This post was actually published by a business partner of mine on the company I work for, Cirque du Soleil. I could not resist to share it with you as I think Cirque revenue management strategy in terms of box office sales is quite advanced. It helps to both offer cheaper prices than before and optimize the company’s revenue.
The post was originally published here.
What started with two street performers in Montreal has grown into a worldwide phenomenon with shows on every continent (except Antarctica). Cirque du Soleil is one of the leaders in live entertainment with their fantastic performers, musicians and overall experience.
One area you might not realize they’re also leading in is pricing. Cirque du Soleil recently began optimizing their dynamic and flex pricing, with positive results. To learn more about the process we spoke with Éric Valley, Ticket Sales Director for Touring Shows. Read on to learn howCirque du Soleil prices their shows and how your organization can adopt many of the same ideas:
Selling Out: You made the move fairly recently to use dynamic and flex pricing for your shows. What prompted this decision?
Éric Valley: We started a pilot two years ago. For years we could observe that the demand was not spread equally across performances. There were many unsold seats on some performances and other performances would sell out too quickly. We wanted a way to better respond to the uneven demand and if possible steer it to where it was less strong. We had done first steps in that direction a few years back by having peak and non-peak pricing, but realized we could push the concept much further.
SO: Can you talk a bit about how this is set up from show to show?
EV: The pricing changes are currently dictated by volume of tickets sold in a given performance and by category. We start with lower prices and gradually increase them [as] we reach certain volume triggers. All price hikes and pricing structure is determined before we go on sale. To better meet demand there are more scaling models than before — instead of having two category layouts (peak and non-peak) we can go up to 5 or 6 seating layouts depending on what the data tells us. Also, the price increases are likely to be more conservative on performances where there is less demand.
We track sales daily and adjust pricing once specific thresholds have been met. It is a very granular approach. Before even considering the pilot we spent quite a bit of time figuring out how we’d need to build the events and how to monitor them. But that work has paid off.
SO: What has been the impact of dynamic pricing on ticket sales and revenue?
EV: This is the part I’m particularly proud of: Most of the revenue comes from having more tickets sold, and we managed to preserve — and in many cases even increase — the average ticket price. It is a very healthy way to grow your revenue. The other benefit is that we’re slowly starting to see a shift in the buying pattern. We see more tickets sold upfront.
SO: What has been the ticket buyers’ response to the changes?
EV: Hardly any response/negative feedback. We were afraid this could cause a backlash, therefore we decided to be transparent about the pricing increases. You need to treat your customers with respect and inform them upfront. People are willing to accept change as long as you are being transparent about it. To do so we had originally put disclaimers on our site that pricing would start to change based on demand, but these pages were rarely viewed. This said we still put in our pre-sale e-mails [to] buy early for [the] best seats and price but only receive very, very minimal negative feedback in the last two years.
SO: Do you have further plans to fine-tune the process? If so, can you tell us a little about them?
EV: Yes, at this point only sales volume is taken into account. But I believe that timing vs. performance, that could be either toward premiere day or performance day, or higher than expected advance sales should be considered in refining our model. I also would like to add seat flexing in the model. The challenge will always be to ensure that you monitor properly sales and inventory. The risk with flex is that if you do not monitor your inventory well, it could turn an opportunity into a loss.
SO: What advice do you have for organizations that want to start dynamic/flex pricing? Is there anything that’s particularly important to focus on first?
EV: On a technical/operational aspect: Consider going more granular in your variable pricing first. Nothing is more important than having that initial pricing as accurate as possible. After that, when talking dynamic, don’t try to integrate all variables at one time – as I’ve mentioned before we started by looking at volume only. Make sure that you monitor and understand the impact of these variables on overall sales.
The other very important factor: Make sure you are in synch with your marketing team. Dynamic pricing is great at optimizing sales when people come to your site or box office, but when fully synced with the marketing message — it can help drive traffic and increase demand.