Strategies

The Price Is Right

More people buying higher-priced tickets? Not impossible at Houston’s Alley Theatre

by Eliza Bent

THE CHALLENGE

Popular theatre myth: In order to sell more tickets, just slash prices—that’s the way to fill seats and make money. But Dean Gladden is debunking this notion at Houston’s Alley Theatre. When Gladden began his tenure as managing director there in 2006, the Alley had just committed to increasing its artistic budget from $5.2 million to $6.4 million. So, earned income had to be a significant part of that equation. Gladden set to work on a variable ticket-pricing plan for the theatre.

THE PLAN

To start with, Gladden decided to reevaluate all the flagship company’s policies regarding earned income. “The primary purpose of this evaluation was to ensure that the Alley was maximizing earned revenues as well as maximizing attendance,” he notes. Since ticket prices were already established when Gladden got to the Alley, he created a variable ticket-price system for that current season, then revamped pricing even more thoroughly for the next season. Three seating sections existed for ticket buyers in the Alley’s largest venue, which seats 824—Gold (92 seats), A (317 seats) and B (415 seats), priced in descending order. When Gladden studied the seating map, he realized the Alley’s largest section had the cheapest ticket prices. “This was not maximizing revenue,” he observes dryly. Gladden decided to restructure the seating chart so that there were 242 seats in Gold, 348 seats in A and 234 seats in B—doing so immediately increased revenue from both subscriptions and single tickets. With a new seating structure and ticketing scale in place, Gladden and his colleagues implemented other changes—including a new take on the policy (a common practice at many theatres) of selling half-price tickets on the day of performance. “This policy rewards people who buy late and gives them a better price than subscribers,” Gladden asserts. The company’s new plan works exactly in reverse, much like the airline industry: The earlier you buy, the less you pay.

KEY PLAYERS

Every week Gladden holds a “pricing meeting” in which the Alley’s marketing director, box-office manager, subscription manager, group sales manager, promotions manager and IT manager convene to review the number of seats sold in each house for each run. “If a show is selling well, then we will raise ticket prices in one or two sections,” Gladden explains. If a show isn’t selling well, the pricing team may decide to create a special promotion with reduced rates. Naturally, the team discusses a lot of variables at these meetings. The main focus, however, is to maximize revenue and fill seats.

WHAT WORKED

Combined with other marketing and promotion initiatives, the Alley has seen subscription revenue increase by 19 percent and single-ticket revenue increase 77 percent in just two years. Remarkably, Gladden claims there has been “virtually no push-back or cancellation on subscribers who moved up from A to Gold.” How could this be? According to Gladden, “The bottom line was that subscribers didn’t want to lose their seats…and in their heart of hearts they knew they were underpaying for their excellent seat locations.” Gladden sums it up this way: “Subscribers always get the best price and best seats.” Moreover, he and his pricing team have noticed an interesting phenomenon: The highest-priced seats always sell first. So the team caters to this occurrence in order to maximize profit.

WHAT DIDN’T

Marketing director Rodi Franco delineates three challenges the pricing team faced in their onslaught of ticketing changes. “We needed to have the right data so we could understand our inventory and our demand,” Franco recalls. The team instituted more thorough sales reports than they had previously used. Once they collected more detailed information they felt better informed on how to price different seats and sections. The second difficulty was how to disseminate information on ticket prices. “We sell about 60 percent of our tickets online,” Franco says, “We needed to get better web-based software to make our customers aware of what the offers were.” Finally, there has been a necessity for better internal communication. “To be able to do this kind of pricing you need to know your inventory,” Franco says. “This requires better internal communication among our different departments. How many comps are we giving away per performance? How many discounted tickets are going to our sponsors? We’ve needed to better manage the tickets we give away.” Of course, another drawback is for the impromptu ticket-buyer who ends up paying top dollar.

WHAT’S NEXT

Franco envisions a more sophisticated seating map in the future with mini-sections and subsections. “Instead of speaking about sections we will talk about ‘price levels,’” Franco says. “Price won’t be related to section, but related to the number of seats available in those sections. So depending on a show, Row J may fall in the Gold section or in Section A.” Or sub-section “A a” or sub-sub-section “Gold-silver,” for that matter…quite a potential matrix! Franco believes, “Assigning price to a certain number of seats and not being tied to the seating chart that was created at one point in time is a goal. But we need to have technology to be able to do that. Now we have to build software around this new strategy.”