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.
"Though while the author wishes they could buy it in Walmart..." Who is "they"? The kids? The author? Something else?…