Why Your Ticket Price Is All Wrong: 5 Counterintuitive Truths About Strategic Pricing
Pricing Pointers, Issue #25 🍎
Every organization that sells something, whether it’s a theater ticket, a museum admission, or a consumer product, faces a tough question: what is the right price?
Set it too high, and you risk excluding a huge portion of your potential audience. Set it too low, and you leave a significant amount of revenue on the table, money that could be used to fund your mission and create better experiences.
This pressure to find the one perfect number can be a major source of stress.
A more sophisticated approach, which Michael Rushton outlines in his book Strategic Pricing for the Arts, views this single-price mindset as a trap.
The reality is that value is not uniform across your audience, and a single price is a blunt instrument. This article distills five powerful takeaways from Rushton’s strategy that will change how you think about value and your audience.
1. The single-price problem
Rushton states that strategic pricing “begins with one single insight: the customers to whom you might sell a ticket to your event differ in the maximum amount they would be willing to pay”.
Economists call this maximum willingness to pay a buyer’s “reservation price”. A single price set for an event will inevitably be too low for your most enthusiastic patrons (the “strong market”) and too high for newcomers (the “weak market”). This creates a significant missed opportunity.
As Rushton notes, if a simple single price scheme is used, “opportunities for surplus” will be left unrealized. In other words, a single price leaves a vast amount of potential revenue on the table.
The key is to create a system of prices that delivers more value to those willing to pay for it while simultaneously creating pathways for a wider, more economically diverse audience to participate.
2. Let customers show you what they will pay
If different people will pay different amounts, how do you sort them? The traditional method is direct price discrimination, which relies on clumsy proxies like student or senior discounts.
A far more elegant and powerful strategy is indirect price discrimination. Rushton defines this strategy by explaining that all customers are offered “a range of options – a menu – from which to choose,” enabling audience members to “effectively sort themselves according to their reservation prices”.
The way to do this is to offer a “menu” of options and let patrons reveal their own preferences. This menu can include choices that vary by quality (e.g., seat location), convenience (e.g., advance purchase), or quantity (e.g., a season pass).
Rushton identifies the goal of this strategy as “gaining high net revenues from those willing to pay more, while not losing patrons only willing to pay a lower amount”. By their choices, customers “self-select” into the price bracket that best matches their own reservation price.
3. Sometimes inconvenience is a feature
We are trained to believe that good business means reducing friction and making things as easy as possible.
Strategic pricing shows that sometimes, adding a small, deliberate inconvenience is a smart move. Consider coupons or mail-in rebates. Rushton highlights that coupons are “a means for the store to offer discount prices to weak market customers, by creating an inconvenience that only those customers will accept”.
The hassle of clipping a coupon or filling out a form, such as for a rebate, is a strategic way of adding a small amount of friction to the purchasing experience. This inconvenience by design ensures that only the most price-sensitive customers will go through the effort to secure the lower price. Meanwhile, less price-sensitive customers will gladly pay the full amount to avoid the hassle.
This is a brilliant and counterintuitive tactic: deliberately manipulating the process of purchasing can be just as powerful as improving the product itself!
By adding a small amount of friction, you can offer a discount that is claimed by the audience you want to attract, without giving away revenue from those willing to pay full price.
4. The hidden danger of a lower price
When an organization wants to increase its audience or appear more accessible, the common impulse is a blanket price reduction. While this is often well-intentioned, it’s a deeply flawed and unsustainable approach.
Rushton identifies the “major problem of trying to reach a larger audience through a blanket reduction in price”: “For a portion of an arts audience, perhaps a large portion, the price reduction simply means they pay less for a concert which they already had every intention of attending”.
The major problem is that a significant portion of your existing audience was going to attend anyway at the higher price. You are simply giving away revenue for free, starving your organization of the very resources needed to fulfill its mission.
This creates a vicious cycle of devaluing your work. The alternative is to create a virtuous cycle. Rushton suggests that gathering revenue using strategic pricing methods that generate profits will “provide the funds that can be specifically directed to programs aimed at inclusiveness”.
Smart pricing provides the funds that can be specifically directed to programs aimed at inclusiveness, from outreach to subsidized tickets for specific communities.
5. Stop selling tickets, start designing choices
Strategic pricing is about more than just numbers. At its heart, it’s about understanding your customers (realizing that different people place different values on an experience and designing a price menu that reflects that reality).
Moving from the hunt for a single price to the design of a thoughtful range of prices is a core competency for modern leaders. It’s a creative act that allows you to serve both your mission and your bottom line, building a more resilient and impactful organization.
The key is to create opportunities for your most ardent supporters to contribute more while opening doors for new audiences to engage. The reality is, a successful pricing strategy is an act of design, not a matter of guessing.