Dynamic pricing, also known as surge pricing, demand pricing, or time-based pricing, is a pricing strategy in which businesses set flexible prices for products or services based on current market demands. It’s widely used in various industries, including the theatre industry, to maximise profitability. However, it has both pros and cons, and these can vary depending on the specific context. In the case of the theatre industry in the USA and UK, here are some potential benefits and drawbacks:
Pros
- Revenue optimization: Dynamic pricing allows theatre companies to maximize revenue by adjusting prices according to demand. For example, popular shows during peak times can be priced higher, while less popular shows or off-peak times can be priced lower to attract more audience.
- Efficient resource allocation: By adjusting prices according to demand, theatres can ensure that seats are filled even during less popular times, which leads to more efficient use of resources.
- Better forecasting: With dynamic pricing, theatres can get better insights into audience behavior and preferences, which can help with forecasting and planning future shows.
- Demand management: Dynamic pricing can help manage demand. Higher prices can reduce demand for overbooked shows, while lower prices can stimulate demand for less popular shows.
Cons
- Perception of unfairness: Dynamic pricing can lead to perceptions of unfairness among customers. For example, a customer who paid a high price for a ticket may feel cheated if they find out that someone else paid a lower price for the same show at a different time.
- Market alienation: If prices rise too high during peak demand periods, some patrons might be priced out of the market, leading to alienation and potential loss of customer base.
- Complexity in management: Dynamic pricing requires sophisticated algorithms and data analysis to implement effectively. This can add complexity to management and operations.
- Potential for backlash: There could be a public backlash if dynamic pricing is perceived as gouging, particularly during times of high demand. This could potentially damage a theatre’s reputation.
- Dependence on accurate data: The success of dynamic pricing largely depends on the accuracy of the data used to forecast demand. If the predictions are incorrect, the theatre could end up either with unsold tickets or underpriced tickets.
In London, I used to see dynamic pricing in pubs, selling beer, and there is a big monitor in the wall of the pub that showed how much was left of each brand of beer, and the price of the beer was changing in real time, so it was a really dynamic game of cat and mouse in the pub.
While the principles behind dynamic pricing remain the same between the USA and UK, there may be specific cultural, economic, and regulatory factors in each country that could affect the implementation and effectiveness of this strategy. For instance, regulatory frameworks around consumer protection and price transparency could influence how dynamic pricing is perceived and implemented.
I think there’s still a lot of psychological resistance to introducing this kind of variable pricing to theatre venues in Korea, but it’s a matter of timing, and I think they’ll catch on eventually.
