Time for a new pricing model?

As predicted in Baker Richards’ and Indigo’s Missing Audiences research, many arts organisations are finding their audiences 25-30% down. Increasingly, the conversations I am having in the sector are about looking for alternative approaches to pricing, away from simply trying to find just how high you can push top prices.

A few years ago, I visited a café in Manchester, where instead of paying for each coffee I drank, I was charged by the minute for how long I stayed. I drink a lot of coffee, so in the hour or I was there I paid about £5 for a couple of coffees and a cake - certainly a reasonable price to pay. But I do remember I couldn’t quite relax knowing I was being charged by the minute. If I’d just had a single coffee in the same amount of time for £5, I’d probably have come away thinking that was expensive.  

I don’t know if this pricing strategy makes them more money than the traditional Pay-For-What-You-Buy approach, but I’ve only found a few other cafes offering a similar model, so it doesn’t appear to have revolutionised the way we use these spaces yet. It’s a risk.  

Interestingly the Weserburg Museum für moderne Kunst in Bremen, experimented with the Pay-As-You-Stay model, charging people on exit for the time they spent in the museum. Ultimately they lost some revenue, but an essential component of risk-taking is being prepared to lose. It is said that you should never gamble more than you can afford to lose - the same is true of pricing. All pricing contains an element of risk; getting it wrong can have serious consequences.  

Should we stick with traditional models of pricing?  

Absolutely not. Remember when theatres sold general admission at a single price? When the price one day was the price you paid the next? Making radical changes to pricing strategy is about controlled experimentation. If you want to try something new you generally develop a hypothesis, start small, test your hypothesis, refine and adapt –maybe discovering in the process that what works well in one context does not in another.  

A good example is how the Pay What You Can (PWYC) model has evolved over the last few years, in part spurred on by how it was used to price digital events. Rather than leave the financial contribution entirely in the hands of the consumer, perhaps anchored by a suggested amount, increasingly ticket sellers offer patrons the option to from a range of prices on offer.  

At Baker Richards, we’ve recommended this choose-your-own-price approach to organisations on the basis that willingness-to-pay is a long curve with some people prepared to pay a lot more than others. This has always been the basis of any price differentiation model, but where older models justify differences in price by factors like seat location, this revised approach leaves it to the customer to decide which price they are prepared to pay.  

How are different models applied?

Battersea Arts Centre (BAC)’s prices start at £6 rising to £40 for most of its forthcoming autumn season. BAC do this with the aim of increasing accessibility, arguing that when so many are struggling, no one should be excluded by their financial circumstances. There’s even the option to contact the box office for a cheaper price if you can’t afford £6.  

The beauty of BAC’s model is its simplicity. There are no catches, no need to sign up to anything, nothing to prove and no questions asked. You just choose the price, turn up, see the show.  

Arcola on the other hand have a Pay What You Can offer on Tuesday evenings. You can only buy from 6pm, on a first-come-first-served basis, so patrons run the risk of not being able to get a ticket. Not all customers will be willing or able to take the risk – an approach which balances scarcity, accessibility and the last-minute sales of what would otherwise be empty seats..

Generally, organisations with an open PWYC model are less reliant on ticket sales than their peers so can focus less on maximising income from tickets. The hybrid approach emerging from a combination of fixed pricing and PWYC makes for a more sustainable financial model for most. 

Choosing your own price

Tron Theatre in Glasgow has been running this choose-your-own-price model for a while now. Tron is a mid-scale venue staging new work, making it the ideal place to trial this approach. They have three price options with neutral naming, simply A, B, or C. There are no other concessions, no variation by show or by day of week. Just a simple message: ‘our pricing strategy has now changed to give everyone a chance to access affordable theatre’.

Another benefit of this approach is the financial risk is clearer; you can calculate what your ticket income will be if everyone chooses the lowest price. The major variable becomes volume of sales, not price. It doesn’t solve the problem of low demand for tough sell shows of course, but no amount of pricing mastery can fix that. Pricing sophistication works best when selling something people want to buy. 

No matter who a patron may be, the pricing options aren’t tied to days they can’t visit, arbitrary age thresholds or other life characteristics. The customer decides, knowing the experience will be the same.

The jury’s out on whether this approach can be applied to larger venues. Outside the performing arts, we’ve yet to see any visitor attractions take this route - although we are in discussions with some. The point is that, for a certain type of venue with a certain type of product, this approach works, and it bends without breaking the conventional to offer something new. 

In my second article, I’ll be looking at an emerging trend in performing arts organisations to switch to an all-you-can-see subscription model, and other innovative ways of pricing.  

David Reece is Deputy Chief Executive at Baker Richards.
 www.baker-richards.com
 @BakerRichards |  @davidnreece

This article, sponsored and contributed by Baker Richards, is part of a series sharing insights into how organisations in the arts and cultural sector can achieve their commercial potential.