Main Image: The Second City performs Together at Last
Sean Kelly, founder of Vatic, a provider of dynamic pricing tools for the performing arts and ticketing industries, accepts that this sales model gets something of a “bad rap”. But that doesn’t mean it’s not the right answer for many businesses in the live events sector.
Kelly wrote his first pricing algorithm back in 2009 and now his company, Vatic, works with organisations in the performing arts sector to create a road map of how their customers purchase tickets. The company, founded in 2018 and headquartered in Dallas, then manages the pricing to sell more tickets and increase the average price.
“I had worked at Starbucks and a lot of my work was around gathering huge amounts of data and distilling it down to actionable strategy for the company,” explained Kelly. “Vatic does the same thing, but we take an organisation’s past sales history to create a road map of how their customers buy. We use that road map to manage pricing with the goal of selling more tickets, and increasing the average ticket price.”
Kelly added: “Folks think that the point of dynamic pricing is to gouge customers, and like any tool, it can be misused. But that’s not actually what it’s for. Dynamic pricing gives you a process for aligning the prices you charge with patrons’ expectation of value for the event.”
We spoke to Kelly in depth about dynamic pricing to find out more on how businesses can benefit from looking into utilising the model…
Image: Sean Kelly, founder of Vatic
TheTicketingBusiness: How can companies take advantage of dynamic pricing, benefit from utilising it and where would they begin?
Sean Kelly: “Dynamic pricing is process-driven. It takes time and dedication. Organisations need to start looking at how sales are trending and ask themselves two questions: ‘Am I ahead or behind where I should be right now with sales?’ and ‘Am I trending up or down?’. The reason you have to ask both of those questions if that you might be ahead on sales, but trending down, so ultimately you might not end up where you want to be.
TTB: How has dynamic pricing evolved?
SK: “In the early days of dynamic pricing, most organisations were using capacity targets to manage pricing. They would get to 70% capacity and they’d raise prices by five bucks. Then if they got to 80%, they’d do another five. And so on. It was an easy to remember system. Only problem was, it didn’t work.
“When we analyse a customer’s data, if they’ve been using capacity targets, the real revenue growth is only 1-2%. That’s a lot of work for 2%. Now, with Vatic, you can actually use what the customer’s feel an event is worth, what its value is, to set your pricing. So even if you don’t get to 70%, you can make more money, because if customers think it’s worth more, than you can charge more without having it affect or decrease the number of tickets sold.”
TTB: Is dynamic pricing fair for customers?
SK: “Our point of view is that customers should be telling you what to charge for tickets. If they feel it deserves a premium price, then you should follow their lead. Likewise, if demand is low, then you should set much more accessible pricing. The situation in which dynamic pricing is not fair, is when customers are taken out of the equation, and the only consideration is ‘How much more can we charge for this ticket?’ That’s not what Vatic does.”
Image: Theatre Latte Da performs Chicago
TTB: Could the entertainment and events ticketing industry learn from other sectors that utilise dynamic pricing?
SK: “Dynamic pricing has been in place for a long time now for airlines and hotels and while they don’t all do a super fantastic job, they have helped live events understand where the opportunity is, and what pitfalls to avoid. Dynamic pricing works best when it leverages the data to increase price and increase demand by setting lower prices when things are not moving fast enough.”
TTB: Are more segments of the entertainment and arts industries more willing to adopt dynamic pricing, i.e theatre?
SK: “Adoption is slow, because it is a new practice, and lots of these organisations are literally steeped in tradition. If you’re performing works that are hundreds of years old, that is actually going to be reflected in the values of the organisation — you are naturally going to be more conservative when it comes to trying new things.
“But what every one of Vatic’s clients discovers is that, when dynamic pricing is done right, those concerns fall away, and actually you end up with more time to focus on expanding your marketing channels or enhancing the customer experience.”
TTB: Do you think dynamic pricing will become the standard practice in the future?
SK: “Yes, it’s never easy to run an organisation that is dependent on live attendance, and as government and foundation subsidies shrink, that revenue has to be made up. If you can do that without actually cutting into the number of tickets sold, then dynamic pricing is a good path to follow.”
Vatic is a sponsor of TheTicketingBusiness Forum, the world’s No.1 B2B ticketing business meeting, which will take place from July 7-8, 2022 at Emirates Old Trafford, Manchester.
Images courtesy of Vatic