#TBT: Before You Start With Dynamic Pricing …
Happy #TBT. To celebrate, we’re sharing an oldie-but-goodie post: Before You Start With Dynamic Pricing …
The following piece was written by Barry Kahn, the CEO of Qcue (which describes itself as “the premier dynamic pricing engine for live entertainment events”). This is a basic overview of what to do in thinking about how to start doing dynamic pricing, and it highlights some of the challenges.
With no further ado, Barry …
I have to say, we’re excited to see all this talk around dynamic pricing these days. Our clients are seeing tremendous success, so there is certainly proof that increased flexibility in pricing translates to increased revenue.
Lately, a lot of people have asked me how they can dip their toes in the dynamic pricing waters, so I thought I’d share a few tips. At the highest level, it’s important to realize that on the back end, dynamic pricing isn’t easy. We’ve spent years perfecting our formulas and working with partners so we can make the right price recommendations and provide direct integrations to ticketing systems. All that work has paid off and on the front end, we’ve made the process of changing prices incredibly simple for our customers. It’s literally one-click.
That said, for those just getting started in dynamic pricing, here are a few tips and things to think about:
1. Take a step back. Make sure you understand the effects of any price change you make. Do you have multiple sections? Will changing the price in one section impact another section? Will changing a price on one night impact the following night’s performance? Do people typically purchase tickets to your events at the initial on-sale, or do they wait until the last minute? Will you endanger relationships with season-ticket holders? Are you prepared for prices to go both up and down?
2. Analyze all of your data. Do you have historical data you can import into your formulas? How does a Saturday night differ from a matinee or a weekday event? Not just how it has affected sales in the past, but how it truly affects demand so that you can anticipate the response to a price change.
3. Know how quickly you can get real-time data. You don’t want to be using outdated data to make pricing decisions about an upcoming event.
4. Determine the process for updates. Do you plan to make all of your updates manually? If so, how many events do you plan to change at once, and how frequently do you plan to make changes? If you are talking about a full season (of games, theater performances or concerts) and multiple sections within the venue, you could be talking about hundreds of prices changing daily or weekly. Make sure you are prepared for the work this entails.
5. Communicate your strategy. Consumers don’t want to be surprised. If they are used to prices staying static, you need a communication strategy that discusses the new process. Be sure to anticipate questions and be prepared to respond.