Pricing Is Yucky
“Yucky” is a really useful catch-all term that little kids use to describe things that they just don’t want to have anything to do with. I remember my own toddlers would describe various things as yucky, which didn’t mean they smelled bad or had some horrible sticky substance all over them. It just meant they weren’t interested and couldn’t be made to get interested.
I have a theory that a lot of the mistakes and misconceptions that people make about price in live entertainment and arts comes from the fact that pricing, for many people in the business, is yucky. Boring, crass, complicated — take your pick. These are all good reasons to want to set a price and then walk away. But here’s the reality: Pricing is very difficult, and you’re pretty much destined to get it at least partly wrong. If your mindset is to set it and forget it, you, being a human being, will turn out to be at least partly in error and giving away some potentially very valuable opportunities.
Of course, also being a human being, you won’t let that happen. If you were wrong about your initial price assessments, you’ll create a vast network of justifications for why, despite all financial evidence, you were in fact right all along. You were right, you were right, you were right. La, la, la — I can’t hear you.
Two stories I read lately show examples of how price makes an impact on results in important ways. This Wall Street Journal article describes how the Met Opera raised prices and dropped both revenue and attendance, and this Independent article is about how British orchestras, as a whole, have lowered prices and raised attendance, but lowered revenue.
Now, lest you think I’m saying anything bad about either organization, I’m not. Pricing is hard, and the way to learn is to see what the market says, after all. I would say that I’m less impressed at the way both stories were reported because I think they both failed to make the very obvious economic connection between the facts and the causes.
If prices are lowered, you should get more buyers, BUT if you also get lowered revenue, you’re cutting when you shouldn’t be. If your prices are too high and you cut them, revenue AND attendance go up.
On the other hand, if you raise prices and both attendance and revenue go down, you’re raising prices when you shouldn’t be. If you raise the price, you should see at least some reduction in attendance (all other things being equal), but you should also see an increase in revenue. Broadway looks quite a bit like this right now, for example. If you raise prices and BOTH attendance and revenue go down, you should not be raising prices.
British orchestras are lowering prices to grow attendance and that might be a good goal, but only if they’re prepared to replace the income or do without it. It doesn’t sound like they are, so they should be managing Revenue Per Seat better and using it to create BOTH new revenue AND accessibility. Which can be done. It’s not an either/or unless you make it that.