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Filthy Lucre #3: Through the Looking Glass

04.15.10 | 20 Comments


CATEGORIES audiences, marketing

We price everything backwards in the theater.

Tell me if this sounds familiar: You debate with your box office/marketing/artistic staff to find just the right price point that feels “accessible” (read, your friends tell you that this is what “they” will pay to see your work, despite the fact your friends are comped and rarely actually pay to see your shows). You create special discounts for young folk (because they’re poor, you theorize inaccurately) and old folk (fixed incomes! Plus they are the loudest complainers about price changes). Then you slap that price on everything you print.

And you wait. Some sales trickle in, from the usual suspects: people who see everything you do and subscribers who want to bring their friends. A week before opening you PANIC. Too many lightly sold houses! A special offer must be created!

You think of everyone who might be able to send out a 2 for 1 offer to their email list. You promise to give a curtain speech in their honor longer than the play itself and spam your own customers with offers from them just to get them to offer 2 for 1 tickets to their 300 email list members. You paper the first weekend’s houses with ANYONE who will be willing to show up.

A trickle of movement. Still not much though.

Then BAM! A great review hits. Now your Friday nights start filling up. Woo hoo! All those people who got offers are now racing to buy your Friday night tickets at that great deal you offered.

Saturday matinee is still dead. But that’s okay- you have a rush ticket program, so people start lining up on Saturday for $10 tickets and your house goes from 1/3 to 2/3 full in the last ten minutes. You didn’t make any money on those seats, but hey- they were just going to go empty. Right?

Closing weekend comes. The word of mouth has been great, so it sells out. All those people you made 2 for 1 offers to? They’re scrambling to get in. The people who always hit you up for comps? They’re desperate to see it closing night. And, you’ve got a line around the block of people trying to snag no-show seats for that amazing $10 rush deal. You turn half of them away. And smack your head, saying, “Let’s extend! We’re a huge hit!”

If you went back and did the math on this huge hit, you would discover that your average ticket price was APALLING. That carefully modulated perfect ticket price that you haggled out with your business manager and your artistic director? You didn’t even come close. A shockingly small percentage of your patrons paid anywhere NEAR your perfectly accessible-but-culturally appropriate price.

On top of that, look at the behaviors you’ve rewarded:

1. Wait till the review
2. Wait till the last minute
3. Wait till the last weekend

Let’s cull that down to the one behavior you’ve rewarded: WAIT.

Why do we do this? Our own egos, pure and simple.

First we are massive optimists. We assume that of course everyone will rush to buy tickets to opening weekend even though there’s been no reviews (our postcards in coffee shops are just THAT compelling).

When that doesn’t happen,the thought of a half-empty opening weekend fills us with dread of embarrassment- Those patrons who paid our idealized price early can’t be allowed to discover that they paid that price for something only a few people wanted to see!

So we throw out a deal or an offer to paper the house. The house fills, but some of our patrons who paid top dollar get that email and discover that, if they’d waited, they could have paid half price. Some of them call and demand a refund for the difference. So in the name of good customer service, we provide it. But hey- it was worth it.

Because a FULL HOUSE of $10 tickets is better than a half-full house of $60 tickets.

Right?

Then, when the closing weekend sells out and we’re all congratulating ourselves on our success, we make the stupidest decisions of all: we feel powerful by comping in important people to a sold out house. We plan a longer run for the next show (because, clearly, the audience wants more of us). And we feel compelled to honor the advertised cheap deals we sent out early in the run (that we failed to set any limits on) despite the fact that the next person in line would have paid full value or more to get in to this super popular show.

It’s all backwards. The people who commit BEFORE the reviews should get the best deal.

The people who wait till that perpetually sold out closing performance should pay the most money- because those seats are in the highest demand!

And if 10 performances that will sell out 5 minutes to curtain at $10 a ticket is good, then 4 performances that fill with truly committed and excited $60 buyers weeks in advance is BETTER.

Want longevity as a company? Build your audience one committed high-value patron at a time, rather than in batches of low commitment, procrastinating deal hunters.

And before you holler about new audiences, remember: New, young, hip, diverse audiences are not all poor and they’re not necessarily price sensitive. They’re just MASSIVELY UNIFORMED about your art. Informing and exciting a new audience member takes resources. Resources that will be provided much faster by a committed existing audience willing to pay top dollar for the experience you provide them.

So, how do you structure your marketing campaign reward early and committed, while leveraging those early adopters to help you reach sexy new audiences?

Here’s 5 Things You Could Do to Push Your Pricing Back Through the Looking Glass:

1. Stop Panicking. A half full house early in the run is not a failure. Price resistance in the box office is not a problem- if you are not getting 10 to 15% of your audience asking for a cheaper deal than your top ticket price, your prices are too low.

2. Think like a Bedouin. If you buy a rug in Morocco, the price you are first quoted is double the price that anyone actually expects you to actually pay for the rug. The list price is a starting point, a claim of value, and an assurance that the ultimate price you pay must be a WICKED GOOD DEAL. If you have developed a magic perfect price for your shows, you’re most popular night should be as much as 20% higher than that perfect price. The people who really don’t care about price will pay it, and the people looking for a deal (like those theater industry friends who complain about how expensive you’ve gotten) can be negotiated into an earlier show, a harder to fill time slot or a highly visible but less desirable seat.

Remember, it doesn’t matter if they think your tickets are EXPENSIVE. It matters that they think they got a GREAT DEAL on a normally expensive ticket.

2. Be a Boy Scout. Be prepared.Identify your usual problem houses (for many theaters, the Saturday after opening is a common culprit) and create early offers to your strongest supporters for just that performance. Not a blanket offer. A targeted offer for the early performance that’s a tough time or day. This takes research, to identify the right audience group for the offer. And it takes time and effort to give that group enough information about the show and a good enough offer to get them to bite early and help flesh out that troublesome house. Have these offers prepped weeks ahead of opening night.

This is also a great way to reach your accessibility goals (if price accessibility is important to your mission or donor pitch).Target specific groups you’d like to be accessible to (women’s shelters, treatment programs, under-served neighborhoods and children), and offer a trade: their contact information in exchange for a great deal on a difficult night. Then make sure they have the opportunity to advocate for your show by sharing their thoughts about the experience on Facebook, by e-mail, or on a board in your lobby. Their public goodwill becomes a reward for the donors who help pay to make seats accessible to that audience, completing the circle of value without giving away seats to people who can afford more.

3. Reward early and committed. They follow you on Facebook or Twitter? They get a great deal for buying early. They’re on your mailing list? They get the best price, two weeks before opening. These people have given you something precious- a cheap pipeline to communicate with them. Make it worth their while with great deals. Make sure that if they ever accidentally find out what the person is paying at the box office 5 minutes to curtain, they get to GLOAT about the deal they got instead of GRUMBLE about why they paid more than the uncommitted schmo who showed up off the street two minutes ago. Many of these people may choose not to take the deal. But they’ll still be thrilled to receive it, and they’ll rate the value of your communications higher because of it.

4.Make Procrastinators Pay for the Privilege. Last minute and closing night should cost more. Instead of advertising rush, make sure your audience knows that the price goes up the closer you get to curtain.

5. Turn people away. A triumphant sold out closing weekend is better for the future sales of your next show (“I guess I better buy my tickets sooner next time!”) than an anemic extension tacked on at the last minute because closing night sold out. People who didn’t get in to your last show will make more of an effort to get in early on your next show.

A word of warning: the first time you implement this strategy, it may feel REALLY WEIRD. After all, if you’ve been living backwards your whole life, moving forwards might really take getting used to.

And you might find resistance from pockets of your organization (and your audience). So make sure you track the results of your new efforts- from audience feedback to average price point and average house size. This will help you balance the reporting about the new strategy. Everyone will have heard about the two cranky patrons surprised to learn they would pay more for procrastinating. But unless you tell them, nobody will know the dividends earned from the many happy, higher paying patrons who bought earlier and felt great about the price they paid.

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  • Interestingly enough, as much as the constant drumbeat of “Let's Talk About The Business of Our Industry” crap that I wade through, this is exactly right on the money.

    Well said.

  • Trisha Mead

    Thanks Don!

  • This is EXACTLY the post that I needed to read right now. Thank. You.

  • Very smart. Well done!

  • Sarah T

    I REALLY enjoyed this article, and have pushed it forward into viral land. Loved the logical thinking (why do panics over ticket sales throw all logic out the window?). Just wanted to point out that there are two #2's (but I wouldn't have minded if there were more). Thanks for your thoughts!

  • This post is fantastic. It makes total sense. Excellent insight, Trisha!

  • Brian Mahoney

    In the article you touch on the idea of failing to set limits but then when setting forth the ideas, all smart, you omit setting limits on discounts. There needs to be a #6: include language in discounts that the offer may be revoked or modified at the discretion of the producer or theatre. Once demand picks up, adjust where in the theatre the early offers are valid: reserve the better seats for full price customers and push the discount availability to the rear of the theatre, preferably upstairs. If the pre-opening discount price turns out to be low based on demand, revoke the original offer and honor it at a new higher price.

  • i_am_rin

    Fascinating.
    One thing I took away from this is the importance to let people know how long deals will last, and that the general plan is to market in this way.

    I'm not saying that the whole strategy should be on view, but if audiences think your structure will be similar to past seasons and you throw a massive change on them, you might lose them

  • Trisha Mead

    Brian,

    You are SO right- The timing of when discounts expire (and making sure that language is clear in the offer) is critical. And I totally glossed it in this post.

    I also agree about reserving the right to raise prices… though I will probably save that for an upcoming post on dynamic pricing… one step at a time.

    Thanks for the sharp eyes and good ideas!

  • Trisha Mead

    I definitely agree that fair warning is a must when you are going to change the rules of your discounts. Backlash in pricing is primarily a result of setting incorrect expectations.

    Having said that, you may be shocked at how little your patrons actually pay attention to your pricing structure- every time I've enforced a major change, I've sat around with the box office that first day, SURE that it was going to be complaint city all day.

    Most often, there's nary a peep. They don't even NOTICE. Then I kick myself for not having done it sooner…

  • aaronandersen

    I think you've got the disease well-diagnosed, but I've gotta push back on the cure.

    The bright side of price discrimination: The first people who buy tickets or subscribe are the ones willing to pay the most. If you give them the lowest price, you are leaving money on the table. I think it is far more sensible to offer these early adopters additional value, not a lower price. Give them personalized service, better seats, access to a special talkback or party, a free beer if you can give away free beer. Give them something special, but take their money, because they are willing to give it to you.

    The dark side of price discrimination: Some of those waiting for a discount are really just waiting for a price they're willing to pay. I have a blog about $20 theater in Chicago. If I want to go to a more expensive theater in town, I'm looking for a discounted ticket, because that is the constraint of my personal budget. Get price-sensitive customers (like me, I guess) into your back row, or the seat on the other side of that annoying structural pillar, or in non-adjacent seats, or make them wait to enter last if your house is general admission. Constrain the cheap seats, yes, but understand that there are price-sensitive buyers out there, and understand there will be times when you have empty seats. If you don't match these things up, you again leave money on the table.

    Others are simply uninformed about the value of your product: you give an example of young people who have money but don't know why they should give it to your theater. Yes, I'm certain there are a lot of these people, especially in the neighborhoods where most of our theaters are located. However, theater is an “experience good.” You can't really understand the value until you've tried it (and then, only if it was a good production). A low teaser price is simply one way to reduce the risk for these customers to try something new. But you've got to make it clear that this is an introductory price, not the regular price. And that, of course, means you have to get enough info about them to know when they come back again. You have to work hard for these customers. I don't think that conflicts with anything you've said, but you still have to do something special for them to get them in the door the first time, and that might be a discount.

    You are absolutely right that many of the people waiting for discounts are people you've trained to wait. I agree that this is a self-perpetuated problem, and I think it is death by a thousand paper cuts. So the training should theoretically be stopped. However, no theater gets to make this decision in a vacuum. If every other theater in town is playing the same frantic discounting game, and you don't play, you are not going to overwhelm all the other bad training going on. This is a classic prisoners' dilemma. All theaters will benefit in the long run if we all hold hands and jump off the cliff together. But each individual theater has an incentive to break the deal; if it continues to offer heavily discounted tickets, and no other theater does, they can snatch up the customers trained to seek discounts. Since all other theaters know this can happen if one or two break the deal, it makes it quite a bit less likely to make the deal in the first place.

    I, personally, would love to see a drastic limitation on industry tickets. Really, industry people (people reading this blog) are needed in the first two weeks if a show has good word of mouth or gets good reviews, and we ought to pay full price thereafter. This applies to a theater's ensemble members, as well. These extended family members are also way more helpful for generating/perpetuating word of mouth if they see it early. It doesn't help word of mouth at all if our industry friends show up on closing weekend, so they ought to pay. This is something that I think a theater can do on its own, if its shows are good.

    Your first point of advice is, I think, exactly right. When we panic is when we throw all strategy and discipline out the window. Panic is always short-sighted. Don't panic.

  • Trisha Mead

    Aaron,

    Much to agree with here, and a few counterpoints to offer:

    I agree that your strongest supporters are often the least price sensitive. But I disagree that offering them a deal to order early is “leaving money on the table.” “Leaving Money On The Table” is one of the great MacGuffins of theater marketing when it comes to early discounting. I'll explain:

    A strong supporter who commits early and gets a deal is more likely to A. bring a friend at full price (after all, its already scheduled and paid for, so now they have time to invite others), B. Be effusive in their evangelism of the show to others (because they are delighted to have received the offer and feel a social debt to “pay it forward”) and C. return again and again to your theater, especially if thanked and rewarded with insider deals and opportunities. This incentive to return means your close supporter has a lifetime value to you that is thousands of dollars higher than a first-time buyer. Is that worth a few dollars off each of their ticket purchases? I'd think so.

    Some of those “rewards” can definitely be the value-added intangibles you mention. But if you don't also reward them with the opportunity for a great price, and later they discover that their friend who called last minute and has no relationship to the organization got a better deal than them, you've actually trained them that having a close relationship with your org is more expensive than being a dilettante.

    The other counter-intuitive thing about offering the best deal to your best customers (with restrictions that they order early and see an early performance) is that the vast majority of them will not USE the discount- they'll end up choosing a more preferred date/time at full price while still identifying the special offer as the incentive to call.

    And they will still feel rewarded by the offer even if they don't use it. Its weird, but it demonstrably works.

    I also agree that the right offer can encourage a new audience if its framed properly. And that the offer can spur that audience even when people don't use the discount.

    Here's an example: At Portland Center Stage, we offered 2 for 1 tickets to The 39 Steps to anyone who came handcuffed to their date. This offer got huge play, particularly on Facebook, Twitter, and with the alternative papers who thought it was HILARIOUS.

    Only 2 couples actually used the discount. but the single ticket demographic of our audience skewed noticeably younger because of the visibility that silly, but fun, offer got. Here's how it would go: People would call to find out about the funny discount (“Is this for real? How do I get it?”), discover that they would have to show up at the box office handcuffed to receive the discount, decide they'd rather order by phone and pay full price (convenience trumping price), get the tickets, and feel completely satisfied (and amused) by the whole experience.

    Also, your note about discount hunters (and about being one yourself) is a perfect example of the logic that the price sensitive use in their purchasing decisions. I am sure that you, as a classic discount hunter, would gladly take that Tuesday night ticket in the first week if it meant you got half price. You'd have to know about the offer though, and for that you would probably need to be on their email list or a Facebook fan of the company. Making a choice to participate with the company in either of those ways would automatically make you a core supporter, which brings us back to the “reward your core supporters with great deals” logic.

    But remember that not all audiences are discount seekers. And discount seekers are not even necessarily your best or broadest audience. There's a huge segment of theater-goers who want to see the “it” thing- or who passively buy whatever their friend who pays attention to the “it” thing tells them to buy. These people don't care about the deal. They care about going when their date is available or their friends have organized a night out. They'll pay what it takes to participate in the social experience.

    It's seductive and understandable to assume your audience makes purchase decisions the way you do. We all play this game.

    But the reality is that most industry insiders have dramatically different values, incentives, and purchase sensitivities than their audience. A focus group of theater people will always end up picking a $9 ticket price, and happily jump through a bunch of hoops to get it.

    Take your market research out to the burbs or even just your neighbor small business owners and you may discover that their choices are made using VERY different metrics than ours.

    But that is a topic for another post.

    • Musical Lottie

      Here via Geraldine in a Bottle:
      “The other counter-intuitive thing about offering the best deal to your best customers (with restrictions that they order early and see an early performance) is that the vast majority of them will not USE the discount- they’ll end up choosing a more preferred date/time at full price while still identifying the special offer as the incentive to call.

      And they will still feel rewarded by the offer even if they don’t use it. Its weird, but it demonstrably works.”

      Speaking as a cash-strapped customer, I think it probably works because those who’ve been offered the deal feel empowered, valued, and appreciate that they were given the choice of how much to pay.

      I for one would welcome a reformed pricing structure for cultural events, because much as I would love to attend certain performances, I always have to wait for the cheaper tickets and run the risk of missing out – which often happens, and is gutting as I try my best to be loyal to venues and performers.

  • Thanks for the reply, Trisha.

    The handcuff promo sounds brilliant!

    I actually don't assume that most people apply my decision criteria to purchasing theater tickets. My price criteria are actually different for different theaters. Anyway, I was simply sharing that there are some price-sensitive audiences out there, and that we do want some of them to show up when we have spare capacity. This argument is based more on experience and microeconomics than my personal preferences. And price-sensitive purchasers do not need be our Facebook friends to get a deal. Goldstar and Hottix (in Chicago) provide bargains without any connection. These services are designed to liquidate excess capacity, and potentially help by reaching audiences outside our social networks (on and offline). Our problem is that we rely on them overmuch, which is very much in line with what you are saying.

    There are other ways to make your subscribers into your faithful promoters, and I would argue many are more potent than offering the greatest discount. And if you can get people to be donors as well as subscribers, you get a very different effect: donating more makes you more of an evangelist, because you've invested more of yourself into something.

    As for bringing their friends, some theaters offer “buddy” discounts, so a subscriber who paid some subscription discount off of full price can bring a friend who gets a very similar discount, which is still closer to full price than industry or Goldstar tickets. Basically, if you are going to use Goldstar or something similar, you are always going to have somebody paying a liquidation price (usually half-off, plus fees), and I don't believe you can let your best customers pay that little.

    I think we could go round and round on this, but I completely agree with you about one thing. If a person somehow comes to the conclusion that s/he overpaid in return for loyalty, that perceived loss is felt very keenly. According to behavioral economists, that loss is felt twice as much as an equal and opposite perceived gain. But I think the reality of price discrimination is that the people who want something more are going to pay more. This is empirically supported and completely fair. I believe the key to making it not be *perceived* as unfair to anybody is to give those people who wanted it more some extra value kickers.

  • David

    Great article, and even greater comments. It would be great to see MASSIVELY UNIFORMED new, young, hip, diverse audiences at shows. This is a fun image/typo to ponder. (Not meant cynically! Bring on the massively uniformed hipsters!)

  • Great post; great discussion; thank you.

  • “5. Turn People Away” Every time I sit in a theatre that has packed extra chairs in so that the audience is smashed together like sardines closing weekend, I want to scream this.

    Not only will people make more of an effort to see the next one earlier, but you won't lose folks who hated their experience because they were smushed together the whole show.

  • monicareida

    The idea of “Turn people away” is something that I've learned after having to work in retail. If you sell out of an item during a big sale, it will either get people to come back in hopes of the item or they will learn to come in earlier if they're set on getting that item.

    I've also witnessed a theater company see an upswing in ticket sales for productions that follow sold-out runs.

  • Flux Theatre Ensemble in NY (who I once worked with) has had success with offering their cheapest tickets to their email list for opening weekend. The NY showcase code caps tickets at $18, so they offer $10 tickets for the first 50 people who respond. When I asked about this, their general manager told me that it is to reward the people who are honestly interested in the company's work and will commit to come seeing it. Then they slowly increase ticket prices as they approach opening. They guarantee that whatever you pay, you won't later see a cheaper ticket price and feel you've been duped. It took a few productions, but their audience understands this now and books accordingly. Many people, like me, wait anyway. But I wait for my convenience, not because I expect to get a great deal later.

  • Trisha Mead

    This is a great model- and I think its a good point to remember that it takes some time (and the intestinal fortitude of your box office) to get your audience used to this new approach. What I particularly like is how sure a patron can be that they will never be penalized (with a higher price) for buying early.

    Excellent.


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