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Placebo Pricing And The Ticket Price Quandary

Regardless of your view on whether or not the average ticket price at professional US orchestras is an accurate representation of the overall experience’s value or is artificially inflated to help pad earned income shortfalls (or a little of Column A and a little of Column B), Joe Patti presented a fascinating point of view on all of this at Butts In The Seats in a post from 1/18/2012. Whether intended or not, Patti presents a potentially useful option to help groups take a permanent step back from current pricing levels without looking like they’ve been gouging ticket buyers all along.

Patti ponders the notion of Placebo Pricing; which, in a nutshell, is a permanent discount offered off of artificially inflated prices.

Although Patti examines the notion from a general pricing point of view, his ideas could easily provide the foundation for strategic solutions geared toward reducing attendance barriers related to average ticket prices.

Can it really be as easy as having a perpetual 50% off sale?

We are all aware on some level that when a store has a sale with deep discounts, the original price they are quoting was probably inflated. We may grouse and think it is a little dishonest, we are still out there buying from that store on a regular basis.

And this feeling of being in a dishonest situation can be ameliorated by providing sincerely good service (leavened, perhaps with a little bit of the personality that appeals to the specific customer). The other thing is, no one actually ever pays full price, even accidentally, and everyone knows it. That isn’t something you can know for certain when it comes to airplane tickets, a pricing model it is often suggested performing arts organizations adopt.

So the big question is, do you take advantage of customer psychology to provide audiences with a satisfying experience?

Oh, actually, you already do in a thousand different ways with your marketing, pricing and other practices. Question is, do you do something so blatant?

Given that in some cases the placebo effect works even in the face of full disclosure, it is tempting to try out such simple way to create an experience. Many ticketing systems, including my own, make it very easy to print one price on the ticket and set the actual price much lower.

This has terrific potential as a solution because it allows orchestra to focus on the core concepts of doubling down on their strongest asset: the concert experience.

In the end, the devil is certainly in the details; not the least of which being what to do about reduced earned income from lower ticket revenue. But this is still a fascinating notion and one that deserves attention from one or more of the major philanthropic funders out there who are interested and willing to help an orchestra with the combination of a hot concert experience and crack marketing team put something like this into place; then write a paper about the entire process and subsequent results.

Let this rattle around in your head a bit and weigh in via a comment with your thoughts.

5 Responses to Placebo Pricing And The Ticket Price Quandary

  1. Dave MacDonald January 23, 2012 at 8:36 am #

    Every time I go into a Shoe Carnival, they are making a big deal out of their special “buy one, get on 1/2-off” sale. Every time, I think to myself, “This is just silly. They ALWAYS have that sale. Why don’t they just make all the shoes cheaper?”

    But you know what? I ALWAYS go back to Shoe Carnival, and I ALWAYS buy two pairs of shoes.

    • Drew McManus January 23, 2012 at 10:57 am #

      Bingo. One of the more challenging details for any orchestra interested in considering this strategy is how to separate itself from the bargain discount provider stereotype. Perhaps unsurprisingly, avoiding a marketing campaign with the word “carnival” anywhere in the lead is probably a good place to start :)

  2. Mike Macaulay January 23, 2012 at 10:37 pm #

    My only major concern about a placebo pricing strategy is how it might affect orchestra audiences’ perception of their relationship with the orchestra. A placebo ticket sale could lead to increased public consciousness of the business aspects of an orchestra, which wouldn’t suit the image that most orchestras want to create right now. Orchestras don’t want to be seen by the public as businesses attempting to maximize ticket revenue, even if this is technically what they are – orchestras want to be seen as cultural treasures, as friends to the community, and as artistically (rather than financially) motivated institutions. Transparent pricing may not be the most economically efficient model, but it helps maintain the public impression that orchestras are fundamentally different from other kinds of business, be they for-profit arts promoters or shoe stores.

    As a side effect, Placebo pricing could also potentially devalue subscriptions in the mind of the customer. There’s a beautifully concrete economic incentive to subscribing at present – when you buy a subscription, you know the difference between what you’re paying and the face value of what you’re getting. This value is kept pretty constant by virtue of the fact that orchestra tickets rarely go on sale, and that aside from basic price-discrimination (discounted student/senior tickets, group discounts etc.) there aren’t any good/secret/insider ways of getting cheap orchestra tickets. I suspect that even if the placebo sale price were kept absolutely constant, the mere presence of the illusory sale would be enough to make the subscriber uncertain as to the subscription’s true value – they’d wonder, if only a little bit, if they’d still feel good about buying the subscription if an EVEN BIGGER SALE then came along two months into the season.

    That all being said, it seems that we’re entering the era of the single-ticket buyer now, and maybe a conversion to placebo pricing would just be seen as an orchestra’s “catching up with the times” and attract no bad press – it’s just a crazy enough idea that it might work!

Trackbacks/Pingbacks

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  2. Price Discrimination for Orchestra Tickets | Mae Mai - February 10, 2012

    [...] McManus (of Adaptistration.com)had a fascinating post about Placebo Pricing (also see his follow-up post) that was the subject of a blogpost by Joe Patti [...]

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