First published: March 2, 2016
Everyone can relate to this. You are looking at airline tickets today to check the price for that great vacation to Dubai, the price looks good right now. But you want to check with your traveling companion. The next time you look, just an hour later, the price is different (and not surprisingly often higher). What you are seeing is the effects of dynamic pricing that has been going on in the travel industry for years. But for the last few years now, not only is this happening with airline tickets, but also with sporting events, concerts, theatre tickets and other events. This process, known as dynamic pricing, can be achieved in multiple ways. The objective is the same though, maximize revenue.
What does this mean for Venue owners or Ticketing Service Providers?
It means that everyone is scrambling to implement different pricing strategies, as consumers become more accepting, or at least more used to, dynamic pricing and other types of variable pricing. Venue owners see the opportunity to increase revenue. Ticketing service providers are also getting more and more inquiries to add functionality that will enable the venues, using their ticketing services, to analyze their sales, forecast their sales and interactive tools to enable the venues to optimize pricing.
The best way to implement optimal pricing methodologies is to implement a revenue management process. There are multiple parts to maximizing revenue, including analyzing the existing situation, forecasting, defining the model to be used that works best for a venue, or multiple venues in the case of a ticketing service provider, implementing the strategies, and so on.
So how does a venue, or even a ticketing services company for that matter, implement dynamic pricing, or other pricing strategies so that they can maximize their revenue?
Let’s start at the beginning
……….with a short question and answer session.
Q: Revenue management versus dynamic pricing, are they the same thing?
A: Actually no. Dynamic pricing is only one part of revenue management. Revenue Management involves predicting consumer behavior and optimizing product supply and pricing in order to maximize revenue. In this case, the revenue generated from ticket sales. It involves understanding the price sensitivity of consumers. Methods implemented to maximize revenue can include; packaging, variable pricing, discounts, dynamic pricing, etc.
Some questions that revenue management can answer are:
- When can we/or should we, raise ticket prices?
- For which events would we be able to increase prices?
- How much additional revenue can we make if we increase prices at different times?
Q: What triggers may occur for a venue that let an owner know that it may make sense to implement revenue management?
A: Technically every venue owner wants to maximize their revenue, right? Therefore having a good handle on how it is earned today, over what events, when tickets are sold, to whom, etc., is worth the analysis at any time. However, there are certain events that may increase the urgency.
For example if a venue has recently expanded and now is having difficulties filling the increased capacity. In the same token if the venue owner is thinking about expanding, and is wondering how to sell additional season tickets.
Another example may be if the events at your venue have a hard time doing advance sales, with tickets typically being purchased the day before or the day of the event.
Q: How much work would it be to get started looking at revenue management?
A: Revenue data is definitely going to be needed, the more the better, but if you only have data on sales for the last year, it is enough to get started.
Q: What are some of the complications of implementing dynamic pricing?
A: One complication, for certain types of events and venues, can be the number of parties involved. Groups, promoters, venues etc., all have to be on board with the plan, implementing a new strategy with many parties involved can be challenging. That is why a good process is needed.
Another issue also related to data is the ability to forecast sales for an upcoming event. For a baseball game the owners would have information as to which opponents draw the most attendance, based on past history and based on where they are in the standings. Other events may be harder to forecast demand. Newer music groups or theatre events.
There will need to be some trial and error.
Q: What are the concerns with implementing dynamic pricing?
A: Altering the face value of a ticket, can be a concern, the date you alter the prices can be a concern. If you always do it on a Friday, how will you get anyone to buy tickets before that date? We are here to work through those concerns with you.
Revenue Management is not a one-time activity
Q: What could be the results of a revenue management project?
A: Revenue Management is an ongoing process. The results of a revenue management project can not only include the analysis of your current situation, the development of a new strategy to aid in optimizing revenue, but it can also include the development of tools for ongoing monitoring and decision making.
For example, for a venue:
- Dashboard for venues to be able to see the real picture of pricing changes and how changes will affect the bottom line.
- Analysis of sales by type, by location, by time, so you can control your pricing strategy.
- An interactive forecasting tool so you can have better sales expectations.
For a venue owner or a producer:
- A mobile application to alert you as to when a particular event has reached the breakeven point.
- Mobile application with charting capabilities to view revenue by events, by venues, by a chosen time period, so you can keep on top of how pricing is affecting revenue.
For a ticketing service provider:
- Adding capabilities to your ticketing service that enable your venue customers to get the best handle on their revenue and how different pricing strategies can affect their numbers, is in demand by today’s customers. Modules can be designed and developed to take the sales data already being captured and provide interactive tools so your customers can use their data to make better pricing decisions.
Optimal Revenue Management Solutions
As innovative ticketing guru’s, Softjourn works with ticketing customers in many ways. Interested in what pricing strategies may work for you, contact us about revenue management.
