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Interested Boosting Ticket Sales? Consider Dynamic Ticket Pricing

For anyone interested in boosting revenues with a strategic approach to prices, dynamic pricing is a great place to start.

For anyone interested in boosting revenues with a strategic approach to prices, dynamic pricing is a great place to start.

In fact, we can see dynamic pricing in our everyday lives—from happy hour in a restaurant, off-season specials on hotel bookings, and different classes of airplane tickets, to dynamic prices on tickets for sporting events. For the ticketing industry, dynamic pricing (DP) is a particularly effective strategy, as it helps vendors fill venues regardless of market conditions.

In this article, we explore how you might use dynamic pricing in your ticketing business and price your inventory in a way that better reflects how much consumers value your events. But let's start with the dynamic pricing definition. 

What is Dynamic Pricing?

In ticketing, dynamic pricing is a successful selling strategy that changes the ticket prices for different customers. The price varies intentionally to optimize and maximize overall profit and influence the number of tickets sold. Moreover, dynamic pricing is usually an automated price adjustment that will offer the same ticket at different prices to different people at different times.

Dynamic pricing does a good job of balancing supply and demand based on a number of variables, such as the time or destination of a flight, a team’s opponent, weather conditions, or simply the fair market value of a ticket. This pricing strategy applies variable prices instead of fixed ones, so ticket vendors can update their prices whenever they consider this necessary.

Who Uses Dynamic Pricing?

The first businesses to start using dynamic pricing were airlines and hotels. Since then, Amazon has become a leader in dynamic pricing by changing the prices of millions of items every few minutes. However, these are hardly the only industries that can enjoy the benefits of this approach. Today, a wide range of businesses in the service sector is applying this principle:

  • Travel
  • Hospitality
  • Entertainment
  • Utilities
  • Retail
  • Public transit
  • e-commerce

According to a Statista survey, only 37% of retailers say that dynamic pricing is not for them. The rest are either considering it or already using it. Most businesses use dynamic pricing differently, based on groups, location, time, and demand.

Share of e-commerce companies worldwide planning to use dynamic pricing in 2021

Types of Dynamic Pricing

Dynamic ticket pricing is tightly connected to the dynamics of supply and demand. However, there are some variations you can consider. Each approach has its advantages and disadvantages, but, used together, they can help increase ROI and sell more tickets.

Segmented pricing

Segmented pricing strategy promotes selling the same product at different price points through various channels. It helps vendors generate more revenue than a fixed price model, as certain groups of customers are willing to pay more or less depending on how much value they attach to the product or service.

Due to market segmentation, different customer groups have different characteristics regarding the price they are willing to pay.

Time-based dynamic pricing

“Early bird” and “super early bird” tickets are cheaper because the buyer has to commit to purchasing well ahead of time. These types of tickets are important for bringing in revenue before an event, while fans are rewarded with less expensive tickets or are able to buy more tickets at the discounted price. By the same logic, if someone decides to purchase a ticket right before the event, they’ll have to spend more money on it.

Peak pricing

Peak or demand-based pricing is an approach that includes several strategies, all of them based on the idea that the price of a service or product is determined by demand.

Depending on the market data available to vendors, they can determine what their prices should be according to the availability of certain ticket types for high-demand events. This model is similar to time-based dynamic pricing as ticketing platforms determine the ticket price in high-demand: for big events, they can rise up to almost $1,000.

“The industry is adopting a new mantra,” says one concert-industry expert. “If you sell out quickly, you didn’t price tickets properly.”1

Penetration pricing

This approach is often used by ticketing platforms that are new on the market or when they’re introducing a new product. Usually, they offer lower prices to attract new customers and encourage them to purchase tickets through their platform. Prices start getting higher as the vendor establishes a position on the market.

How To Implement Dynamic Pricing?

To help our clients take full advantage of dynamic pricing solutions, we take them through a few important phases to successful implementation. Everything starts with a detailed analysis of your objectives, as these will dictate the type of strategy you should implement. Next, you select a method, set the rules, and test the approach until you fine-tune a model that will work best for you.

How to implement dynamic pricing

1. Define your commercial objective

In this first phase, the key is to understand current ticket types and prices in order to define your new goals and a more suitable pricing model. The analysis should help see what the strongest drivers for demand and attendance are. Whether it's the weather, certain days in the year, the warm-up band, or the season, your new strategy should take every factor into account.

2. Devise a strategy

Patterns are everywhere and a detailed ticketing analysis over one or more seasons can reveal a common trend that can then serve as the basis for your new strategy. Ticket differentiation can show which ticket types are the most or least popular, and how prices affect their popularity.

3. Implement, test, and iterate

Whether you go with a third-party provider or develop your own solution, it’s time to test the solution. When your software is ready, connect it to your ticketing system and start tweaking prices on a daily or weekly basis. If you don’t get the results you expected, reevaluate your approach to get better results for your next event.

4. Develop a merchant-informed algorithm

Certain ticket types are great candidates for frequent price changes, while others are not. Ideally, the prices of basic ticket types (General Admission) or special ones (VIP) should be stable as they are the foundation of your offer. However, all other big-ticket types leave space for dynamism. Again, all your decisions will need to be verified on the market, since frequent price changes can sometimes lead to a consumer backlash.

Examples of Successful DP Strategies

Dynamic pricing offers a number of benefits to event organizers. Once there’s a clear strategy that includes consumer expectations, a detailed pricing plan and goals, you should see some good results.

Ticketmaster

Shifting prices for concerts and other events are often based on market demand, and it’s a strategy that big names like Ticketmaster have been using for years now. As the live music industry slowly bounces back, Ticketmaster’s pricing model is seen as the only way for the entire industry to recover.

Some fans are quite upset over prices, as they’re seeing increases of up to $1,000 for the best seats, but interest is still on the rise, especially for big-name performers like Taylor Swift or Billie Eilish.

NFL Teams

With the 16 NFL teams having shifted from fixed prices, it is obvious that dynamic pricing in sports is an industry-wide trend. Today, college and pro sports teams are also relying on various models to fill seats, depending on the weather, date or number of discounted seats.

Some teams are also working on maximizing revenue by cutting down on the number of discounted and complimentary tickets. This decision has helped them to slowly increase their base of season’s ticket holders and attract loyal fans who are willing to pay more.

What Makes Dynamic Pricing So Effective

For a number of industries, dynamic pricing is an effective way to optimize prices and increase revenues. Indeed, some benefits can be noticeable in a short period of time.

Strengthens your value proposition

When you develop a pricing strategy, you have to consider everything, from promotions, discounts and coupons to other strategies you’re planning to use. By studying trends, you can come up with competitive prices to maximize your revenues.

Fills all your seats

Finding the most effective way to sell tickets will drive additional conversions and it can even attract a new audience. When you reach full capacity, your revenues will be maximized, even with lower margins.

Helps synchronize demand and pricing

Dynamic pricing demands a test-and-learn approach if you want it to start working. Keep in mind that it will take time until you figure everything out, but this analysis will help you allocate money more effectively. After a few months, you are likely to see growth in both sales and profit margins.2

Helps you remain competitive

Working to understand your market position and how much customer value your events represent will support you in making well-informed decisions to come up with ticket prices that really sell your events.

Challenges to Watch Out For

When you decide to implement dynamic pricing in your business, be ready to possibly face dissatisfied customers if you don’t inform them about the changes you’re making. Here are some of the common pitfalls after implementing dynamic pricing.

Customer frustration

When they notice inconsistent prices, customers may become upset, which can affect their purchase decisions. What’s more, many will leave bad reviews, file complaints, and give your brand low grades once they realize that your pricing is not transparent. By establishing strict pricing guardrails, your prices will fluctuate gradually, and the customers won’t be confused or annoyed by them.

Reduced ability to collect relevant consumer data

If customers recognize you raise prices based on their web browsing history on your site, they may resort to browsing privately, depriving you of valuable customer data that reduces the effectiveness of your dynamic pricing initiative.

Don’t follow the market blindly

When you’re open about your pricing and notify your consumers on time, they will know what to expect.

Seasonal change or Black Friday often trigger major price changes and if you rely on your competitors’ prices too much, you might make an unnecessary change that will negatively affect your sales.

Fans often complain that dynamic pricing is unfair and once they know when the prices might be cheaper they simply follow the discounts and do their purchase on certain dates.

When Is The Right Time For a Dynamic Pricing Solution

When is the right time for implementing dynamic ticket pricing

Once you are aware of all the benefits and challenges of dynamic pricing, it’s up to you to decide if the time is right to explore how to implement it into your ticketing solution.

You may want to make dynamic pricing a top priority if:

  • Your venues are not operating at full or near-full capacity.
  • Ticket buyers tend to wait until the last minute to book, making it hard for you to plan.
  • Your profit margins are below your industry’s norms.
  • Your revenues are flat or shrinking.

If your organization fits any of the above, it’s time to move to the next step and ask yourself some tough questions:

  • Are you willing to invest in the software that enables dynamic pricing?
  • Have you seriously considered the challenges of dynamic pricing (and how to proactively address them) as well as the benefits?
  • Will you be able to train your customer-facing staff to handle questions about dynamic pricing with confidence and in a way that will ensure customer satisfaction?

Because ticketing is our specialty at Softjourn, we’ve collaborated extensively with many industry clients as they’ve worked through the same decision you may be contemplating right now. We’re ready and willing to share our know-how with you.

Final Thoughts

With the explosion of dynamic pricing across various industries, it’s clear why it has become a must-have growth driver for ticket vendors. The fact is that this strategy has proved effective for using machine learning to generate optimal prices for tickets and other products, tracking expenses, and maximizing profits.

Dynamic pricing is also ensuring a steady flow of sales and revealing the perceived value of tickets among fans. Vendors and retailers who decide to move quickly and customize their solutions can leverage dynamic pricing as a major competitive advantage.

If you are looking for a partner to help you develop a dynamic pricing solution from scratch or you’re looking for the best dynamic pricing provider - Softjourn can help. 

FAQ:

  1. Why is dynamic pricing suitable for the ticketing industry?

For venues that have limited capacity and varying demand, dynamic pricing is a very useful solution. With event prices depending on the date, weather, performers, or opponents in a sports event, dynamic pricing can be instrumental in raising the number of visitors.

  1. Will our tickets have to become more expensive?

They can, but they don’t have to. Dynamic pricing is a system that allows you to both raise and reduce ticket prices. The best approach is to adapt your strategy to the event you’re organizing and raise prices for high-demand events and reduce them to stimulate more sales for other events.

  1. What goals can my business reach with dynamic pricing?

Dynamic pricing in ticketing can help you reach one of several goals like driving ticket revenues, helping collect more customer data, improving social media presence and event visibility, increasing or decreasing visitor attendance, and helping you secure cash with early bird sales.

  1. How is dynamic pricing good for fans?

Fans who decide to buy their tickets early are normally rewarded with lower prices. This means they are more likely to bring their family and friends to an event they are interested in.

  1. What does it cost to implement dynamic pricing solutions?

The cost of implementing dynamic pricing varies depending on your project requirements. However, your revenues are highly likely to be between two and five times higher than the cost of implementation. Moreover, you can look forward to an increase in the share of online sales and a significant reduction in no-shows.