All you need to know about dynamic pricing

Aubrey Stork is at the head of marketing and e-commerce activities at Mirvish Productions the largest theatre production company in Canada. It is through a mix of data analysis, pricing strategies, one-on-one communication and user experience optimization that his work has been successful in maximizing customer value. As such, he is particularly well positioned to discuss dynamic pricing strategy and its future evolution. 

INTIX (International Ticketing Association), the main forum for ticketing professionals, met Aubrey Stork for an interview in which he shares his thoughts on the advantages of dynamic pricing, its potential evolutions, his advice... Arenametrix has translated this discussion for you!

- For those unfamiliar with the term, can you explain what "dynamic pricing" is?

Dynamic pricing is the practice of varying ticket prices to better reflect their real value (change in demand, change in stock levels, proximity to the performance date, etc.). Most organisers of live events have always used this practice but in a different form: moving tickets from one price zone to another, increasing prices when stocks are low, reducing prices when demand is low...

This practice has evolved greatly with the development of new technologies to determine market value in a more scientific manner and by taking into account factors that were not previously taken into account. I refer to this form of dynamic pricing as "dynamic fair pricing" because of its ability to reflect the value of a ticket in real time.

- How is dynamic pricing used in the theatre to ensure that the hall is filled?

We use the right dynamic pricing to define the price evolution for each ticket and for each performance. It is by taking into account detailed sales history, other shows in our market, macroeconomic data, attendance, time of year, weather and many other factors that we recalibrate the number of tickets needed to sell each day to reach our attendance goal for a given show. Ticket prices are one of the main levers we use to achieve this objective, hence the importance of a dynamic pricing strategy. 

- What are the benefits of dynamic pricing for the site operator?

Aside from offering quality shows, our goals as a theatre company have always been to maximize both attendance and revenue. Fair dynamic pricing is a tool that allows us to achieve these primary objectives more effectively by minimizing the massive use of discounts, which can undermine the credibility of a show. 

But this goes even further, since this method also meets another objective, that ofincreasing the number of subscribers. The established business rules support this objective. Indeed, prices are guaranteed for our subsc ribers since they benefit from a priority sale for each show. The rules put in place ensure static prices during this priority period, thereby encouraging early sales.

A final objective is to minimize the secondary market for our Notes. The better we determine the actual market value of each seat, the less lucrative the reseller market is.

- What are the benefits of dynamic pricing for the consumer?

By reducing resellers' margins, we reduce the likelihood of artificially limiting supply and inflating prices.

In addition, when we sell directly to our spectators, we are able to provide a better service. We can communicate directly with them about their show - cancellations, pre- and post-show communications, etc. 

Fair dynamic pricing also means that adjustments are made in both directions: upwards and downwards. In fact, it is not uncommon for ticket prices to fall. The most interesting example is when, despite this, the average ticket price for a show has actually increased. While this may seem counter-intuitive, part of the reason for this result is that by reducing the price of some tickets and narrowing the price differential, customers ended up buying better tickets than they would have otherwise. As a result, not only did we fill the venue more efficiently and generate more revenue, but customers were able to see the show in better seats for a lower price.

- Have you noticed any negative aspects or drawbacks of dynamic pricing?

I don't know if it's a disadvantage, but it's a misconception that people have about dynamic pricing. Indeed, this technique alone is not enough to sell your show. It certainly helps to maximize conversion when people come to your box office, but marketing still has some work to do to get people to come to your box office. 

- Finally, what advice would you give to anyone considering implementing dynamic pricing?

We have learned a lot from this dynamic pricing approach. In terms of implementation, I would say that the most important thing has been training and communication.

If you decide to practice dynamic pricing, make sure that all the teams in the counter and call centre, marketing, subscriptions and sales participate in training. They will raise questions and concerns you may not have thought of. For us, it was through these conversations that we were able to establish business rules that were good for the company, but also for our spectators.