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Understanding more about what people value about the arts can help arts organisations to make the most of what they offer and ensure that it is communicated in the right ways to the right people at the right price. Tim Baker and Liz Palles-Clark explain.

The difference between cost, price and value is fundamental. Imagine you have produced a piece of artwork that cost you £1,000 to create, including 100 prints. If you then sell all the prints, their cost per unit is £10. The price is whatever you set it to be £15 perhaps. But the value of each print will vary infinitely: value is attributed to the print by the potential customer, and 100 customers may attribute 100 different values to the same print.

This is not to say that you cant influence the customers perception of value (even when the cost to you remains the same) if your name were Pablo Picasso, producing the print hasnt cost you any more than the next person, but its likely your print will be valued more highly than a print by an unknown artist.

Value judgements

Thinking about how we determine value, consider your reaction to the shop front in the picture below. What is your immediate judgement of the quality of the products in the shop? Would your perception of the place change if it were called Bargain! or Cheap!, and would it appeal to more or fewer people?

In this context, think about the message are we sending out when we discount tickets. In the arts, we frequently underestimate the value that we offer. Simply offering bigger discounts is not the solution to selling more tickets, since discounting is irrelevant if absolutely no value is recognised by a potential customer: no matter how competitively you price your fine wines, you will struggle to sell them to a teetotaller.

Furthermore, discounting can also impact negatively on prevailing perceptions of value: if a shop suddenly slashes the price of its signed Picasso prints, might we not jump to the conclusion that they may not be authentic? Failure to understand the value we offer, as well as concern over perishability in the arts (what you dont sell by curtain-up cant be put on the remainder shelves), routinely leads to frantic discounting. The danger is that, frequently indiscriminate, last-minute price cuts can undermine perceptions of value. Finally, lets not forget that, thanks to subsidy of the arts, the true cost of our product is often many times higher than the prices we set.

Willing and able?

People are looking for the value they will get for their money, and if they think they will get it, they will pay. In the arts in particular, if they dont pay, its rarely because the price wasnt low enough. Indeed, Baker Richards research has routinely found higher demand for higher-priced events or seats. The issue is about willingness, rather than ability, to pay. When thinking about the value of the arts, we need to tap into that willingness in order that, rather than decreasing price, we are thinking of ways to increase the value.

There are four key components of value1, which provide a useful framework for thinking about how value is determined, how it can be added, and how it can be used to persuade potential customers that what we have to offer is worth their money and time.

Comprehend value: What is the value you offer, and where could customers go to find the same value elsewhere? Some people find value in the strangest places, so look beyond the obvious the Bad Film Club, for instance (tagline good comedy, bad movies, one great night out), wasnt born out of a love for the art. Comprehending value involves thinking beyond the internally focused assessment of what you have to offer, and becoming, instead, more market-focused when valuing a product and setting prices. Think about what your customers various motivations are for coming to you, and bear in mind that circumstance can alter value greatly. An art gallery might provide value as something to do with the kids on a rainy day, in which case, what are your competitive differences compared with the museum down the road, or the local swimming pool?

Create value: The value of a product is determined by more than just how much it costs and the nature of the core product. Factors that can determine value include the nature and quality of the core product, as well as its perceived scarcity, and its status in reviews, but also the venue itself and the wrapper ambience, catering and other add-ons such as pre- and post-show talks and discussions. Brand values can also have an impact that extends beyond the product itself.

Communicate value: To communicate the value of our artistic product effectively, we need once again to be market-focused rather than product-focused in our approach. Working in the arts all the time means we tend to assume potential audiences or visitors will understand how the features of our product will meet their needs and thus have value. We frequently lapse into copy such as directed by x from the company that brought you y. While this communicates a good night out to someone who happens to know that company and/or director, it is not going to convince the majority, who cannot translate the implications of that description.

Capture value: Finally, you need to capture the value you offer with an appropriate pricing strategy. Since the value of the product will vary from person to person, ideally you would have as many prices, offers and packages as there are customers, each perceiving your product value differently. Differentiating your prices allows you to offer a wide variety of price points to reflect that variability in perceptions of value.

Implementing a sophisticated pricing strategy that can capture value gives you the opportunity to maximise both access and income. It enables price-sensitive customers to find a price that suits them, while at the same time getting the most out of those who are willing to pay more for what they value highly.

Tim Baker is Director and Liz Palles-Clark is Research Manager for Baker Richards Consulting Ltd.
t: 01223 242100;
e: liz@baker-richards.com;
w: http://www.baker-richards.com.

1 Ronald J. Baker (2006) Pricing on Purpose: Creating and Capturing Value, Wiley.l

Big night out at the Broadway

The profile of the audience in the catchment area for the Broadway in Barking could hardly be less conducive to attracting attenders to the subsidised arts, with, among other factors, low levels of educational attainment and a low index for social grades A and B. Consequently, the organisation realised that for this market, value lay in promoting a good night out experience rather than art on stage. To deliver this, the core product was presented as a Big Night Out with the emphasis in images and copy placed on the customer experience rather than the product.

Big Night Out events have proved to be a huge success and interestingly, given the price-sensitive nature of the market, the most expensive premium seats sell best. This is because the premium offer includes waiter service and cabaret-style seating, enhancing the night out offer that people are looking for.