Commentary: Forget dynamic pricing, use placebo pricing

Joe Patti, Butts In The Seats blog, 1/18/12

A lot of retail stores are designed to appeal to the idea people have about themselves rather than to who they really are. I have been thinking about how arts organizations can identify what image audiences have of themselves when they attend performances and adjust the physical, social and customer service experience in that direction without incurring large expenses. I was amused to find a possible answer linked to on the Marginal Revolution blog. Peter Seebach suggests a placebo restaurant where you list everything at twice the normal price but give everyone a 50% discount:

"There was some research a while back which found a possibly-surprising result. ...if you serve the same wine to a lot of people, and tell some of them it's $12 for a box and others it's $400 for a bottle, the latter like it better... Say you have a steak roughly of the same quality as the $13 steaks at Outback Steakhouse. The menu says $26, your bill when it arrives has a 50% discount. But everything you order feels expensive. The basic idea here is... people aren't going out to eat for the food, they're going out for the experience. Why not sell the experience as the product? And thanks to some lovely research done on placebos in the 60s or so, we know that in some cases they work even if you know it's a placebo -- they've been shown to treat depression effectively even when explained."

Can it really be as easy as having a perpetual 50% off sale? We are all aware on some level that when a store has a sale with deep discounts, the original price they are quoting was probably inflated. We may grouse and think it is a little dishonest, [but] we are still out there buying from that store on a regular basis. And this feeling of being in a dishonest situation can be ameliorated by providing sincerely good service. So the big question is, do you take advantage of customer psychology to provide audiences with a satisfying experience? Oh, actually, you already do in a thousand different ways with your marketing, pricing and other practices. Question is, do you do something so blatant? Given that in some cases the placebo effect works even in the face of full disclosure, it is tempting to try out. Many ticketing systems, including my own, make it very easy to print one price on the ticket and set the actual price much lower.

Commentary: How much will people pay for entertainment?

Keith LaSpaluto, Box Office Representative for Ballet Arizona, on Ticketforce's blog, 1/5/12

How much will people pay for entertainment? Most of you reading this are in charge of live performances of some sort that take place in a venue probably ranging from a few hundred seats to possibly a couple thousand. Are you ready to do something different with your pricing than what you've been used to for years? Dynamic ticket pricing is expanding. Companies are trying to think outside the box and maximize revenue. But will it? "Buy your tickets now because the price is probably going to go up." Is that how it will go? Or will it delay sales as ticket buyers wait for the prices to go down. It is amazing how a ticket buyer can be perfectly satisfied with his or her purchase until they see the same tickets for a lesser price. It was a good value then, but now it seems like less of a good value. No smaller venue needs to be upsetting any ticket buyers by making them feel like they got a bad value. Sure, you'll get the ones that bought before the price went up, the ones that are excited to know that the tickets they bought are now worth 3 times that (well, not all of them - consider this: "I brought my infant to today's show. You mean I have to buy a ticket for my infant? How much does that lap seat cost?"). How many of your patrons are going to email the theatre director because they got in when the going was good verses the ones that saw their ticket prices go down? I believe we tend to think in negative terms too often, myself included. Obviously effective use of dynamic pricing is a good thing for the ticketing industry as a whole and can likely bring benefits and rewards to your situation. And it is likely that, as the trend expands, the public will come to understand it better and accept the risk of buying now verses buying later

Commentary: "Happy customers will pay more"

Ivan Schustak, in reply to the above blog post,

Interesting. I personally can't stand dynamic ticket pricing, and I think it highlights a lot of the difficulty the entertainment industry is seeing. Very often, arts organizations anger and frustrate their patrons through countless minor annoyances that add up. Put a captcha here, wait on hold there, view a confusing seating chart this time, run into a service fee, etc. All this does is add another layer of confusion for a ticket buyer. I JUST WANT TO GO AND HAVE A GOOD TIME, DAMN IT! People should not need a an advanced degree in quantum mathematics to see a show. Patrons feel nickel-and-dimed throughout the entire evening of a show. A simple evening will consist of tickets + "convenience fees" + overpriced conessions + overpriced merchandise + parking. And then you are inevitably "thanked" with a call from the telemarketers asking for a donation or a subscription the week after. Adding additional complicated elements is not the answer, and will just contonue to confuse people. Remember the tried and true motto - KISS. Keep It Simple Stupid! It needs to be applied everywhere. Happy customers will pay more..

Commentary: The cure for the ailing movie business is to raise ticket prices?  

Brad Tuttle, Time Magazine, 1/5/12

Last year was a bad one for the movie business, with the fewest tickets sold since 1995 and revenues that dropped 4.5% from the previous year. Analysts foresee a better year ahead in 2012, and what is it that's expected to turn things around? Yep, higher ticket prices. The Hollywood Reporter cites the forecasts for several analysts, all of whom predict an increase in revenues compared to 2011. This doesn't necessarily mean that more people will be going to the movies more often. Instead, two of the analysts say box-office gains will occur almost exclusively by theaters charging more for admission. In terms of movie attendance, the most optimistic of the analysts quoted looked for a whopping 1% increase in the number of tickets sold. Nonetheless, the analysts say that revenues in 2012 will surpass that of 2011 because the cost of tickets will rise by 2% or 3%. What about the movies themselves? Will they be, um, any good? The analysts expect many, many blockbusters. Then again, maybe the movies won't draw crowds any bigger than in 2011. A Barclays Capital analyst admits:

"While there are plenty of movies that we are excited about in 2012, we admit that we felt similarly about the 2011 film slate this time last year."

The Atlantic's Richard Lawson put it well when exploring the dubious strategy of raising prices as a solution for decreasing movie attendance:

"If there's one thing that Americans have been saying as theater attendance lags over the past ten years it's that tickets just aren't expensive enough. Why are we, here in New York at least, shelling out a measly $13 for a ticket when we could be paying $20? Or $30?"

That's a joke, I'm pretty sure. So all you movie theaters out there, don't get any bright ideas.

Commentary: The psychology of ticket prices

Eugene Loj, Event Marketing and Event Promotions blog, 1/21/08

It has been said that consumers buy with their emotions and justify their purchases with logic. I've seen ticket prices that range from a few dollars to hundreds and thousands of dollars. High ticket prices aren't a barrier if the consumer convinces himself that the purchase price equals or exceeds the time value an event offers. It's critical for event marketers to convince their customers on the value of the event experience. How many times have you been subject to event advertising all about the event date and location and not about the event itself? Yes you need to let people know when your event is happening. At the same time, you need to focus on what type of experience you are delivering to the consumer before they enter your event. You need to convince the consumer that the ticket price is exceeded by the value you are delivering.