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Australasia needs to make the most of dynamic pricing in entertainment and sport
Speaking at the NARPACA Ticketing Professionals Conference yesterday (Tuesday 18th February), and in a feature in the November/December 2013 issue of Australasian Leisure Management, revenue management consultant Tim Baker has explained that while dynamic pricing is common in the sport and entertainment in the USA, organisations in Australasia and Europe have been slower to pick up on the opportunity.
Baker, Director of international software and consulting firm Baker Richards and Vice Preisdent of its US-based sister company The Pricing Institute, believes that while the slow adoption of dynamic pricing is partly to do with technology, he argues that it is not generally appropriate to fully automate the pricing process.
Explaining that "dynamic pricing is a pricing strategy where the provider of a service or commodity varies the price depending on the time and expected or observed demand", Baker believes that dynamic pricing is just one element of revenue management.
He sees dynamic pricing as being particularly useful:
• When demand is difficult to forecast
• Or when brand or positioning demands consistent pricing across a range of performances, but demand says otherwise
• To help drive booking earlier (and reward customers who are willing to commit)
• As a way to create an enhanced benefit for subscribers or members, where they are not impacted by dynamic pricing increases.
But there are situations where dynamic pricing might not be the best approach:
• For an organisation with a high proportion of loyal, frequent customers who all book early
• Where dynamic pricing does not fit with the overall earned income strategy. For example, where pricing is being used to leverage other income streams such as memberships or donations.
• Where you already know that demand will be high.
In his feature in Australasian Leisure Management, Baker continues "assuming that your objective is to optimise yield, it is always better to get prices right from the start, rather than using dynamic pricing to address under-pricing later - unless you have branding reason for starting prices low/uniform.
"Organisations should certainly be doing everything they can to plan pricing properly, but customers willingness to pay can vary so unpredictably that it is not possible to set each price at exactly the right level for each purchaser in advance. Then, dynamic pricing allows you to respond to customer demand.
"The time is right for dynamic pricing. Customers understand and accept the practice, barriers to its use are mainly in the mind, and implementation can be relatively easy. In the USA, theatres are making very significant improvements to their box office revenue: Center Theatre Group in Los Angeles took an additional $1.4 million on one show while the Arsht Center in Miami has been exceeding sales goals for one-week shows by more than $150,000 a time.
"Even smaller theatres, such as Seattle Repertory Theatre, have earned $50,000 in incremental revenue - just the yield over and above original prices - in a year."
Tim Baker delivered his er presentation 'Implementing Dynamic Pricing for Box Office Managers' at the 10th Annual Ticketing Professionals Conference being held in Brisbane between 17th and 19th February.
His feature, 'The Price is Right?' was published in the November/December 2013 issue of Australasian Leisure Management.
18th February 2014 - EMERGING DIGITAL TECHNOLOGIES TO IMPACT LIVE EVENTS
23rd May 2012 - DYNAMIC PRICING IN THE SPOTLIGHT: ARTS AND ORIGIN II
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