Pricing

A Moment of Congruence

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Hat tip to Carter Gillies who spotted a wonderful congruence between the posts both I and artist Whitney Smith made yesterday.

Reading Whitney’s post, it almost feels like she wrote it to provide practical illustrations for my ponderings about how the arts community views worth and entitlement.

Where I end my post with a quote from Seth Godin about sharing your work, Whitney mentions it right from the start in the title of her post.

Sharing art work can be weird. Last weekend, when I had a party and sale at my studio, I put all the paintings I’ve been doing on the wall. I didn’t put prices on them because I told myself that I just wanted to show them. But the truth is I didn’t want to put prices on them because I was afraid if I did that, people would feel sorry for me because obviously the paintings are awful and it’s just a little pathetic that I actually thought I could sell them.

She goes on to talk about how she personally likes her “awful” paintings and really enjoyed executing them. As it turned out, some people did want to buy them which put her in a tough spot trying to decide on a price.

I guess this is a lesson to always have a sense of your work’s worth in case people are actually willing to pay you for it. This isn’t really a nudge at Whitney. It happens all the time.

Not more than a month ago I was at a gallery opening where one artist expressed his exasperation that one of the people showing wasn’t prepared to provide a price for his work. Of course this raises questions about whether the guy was really prepared to part with it.

Just as I talked about how sharing and impacting the community is cornerstone of arts philosophy, Whitney echos the idea. (I debate whether I even need to state and give an example of something that is so well known, but there are worse ideas gaining traction through repetition.)

Sharing is part of the artistic process. I believe art is there to give something to humanity– something to think about, a new idea, a connection, a moment of beauty, even a moment of transcendence. If the art isn’t shown, it can’t do its final job of changing people’s hearts and minds. If your art is just for one person– for yourself– maybe there is a good reason for that. But I don’t know what that would be.

Selling is another thing. I don’t think art has to be sold, but there is something to be said for moving it along…

So often the debate about the value of a work of visual art is conducted in the context of a gallery, museum or auction. Rarely, at least in the places I frequent, do we read an artist’s internal debate about the value of their work, when it is considered “done,” when to sell it and what to sell it for.

Making Ticket Refundability The Customer’s Choice

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When conversations about demand based pricing for the performing arts comes up, there is often a comparison made to the airlines and the way they factor in dozens of variables when they price their seats. One airline practice that doesn’t get mentioned is the refundable fare where you pay more in return for the right to cancel the ticket.

The right to exchange, and sometimes even get a refund for tickets, has long been a benefit extended to performance subscribers. Now that subscription sales are fading, perhaps it is time to think about applying it to single tickets?

The thought came to me when I was reading an story on a Microsoft blog about Jet.com The company is heavy into dynamic pricing to the point where the price of an item changes while it is in your shopping cart as variables are factored.

One of the ways people can lower the price of an item is to agree not to return it.

At checkout, customers can waive the right to return certain items, driving the cost down further; choosing one credit card over another — or paying directly from a checking account — takes dollars off, too. The system also suggests purchasing combinations that can save customers money.

With greater control over these variables, shoppers can strike their own personal balance between cost and convenience, something Lore’s team saw as missing in the industry. “The whole concept of Jet is to make transparent all of the costs that go into an e-commerce transaction, and then empower consumers to pull out costs as they see fit.

So what if you offer the opportunity to return tickets for an extra $5-$10 per ticket charge?

Generally the motivation for not allowing returns is fear of not being able to resell a ticket. There are also the labor costs and credit card transaction fees associated with processing a refund. Having different pricing makes the economics of all this more transparent and shifts some control to the purchaser.

If you do decide to allow a refund on a ticket sold as non-refundable, the rationale for a fee is clear. I know some performing arts organization charge an exchange fee which can seem punitive. In the context of this type of discount program, it can seem less so since the customer was offered the choice and the price difference has already been discussed.

I am not advocating this as a new source of income. There are social and emotional transactions that occur during the refund process, the results of which may not be directly correlated to whether a full refund was granted or not. It is better when the subject never comes up, regardless of whether you are generating any income from the exchange.

Still, it is something to think about. Especially if the choice of a discount in exchange for waiving the ability to make a return becomes more widespread and familiar.

If such an approach is implemented, it would definitely need to be handled at the time of sale from the positive perspective of “All our tickets are refundable, but you can get an additional discount if you don’t think you will want to exchange/refund,” rather than a more negative, “it will be an additional $10 if you want to be allowed to get a refund.”

Airlines handle it in the latter manner. Just think how much happier you would be if the $500 ticket were only $300 if you waived the right to a refund.

Airlines can’t really it that way because people initially hunt for the lowest price. They gain advantage from advertising the lowest price and adding costs as you choose options.

Price hunting doesn’t factor as much into the decision about which production to see so arts organizations have a little more flexibility in that respect.

I would be curious to see if a higher level of satisfaction might result from implementing this type of pricing. Would people feel more satisfaction secure in the knowledge they can either get a refund at any time or having gotten a great discount to something they fully intended to see anyway?

I imagine it would depend on the demographics of the community. Younger people and families might appreciate the low risk flexibility. More established audiences might view the unorthodox approach and additional level of pricing as confusing.

Art Museum Price Is Right

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While socializing post-reception for a show that opened at the local art museum, I got into a conversation with the directors about the type of information you include on the cards/plaques next to each piece.

Things got a little spirited when the executive director suggested that the cost of a piece be listed. His reasoning was that people are interested in knowing this information due to shows like Antique Roadshow.  His thought was that by including this information, you might appeal to an audience that wasn’t currently being reached.

The artistic director was against this idea. She was concerned that if the prices appeared on the cards, people would orient to that information rather than reading about the importance of the artist to a movement, what inspired the piece, notes that draw attention to technique, etc.  For those works that are for sale, she has price booklets available at the entrance of the gallery.

I tended to agree with the artistic director. I pointed out that people might start to equate price with the importance of a work or its intrinsic value. If something cost more, it must be a better quality work or the best exemplar of the movement.

On the other end of the spectrum, I thought it might serve to more deeply entrench the poor impression people had about art. If you are of the opinion that a 5th grader could produce a similar product, what are you going to think when you learn that it is worth $6 million when a piece you like is only worth $20,000?

We also addressed the issue that all pricing is not created equal. Some prices will be what the artist set for them. Others will be market value which may be absurdly inflated thanks to any number of factors.   I have seen shows where the artists are required to put prices on their works and don’t have the option to list it as not for sale so they will assign a price that guarantees no one will buy it.

This debate went on for quite awhile and suddenly we hit upon a bit of inspiration that we thought might serve both sides. It is still in the brainstorming stage and it is really more applicable to an educational program for a school or as a fun alternative in a lecture series rather than answering the question of what to put on the display cards.

The idea is essentially an art museum version of The Price is Right where you call people down to try to guess the cost of a piece of art. However, instead of just having them take random, uninformed guesses, you provide some of the background you would on a display card or in a lecture.

The general concept at this point is that you show a slide of a work and talk about many of the particulars: This work is from X who was an important figure in the Y period. The use of A, B, C techniques was impressive to people at the time. It was purchased by Mr. Jones for his collection and given to his daughter for her wedding. It was purchased by the Philadelphia Museum but has been lent to these museums in England, France and Hungary.

Talking about the provenance of an artwork can be nearly identical to the way the hosts on Antiques Roadshow talk about pieces people bring in for examination.

While the price does get mentioned, the opportunity to note that is what was paid in 1810 or at auction, etc allows it to be put in perspective. While this format doesn’t  allow for the depth and continuity you might get on a lecture about a movement that spanned decades, it can help spur an interest in learning more.

By controlling the release of information, you can get people to focus on elements that might contribute to why it is valued as it is before unveiling the actual price. This can create an environment where a conversation can occur about how unpredictable and illogical market prices can be when few of these elements seem to factor into multi-million dollar auction bids.

As I said, this is still in brainstorming stage and there have been little consideration given to audience, timing, subject matter, appropriateness, logistics and other related questions.  It will be at least 4-5 months before it happens, if they decide to go ahead with it.

If anyone has any feedback, thoughts, ideas, let me know.  I would be especially interested if someone could see a way to do something similar with the performing arts.

I am not sure we could really address price in the context of other factors in as interesting a format.  If you see some other game that might be played to make mysterious aspects of the performing arts more accessible to audiences, I would be interested in hearing your ideas

Demand Pricing and Extraction Mindset

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This story has been getting a lot of circulation today on social media, but I think it was Thomas Cott who first linked to a story about how a new law in Washington State will prohibit the use of “ticket bots” to buy up all the tickets for a show and then resell them all at higher prices.

In the comment section someone complained about the law saying the venue likely undervalued the tickets if people were willing to pay the reseller’s higher prices. Someone responded noting that perhaps the venue was actually trying to make the show affordable for a wider range of people.

Since the subject of people moving from the corporate world to head up non-profit organizations has been on my mind recently, my first thought was that these two people represent the difference in philosophies between the for- and non-profit sectors. If more people transition to non-profit management, this could be the subject of increased tension.

Except, it is already a focus of debate in the non-profit arts community. There are a number of non-profits who have started to institute demand based pricing for their shows as unearned revenue continues to diminish.

Even organizations that have no desire or technical capability to effectively implement demand based pricing are increasingly pressured to use it. I regularly get contracts that say if the artist is getting a piece of the gate, we will be required to establish milestones at which we will employ demand pricing.

Seth Godin had a post a month ago in which he addressed this exact situation which he termed the extraction mindset.

Thirty years ago, I asked the fabled rock promoter Bill Graham a question that I thought was brilliant, but he pwned me in his response. “Bill, given how fast a Bruce Springsteen concert sells out, why don’t you charge $100 a seat and keep all the upside?” (In those days, $100 was considered a ridiculous sum for a concert ticket).

“Well, I could do that, but the thing is, I’m here all year round, and my kids only have a limited budget to spend on concerts. If I charged that much for one concert, they wouldn’t be able to come to the other shows I book…”

Bill wasn’t just spreading the money out over time. He was investing in a community that could develop a habit of music going, a community that would define itself around what he was building.

Now this was 30 years ago. It is difficult to be sure rock promoters are employing this same mindset anymore.

Though I was actually faced with the same question regarding an annual Christmas show by a national act we present every year. Someone suggested given that we always sell out and have the date for the next year set before the current year’s concert starts, why not sell tickets for next year when the curtain comes down this year.

Problem is, people are so rabid about getting the same seats they had the year before, we were concerned we might force them to decide between buying tickets for the following year or buying Christmas presents. Better that we wait and not put them in that sort of bind.

Godin goes on to talk about the two different economic mindsets that exist today.

The promise of our connected economy was that it would reward the good guys, the long-term players, the people who cared enough to contribute. The paradox is that this very same economy has become filled with people who are easily distracted, addicted to shiny objects and too often swayed by the short-term sensation or by short-term profit.

I think most people embody both mindsets and unless they are really mindful of their actions, don’t necessarily see a conflict between them. People will take advantage of the low prices and convenience of shopping on Amazon and religiously show up to the farmers’ market on weekend mornings because they also value personally connecting to their local producers.

There isn’t necessarily a contradiction in this approach if there aren’t any local companies that make sleeping bags and vacuum cleaners for them to connect with the way they do with the beekeepers, farmers and candle makers.

Even without contractual obligations, when it comes to setting pricing it can be a real challenge for arts organizations to balance economic necessity with access. If you have 1000 seats, gauging whether an additional $10 a seat is going to be an impediment to audiences can mean a difference of $10,000.

If the show sells out easily, there is a lot less labor and expense involved in making that $10,000 than if you have to approach someone for a sponsorship, or write a grant application and final report.