EVERYTHING IS WORTH WHAT ITS PURCHASER WILL PAY FOR IT
What is art worth? A question I would constantly ask my students when teaching my foundation degree. Well, I would say, “Everything is worth what its purchaser will pay for it.” Not a saying from a modern day economist but a saying from the Latin writer Publilius Syrus in the 1st century BC. In other words, as far back as Roman times there was an inherent understanding that what something is worth varies from one customer to another. This goes for houses, clothes or your old smart-phone. This also goes for art institutions as well as individual pieces of art, attractions and performances. Monet’s Water Lilies recently sold for £27m for example. A Rolling Stones ticket for £670.
Whether you are selling a performance or a visitor attraction the implication is that it is essential to offer customers a choice of different prices to generate and then maximise sales and income. A higher price maximises income from those willing and able to pay more. Cheaper prices mean there is no loss of volume from those who place a lower value on something or have a lower ability to pay for the experience or product.
Many years ago in my banking days we studied the elasticity of demand and supply. Classical economic theory, in this case the price elasticity of demand – tells us that having a range of prices means you can sell more (a lower price maximises volume of sales) and earn more (a higher price maximises income from those willing and able to pay more). However, offering customers a range of prices to choose from is also important from a consumer psychology perspective; for example, people might find it hard to judge things in isolation. Instead, we make decisions by comparing relative differences; we might find it hard to decide if £60 for a West-end matinee performance is good value but if the evening performance is £90 then it would appear to be good value. And of course there is a difference between “cheap” and “value for money”. Offering different prices infers a difference of options, not the quality of what you are spending your money on.
By presenting different price/value trade-offs to a customer, the individual is no longer trying to assess an offer (and whether a price is fair) in isolation. Instead, they are weighing up which is the right option for them.
The example I saw recently in Arts Professional concerned the Roman Baths in Bath, which have introduced a new pricing strategy. The key objective was to maximise income from admissions, with a secondary objective of managing demand to improve visitor experience and secondary spend. The marketing company involved, Baker Richards were also tasked with ensuring the following:
- Visitors continued to feel they have paid a fair price for their experience.
- The new pricing structure was accessible to as wide a range of audiences as possible.
- The pricing strategy increased the proportion of web sales.
- The pricing strategy encouraged a more even distribution of visitors.
Prices were reduced for two-thirds of the year, with the largest price increases applied to just 26 days in 2019. Discounts were offered at quieter times and for certain demographics, i.e. families with children. The result was that at the end of May this year visitor numbers were up by 5.7% on last year and revenue was up by 13.9%. Web sales had more than doubled and they had seen particularly strong growth in children and families – up 36% and 20% respectively.
So, as per Monty Python’s Life of Brian: “We are all individuals! We are all different!” An effective pricing strategy is the opposite of a Roman toga – it should always respond to an organisation’s unique situation and needs, and should never be one-size-fits-all. And that’s what the Romans did for us….
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