Coming soon to a theatre near you: Demand-based ticket pricing

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To listen to his colleagues, Howard Jang, executive director of Vancouver's Arts Club Theatre Company, has joined a cult. "Howard's drunk the TRG Kool-Aid," they say, when Jang goes off on his latest tear about dynamic pricing or how to grow patrons up the ladder of loyalty.

At first, Jang was skeptical about TRG – he thought it sounded like a "money grab," he recalls. But now, he's a true believer in the group's power to read box-office numbers as if they were numerology and make predictions about the future.

"What TRG has helped us do is take the information in our database – ticket patterns, what seats sell better – and provide a deeper sense of analysis and help us appreciate how powerful our data is," explains Jang, breathlessly, over the phone from Vancouver.

Jang is not alone. Over the past six years, TRG – a Colorado-based consulting firm – has become as big a talking point for Canadian performing-arts administrators as pollster Nate Silver's similarly data-driven methods were to political junkies in the recent U.S. election.

At least 15 major theatres, opera and ballet companies – from Theatre Calgary to the Confederation Centre for the Arts in Charlottetown – have bought into the group's dispassionate data analysis and diverted limited financial resources to cover the pricey (and not publicly disclosed) consultant fees. ("It's not cheap, but it's an investment," says Bob Baker, artistic director of Citadel Theatre, one of TRG's latest conquests.)

Looking at the results, it's easy to see why so many are gulping down the Kool-Aid. Last year, while the Vancouver Playhouse was going bust, other theatre companies in town who had signed on as clients of TRG were quietly breaking box-office records.

The Arts Club, the largest theatre company in Western Canada, has had a streak of success since hiring TRG in 2008, just before the recession began. During these tight times, ticket revenue and donations from individuals have been on the up and up, while the sale of subscription packages has had annual two-digit growth until now it is at the highest point in the theatre's history.

Smaller performing-arts organizations able to cobble together TRG's fee have benefited, too. In East Vancouver, the Cultch, an alternative theatre with just over 200 seats, saw its box office and individual donations double the season after enlisting the services of TRG with the help of money from the BC Arts Council and Vancity Credit Union. Even as the city's condo market was beginning to crumble last year, Cultch subscriptions doubled and the company had its highest-grossing hit of all time, Ronnie Burkett's puppet play, Penny Plain.

In a time when public and private funding is fickle at best, TRG focuses on the increasing revenue from the only source that performing-arts companies have direct control over – their audience. "Our firm is dedicated really to one thing – helping arts and cultural organizations grow… the relationship and sustainable revenue from patrons," says TRG president Jill Robinson.

TRG's analysts have descended like a special-forces team on clients such as the Royal Winnipeg Ballet or Regina's Globe Theatre to sift through spreadsheets, seeking out buying trends and generating "heat maps" that theatres then use to rejig ticket prices.

While the financial results are difficult to argue with, one of TRG's methods has raised eyebrows south of the border where they've been in business longer: dynamic pricing.

The box-office boosting tactic will be familiar to anyone who has booked a hotel or flight – or bought a hockey ticket from a scalper. As a show builds up steam during its run, ticket-selling staff will increase the prices of the hottest seats on the hottest nights following a demand-based algorithm. The same seat in the centre of the 10th row at the Arts Club's Stanley Stage or Citadel's Shoctor Theatre may cost $5 more tomorrow than it does today. (Though, importantly, TRG has also advocated that many clients – such as Theatre Calgary and the Cultch – reduce their entry-level price point and keep it low until it sells out, to attract new audiences and stay accessible.)

Montreal's Les Grands Ballets Canadiens was the first in Canada to hire TRG and give dynamic pricing a go back in 2006. The idea simply made sense to the company's executive director Alain Dancyger, as he'd previously worked for the SNCF railroad in France, where he was in charge of the application of yield management to trains.

"I knew how effective it could be, but I wanted to know if it was feasible to our field," recalls Dancyger. It was: The practice led to a 10-per-cent incremental increase in revenue for his dance company.

But demand-based pricing hasn't just yielded impressive results in large, 3,000-seat theatres like Salle Wilfrid-Pelletier at Place des Arts either: Compare and contrast the two most recent visits to the Cultch by popular puppeteer Ronnie Burkett.

For Burkett's 2011 show Penny Plain, the top ticket price was increased based on demand until it was 44 per cent higher than it had been for Burkett's 2009 show at the Cultch, Billy Twinkle.

Burkett's bottom line was so impressive that TRG uses it as a case study on its website: Revenue per performance jumped by 12 per cent, leading to an extra $232,896 in box office and a 68-per-cent increase in revenue from his previous hit.

Despite success stories like these, there is still hesitation in some quarters to applying for-profit sales techniques to theatre or ballet. As Chicago Tribune theatre critic Chris Jones recently asked: "Is the dynamic-pricing model the way a mission-oriented, non-profit arts group should be operating?"

Robinson emphasizes that demand-based pricing is not just about squeezing more money out of existing audience members, but part of an overall strategy of creating – or perhaps recreating – a culture of loyalty among patrons. The larger goal is to build audience members up what TRG calls the "trier-buyer-advocate" ladder.

TRG's approach, in many ways, flies in the face of what has been assumed as truth in the performing arts: Audiences buy at the last minute now and the subscription model is dying, or dead. Indeed, the data seems to back that up: The Theatre Communications Group reports that subscription income declined by 17.6 per cent in the United States over the past five seasons.

According to Robinson, however, subscriptions are actually in many ways more valuable now than they were in the supposedly less hectic times of the past because they force theatre or ballet patrons to carve out time in their schedule for the activities that they love; the inflexibility that is supposedly a deterrent isn't actually, as a dispassionate crunch of the data (rather than listening to audience members say) shows. "You can sell subscriptions today, very successfully, but it takes investment," she says.

The old-fashioned marketing methods TRG advocates – direct mail, telemarketing, even money-back guarantees – do come at a cost in addition to TRG's fee. To see its box-office revenue jump from $261,000 in 2011 to $558,000 in 2012, for instance, the Cultch had to more than double its marketing budget, from $51,000 to $113,000.

If there are drawbacks to TRG's approach to building up and extracting greater value from a theatre's core audience, however, Arts Club executive director Jang believes that they are far outweighed by the benefits.

And when he's had audience members question him about changes in box-office practice – and, like other companies, he says there have been hardly any complaints – Jang simply points to cuts from BC Arts Council and the collapse of the Playhouse on one hand and his thriving new-play development program on the other: "Once I explain it, they understand."