Revenue / 03.01.23
Digonex’s Dynamic Greg Loewen Talks About Dynamic Pricing
Dynamic pricing is known by several names: demand pricing, surge pricing, time-based pricing. But what is it exactly, and how is it becoming an increasingly big factor in today’s ticketing and live events space? We asked one of the experts, Digonex President and CEO Greg Loewen. He explained that dynamic pricing is a strategy where businesses adjust the prices of their offerings to account for changing demand.
“Put simply, dynamic pricing is about better aligning prices with underlying demand and supply factors,” he says. “Dynamic pricing can be used for different purposes. It can meaningfully increase revenue. But many of our clients also utilize it to fill their halls better and/or achieve other community accessibility objectives. This means that sometimes the ‘right’ price is a higher one, and sometimes it’s a lower one. When done well, dynamic pricing helps to ensure that tickets are available for loyal patrons and that artists earn a fair return for the value they create.”
Over the years, Digonex has emerged as a leading provider of dynamic pricing solutions across a variety of industry sectors including attractions, performing arts organizations and live entertainment venues, among others. According to Loewen, he and his colleagues have witnessed the adoption of dynamic pricing in the attractions/tour operator segment accelerate dramatically since the COVID-19 crisis. He observes that many operators that his Indiana-based company deals with implemented a broad array of changes to support their re-opening, including advance reservations, timed ticketing and capacity constraints, in addition to dynamic pricing. “Many found that their guests adapted to the changes very easily, and combined impact on business results could be dramatic,” he says. “As a result, most have maintained many of these changes as a core element of their business model.”
To be sure, the majority of Digonex’s clients were using dynamic pricing before hiring the firm. “There was an internal process for gathering and analyzing sales data to identify possible pricing opportunities,” he says. “That said, they also tell us that the process was very time consuming and limited in scope and that there was still a whole lot of ‘gut feel’ and ‘educated guessing’ in determining what the optimal price was. The industry has come a long way. But there is still a significant opportunity for the enhanced utilization of data science and econometrics to optimize pricing decisions.”
Of course, there are numerous factors that are taken into account when setting pricing, and some might not be so obvious. The weather is one example, as is the day of the week an event is taking place. In sports, it might be who is or is not likely taking the field — an All-Star starting pitcher vs. a journeyman, for instance.
Loewen says, “We typically look at a wide variety of data points. Obviously, characteristics of a particular performance or event are important. For example, if we’re pricing a symphony orchestra performance, things like day of week, guest soloist, guest conductor and programming are important. Weather can be a critical one, especially for our attractions clients. Google Analytics can provide a lot of rich insight. Our economists also analyze a wide variety of local macroeconomic variables that can impact household income and discretionary spending patterns.”
So, does human intuition and experience still play a role in pricing strategies and decisions and to what extent? Loewen was eager to answer: “Absolutely, yes! We believe the best pricing process is one that blends the best available data science with management’s unique expertise and market knowledge. No matter how good the pricing algorithms are, there will be situations where relevant information may not be factored in. Our own process combines our automated pricing solutions with oversight by our team of PhD economists. And our proprietary pricing portal makes it easy for our clients to review our price recommendations and accept, reject or override them before they go live. Our own process attempts to integrate the science and human elements in a simple way.”
Digonex was founded in 2000. As one might imagine, pricing has evolved considerably since then. Loewen has been at the reins of the company since 2014. So, he was able to speak to some of the more noteworthy changes over the years.
“The evolution of technology has enabled a much more sophisticated and data-driven approach to pricing,” he says. “The ability for even small- and medium-sized organizations to gather, organize and analyze their data to derive insight and support decision-making has evolved by leaps and bounds. While I’d say the ticketing industry has been a later adopter of some technologies, it is catching up fast. The ticketing systems that serve our clients have made huge strides opening up their systems and building partner ecosystems that allow their clients to take advantage of best-in-class technology.”
He continues, “This obviously goes well beyond pricing. Go to any ticketing conference and most of the vendors/sponsors in the exhibit hall are offering a technology-driven solution to a problem. It’s exciting to be a small part of that.”
The last few years of pandemic, though, have seen some of the most ambitious changes. For Loewen and Digonex, it’s been about striking a balance between what the crisis has called for and what has worked over the long term. He says, “We are always working on ways to strengthen our pricing models. As the research on pricing advances over time — e.g., with machine learning — we adopt our science accordingly. We also saw some of our clients start to experiment with independent dynamic pricing strategies tailored to different segments of their market. That said, while the pandemic and subsequent recovery has led to some significant shifts in the optimal price levels for many of our clients, the fundamental approach to pricing optimization didn’t change dramatically.”
With that in mind, where is this all headed? What is the “future of pricing?” Loewen was only too happy to speculate: “It’s not surprising to hear us say that we think data-driven pricing will become more widespread across many sectors of the economy. Fixed prices printed on labels will become a relic of the past. We also think the application of segmented pricing will expand. Finally, we expect that the ongoing dialogue on the principles of fairness, transparency and consumer privacy in ticketing and ticket pricing will remain in the forefront
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Tags: Revenue , Dynamic Pricing