Selling Out with Gail Jackman
Knowing what to charge for tickets is one of the toughest tasks the live entertainment industry faces. Providing a little insight into the issue is Gail Jackman, President of Reach Research, a full-service market research company specializing in marketing analysis and insights.
Jackman has more than 25 years experience researching markets and is an avid supporter of the arts. She’s worked with organizations such as the Business Committee for the Arts, the League of Historic American Theaters, the John F. Kennedy Center for the Arts, Berkeley Rep and many more. Now, she’s sharing some of her pricing wisdom to help all of us answer the tricky question of pricing.
Selling Out: What’s your best advice for live entertainment marketers about ticket pricing? Are they charging enough for their best seats? Do you have an example of when you’ve seen an organization raise their prices successfully?
Gail Jackman: Like everything, the right price is what someone is willing to pay for it. While this can be challenging to know in advance, one thing we do know is people are willing to pay more for certain seat locations and days of the week/times of day. We also know that some individuals are willing to pay more because they value the experience more and/or have a greater ability to pay. The trick for arts organizations is to figure out these different demand curves as best they can and price each seat to maximize the revenue it brings in.
I have conducted surveys with subscribers and past ticket purchasers to help a theater company price its seats. I used a series of questions measuring what people believe they currently pay, what they think is too expensive and too cheap, and measures of perceived value among other things to calculate each individual’s “ideal price” (where they feel they are paying a fair price) and their “reservation price” (the maximum amount they are willing to pay). … We found, for example, that the “best seats,” those in the best locations for Saturday night, were being underpriced by over 20%, whereas weekday matinee seats were at or even slightly above optimal pricing. By adjusting subscriber and single ticket prices within location and day of week/time of day categories, the theater was able to boost income from subscribers by 18% with less than a 5% loss in number of renewals versus typical drop-off. Single ticket sales also showed almost no decline in numbers over the year but had nearly a 10% increase in revenue captured. This demonstrates that pricing to the market allows organizations to increase revenues and keep its audience base.
SO: A lot of organizations tend to rate success based on average ticket price rather than revenue per seat. Do you see an advantage of one method over the other?
GJ: Average ticket price is tempting to use because, in the end, organizations need to cover their average costs of production in order to remain financially viable. However, average ticket price should only be calculated at the end of a production run or other pre-defined period to evaluate the success of a show. Trying to price to average ticket value ignores demand-based pricing to the market. Audiences choose to pay for a ticket because the price is in line with the perceived value of the experience. Ignoring what audiences are willing or able to pay, but pricing to what the theater thinks it needs, risks bringing in less revenue in the end because the price charged for each seat is not maximized.
SO: Are organizations hesitant to raise prices because of concerns about the economy?
GJ: Clearly, there’s still a chill on discretionary spending, including on live entertainment, due to the slow economic recovery. Some organizations are hesitant to increase prices as a result. However, some segments are more impacted by economic conditions than others, meaning the market for all seats are not affected in the same way. For example, shows and seats that appeal to a more affluent, more established and more loyal arts audience have more room for price increases (assuming they are priced appropriately now) than shows and seats that appeal to younger, less affluent, more diverse audiences who have more financial concerns and fewer reasons to attend. Rather than applying general rules to ticket-pricing policies, organizations should look at what each ticket category is willing and able to pay and price to that.
SO: Does ticket pricing affect new audiences?
GJ: The biggest obstacle to drawing new audiences is interest. Because they have had limited exposure to the arts, they do not know what it offers to them and do not seek it out. Pricing is an issue to the extent that the value is unknown and higher prices mean a greater risk of not getting their money’s worth. The challenge for arts organizations is to demonstrate or communicate value, that is let new audiences know what they’ll get out of attending a live performance. People spend more than the price of a ticket on many things; they just need to be convinced that a ticket is worth the price.
SO: Changing gears, did you see the article in Variety about the math formula that predicts the success of a Broadway show? Any thoughts on that?
GJ: Although I consider myself a statistician, and it’s intellectually interesting to study the determinants of a successful show, I loathe the idea of “creating” the perfect show by putting together components that have proved successful in the past. This is like listening to a pre-programmed radio station that uses an algorithm to choose what to play. The beauty of the arts is that it inspires by touching the heart and soul. This requires creativity and talent. The best shows “push the envelope” by making us think and feel in ways we did not imagine we could. Following a formula, even a broad one, is a road to repetition and mediocrity. Being too safe is, in the end, not safe at all.
This is not to say that audience tastes and preferences should be ignored completely. Artistic directors and all involved in the production still need to use good judgment in what to produce and to produce it well. I have done surveys when shows are in previews to rate the overall show and understand what the audience liked most and least about it. Findings from these early audience surveys help identify successful shows, allowing the organization to promote the show more heavily and extend the run if possible. Shows that score less well can try to correct the major flaws early or attempt to target the show to audiences who are most likely to appreciate it.