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Pricing is one of the most sophisticated tools available to managers of cultural organisations and there are literally hundreds of variables that can be adjusted to help organisations achieve both their financial and social objectives. This page introduces key concepts with links to more detailed material, free to download.
Baker Richards Consulting has helped arts organisations across the UK to make substantial improvements in their income, delivering over 100% return on investment through specialist consultancy ranging from full pricing review and evaluation, to a shorter audit for smaller organisations. See the What We Do section to find out more.
Strategies for Income Growth
There are two ways to make more money from pricing: increase prices to maximise yield, and reduce prices to increase volume. These basically describe two of the three approaches to pricing strategy: skim pricing sets prices high knowing that only a small sector of the market will be attracted; penetration pricing does the opposite. There are case studies on each of these approaches, but a much more common approach in the arts is neutral pricing, which seeks to take price out of the equation, recognising that for most people price is not the main reason they decide to go, or not to go, to the arts. In fact, we propose that best way for arts organisations is normally to use all three pricing strategies.
There are a number of factors which affect decisions about pricing strategy, not least the costs of your operation. However, the traditional approach of cost-based pricing is a very good way to lose money because it ignores the other key influence on pricing strategy, namely customers, and the value they attach to the experience they are offered. In fact, pricing for cultural organisations is much more complex because of the multiple objectives we apply – artistic and social, as well as financial – and contradictions between them often come to the surface when applying a pricing strategy.
The Price is Right?
The key to making more money from pricing is understanding customer demand, which is a function of each individual's perceptions of value. Perceptions of value are affected by many factors, and as a result are almost unique to each customer for each event. Maximising both income and access depends, therefore, on having a wide variety of price points to meet those perceptions of value. The secret to doing this effectively is price differentiation and in cultural organisations there are a wide variety of tactics which can be used to differentiate prices. Having the right prices, the right number of prices, the right relationship between prices, the right number of seats at each price: these and many others are small decisions that can make a very big difference and Baker Richards has spent years developing ways to help you make those decisions more scientifically. Some examples of how to apply these principles are shown in the case studies, for example re-pricing the auditorium, introducing premium seats and adjusting performance schedules. Click here to find out more.
Flexible discounting
Discounting is one of the most flexible ways of differentiating prices. In developing discount tactics, it is very important to distinguish between sales promotions, designed to increase sales volume, and concessions which are about social objectives (as such there are many factors to consider in developing a policy, not least in pricing for disabled people). There is a wide variety of tried and tested sales promotion tactics; increasing frequency of attendance is the silver bullet, delivering increased occupancy and income.
The flexibility of discounting means that yield and volume can be optimised by managing the level of discount. This is a form of revenue management, which is all about the dynamic adjustment of price differentials in order to maximise income and optimise occupancy (see the article on Revenue Management).
For a full list of resources go to the pricing resources page. If you would like to discuss any of these issues, please contact us.
Pricing resources for the performing arts
We have pricing documents and case studies available for download in PDF format. You will need to have Acrobat Reader installed on your system. You may download it for free by clicking the Adobe Reader button below.
For more information about the pricing research we offer, please visit our What We Do page.
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