The art of pricing - students help solve a Disco dilemma
When you offer a unique arts and cultural experience, how do you set the price? How do you judge how much is too much – or too little – when there are no direct competitor “products” against which to compare? Will people actually buy tickets?
That was the challenge facing the Parramatta-based Information and Cultural Exchange (ICE), an arts and culture organisation that has developed a number of unique immersive cultural tour highlighting the unique cultural vibrancy of Sydney’s western suburbs (and beyond).
ICE’s ferryboat, minibus and walking tours have taken visitors to bridges, hidden gems of suburban architecture and unique places of worship. Moving beyond the usual tourism zone, visitors (audiences) have been exposed to unfamiliar and/or forgotten art and culture, and particularly to the stories and perspectives of the people who call western Sydney home.
“These are bespoke cultural programs – they’re not the usual 'run of the mill' bus tour or harbour cruise. They are actually works of participatory art,” says ICE’s Executive Director, John Kirkman. “That makes it hard to gauge the right price - particularly given that the core expertise of a not-for-profit, community-based organisation like ICE is in community engagement and cultural development, not necessarily in sales”.
So when it came time to consider the pricing of a new suite of cultural products ICE sought the input of postgraduate Pricing and Revenue Management students from UTS Business School’s Marketing program, under the supervision of pricing strategist John Burke, the subject’s lecturer and coordinator.
'That makes it hard to gauge the right price,
particularly given the core expertise of a
community organisation ... is not necessarily in sales'
For some years now UTS Business School and UTS Shopfront – a service that matches community organisations with expertise available within the University of Technology, Sydney – have collaborated to set up real-world assignments for postgraduate students with not-for-profit organisations. Students get to apply their knowledge and skills by consulting with a community group, and in turn the organisation gains access to professional help to achieve their goal, explain Lisa Andersen and Pauline O’Loughlin of UTS Shopfront, who worked on the ICE project.
ICE had already developed and run some tours when it came to UTS. In 2013 the ‘Pearls of Granville’ minibus tour, in partnership with the Sydney Architecture Festival, showcased buildings of architectural and cultural significance in a working suburb you wouldn’t find on a traditional tourist trail. The following year, for the Sydney Festival, ‘The Calling’ tour visited places of worship in Auburn, Granville, Parramatta and Harris Park.
“Both were very successful – both sold out. People (and the media) loved them,” says Kirkman. But the question arose whether the price for these first excursions was too low, at $49 for a minibus tour that included a personal guide, a meal and an iPad narrative. Analysis by the students suggested there was room to move, and this fed into the decision making for ICE’s next tour, ‘Bridges Ahoy!’ a ferry cruise that involved higher running costs than the previous minibus tours. ‘Bridge Ahoy!’ was part of this year’s Sydney Architecture Festival and took in structures ranging from the iconic Sydney Harbour Bridge to the less well-known Tarban Creek Bridge on the Parramatta River.
The students’ customer research found ICE’s products had quite a high appeal rating and for a wide range of people, suggesting the case for a higher price could be supported. ICE ultimately priced the Bridges Ahoy tour at $95, and three of the four cruise sessions sold out, with the fourth running at 60 per cent capacity.
ICE is next presenting ‘Disco Dome’, an after-dark walking tour for the 2015 Sydney Festival that taps into the history of Parramatta’s lost discotheques. This tour will be priced at $89, including drinks and supper.
Kirkman says ICE currently receives grant funding to run its tours on a production cost recovery basis (with profit only assured from ticket sales). Thus the financial risk for ICE is enormous. And the risk is exacerbated by the fact that ICE, like many modestly funded arts organisations, must look to a future where it will need to produce modest profits to stay creatively and financially sustainable.
'To operate in the contemporary world
as an arts organisation ...
you have to operate as a business'
“We recognise that to operate in the contemporary world as an arts organisation and a cultural organisation, you have to operate as a business,” he says. The balancing act is in setting prices that meet both financial and community building goals – achieving the desired return without significantly reducing access to programs.
Kirkman says the students brought rigour and science to ICE’s pricing deliberations. “We really needed to think through the brand and the demographic, and what that demographic would pay for the brand,” he says.
Pricing strategist John Burke explains that pricing includes understanding the “value” that’s being offered. “Take a cup of coffee purchased from a local café – you are not just paying for a cup of coffee but a combination of factors including taste, location, ambience, speedy service, friendly staff etc.,” he says.
So pricing is a complex equation, especially for organisations such as ICE where there may be added dimensions – for example, an element of “gifting” in the price supporters are prepared to pay for a tour. Corporates pay for this sort of strategic pricing advice, Burke says, but it’s expensive and normally out of the reach of not-for-profit organisations.
Kirkman says that as well as the science of pricing, the students contributed an outsider’s perspective to ICE’s program. “You become invested in your work, you know it intimately,” he says. “You don’t always have the chance to have fresh eyes look at what you are doing. There’s a great sense of critique about that, a freshness of evaluation. Sometimes that can be a traumatic experience, but ultimately it’s also a very productive process."
Photo: The Disco Dome tour is part of the 2015 Sydney Festival Credit - Lesley Parker, UTS