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Dynamic Pricing

September 21, 2011

You take two tins of baked beans from a supermarket shelf. You pay for your shopping, then realise you need another tin. You return to the shelf, and find the price has gone up because the supermarket recognised baked beans as popular right now.

You’d be at the customer services desk to complain within moments… yet when you buy your airline ticket, you don’t comment at all when exactly the same thing happens.

It isn’t an ‘internet’ thing either. Fifteen years ago – pre online – the travel industry did it all the time with air tickets. I know, I was there. The thing to remember is that (with a few exceptions near the bulkheads and toilets) all airline seats in a single class are the same. You pay for extra space and that is all – you get to the same place regardless.

Theatre seats are different. Some have better views than others, and are differentiated by price accordingly. The best seats are now at “premium” prices, and an article in “The Stage” newspaper (15th September 2011) suggests that theatre owners Ambassador (ATG) want to experiment with this further next year as their new reservation system goes live.

Put simply, they want to designate a group of seats at “premium” price and then reduce them if demand dictates. This has already been seen in a small way with one production at one of their venues earlier in the year, but they hope to expand it.

I’m is curious about whether this will work. At one smash hit new musical, has already had two reports of readers asking to be moved in advance / being moved on the day by the venue to fill gaps in the ‘premium’ area.

This begs the question, “will advance bookers alter their habits once word gets out?” We already know that consumers play ‘chicken’ with any retailer who has either perishable stock like holidays to sell, or deadlines like Christmas Day to shift merchandise. Whoever blinks first suffers – and it seems to be the seller more often than not.

It might surprise people to know that the amount of cash in the advance sales box office is pretty vital to a producer. They can’t actually touch it until an agreed point after the performance date, but it accumulates interest (whether for producer or box office operator provides some amusing court cases) but it does provide ‘security’ for advance planning – and enhances producers’ credibility when they begin work on their next project.

What worries me is that the ‘advance’ may shrink noticeably under the new system, to the detriment of planning for new shows. I’m not much for ‘advance booking’ myself, but if I do, and know that if I wait until a week before I could get far better seats for the same price… I’ll wait.

Regular theatregoers – the lifeblood of new shows for their first few weeks until word spreads – are a clever bunch, and are likely (I predict) to do the same. Result: no interest earned on advance cash, no people safely booked in who will spread the word about a show, no nice cushion of cash in the box office for a producer to launch an new project from.

The ATG experiment may work, it may not… but either way, I really hope they know what they are doing…

  1. September 25, 2011 6:44 pm

    Couldn’t agree more – this seems quite a gamble. ATG seem to be living in a bubble when it comes to recognising that theatre audiences want value for money just like anyone else, and they don’t want to be treated like mugs. Surely the ‘early bird’ model, where early booking is rewarded with a discount, would be a better way of building up the advance bookings, and fairer to the regular theatregoer – as you have pointed out before, bigger audiences, even at reduced prices, can generate future ticket sales through word of mouth and ultimately make more money for the theatre. Reduced price previews used to serve a similar purpose, but these seem less and less popular. We had a quick look at the Barbican’s seating plan for South Pacific, closing this week, and found that there are still significant areas of £85 ‘premium’ seats unsold – could it be that the Barbican’s admirably transparent booking system shows up these seats as being far from ‘premium’ and not worth it? We wonder if ATG will start to fall foul of the law if they are unable to state the actual face value of the ticket they are selling because it is constantly changing?

    • Steve Rich permalink
      September 26, 2011 11:54 am

      I agree with you.

      On the legal question at the end, the answer is ‘no.’ It doesn’t matter if the face value is constantly changing or not. Provided the customer is told the face value at the moment the ticket is sold, so that they know how much the original ticket costs and can see the price of the booking fee beyond that, then ATG are well within all rules.

  2. Robert Baker permalink
    September 27, 2011 10:20 am

    I fear that the people won’t know the total cost until the booking fee is added.

    • Steve Rich permalink
      September 27, 2011 10:45 am

      The price of the ticket itself must be clear before purchase, and any booking fee has to be shown as a separate item by law. The problem is where the fee is shown – some companies tell you the fee before you choose your seats, some add it only at the checkout stage.

      I agree that what may be confusing is finding out that the same ticket (before booking fees) might cost £85 one day, £60 the next and £65 an hour later. Then, as you say, you have to add the fees… It will all get very interesting, I fancy…

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