Dynamic Pricing Isn't the Problem

Here we are again. Another high demand tour has gone on sale and fans are outraged. Aside from the hours long queue to even purchase a ticket if you were lucky, the price advertised was likely not the price most paid. 

Unfortunately, we’ve seen this scenario before: the tour is announced, tickets are advertised as starting at a certain price, but many fans end up paying a multiple of the posted on-sale price. Many media outlets are laying blame at the use of “dynamic pricing.” When employed responsibly, dynamic pricing should never leave anyone looking back in anger. But how can venues and organizations develop a successful pricing strategy that counters this narrative? As the leading expert in the field of dynamic pricing science, we have some thoughts. 

In this latest example, there appear to be several key differences in how dynamic pricing was applied versus the more commonly used approach in the performing arts industry that is typical of our work with clients. 

Prices were allowed to change frequently throughout the day of the on sale.

As a result, fans who went into the queue and invested hours waiting had no transparency about the price they would be offered if/when they were able to purchase tickets. Digonex’s dynamic pricing solution will only change prices on the schedule our clients determine, usually a few times per week but rarely more than once a day. These price changes are clearly communicated on the website so fans know exactly what they will pay when they start their purchase process. There is no surprise at the payment page!

There didn’t seem to be any meaningful limits to the prices presented to fans.

Digonex always establishes minimum and maximum constraints, determined in partnership with our clients, so that tickets will never exceed a price they are not comfortable with. We are generally looking for opportunities to find an incremental 5 – 20% increase in revenue. Not a multiple of the on-sale price.

The details of a venue’s pricing strategy matter and are about more than just near-term revenue maximization. Digonex solutions are customized to balance revenue growth with other vital organizational objectives such as community accessibility and long-term customer loyalty. When applied appropriately, dynamic pricing contributes positively to the health of the performing arts sector in several important ways:

Setting fan expectations with appropriate on sale prices.

Fans are willing to pay a reasonable price in line with demand to attend a performance at your venue. Setting expectations upfront and being transparent about potential fluctuations in price leads to better fan experiences.

Capturing more of the value you create through your art.

This has become even more important in the current environment where costs have risen dramatically and other sources of funding, whether through government programs or patron donations, aren’t keeping up. Finding an extra 5 – 20% can make a huge difference to sustaining an arts organization.

Helping to protect the direct relationship between fans and artists.

By directing more sales volume toward primary channels versus the secondary market, fans know their tickets are authentic and can take advantage of any exchange or refund programs you offer. Artists and venues also have an opportunity to build deeper relationships with their fans over time. 

Reducing prices to make tickets more accessible. 

Not every performance is going to generate the demand a high-profile reunion tour does. For those performances, it might make sense to lower ticket prices without sacrificing revenue. We have seen some clients lower prices for certain performances that still generate additional incremental revenue and sell more tickets than they would have if they kept prices static.

At Digonex, we believe in human oversight and constant monitoring of the pricing algorithms we deploy. Our team of PhD economists, software developers, data analysts, and client services managers are in regular, direct communication with our clients to ensure an effective pricing strategy that works for them as well as their fans. We work closely with each of our clients every step of the way from solution design to implementation so there are never any surprises.

Dynamic pricing is an important part of the strategy for performing arts organizations still struggling to recover lost revenue over the last few years. As with all technologies, it needs to be deployed in a responsible and equitable way.