accesso Blog Series: Score With Dynamic Pricing!
With the abundance of customer touch-points available today, ensuring that each interaction with your fans is as efficient, seamless and meaningful as possible is critical to acquiring and maintaining loyalty. And, as the customer experience begins long before they step foot onsite, nowhere is this more important than with the purchase of a ticket.
The modern, digitally connected customer is seeking choice, transparency, simplicity and personalized experiences throughout the purchasing process. While the cost of an item naturally plays a role in the decision to purchase, to the technologically empowered customer, the overall experience carries more weight than specific products and pricing in building customer loyalty and influencing future decision-making.
The key to crafting a positive purchasing experience for your fans is to understand who your customers are – keeping a finger on the pulse of their patterns, behaviors and preferences – and staying current with industry trends. Within the sports industry, one of the major ticketing trends in the past several years has been dynamic pricing. Let’s take a quick look at the history of this strategy and see how it can be employed by sports franchises from hockey teams to football leagues to drive revenue for your organization while meeting the needs of your fans.
Dynamic pricing – also known as real-time pricing – is a strategy applied to eCommerce and retail that utilizes variable pricing as opposed to traditional fixed pricing. It has been in practice since the 1980s when Robert Crandall, former chairman of American Airlines, introduced “super-saver” fares, with ticket prices fluctuating based on seat availability. In the nearly 40 years since Crandall first pioneered this strategy, dynamic pricing has continued to increase in popularity throughout a wide variety of industries. Ride-sharing services, theme parks, auto dealerships and toll lanes are just a few examples of the expansive list of private and public business sectors routinely taking advantage of this practice.
Dynamic pricing can be immensely beneficial to business operators. By optimizing pricing based on real-time results, sales and profit potential can be maximized for each item. This strategy also allows operators to stay up to speed with the ever-evolving changes in the competitive landscape and with the behaviors of their customer base.
It is important to remember that, in many ways, your fans are more intrinsically dynamic than you are. The practice of comparison shopping – searching for the best product, price and reviews – is on the rise and shows no sign of slowing down. By implementing a solid dynamic pricing strategy, operators can stay flexible and keep up with changes in competitor pricing, as well as the ebb and flow of supply and demand.
One of the most common dilemmas that business face when considering making the switch to a dynamic pricing model is the risk of encountering push-back from customers. This may be due to the very fine line between dynamic pricing and personalized pricing, in which the price of a product varies based on customer-related attributes, a strategy that is ethically questionable and has been shown to weaken consumer confidence. However, as dynamic pricing gains traction and popularity within a multitude of industries, customers are more aware, familiar and comfortable with the practice and it is rapidly gaining social acceptance.
Gartner Research director Chris Fletcher suggests three basic rules to follow when implementing a dynamic pricing strategy:
- Develop digital solutions – To ensure seamless operation for both the operator and customer, pricing configuration must be automated with the assistance of algorithms. We are in the midst of a mobile revolution: according to Juniper Research, $32 billion in global ticket purchases will be made via mobile device by 2019. If your pricing strategy cannot be implemented on a mobile platform, you will limit your potential.
- Be dynamic – You need to be able to adjust your pricing in real-time to stay up-to-the-minute with competitive pricing and the behavioral patterns of your customers.
- Be defensible – The methodology and reasoning behind your strategy must be communicated to customers. By being up front and implementing full transparency, you can work to counteract any concerns your customers may have and explain what’s in it for them. The New York Yankees, for example, have a Dynamic Pricing FAQ listed on their website.
On a very rudimentary level, sports and entertainment venues have experimented with dynamic pricing for years through simple “Advance” and “Day of Show” ticket prices. As many ticketing managers can attest, having the ability to configure these two prices has become nearly ubiquitous on ticketing platforms. Commonly, the difference is only a few dollars, which is enough to provide early ticket-purchasers with a small reward for planning ahead, but not too high that it alienates those who waited to purchase. While profitable to some degree, this basic “date-driven” strategy does not take true factors of supply and demand into account and is therefore less attuned to overall trends in the marketplace.
When we think about true dynamic pricing, what we are referring to is inventory-based dynamic pricing. Inventory-based dynamic pricing allows operators to take prime advantage of supply and demand principles to directly increase their bottom line. This can help venues maximize revenue during times of increased demand, encourage purchases during periods of slower demand and incentivize season ticket purchases earlier in the season cycle.
Today, this technology is more accessible than ever before – in large part due to the increased flexibility and control that ticketing solutions now provide to the end-user. Box office managers and venue operators can now configure dynamic pricing directly from the back-end of their ticketing system, managing inventory and pricing changes with incredible ease while effortlessly driving revenue. One or more price changes can be pre-scheduled and linked to pre-set thresholds. As inventory is automatically monitored, the price change is instantly deployed when the threshold is reached.
Dynamic pricing can be perceived as risky, and some organizations with large fan bases can be hesitant to embrace a strategy that could alienate their most loyal customers. It is important to realize that a successful dynamic pricing strategy can actually reward your most loyal fans, while also helping your organization. For example, you could offer a discounted $20 single-game ticket to the first 100 purchasers before the price is raised and announce this in an eblast to your season passholders, so they receive first priority.
Don’t forget that the right ticketing solution will give you a variety of pricing and promotional tools to use, and while you’re offering your most loyal fans first access to this special discount, you can still run other promotions that target new audiences. Something as simple as a $5 coupon code through a social media post or radio ad can make a big difference for price-sensitive customers (even if your inventory-based dynamic pricing program has already raised the ticket price by $20 after selling 90% of your inventory). Most ticketing systems will allow you to control the number of redemptions and render a code unusable after a certain amount, so that you do not need to manage this manually.
As competition within the eCommerce and retail markets continues to increase, dynamic pricing presents organizations with the opportunity to stay ahead of the curve and adjust pricing based on a variety of factors unique to their venue. When implemented successfully, dynamic pricing will drive customer conversion, retention and satisfaction while increasing profitability. The intuitive and automated features offered by our accesso solutions keep you at the forefront of this trend and help you deliver maximum value in today’s evolving and demanding market. To learn more, contact us here.
Katie Reilly — Digital Marketing Manager
Katie joined the accesso team in 2016 and manages our content and presence online. She began her marketing career in the performing arts, working in group sales for the nation’s oldest continuously-operated theatre where she played intricate games of “Seating Chart Tetris” in order to accommodate large school groups. Katie is a graduate of The College of William & Mary and New York University, and when she’s not strategizing our digital campaigns, she enjoys all things musical theatre, learning how to be a new mom, and traveling around the world while discovering the best cheese shops along the way.