discovery process we’re rolling out, the idea is to allow theatregoers to find performances based on criteria they set, including a price range. If a theatregoer is price conscious, they can more easily find tickets to performances that are dynamically priced lower, therefore moving more sales into the performances that need it most.
A final objective we have is to minimize the secondary market for our tickets. The better a job we do of setting the actual market value for each seat in the house, the less lucrative the reseller market becomes.
INTIX: What are the benefits of dynamic pricing for the consumer?
AS: By thinning reseller margins, we reduce the likelihood of artificially limiting supply and inflating prices. Above this, when we sell to our theatregoers directly, we’re able to provide better service. We can communicate with them directly about their performance — cancellations, pre- and post-show communications, etc. — and our customers are also the first to have access to future shows, special offers and so forth.
True dynamic pricing also means adjustments happen in both directions: up and down. In fact, it's not uncommon for there to be a greater number of lowered ticket prices than raised ones. The most interesting instance of this was one where despite this fact, the average ticket price we saw for the show actually went up. Though this might seem counterintuitive, part of the reason for this outcome was that by reducing some tickets and making the margins between prices narrower, customers ended up buying better tickets than they otherwise would have. So, we not only filled the house in a more efficient way and generated more revenue, but also, patrons were able to see this particular show in better seats for less.
INTIX: Are there any negatives or drawbacks of dynamic pricing you’ve seen?
AS: While I don't know that this is a drawback per se, it is a misconception about dynamic pricing. That is that it in and of itself, dynamic pricing will not sell your show. It will not create demand. Reducing a price will not bring more traffic to your website or sell a show that people just don't want to see. It will help to maximize conversion when people get there, but marketing still has a job to do. People need to know about a show, and it needs to have enough appeal to drive some action.
The only other challenge is around how strongly people feel about the arts. This is absolutely a good thing. But, for some, it's difficult to reconcile that we are both in the arts and in business. With this, we've wanted to be sure that our actions allowed us to not only thrive as a company, but also demonstrate to our patrons that we share one of the values traditionally associated with the arts: It should be accessible.
INTIX: Do you see dynamic pricing as something that is going to be used more in the theatre space specifically and live entertainment in general?
AS: Absolutely. Ultimately, anyone who has ever set a price on a product or service has tried to do so by considering whatever information they have available to them. Dynamic pricing is doing just that. The only difference is that it can compute and make sense of a much broader data set. For live entertainment, dynamic pricing has been in practice in some form for years. So, I believe true dynamic pricing is just the next evolution of this.
INTIX: Finally, what advice would you have for anyone reading this who is considering implementing dynamic pricing? What have you learned?
AS: We've learned a great deal with this approach to dynamic pricing. In terms of rolling it out for the organization, I’d say that the most important thing has been education and communication. People in all facets of the company needed to learn what this kind of dynamic pricing is and, perhaps more importantly, what it isn't. If you’ve decided that you’re going to pursue dynamic pricing, make sure all teams from the ticket office and call centre, marketing, subscriptions and group sales are involved in the conversations that follow. They'll bring up questions and concerns you hadn't considered and will allow you to shape your implementation in a way that makes sense for your business. For us, it was through these conversations that we were able to establish business rules that were good for the business, but also good for our theatregoers.
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Dive deep into dynamic pricing at the INTIX 40th Annual Conference with a session led by Sean Kelly, founder of Vatic. "Data-Based Decision Making and Dynamic Pricing," will provide actionable steps to improve how your dynamic pricing works and better match your pricing with your ticket-buyers expectations.