Dave Wakeman’s appearance on Angela Meleca’s ARTS Redefined podcast was making the rounds of LinkedIn last week. One section in particular where Wakeman discussed his opposition to discounting caught my attention. (Starting at 27:10, the index in the video is way off for some reason)

Wakeman says people tell stories about themselves –what type of person they are, what value they have in the world. He says discounts do the exact opposite – it removes the value narrative and says you are a commodity and suggests you don’t believe in the value you are offering.

Wakeman recalls one of his marketing professors taught him that for every 1% you discount, you can lose up to 40% of your profit. Wakeman acknowledges it is an extreme example and the typical loss is around 10-11%. He cites additional research on the other side that shows for every 1% you raise your price, you gain 10-11% in profitability.

He says that the first time you discount, you might get good results but then people learn to wait for the discount. The better approach is to just recognize you set the price too high, change the price and continue with that new price.

Without naming names, Meleca gives Wakeman the example of an arts organization that makes all their tickets $11 with the expectation that people will enjoy the experience and come back again at a higher price.

This is clearly a reference to Opera Philadelphia’s  $11 pay what you want campaign that was introduced at the end of August. I suspect the podcast episode must have been recorded around then because Wakeman doesn’t seem aware of this and I am reasonably confident I saw him comment on the story in early September.

I will say that based on Opera Philadelphia reported ticket revenue being generally 13% of their revenue, I don’t necessarily think they were depending on people returning at a much higher price point in the future. Fundraising is probably at the core of their plan to stay in the black.

Interestingly, Wakeman brings up a “not going to name name’s” example of a sports team that did the same thing. He characterizes the belief that people will come back at a higher price as just stupid. He says it is much tougher to raise a price when you have lowered it.

He goes into detail about the approach of just changing the price and how to communicate it in a way that is positive for you. Announcing a whole new block of seats at $20 Vs  20% off ticket price is a more constructive framing. The discount raises questions about the value of the show and how it is selling.

That said, I want to point out you can only do that so much. There were a lot of concerts this past summer where people had purchased tickets at $300 or more several months out only to find them selling at around $50 dollars a couple weeks out from the show. Based on what I saw unfold on regional concert venues this summer, I am pretty sure some of that is attributable to 3^rd parties buying up all the tickets, ratcheting the price,  and then trying to unload them when they wouldn’t sell.

Whether it was 3^rd parties or the venue themselves, there were a lot of pissed off people making videos and comments on social media because their perception shifted from being smart for getting tickets early to being cheated of the hundreds or thousands of dollars difference between their purchase price and the current sale price.

Wakeman talks about this shift in perceived value in regard to discounting as well. He suggests having a strong data based process in place for price setting so that you have the best chance of creating an accurate price in the first place.

He says pegging it to the actual cost of presenting the show is bad because that often doesn’t align with perceived value.

Once you set the price, don’t be timid or apologize for it – promote it confidently and proudly.