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Priceless Tickets At Pollstar Live
Whether selling concert tickets or peanut butter it’s important to know what makes someone decide to pay a price and what makes that person walk away.
Bestselling author William Poundstone, using research from Nobel-laureate psychologist Daniel Kahneman and his longtime collaborator Amos Tversky, offered conferencegoers a new spin on the age-old debate over ticket prices.
By tapping into the mind of the fan using theories of behavioral economics, Poundstone thinks the industry may be able to get to a place where ticket prices take a backseat, in the consumer’s mind, to the experiential value of a concert.
Thus, his presentation, “Priceless: The Hidden Psychology of Concert Ticket Prices & the Myth of Fair Value,” set out to uncover how the classical economic idea of supply and demand doesn’t always jibe with emotional consumers who expect fairness and a quality experience.
But here’s a sneak preview: The presentation didn’t always jibe with emotional panelists either, who thought some of Poundstone’s illustrations (e.g. comparing peanut butter sales to the selling of concert tickets) attempted to oversimplify the incredibly complex nature of the problems faced by the concert industry.
There are five principles of price psychology that could work for the concert industry, according to Poundstone.
The first describes how offering extras and bundles such as a free CD or download in addition to a concert ticket as one way to drive sales. The technique is often used in infomercials.
“When you’re trying to justify a purchase and a price to yourself, it really helps to be able to say you’re not just getting one thing, but a number of things,” Poundstone said.
Adam Friedman, who recently stepped down as CEO of Nederlander, said he’s seen bundling work with huge artists like Prince, He wondered whether the principle can work in other cases.
“If a ticket is overpriced to begin with, putting in a free CD or some other type of value add is still not going to yield the same type of results you might see in these other industries because the price point in the aggregate is just too high,” he said. “We have to figure out the cost problem first in our industry to apply some of these techniques.
“For us the bundling problem right now is that we have a bundling in the cost of the ticket before you even get to the value add.”
Principle No. 2 notes that the less a customer thinks about the price, the better. Can a ticket website be formatted in a way so consumers don’t feel they’re being nickeled and dimed at the end of a transaction when they see the menu of fees and delivery options at the bottom of a page? Or, can ticket packages be bundled in a way so the consumer thinks more about the product and experience being offered and less about the price?
Friedman noted the industry is already testing out this model with all-in pricing. But in some cases, artists have balked, saying they don’t want to be associated with a higher, all-in price that includes convenience and facility fees that they don’t see a dime of, simply to make marketing easier on the ticket companies.
The third principle is charmed prices, or prices that end in 9. While any trip to the grocery store will yield charmed prices aplenty, Poundstone thinks the technique could see some traction when establishing that a concert ticket is a good value. He cited a study showing that, time and again, consumers will purchase a $39 item more often than the same item priced at $44 or even $34.
But the concert industry’s use of charmed prices is inconsistent, he says, citing an example of George Strait tickets being sold for $399 on the high end and $74 on the low end.
“When someone’s paying $400 for a concert ticket, they mean to impress someone,” he said. “So why spoil their fun and say, ‘That’s just a $399 ticket and not a $400 ticket?’
“At the other end of the spectrum, people are much more price conscious. Studies like this show, there’s a good chance they could have sold tickets like this for $79 just as easily as $74, if not easier, and are leaving $5 on the table because price sensitive customers would have paid it.”
Principle No. 4 is nonlinear pricing, or offering customers incentives for buying in quantity. While this is another idea that sees a lot of traction at stores – buy three, get two free! – a similar pricing structure has been used by nonprofit philharmonics for years. Patrons that buy season tickets and subscriptions get tickets at a discounted rate. Poundstone thinks there may be room to test out such a structure with popular music as well.
Anchoring is the final principle of price psychology and focuses on the power of suggestion applied to numbers. Poundstone, citing the example of a website selling Drake tickets for $805 on the high end and $70 on the low end, hypothesizes that a consumer sees the high price and has a raised perception of what the artist is worth. Thus, when they scroll down the page and see the $70 ticket, they may think they’re getting a great deal for the artist.
Madison Square Garden Entertainment’s Bob Shea wondered whether consumers really react to anchor prices in the moment, or whether they’re using past knowledge or previous experience to make a purchasing decision.
Friedman seemed more willing to get behind the idea of anchoring, explaining that with dynamic ticket pricing, consumers are given a price point in each category that they think they can afford and they’re getting a good value. He sees a problem, however, when ticket sellers reduce the price of the anchor as the show nears, in essence devaluing the pricing structure.
AEG’s Stuart Ross agreed.
“There’s an amphitheatre I know that had problems for years because toward the end of a sales cycle, they would paper the house to raise ancillary income,” he said. “What they ended up doing is training the audience that if you just wait long enough, you can get in for free. It severely hurt the market for years and years.”
In short, the problems faced by ticket sellers may not be easily solved by using charmed numbers, or bundling tickets with other stuff, or even by raising prices artificially high and working backward.
Friedman wondered whether some of the pricing principles could be used to change the core problems of the industry or whether the core problems have to be fixed first.
Poundstone closed noting that perhaps the industry puts too much emphasis on numbers.
“The experience of a really great live performance can’t be easily translated into numbers,” he said. “Prices tend to get a little too much weight in our decision making. Prices make us a little more thrifty, a little more greedy than if prices didn’t exist.
“The role of a well-crafted price is to counteract that just a bit and to remind people that a great concert really is one of life’s pleasures.”
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