Pricing

Over the weekend I read a very interesting blog post by Nick Kokonas who implemented a system where people would buy tickets to his restaurants.

One of the problems he faced was that they were employing 3 people full time just to call people back and tell them there were no seats for Friday or Saturday at 8 pm. They were also losing a lot of money due to no-shows or partial no-shows because they couldn’t call their long waiting list of people to tell them they could be seated in 15 minutes.

What they did was create a demand based pricing structure with non-refundable tickets and put the whole system online. That way patrons could see exactly what was available and see that weekend nights were much more expensive than Tuesday nights and make decisions accordingly.

This creates a lot of transparency and trust with customers because the restaurant doesn’t have to overbook to hedge against no-shows and then divert people to the bar if more people keep their reservations than were anticipated.

They also differed their operations from other online services like Open Table. Most restaurants don’t put their entire seating online and customers have figured that out and call in to the restaurant anyway. Since Kokonas wanted to avoid paying his employees to say “No” all the time, they basically put everything they intended to offer online giving people no reason to call in and try to wheedle a seating.

Their no-shows dropped precipitously and even if only a partial table shows up, they have already collected the cost of the meal from them.

I should note, the restaurants offer a fixed menu so there is not a lot of variability in people’s orders. They do have one bar-restaurant with a more variable menu where they collect a $20 deposit which is applied against your bill and no-show dropped immensely there as well.

But reading this got me thinking– this is a situation where people pay a uniform price in advance to consume a similar product and the the result was a greatly reduced no-show rate.

This sounds lot like going to a live performance. Only when I have looked at the sales versus tickets taken at the door (or just eyeball the audience at a performance) I see more no-shows than I would like.

I wonder at the reasons behind this. It could be that many are subscribers and they forgot they had tickets for the show or they have decided this is the show in the series they are least interested in and want to skip it.

I know this doesn’t just happen to me because I have attended otherwise sold out performances where a significant swath of prime seating remains empty.

While subscribers have the right not to occupy the seats they have paid for, as conversations about demand pricing for seats at performances continue, you have to at least consider whether you are setting prices high enough.

This is absolutely a consideration at sold out performances where you might really have an opportunity to increase your earned revenue in the face of decreasing support from foundations and individuals.

It is also a consideration in less well attended performances where too low a price might not provide enough incentive for people to attend. I have seen a decision to go from free to a $5 charge fill performances. If you are intentionally keeping prices low so a target audience can attend and they buy tickets but don’t attend, then the effort is as much as failure as if high prices dissuaded their attendance.

There are dozens of other factors that can account for the difference in no-show rates between Kokonas’ restaurants and performance venues. The social cachet of eating at a high demand restaurant that only seats about 90 being a significant one.

Even without considering the success Kokonas’ has realized, there are dozens of factors that make ticket pricing decisions very difficult for arts organizations. Still, it is always interesting to see how pricing is used to good effect and ponder what lessons might be derived.