Variable Versus Dynamic Pricing

The stock market takes advantage of dynamic and variable pricing, do you? Photo credit: “Tickers,” © 2012 Francisco Gonzalez, used under a Creative Commons Attribution-ShareAlike license.

The stock market takes advantage of dynamic and variable pricing, do you? Photo credit: “Tickers,” © 2012 Francisco Gonzalez, used under a Creative Commons Attribution-ShareAlike license.

Do you have one of those friends who can’t resist correcting people on the proper use of “who” versus “whom”?  Perhaps you don’t because you are that person. Regardless, you’re all welcome here.

Personally, I let the who/whom thing go because I’ve never misunderstood anything said to me because of it.

Other frequently mistaken words though aren’t as harmless. They have the potential to get you all mixed up, crazy, and worse still, losing out on money from ticket sales.

So we’re going to spend just a few minutes making sure we all understand the difference between dynamic pricing and variable pricing. If you’re a marketing professional in the live entertainment business, it’s not OK to use these interchangeably, and you really don’t want to be hanging with your colleagues at some fancy ticketing party or convocation and not know what they mean. So here goes:

Dynamic Pricing simply means prices that might change after the tickets are put on sale. Orchestra 1 starts at $80, but demand surged, so they went up to $85. Or demand anti-surged and they went down to $75. This can be done a whole lot of different ways, from high tech to low tech. The highest tech form of this relies on real-time algorithmic assessments of current demand to produce a price just for an individual consumer. Most dynamic pricing in live entertainment is done in a fairly low-tech fashion: if sales meet a threshold (usually on the high side) by a certain time, raise the price on all tickets by x dollars. Almost completely manual. Generally, the more sophisticated stuff is done in the sports genre, with the help of companies like Qcue.

Using channels like Goldstar is also a form of dynamic pricing as well, but it’s a little less direct. You’re not just changing a price; you’re also reaching a different audience than the one you normally reach. In reality, you’re reaching a new audience, whose price dynamics are governed by something different.

Variable Pricing by contrast is not about prices changing, but about prices being different initially for different reasons. The most obvious example of this is peak and off-peak nights: if Saturday is your best night and Tuesday matinees are slow, for example, you can (and should) charge quite a bit more for Saturday night. If you don’t, you’ll end up overcharging for Tuesday and/or undercharging for Saturday night.

But variable pricing is more than that. It can be day of the week, but content can also play a part. The opponent in sports is a great example of this. When the Yankees or Red Sox come to town, the Kansas City Royals charge more for those games. Likewise, when Book of Mormon tours the Performing Arts Centers of the world, they charge more than for a somewhat long in the tooth revival of Oklahoma.

But really, variable pricing could be about anything, and in my opinion, it includes good seat scaling. Unthoughtful scaling is one of the most common mistakes I see and one of the biggest opportunities to increase revenue with almost no pain whatsoever to anyone.

So here’s an FAQ: Can you do both at the same time? The answer is absolutely. Set those variable prices and then let them move dynamically. It’s not a mutually exclusive choice, and in fact, they work together brilliantly.

Here’s another FAQ: Which is more important? My information from multiple sources tells me that variable pricing, including proper, data-based scaling, has more potential for most venues. Some have said to me that 20% is a reasonable expectation for increased revenue if you really aren’t doing any variable pricing and haven’t really put much thought into your scaling. Dynamic pricing has a significant value too, but overall and for most, variable pricing probably has more potential.

FAQ 3: Which do I do first? Here I would suggest you clearly do your variable pricing project first and get it in good shape. Dynamic pricing should be a layer on top of a pretty smart system of knowing what is worth what to your ticket buyers.

So now you know! Dynamic and variable and different, but related, and both valuable. And if they ask whom told you about it, tell them that I did and that, yes, I know it should have been “who.”

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