Do dynamic ticket pricing make the ticket price higher or lower?

I actually went out for a night last week! – the first time in quite a while and enjoyed an evening at the amazing Sydney Opera House with some friends. Of course, as a devotee of all things pricing, as I was listening to the lovely music, I also wondered about the pricing strategy for the tickets and whether it was an advanced strategy or ad-hoc.

 

As you will know if you have been to the Opera House – there is a very wide audience at any performance. This ranges from cruise ship (a similar industry that has introduced revenue management principles to the capacity-constrained business model) tourists wanting to see an architectural icon, students from local universities, opera aficionados and people like your author – someone getting out for a rare night off! Obviously this disparate audience has very different value drivers and appropriate pricing points. These issues will impact the related industries such as pop concerts, conferences and events, cinemas, live sports etc.

 

Dynamic ticket pricing – coming to a concert hall near you

 

Like many pricing strategies to increase sales, dynamic ticket pricing for events is a very similar model to other capacity constrained and expiring products such as car rental, hotel booking, airline flights – i.e. the industries that have been most progressive in implementing dynamic pricing and revenue management systems – and IT programs such as PROS. The ticketing industry has been seeking to move in this direction since c. 2010 with Ticketmaster CEO Irving Azoff proclaimed, “We haven’t done enough dynamic pricing for tickets, and we should, and that will help make people happy.”

 

 

 

Dynamic Ticket Pricing

 

The UK based Independent paper reported in 2016 “, Digonex is now one of the world’s biggest names in dynamic pricing. It’s already big business in the US, where Eglen and his team use patented software at their Indianapolis HQ to crunch numbers and suggest prices for more than a dozen sports teams. Digonex, and its competitors, who include Texas-based Qcue, have clients in the entertainment industry, too, but the San Francisco Giants team have led the way. From 2009, the baseball team have adjusted ticket prices according to details as minute as, say, a crowd-pleasing face-off between two big pitchers. Ticket revenues have risen by 7 to 10 per cent each year since a financial home run for the team’s investors.”

 

Now, after tickets first go on sale, typically at low prices, “the algorithm analyses every purchase for every seat in every area,” Vicars says. “Twice a week it reports to us with suggestions. It might say, you’ve sold x seats in that area, we suggest prices go up for y seats from £20 to £22.” Vicars says prices typically vary in the run-up to a game only by as much as £10 as the system responds to, for example, a run of victories or losses, or a bad-weather forecast.”

 

So let’s look at how Ticketmaster prices tickets. Basically, they do not own the tickets themselves. They do, however, determine the various fees which can increase the price by 20 per cent of the face value of the tickets. It is the client who sets the face value of the tickets like the promoter, the venue owner or the main attraction itself.

 

Ticketmaster only provides the online platform for the promoters to sell their tickets directly to the fans.

 

So what are the fees Ticketmaster adds to the ticket price:

 

  • Face value price. The basic price of the ticket set by the promoter which Ticketmaster pays back to them.

 

  • Facility charge. It’s the fee charged to the promoter for the maintenance of the venue. Think of it as a deposit for renting the place out. Once the event is done, the cleaning up and other facilities used are included in the charge.

 

  • Taxes. Every city or town collects a tax fee from the concert promoters. This is to pay the public services of its police force for a peaceful event; ambulatory services in case of emergencies and the city sanitary services for cleanup.

 

  • Service fee. This the charge for using the Ticketmaster’s platform selling the tickets.

 

  • Order Processing Fee. The charge for the transaction in buying the tickets. This makes up for the costs of holding the tickets, delivering it and other costs to bring the ticket to the buyer. Picking up the ticket personally can avoid paying this fee.

 

  • Delivery Fee. Basically, the fee to deliver your tickets. It can be: mobile, mailed, printed or for pick-up. Again the fee price set by the organiser.

 

 

 

 

Remembering that your customers are also fans

 

The music and sports industries have to remain aware however that their customers are actually also fans – and that there are more issues in place than just maximising profitability through dynamic ticket pricing – any smart operator also needs to ensure they keep their fan base – customer base on side for the indefinite future i.e. a football club can not be seen to overcharge loyal fans for the biggest games of the year.

 

As companies and sports clubs seek to avoid any perception of unsavoury price gouging. It opens up secondary markets and online ticket trading (to enable tickets to be exchanged at higher prices). In this way, TicketMaster’s fastest-growing business is allowing people to resell tickets above face value through its secondary ticketing websites, such as Seatwave and GetMeIn.

 

As in all pricing scenarios – there is always more in play that simply maximising pricing and profitability for today through dynamic ticket pricing. We highlight this requirement and complexity in other blogs we have published on the role of pricing professionals such as Revenue Manager: Is Your Pricing Career On The Right Path?

 

How do dynamic ticket pricing works

 

Dynamic pricing works on a lot of factors to set the ticket price. The factors include holidays, the team’s popularity with the crowd, players’ injuries and weather forecast. With this in mind, the price can go lower or higher at any particular moment.

 

The tickets you purchased are not the lowest as guaranteed. Just have to roll the dice to see if you’re lucky.

 

Implications

 

  • Dynamic ticket pricing uses algorithms to determine the price at a particular time or situation.

 

  • No one fixed price during the selling of the ticket.

 

  • The actual ticket price is the client base price. The various fees, as part of the price increase, including using the Ticketmaster’s platform.

 

Conclusion

Since dynamic ticket pricing is a relatively new concept. The factors discussed in this article are some that influence the price of the ticket. Another is the sports fan relationship with the team based on the performance of their games. Whether they play well or poorly, their aim is to keep the fans coming back to the game. This can have an effect on the ticket price. Lastly, there is a finite number of variables that can affect the fluctuations of consumer demands.

 

 

 

 

If you would like to learn more about dynamic pricing strategy, download our free pricing guide or e-book now.

 

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