Posts tagged ‘variable pricing’
The notion of treating the customer journey as an ongoing cycle resonates for me in Why Experience is Key to Customer Loyalty. The cycle puts wheels (oops sorry) on the notion of maintaining and building ongoing loyalty. The more times successfully around the journey cycle imbues a momentum of loyalty and that great human trait of habit can take hold. (By the way, I am not sure what Lego has to do with it.)
I have touched on the journey idea before in Mapping The Customer Journey.
It is interesting the concept of ‘fairness’ that is introduced by Valeria which is put in context in her linked post re: Lufthansa as “transparency”. This reminds me of an article Tim Baker of Baker Richards and The Pricing Institute recommended written by yet another Tim, Tim Hartford The Undercover Economist, Enough Whingeing About Price Gouging. Tim discussed the concept of dynamic pricing which is the darling of many an airline’s Revenue Management strategies. After mooting dynamic pricing as a way of better managing the finite supply of Easter Eggs to less garden watering bans to the need for a lottery to allocate Olympics tickets, one of the comments by a reader raised a very interesting extension of dynamic pricing that highlights the question of fairness. We are used to passengers paying very different prices for an airline seat depending when it was bought in response to demand and the finite supply. Just imagine the extension of dynamic pricing to the equally scarce commodity of storage for hand luggage, yes you can take on that hatbox madam, but it will cost you $100 extra. Whoohoo, that would cause some air rage (well ground rage ) and accusations of price gouging, before they got airborne. BUT it would help solve the problem of luggage locker hogs on planes and provide space for the rest.
Another poster, Joanna mentioned an application of dynamic pricing that was new to me, street parking in San Francisco. At peak times around special events parking charges on meters are raised in response to the increased demand and finite supply. The result is that if you want a car park you can find one … but you will pay a premium for the privilege. That reminds me of the car park outside a tax office somewhere in Scandinavia (I think) that wanted to ensure that the bays were only used for dropping off tax returns, not parking. Rather than higher charges and fines, they used the Nudge: you could park as long as you liked as long as your car lights were left on, otherwise you would be towed away. Guess what problem solved.
“It’s really ####ing shady!“ Viagogo employee in The Great Ticket Scandal.
“at viagogo you’ll work with fun people who are committed to helping fans gain access to tickets to the best live events in the world!“
One of the required Skills and Attributes is “A sense of humour”
The Great Ticket Scandal in summary:
Viagogo takes the most flack (not surprisingly they attempted to block the broadcast with an injunction), but Seatwave and others named are not without blame. Promoters LiveNation and SJM are also incriminated for duping fans with a 90/10 split (in their favour) on the markup on tickets withheld from the primary marketplace and allocated to resellers like Viagogo.
1. SECONDARY MARKET COMPETITION WITH PRIMARY MARKET
“Viagogo staff compete directly with real fans to buy tickets from primary ticket sellers, like Ticketmaster, for in demand events as soon as they go on sale. To get around systems put in place to prevent bulk buying of tickets, Viagogo staff use multiple credit cards registered to different addresses.“
2. PRIMARY MARKET SHORTCHANGED
“major promoters allocate hundreds or even thousands of tickets to be sold through their (Viagogo) website at well above the face value. Tickets for recent gigs and tours by Coldplay, Rihanna, Westlife, Take That, and V Festival have been allocated by the promoters in this way.“
The Dispatches episode on the Channel 4 website:
The Great Ticket Scandal (not available online outside the UK)
Outside the UK watch the exposé on YouTube (in 4 parts):
The Great Ticket Scandal (outside the UK)
Various recent articles:
While it is currently only for a handful of cities (including New York, Chicago, Los Angeles, Dallas and Minneapolis) and for a few airlines (namely Delta, JetBlue, Continental and American Airlines) … oh and only the US – the introduction of Flight Search will be very interesting to watch as it is rolled out further.
In theory, Flight Search will allow you to search for flights by a variety of criteria including price, location and other combinations including duration, stopovers, even loyalty program etc. It has a simple and intuitive Google Maps style interface and lets you iteratively filter and fine tune an airfare search. This would get even more powerful if Google integrated tools like Street Map, Hotel search and so-on.
An early iteration was launched in May 2011 following Google’s purchase in July 2010 of ITA for US$700M. ITA is the developer of the airfare search and pricing system QPX that is used by major airlines. There are no clues yet whether this will follow a similar business model as Orbitz, TripAdvisor or Kayak which use QPX and whether Google has or will strike deals with airlines and prioritise ‘searches’ accordingly or whether Google Flight Search will remain definitive and neutral.
What has this got do with Entertainment?
I am glad you asked! The ITA/Flight Search model accesses various airline schedules and integrates these to offer one view of the various options. I wonder if Google has considered accessing or integrating with the various ticketing services to offer similar functionality for entertainment? It is an interesting idea that you could search what is on in a city independent of the ticketing service selling the event. That sounds like some of the various individual portal projects like www.seethis.com in Manchester or others from www.artsopolis.com to www.theatrebayarea.org. However, rather than develop such initiatives from scratch, imagine if Google just included such funtionality? The questions that remain is what business model Google envisages for Flight Search and what would the possibilities be for Event Search ™
The trouble is that the manner in which data is set up and collected in many ticketing systems has not been arranged to portray meaning easily. Inconsistent and non-standardised entry of data at event set up is a common problem.
There seem to be quite a few articles (re-purposed press releases?) about dynamic pricing lately. I wonder if ‘someone’ has decided that it is the answer to extract more revenue from the marketplace.
“‘dynamic’ or ‘variable’ pricing — a ticketing philosophy that has theaters and arenas boosting ticket prices based on hot-selling shows and popular game days. Prices also can decrease based on demand.“
“It’s going to give the buying public more power and more options,” said Sammy Wallace, vice president of event programming at Germain Arena in Estero. “You could pay more for a ticket, or you could pay less. It’s really up to you.”
Is it too cynical to suggest that you could pay more for a ticket or not go, it’s really up to you?
“Overpriced tickets can cut out budget-minded buyers, while underpriced tickets can lead to ticket scalping because some fans are willing to pay much more for the best-possible seats. Dynamic pricing helps correct that.“
I find the concern for the “budget minded buyers” a convenient social equity argument and I wonder how often dynamic pricing goes the other way? Didn’t that used to be called discounting of less desirable seats to acquit social accessibility responsibilities?
“Economics is driving this new ticketing trend. Dynamic pricing is a response to many factors, including higher production costs and artist fees, lackluster ticket and album sales, and the looming specter of ticket scalpers.” I think the real driving factors have been identified here and … sorry … the consumer and better or more equitable service is not identified as a driver.
A new entertainment marketing resource online theSituation and an interesting post that discusses cost per ticket versus revenue per seat.
“Think of revenue per seat as a measurement of how much financial productivity you’re getting out of your venue. You should never forget that each seat is an opportunity to produce revenue and get somebody watching what you’re producing.“
“Nearly a decade after “The Producers” introduced the $480 ticket to Broadway, V.I.P. pricing has established itself in the ledgers of rock ‘n’ roll. This summer Justin Bieber fans can pay $350 to attend a pre-show soundcheck. For $800, Christina Aguilera will pose for a picture. (For $900, Eagles fans get dinner but no photo-op …“
“At Bon Jovi’s three sold-out shows this week at the New Meadowlands Stadium in East Rutherford, N.J., the top package — which includes the takeaway chair, a leather bag and a catered meal — is $1,875.“
“… despite the soft economy, promoters have found that hard-core fans are willing to pay premium prices to get red-carpet treatment for their favorite shows.“
“It’s probably the biggest negotiation in any tour deal,” said Randy Phillips, the chief executive of AEG Live, promoter of the Bon Jovi tour. “On a hot act you can make as much money from 10 percent of the house as the other 90.”
A background piece in Bloomberg Businessweek about Barry Kahn of Qcue (pronounced “Q-Q”).
The San Francisco Giants are using Qcue software to “price baseball games in much the same way airlines manage seat prices to keep planes full“. Hmm a full plane (i.e. all seats sold) is reducing loss on the fixed price of ‘empty seat’ and is a different thing to maximising profit on prices alone. There are issues here regarding access, let alone equity.
Will this preclude such cutting edge technology from being applied to the ‘not-for-profit’ or subsidised arts? Alternatively, will it just be a more complex algorithm that addresses larger issues of better synchronising demand with supply (not just audience development) within the parameters of a cross subsidy of yield maximisation?
“The Giants say the technology could add $5 million-plus in revenue this year. Revenues are up 12% this season and attendance has jumped 7% (true, the team is playing well), …” That is one thing entertainment does not have going for it – a winning streak!
“”There’s big money out there in lost revenue from mispricing,” Kahn says—more than $20 billion a year for live sports and entertainment, much of it cash that today goes to scalpers. Flexible pricing, he says, lets teams “hedge their bets in bad times and capture the benefits of the good times.“”
I am not so sure that scalping is purely due to ‘mis-pricing’. What do you reckon?
10 tiers added with dynamic pricing to shift 40% unsold inventory http://ow.ly/1ggdM