Airline-style pricing experiment pays off for arts centre

A pricing experiment to test ‘airline-style’ ticketing practices at an art centre in Windsor has found that gradually increasing ticket prices in the run-up to an event can increase sales revenues without any loss of audiences.

Three different approaches to ‘dynamic pricing’ were tested in a twelve-month experiment hosted by The Firestation Centre for Arts & Culture, funded by the Digital R&D fund for the Arts.

The only approach that led to significant growth in revenue with no loss of audiences was the ‘rising prices’ model. Researchers found that if initial prices were set 25% lower than normal and gradually raised to 25% higher immediately before an event, then sales income rose by over 8% with no loss of audiences. This approach also encouraged people to book early.

When prices started at 50% below their norm and rose to 50% above immediately before the event, sales income rose by over 9%, although this was at the expense of audience numbers, which fell.

The two other pricing models tested were the ‘moving prices’ model, under which prices go up or down depending on demand, and the ‘random price crash’ model, where prices were reduced for periods of 30 minutes at random, but these made no significant difference to sales or revenues.

Although manual pricing adjustments are used by box office managers attempting to increase revenues, the experiment was specifically set up to test the impact of automated price adjustments through the ticketing system. Tests were carried out on a programme of 54 events, in a collaboration which saw Monad Ticketing develop and maintain the box office system and the Economics Department at Royal Holloway and Bedford New College, University of London, analyse the sales data.

As well as examining the revenue implications of the tests, Firestation also carried out research into customer attitudes to dynamic pricing. Over the twelve months, the percentage of respondents stating they would be “absolutely” bothered if another member of the audience paid less for their tickets fell from 13% to zero, which researchers suggest is a sign of “a more tolerant attitude to variable pricing among arts audiences than is often anticipated”.

Firestation Managing Director Dan Eastmond said: “It’s been a hugely exciting project for us, not only to play with the possibilities offered by digital ticketing, but also to share the process of experimentation with our audience and artists. That there seems to be a clear result of better incomes when offering customers a more dynamic and contemporary buying experience is very encouraging.”