What Can You Learn from Scalpers? Dynamic Pricing and Association Learning


The following post, written by Celisa, was the main article in the August issue of our monthly Association Learning/Technology Digest. Each digest also includes a wealth of links to news and resources. We put a new issue out today. It’s free, and if you aren’t already subscribed, you can get the latest issue sent to you automatically by filling out the short form on our newsletter subscription page: http://www.tagoras.com/resources/newsletters/

Photo of Ticket Scalper

Dynamic Pricing and Association Learning

What can your association learn from ticket scalpers? Potentially a lot. At least a recent Harvard Business Review podcast called “The Pricing Secrets of Ticket Scalpers” suggests businesses have something to learn about dynamic pricing from the $3 billion-a-year scalping market–and, we believe, associations have something to learn about pricing their educational offerings.

The HBR podcast features Rafi Mohammed, pricing strategy consultant and author of The 1% Windfall: How Successful Companies Use Price to Profit and Grow. The dramatic impact of a 1% price increase–versus a 1% increase in volume or a 1% decrease in costs–is the topic of Mohammed’s book and a recent post on our blog (http://www.tagoras.com/2011/07/20/1-percent-price-increase).

Scalpers aren’t trying to sell tickets to your annual conference or your Webinars. But what if they were? What do they know about dynamic pricing?

  • Dynamic pricing fluctuates based on demand. In the airline industry, prices vary daily, even hourly. One company can price just dollars lower than another to steal demand–because, for the most part, a flight to Boston is a flight to Boston. With music and sports, demand gets trickier–a Rolling Stones fan won’t buy a ticket to a Justin Beiber concert because it’s cheaper.
  • The price of scalped tickets can rise and fall compared to the face value. The price can be lower because of the ticket-issuing agency’s reluctance to change pricing after it’s initially set. It rises because of a hesitancy to set initial prices too high for fear of damaging good will–bands and ball teams have an allegiance to their fans.
  • The San Francisco Giants conducted an experiment where they lowered seat prices in selective sections. While the revenue for those sections increased, overall revenue didn’t because people, who would have paid a bit more, opted to save some money once they saw the cheaper option for essentially the same seat. Instead of lowering pricing on similar products, increase the total purchase by lowering the price on a more expensive product–make your box seats cheaper.
  • Closer to an event, prices tend to drop. Consumers who wait until the end often get the lowest price; same-day tickets for Broadway performances are cheap–if they’re available. But some consumers–those celebrating a special event or only in town for a few days–value certainty; they’ll buy earlier and pay more to guarantee a seat.

What does this mean for pricing your association’s education? We offer these questions as a starter.

  • Are you in the position to steal–or lose–learners on price alone? To what extent does loyalty figure in? Is your association incomparable–the Rolling Stones of your field or industry?
  • Are you open to exploring your full pricing range? Do you really know what your high end is? Are you reluctant to lower pricing when demand is lackluster?
  • How can you provide more value to the people who would buy your education anyway–what’s your equivalent of box seats?
  • How can you make the certainty of getting a seat something your audience values? If demand is lower than anticipated, what natural trigger can you tie to a lowering of price–what’s your equivalent of Broadway’s same-day discounts?

Mohammed expects to see more price experimentation in the future, and we hope to more associations experimenting too. If you’re interested dynamic pricing, we encourage you to listen to the podcast (about 13.5 minutes at http://blogs.hbr.org/ideacast/2011/07/pricing-secrets-of-ticket-scal.html) – it’s well worth the price. ;)

Celisa

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{ 4 comments… read them below or add one }

David M. Patt, CAE September 29, 2011 at 6:36 pm

Astute observations, Jeff. Put me in the group wanting certainty. I don’t book hotel rooms online because I want to be able to get a refund if my plans change.

I wonder if association members will think it’s unfair for rates to change the same way hotel and airline fees do. Associations usually have lower early fees, not lower late fees.

Reply

Jeff Cobb October 6, 2011 at 4:02 am

David – Thanks for commenting. Celisa wrote the post, so I have to give her credit for the observations. Nonetheless, it’s a topic I think about a lot. I don’t think I would recommend that the average association follow the airline or hotel industry models – the market dynamics are very different. On the other hand, I think something like the Giants example is informative. Many times organizations lower prices in ways that that don’t impact overall volume – i.e., they would have gotten the same volume at the higher price – and thus negatively impact net revenue. In some cases, the “early bird” conference fees may have just this effect, especially if they are set too low.

I also suspect there are numerous instances in which organizations could modify their standard offerings in relatively low cost ways (or in ways that it would be attractive for a sponsor to offset) to add value for which their biggest “fans” would gladly pay. This might include things like throwing in a book with registration, a “back stage pass” to meet a popular speaker, or a quarterly small group Web conference with the CEO. I’m sure a half hour of brainstorming at most organizations would result in a significant number of ideas. (All the more so if participants can be convinced to lay assumptions and “sacred cows” aside for that time period!)

Thanks again for commenting.

Jeff

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william thomson July 27, 2012 at 5:59 am

Very interesting post and I’ve highlighted it in our making good organsiers group on linkedin. As an event consultant in the associations sector I am not surprised that I have never been asked to look at this. It would scare the begeebies out of most associations! It is certainly something I will give some more thought to though.

Pricing although one of the classic four p’s in marketing is never really given the analysis that it should have. Price is an exceptionally important part of the mix. We’ve had a lot of innovation in place and promotion through social media and the product for some has changed too. Most of my work for associations is in the product or the promotion category. But price…..maybe that’s the next innovation battle ground.

We should also observe how some bands in the music industry have covered this. Radiohead for example release an album (come with me on this one) to their ‘fans’ who we could call members. They then ask their ‘members / fans’ to pay what they think it’s worth. As associations attendees are (in the main) their members maybe this is an option. Interesting times ahead!

Reply

Celisa Steele July 27, 2012 at 2:35 pm

Thanks for the comments, William. I think you’re right that pricing is the P that doesn’t get much attention–but should. And your Radiohead example is interesting. Members paying what they think an offering should be worth? That would definitely scare the beejeebies out of most associations (to borrow your phrase)!

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