Tuesday, May 12, 2015

Dynamic Confusion

Let's take a plane trip to Florida!

Hmm. How much does a plane trip to Florida cost?

Everywhere I look for the price, I have to supply my name, date I want to fly, how many people are going, what day of the week I want to go, if I need or want an aisle seat (or a window seat), how many pieces of luggage I'm bringing, what time of day I want to go, if I want a direct flight or non-stop, which particular airport I'll be flying into or out of, do I want Economy or First Class or Business Class, a refundable or a non-refundable ticket, and maybe even other information I haven't mentioned.


All I wanted to know was,"how much does a plane trip to Florida cost?" Even after providing all of this data, if I don't book immediately, the price will invariably change in a moment. I can only conclude that the is no real price for a plane trip to Florida. There is only a methodology for airlines to asses via computer algorithm how much money is the most they can wring out of any particular customer. This, in a nutshell, is the consumer's experience with dynamic pricing.

This also happens to be the pricing model that Broadway shows would like to emulate, and have been moving towards for the last several years.

Who even wants to fly anymore?  Deregulation has destroyed the industry, with consolidation leading to the oligopoly we have today. Passengers are herded into cabins with small seats and no legroom, charged extra for any amenity, and are served by degraded staffs of pilots and flight attendants losing every labor battle for their own professional dignity. Is it any wonder how many cases of passengers or staff are suffering mid-flight breakdowns these days? And that's only the ones we hear about.

In spite of how unsatisfactory the airline industry's example appears, their computerized dynamic pricing is credited with adding to airlines bottom line. I wonder how there being so little competition in the industry adds to the bottom line, but I digress.

So Broadway wants some of that dynamic pricing magic. It's already an oligopoly, of sorts, only 40 or so "Broadway" theaters, and, well, there is only one Broadway. But there are some stumbling blocks.

While airlines may never have had an "established price" on any of their routes or services, Broadway tickets have always had an established price scale. An orchestra ticket had a listed price, and it was printed on the ticket for all to see. Whether it was $5.00 forty years ago, or $150.00 in the present day, it's still called an "established" price.

But today, computers have helped to muddy the waters somewhat. A "premium" ticket, located amongst "regular" priced tickets may cost as must as $500.00, even though it is located in an area designated as $150.00. The premium tickets will even have the premium price printed on the ticket for all to see. Many big hits sell many premium priced tickets, and the sky high grosses of the big hits reflect these premium priced tickets.

Shows also now have the ability to "dynamically" raise prices in anticipation of higher demand, on holiday weeks, for example. Shows do have the ability to dynamically lower prices , but that doesn't happen very often. Ticket prices not in line with other shows may confer a distressed status to the underpriced tickets. Who want's to buy tickets to a show that's "lesser" than a hit?

Since discounting is so baked into the DNA of Broadway ticketing, the savvy among the audience knows that only tourists or people with too much cash to know know any better will have to or want to buy premium or regular priced tickets. Most ticket buyers have learned that the discounts are coming, and if they wait long enough, they will be rewarded with, at the very least, half price same day TKTS tickets.

Many will look in their mail boxes for direct mail discount offers, or check out theater websites for their inevitable discounts. All of these discounts are based on that "established" price and are marketed at some percentage off that price. Many old timers will remember those colorful strips of paper called "twofers" that used to litter the cashier counters of Manhattan retail stores.

Broadway and the airlines are similar in that they both have seats to sell, and once the shows start or the planes leaves, those empty seats are lost opportunities for revenue. However, Broadway's infatuation with the airlines dynamic pricing model may contain a few unhappy surprises if it were to become the completely dominant pricing model for Broadway.

These days. people do not fly for pleasure, they fly because they must. While "getting there is half the fun" may once have been true, that's a fading memory now. People fly for business because they must, unless they can make use of internet meeting software to save them the trials and tribulations of flying. Even vacationers have no choice. If they want their vacation to be more than a days' drive away, they must suck it up and endure the indignities attendant to planning and buying their plane tickets.

Who doesn't sit on a plane and wonder what the person next to them or in front of them paid for the same flight? Someone always has a better deal than someone else, and the frustration of that added to the discomfort of the crowded flights, typically delayed, leaves a sour feeling in most everyone's gut. While the faces of the flight crew show none of the eager happy feelings of the safety video's crew, everyone will be happy enough if no one freaks out on their flight.

Broadway has never been a "must have" when it comes to disposable entertainment income. It's never been "cheap" by any stretch, but up until the advent of premium and dynamic pricing, it always had a definite "democratic" quality to it. Anyone who bought a ticket might find themselves sitting near a celebrity or a captain of industry, or their neighbor from down the block.

The premium tickets have segmented the buying public into those that will never under any circumstances purchase a $500.00 theater ticket and those that will patiently wait for those discount offers to trickle down. Just as a First Class plane ticket separates the "well-to-do" from the "riff raff", premium tickets absolutely remove the "democratic" feel from the theater.

Nowadays, with more entertainment choices available than ever before, Broadway must be careful to not push away their customers even more than they already do. If dynamic pricing were to be fully instituted, with daily fluctuations in pricing, buying theater tickets would become just like buying airplane tickets with all of its frustrations and feelings of being ripped off. That would not be wise in a world of $10 monthly Netflix subscriptions.

And what of Broadway's existing marketing of discounts? Dynamic pricing would make all discount offers moot, because with no "established' price, how much off is a TKTS 50% deal anyway? 50% off what?

Just as Broadway ticket prices have fully evolved into a hierarchy of various discounts, implementation of total dynamic pricing would upend the entire system, and bring with it the replication of one of the most consumer unfriendly methods of sales ever devised.

There is no end to bad ideas, is there?

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