Tuesday, January 24, 2012

A Bit More on Pricing and Audience Segmentation

Elsewhere on the intertubes, a friend suggests that if all the tickets aren't sold, the price was too high, and that's the justification for the American Mavericks pass.

Well, hold your horses. It's more complicated than that.

As the biggest game in town, San Francisco Symphony has many constituencies, or market segments, or niches that it's trying to fill. People attend for social reasons; because they want to hear the old classics and not much more; because they want to hear the latest and greatest; because they want to hear particular soloists; because their husband/wife/spouse/partner/companion likes that stuff; because they're professionally interested; because they're music students; etc, etc.

SFS wants to both sell the maximum number of tickets and make the maximum possible revenue. The two needs are somewhat in conflict. The perfect price for selling out the house every time might be under the price that maximizes revenue, and there's major risk in pricing seats too low. That is, if you start with a high price, it's easier to offer discounts than to say "Ooops! We advertised this seat last June for $75, but now it's $95."

Only the airlines can get away with that kind of pricing. It's easy to understand why an orchestra might not want to get into airline-style pricing.

Here are some of the segments SFS has to take into account in deciding on prices:
  • People who plan ahead
  • People who make decisions spontaneously
  • People who have the money to pay full or full subscriber prices
  • People who are bargain hunting
  • New listeners the orchestra wants to get hooked
  • People who are risk averse
I plan ahead, have money to buy at full subscriber prices, and I'm risk averse. I would have wept if I'd missed seeing the Janacek/Debussy program. (I can't count on being assigned a plum review, either.) The above doesn't take into my particular craziness, either: I care mostly about repertory.

So the question is, what's too high? If people buy at a particular price point, it wasn't too high for them. If every seat does not sell, you then look for the next price at which tickets will sell. SFS does this with their apparently-annual January sale, which is going on right now, with rush tickets, with dumps to Goldstar, and with passes like the Mavericks pass. SF Opera typically does the same thing: some seats turn up on Goldstar, and they've been known to do half-off sales. That's how I got a $225 seat to Die tote Stadt for $100 or so.

As I said, it's complicated. I'm fine with SFS's January sale because 1) it is now predictable and 2) I understand the reasons for their needing to find buyers for unsold inventory. But the Mavericks pass is an enormous discount. And there is certainly some risk of audience resentment, when someone like me slaps her forehead and wonders why she didn't save a few hundred bucks by waiting to buy tickets. Or save even more by not buying tickets at all.

Slightly updated at 12:15 p.m.


Henry Holland said...

One of the subplots of the LA Opera Ring and how it underperformed at the box office was this:

For people who live here, unless you're lucky like me and live 10-20 minutes away from the Dot, the audience is going to be driving from all over the LA Basin (the Valley, South Bay, Westside, OC even). Given the length of the Ring operas, they have to start by 6:00 pm or at the latest, 6:30 pm.

To get downtown from any of the places in ( ) above, during the week, at the time required is a nightmare. You either have to rush out of work and pray that no 5-car accident on the 101 has you at a stop for 10 minutes or you get there on time, arriving frazzled or you have to leave work early, which a lot of people can't do.

So, you have the dynamic of the locals, which meant LAO scheduled as many performances on the weekend as possible. However, this didn't work for the Ringnuts who travel to performances, as the cycles took 9 to 10 days to complete instead of the usual 7. That's 2-3 extra days in a very expensive city to visit and get around in and it means people that would take M-F off of work would have to take an extra 2-3 days of time off.

Since I have very specific tastes in orchestral music, you know what is a big decider for me? What they pair the piece I want to hear with. For example, the London Symphony is doing a Szymanowski retrospective with Gergiev. Great! I think he's a fabulous composer and I love his symphonies, violin concertos and concert pieces.

Guess who they paired his stuff with? Brahms! To say I dislike Brahms' music is an understatement, so if I was in London, I'd either have to give the concerts a pass or leave before the intermission (and I loathe crawling over people to leave while they're setting up for the next piece). Why on earth did they pick Brahms? Why not early Bartok, the Strauss tone poems and stuff like that, Szymanowski's influences?

Anonymous said...

> Only the airlines can get away with that kind of pricing.

Alas, I think this is no longer true. The Center Theater Group in LA (Taper, Ahmanson) started doing exactly that this year, and the LA Opera has announced it will begin the same next year. Just the idea drives me crazy, since I'm so often a last minute ticket buyer. This year, by the time I decided I wanted to see "God of Carnage", center orchestra seats had risen from $95 to $200. I skipped it.

Lisa Hirsch said...

Shudder - that is insane.

I should have mentioned that CalPerf has some kind of demand pricing.

Henry, those are interesting issues,though not exactly pricing-related...

Jon Silpayamanant said...

I brought up the issue of price discrimination regarding tickets at Greg's blog.

I think this is an area of revenue that needs to be explored more. I should probably post a blog about it myself, but was intrigued that Flanagan made the suggestion for more price discrimination in tickets for orchestras in his recent book.

Lisa Hirsch said...

If I read whatever is going on at Sandow, will I see red?

I seriously regret responding on the subject of SF Opera, and I saw red when he denied Drew McManus's knowledge of what goes on inside orchestral labor negotiations, since Drew consults with both management and labor during such negotiations.

Lisa Hirsch said...

Okay, what you say is fine. Be interesting to see if he has anything to say. :)

Jon Silpayamanant said...

Likely, he won't (and obviously hasn't) respond(ed). I guess the irony is that he is constantly referring to the Flanagan as the be-all-that-ends-all message about the doom and gloom study of orchestras, I find it relatively insightful and (dare I say it) uplifting.

Flanagan gives tons of advice that could help generate more revenue for orchestras, and while he does say that any one strategy will no overcome the Baumol Effect, he does refrain from saying that possibly using all the strategies could do just that.

What I find remarkable is the almost counterintuitive notion that actually lowering ticket prices could generate more performance revenue. Well, counterintuitive until we realize that, if there is an average of 30-40 percent of seats empty at most concerts, then there surely is a ratio of lower ticket pricing in conjunction with a full hall, then more performance revenue could generated.

ANd apologies if there may have been multiple comments by me, for some reason, your blog isn't letting me see that my comment is posted and showing me as having typed the wrong captcha (which may be the case with this one as well).

Jon Silpayamanant said...

Oh, and haha--yeah, that comment about Drew's knowledge--well, that's Greg for you.

BTW--I found this, ironically, in Baumol's book:

"Doubtless, some alleged crises represent a tactical stance -- cries of woe intended to help in raising funds or in negotiating with unions." (pg. 3, Performing Arts -- The Economic Dilemma, 1966)

The patron saint of the Chicken Little Think Tank doesn't seem to disagree with that notion! ;)

Lisa Hirsch said...

Your comments (2 different ones, no extras) submitted fine. You won't see them posted until after approval; I put the blog on moderation a couple of years back because of spam.

The Patron Saint of Chicken Little is good at ignoring anything that doesn't fit his views - I mean, we all are; there's lots of research evidence about this, but he seems...ah....more prone to this than others.

The Baumol and Flanagan points are fascinating, thank you!

Jon Silpayamanant said...

Glad these posted fine--I had given up on one of your other posts. Just wouldn't go through at all.

I decided to blog about the issue, though I mostly just quoted myself, but with luck we may hear some comments from Drew since this will trackback to at least four of his posts on ticket pricing!