Adriaan van der Hek: There’s a lot to gain. There’s a lot to gain.

Andy Povey: I hope that you find this all useful.

Adriaan van der Hek: Hey, I’m Adriaan, located in the Netherlands. So I’m a Dutch guy. I’ve been working in online for all of my professional life and I’ve basically sold everything you can imagine online from travel to fashion to common retail to ticketing, lots of ticketing, but also the Internet itself. At the early days, I was. I was in telco and sold the Internet itself like dial up and adsl. So it’s all over the place. Currently I am deep into lead generation online and I was. Well, we worked together, Andy, for quite a few years in the attraction industry, selling tickets heavily and deep into dynamic pricing. Before that, maybe it’s also interesting to say I ran a company with, how do you say, personalisation based on AI that was already in 2016 before everybody knew it was a smash hit.

Adriaan van der Hek: And again, they’re using data to personalise the experience. So you can personalise anything, you can personalise pricing, but you can also personalise many different Things if you have the data. And it has become more and more important nowadays. So I’m happy to talk to you here about dynamic pricing and the differences and how you can do that.

Andy Povey: We were talking just before we started recording and I made the bold statement that I think dynamic pricing is a really bad label and it’s creating a load of negativity in the consumer’s minds, primarily because of the way that it’s being used in sport and in music. There’s obviously the headlines that came out from the Oasis concerts here. More currently you’ve got the whole conversation. Ferrari. I’m not quite sure what the right term is for what’s going off with FIFA and ticket sales for the World Cup right now. So what do we actually mean when we’re talking about dynamic pricing, Adriaan?

Adriaan van der Hek: Well, the word dynamic just means that it depends on the time, right. So it’s timing based pricing. Although it changes. So there’s change and change is the only constant. I always say you can make it depend on anything else than price. So you can also make it based on location or based on demand. So and I think in the entertainment space and in the leisure space, it’s a bit of a combination of timing and demand in order to maximise the yield. Yeah. And then of course, as soon as it starts to become a little bit extreme, when you do two times, three times, four times, five times or even more the original price, then yeah, people are not going to like it. Some of the users are going to really like it. Like Oasis. I think Oasis did pretty well.

Andy Povey: Yeah, yeah.

Adriaan van der Hek: And there’s many examples of that. But I’m buying quite a few tickets on different types of events and almost all of these events currently have pricing which has early bird pricing, which is also timing based because I’m getting a discount if I’m committing early to a certain event. I think that is actually pretty good because it rewards your loyal customers for being early. Being early also helps you to prepare for whatever you’re doing right, even if it’s a concert. But if you’re an attraction or if you are park, you want to know how many people come in order to get your staffing and all your stock in in order. So that’s just timing based on how early you are before that. But yeah, when demand is high, you can also change prices and. Well, very simple.

Adriaan van der Hek: I live in a nice small Dutch town with a lot of restaurants and the restaurants have different prices over the weekend versus Monday, Tuesday, Wednesday because there’s a lot of Students here. So if you want to eat out, you can. And if you want to do it cheap, you just go on a Wednesday or Tuesday and then it’s just cheaper. It’s a few euros difference here and all of that, you get the point. And then anything in between.

Andy Povey: I like the analogy of a restaurant. I mean my favourite example of this is pubs and happy hours. Exactly. We all love it. We all love it when the price goes down.

Adriaan van der Hek: Yeah. And what you were saying is that people didn’t like it, that it has a negative connotation sometimes I think it depends on how you use it if there’s also a benefit to some of the customers. So for example, my value perception for weekend pricing is that I can get it cheaper on Monday, Tuesdays and Wednesday. So this is interesting. My brain thinks, hey, I get it cheaper. Instead of that it feels like it’s being up priced during the weekend or the rest of the week. So perception is actually pretty, pretty interesting here. If you take the prices and make them go up like 10x. Right. Nobody’s gonna perceive this as a benefit to the consumer. Right.

Adriaan van der Hek: But, but if you do early pricing, actually that feels like okay, you’re doing me a favour or we’re exchanging something, I’m committing early and you’re giving me a discount. So that perception is super important. And then if it’s super busy or if it’s a super high demand. So in an event that could be front row places, for example, people get that front row costs more. Right. So that is then a combination of location combined with demand in this case in venue location. But it has to be logical and people have to feel, and I don’t think that it’s actually perceived negative. I think it is super positive that I can get a cheaper price when it’s rainy or whatever circumstances there or when it’s not so common to come.

Adriaan van der Hek: And yeah, that I have to pay a little bit more if everybody wants to come. I also expect that the experience might be controlled due to that. So for example, what I would really hate is if I pay 10x and then to it to a venue for example, which probably is not viable. But that if It would be super busy, like you cramped in everybody at the same time, then again it would be perceived as very negative. But if I got for that no. And it was actually so yes I paid but I got a good show and, or I got a good experience and it was, yeah, then it’s worth it, right?

Andy Povey: Absolutely. And so it’s all about that difference between. I think it’s Warren Buffett that talks about the value and price. And price is what you pay, but value is actually what you get. Exactly. And as long as the consumer feels they’re winning in terms of value, then you’re onto a good thing is when that equilibrium goes the other way that you lose.

Andy Povey: Let’s talk about what it actually means. What does the phrase dynamic pricing mean? And I think it helps if we can agree a definition. And for me it’s all about the core definition is where the price of a product can change between the day that is put on sale and the day is actually sold. So static pricing would be we’re selling tinted beans for a pound each, a euro each. Whereas dynamic pricing is the well today they might be 50 cents but tomorrow they’re going to be 75 and the day after they’re going to be a pound. How does that sound with you? How does that fit?

Adriaan van der Hek: Yes, sounds good. It reminded me of this trend in retail where you currently also have dynamic pricing and people are due to the esl. So the electronic shelf labels, I don’t know if you heard about them, little E paper pricing and now suddenly it enables you to change prices based on your competitor or based on your whatever. And this is in retail becoming super common. Many retailers are switching to ESLs because it’s actually super labour-intensive to change prices all the time if it’s just physical paper.

Andy Povey: It’s really interesting looking at retail, we had a couple of Amazon concept stores here in London and a couple of other places in the UK about 12 months ago. And for me it’s a. When do you actually, if you’re in a grocery store, when is the point of purchase? Is it the point that you take it off the shelf and put it into your basket? At which point the shelf heads label is fine. But if it takes me half an hour to walk around the store then the first items I put in my basket have been, they’ve decayed over the price has decayed over those 30 minute period.

Adriaan van der Hek: In retail, t’s not going that fast. They update it once. Well, some of them do it every day but the majority is for certain products a certain time in the week. It’s saving. There’s also new legislation around it for example, I think it’s European law and so you’re probably, we can ignore that but it’s like you have to show the lowest price in the last seven days or the last 30 days in order to prevent that up pricing before discounting, which is an old retail trick. Okay. Let’s first increase the price and then let’s say that there’s a used discount. No. So things like that are being combated. So you have to show on the displays as well. This is the lowest price in or what the lowest price was in the last seven or 30 days. Very interesting.

Andy Povey: We did have some grocery stores here in the UK actually try this during the day.

Adriaan van der Hek: Morning pricing and afternoon pricing. Okay. Interest.

Andy Povey: Yeah. If I’m going into Sainsbury’s on my way to the office in the morning, discount the lunchtime offer because I may well pick it up there and avoid a second trip out. So they were trying to capture that so early smart. By offering a different price.

Adriaan van der Hek: Didn’t hear about that, but that sounds really smart. It’s all about tenting. Right? Marketing is about the right message to the right audience at the right time.

Andy Povey: If I think back to a long time ago when I studied a little bit of marketing, it’s the 4Ps, isn’t it? Price being the first one of those 4Ps.

Adriaan van der Hek: It is one of the dials that if you start turning it, the effects are super feelable. How do you say that? Super noticeable because. Yeah,.

Andy Povey: Adriaan and I worked together a few years ago in an organisation that was doing real time pricing for attraction tickets. I don’t really want to get into the mechanics of how you make that work, listeners. If you want to understand then reach out to Adriaan or me and I’m sure we’ll have a chat about it. But I want to look at what the different kinds are. So we’d start with rules based pricing and off peak versus off peak. It’s very simple. You could implement that today if you wanted to. But why would you? What’s that? What’s the benefit of doing it? Why, why would you look at dynamic pricing edging?

Adriaan van der Hek: Well, I think there’s compared to static pricing. So let’s say why would you go and do all this effort? Well, there has to benefits somewhere, right? We already discussed what the benefit or downside could be to the consumer. But let’s talk about what the venue can, what it can bring to the venue. Basically there will always be a group in your audience that is willing to pay more than they’re currently doing. So it might shrink your audience. Because if you’re saying, okay, I’m currently my ticket is, I don’t know, for 40 pounds, let’s say what happens if I switch to 50 pounds? Then maybe you lose a certain group of people. But if there are enough people that are willing to pay 50, then there is clearly a gain. Right? And there’s also a trick on the other side.

Adriaan van der Hek: If you lower your price, so at £40 you could get, I don’t know, 5,000 people in a day. And let’s say you lower your price to 30 pounds, maybe you could get 7,000 in. 7,000 Times 30 is more than 5,000 times 20. That could benefit. Right? So we’re trying to optimise with dynamic pricing. The whole purpose is to optimise the balance between how many people are coming and how much are they paying. And if the total is better, it might work. And then if you throw that into a mix at the right time, you could do both, right? You could do both. You could say at the last minute I’m going to re, and we’re almost sold out. You could increase price.

Adriaan van der Hek: And for, like you said, rule based, super simple, where you say, for example, like we discussed during the weekend, prices are higher. It’s just one simple rule. If we can’t, then 10, for example, super simple. As long as you still get the people in. Anything you gained was pure.

Andy Povey: And it’s very clear on tickets, isn’t it, where your incremental cost of sale is almost zero.

Adriaan van der Hek: Exactly.

Andy Povey: Everything goes straight to the bottom line.
Adriaan van der Hek: Well, I have a comment on that because I’ve learned while I was in the attraction industry that not necessarily 100% is always the optimum. The optimum because there are certain points in the formula where a park or a venue runs at an optimal scale, right. At a certain point you need to start opening additional restaurants, which means additional staffing, additional things. So it depends on the venue, I think where the optimal visitor points are. And they could, there could be multiple, right? Could be at 5, at 7 and at 10,000, for example.

Andy Povey: Absolutely no one wants to be the only person at a party. So you don’t want to go too high, so you attendance drops massively. There needs to be a buzz, there needs to be energy. In the same way, going back to the FIFA football example, empty seats in the stadium in a World Cup just don’t work.

Adriaan van der Hek: No, no, it doesn’t work.

Andy Povey: Why, why would you actually do it? There’s obviously the revenue element, increasing your income and the premium price point is interesting. We hear a lot of stories from associations in the UK right now. ALVA, ASVA, et cetera, all talking about the fact that we’re in this cost of living crisis and we’ve been in the cost of living crisis ever since the pandemic crisis started. And I don’t know quite what the next crisis is going to be, but there’s a section of society that aren’t affected by this. So people who have paid off their mortgages and people who are sitting on cash, lots of spare cash, it’s not a huge section of society.

Andy Povey: But by amending price and improving the offering you can put out and adding a premium offering, you are doing something to entertain that section of society which is going to be more lucrative for you. The examples they give are the Paddington stage show here in the West End in London, they’re selling marmalade sandwiches to people to pre-book for 38 pounds each, which is quite a lot of money for a marmalade sandwich in marble. And on the Paddington bus tour, again very Paddington themed, the first seats to sell out are always the four in the front row. Because if you’re on a bus tour, you want to see what’s going on from the front of the bus. So dynamic pricing can help you differentiate your market and potentially differentiate your product.

Andy Povey: So there’s a market for a premium price product and if you’re not satisfying that demand for a premium price product, then you’re losing money or you’re leaving money on the table.

Adriaan van der Hek: While it’s true that there is at this, let’s say at the top, there’s a portion of people that are able and willing to pay for a premium price, I think there’s also something very similar at the bottom. In the entertainment and venues, it is very common to discount, to sell by discount. And the problem with that, if you do a generic discount, like with the discount code, for example, is that it might end up giving premium seats away at a way too low price. So what you can do with dynamic pricing is you can say, no, this discounting, I will only do that at a time where it’s not hurting me that much. I don’t want people to be in expensive seats at a low price. Right.

Adriaan van der Hek: So let’s say it’s going to rain on a Thursday, then maybe that’s the ideal time to lower your prices because you’re an outdoor venue. And yeah, there’s, it’s not going to be busy. That’s when you want to have people come in at a lower price. That’s because they will feel okay. It’s raining, it’s not the best day, but I got my tickets pretty cheap and now it works for me. So where one hand you have this at the premium price, where it’s during Easter or whatever, it’s always going to be busy. So people have to pay premium price and they understand because it’s a special holiday or it’s a special day.

Adriaan van der Hek: But you can do the same by saying, let’s get people in at a who are maybe not as fortunate as the other guys that are able to pay such a premium price. And I’m going to give them really cheap tickets, but I’m only going to make sure that they can cash those tickets in on days where I need just guys in my venue. So that’s sort of a counterbalance. It’s a two edged sword as they say.

Andy Povey: Completely. I mean this is your restaurant idea, isn’t it?

Adriaan van der Hek: Exactly.

Andy Povey: Different price on a Monday to a weekend.

Adriaan van der Hek: Yeah, but the cool thing about dynamic pricing is that you can actually make it dependent on any factor, not only time, but also on the weather or on. And you can say okay here, if you have a specialty ticket, use this product. And that product is only available if maybe the forecast is that there’s less than 40% of people in the park. And then it just shows you just the days that are applying to that rule. For example, there’s so many things you can do.

Andy Povey: I think more than even discussions about pricing, our conversations historically have all been around conversion and getting people to do what it is you want them to do on that web page. Whether that’s buy a ticket or sign up to a marketing list or donate to a great cause or whatever it is that you want them to do, they need to be able to do from that web page. How does dynamic pricing influence conversion?

Adriaan van der Hek: I think I have a great story about that. Like I think it was 15 years ago, a friend of mine bought 20,000 pair of jeans and he was selling them in a pop up store and I had a nice little chat with him on how he was selling his jeans and he said there’s one little trick that is super important. And he asked me, if somebody comes in, takes a pair of jeans, looks at it, you as a store employee, what do you say to the guy? And I said, well, how can I help you? And he said nope, that’s not the right one. How can I help you? And I said okay, do you want to try it on? He said no, that’s not the right one. And I said, okay, what is it? What is it?

Adriaan van der Hek: And he said, we have that one also in black. And I said, okay, tell me why is that the. And he said, well, when somebody is looking at a pair of jeans, the question is, am I going to buy yes or no? Am I going to buy this pair of jeans or no? So that’s a 50-50, yes or no? I said, I’m turning that into a black or blue. He said, I have 20,000 of those jeans. I don’t care which they buy, as long as they buy. Right. And I think with dynamic pricing, there is this great psych that you’re going to scout for the best deal for the one that works for you. Not everybody, but there will be people who are coming in and there it changes. Am I going to buy a ticket? To which ticket am I going to buy?

Adriaan van der Hek: Great, because now I get your attention and you’re playing around with it. And while you’re playing around with it, while you’re going back and forward, you’re making an effort and people hate it when they have made some effort and then it results into nothing. Right? So again, the conversion will go up if they are able to play around with it to see, okay, when is it? And it’s, it becomes sort of a game. And, and despite what you might think, sometimes putting in more effort leads to higher conversion. And we’ve seen this online in many different situations where the common belief is, okay, make it as, as simple as possible. Which is very true. I won’t debate that. That is very true.

Adriaan van der Hek: But there’s also this effect is if you do a little bit, if there’s a little bit of a play aspect in it and if you do more effort it, and you’re hunting and scavenging for what is the best deal, then it works really well and people are more engaged. And then once they have the deal, it also feels better. So there’s more dopamine released when they actually have the tickets. So it’s also important that if they did that, you show at the end. Yay, you got them.

Andy Povey: Yeah, I’ve secured this deal. You’re very clever.

Adriaan van der Hek: Exactly.

Andy Povey: Well done.

Adriaan van der Hek: Good for you.

Andy Povey: Interesting. There’s a lot of, again, research here in the UK about the way that guests are engaging with websites. And theory is that actual propensity to visit and propensity to spend isn’t diminishing at all. People are just much more interested in researching beforehand. So the same Visitor to your website. It’s actually theory states they’re visiting twice. The first is where they’re spending a long time on your site researching what they’re going to do, that effort that you just described that they’re putting in. And then the second visit, which might be in the same day, the same time, the second visit, I’ve made my decision. I want to buy and I want to buy now. So you reduce the friction on the second element, add some things for people to investigate.

Adriaan van der Hek: A dynamic website is also good. That just keeps engagement high and people coming back. Right. So it’s always the battle for attention.

Andy Povey: Absolutely.

Adriaan van der Hek: And the more attention you get, the, in the end, the more fruit comes from that. Yeah.

Andy Povey: This improvement or this change in behaviour. You don’t actually need complex dynamic pricing rules or tools to be able to drive that, derive that benefit. It’s about offering difference.

Adriaan van der Hek: Exactly. Yeah. So like I said with the restaurant example, some of the rules can be really simple. Now of course, if you want to be more sophisticated, you can because currently technology becomes more and more available and there are, yeah, it is possible to connect it to, I don’t know, stock levels of products or to weather or to all kinds of factors. But yeah, it all. Often it also means the more sophisticated you get, it takes a little bit more maintenance. Right. Because you have to pay attention. You have to pay attention. But with, with super simple rules, you can already achieve quite a few of the benefits that the dynamic pricing is pretending to give you.

Andy Povey: Yeah. So any attraction operator should have the ability to do this now without actually going out and replacing software. I mean, we’re just about to enter into the main peak season for outdoor attractions. No one’s going to be changing their software right now.

Adriaan van der Hek: I wouldn’t.
Andy Povey: But you can take advantage of it.
Adriaan van der Hek: Well, I think nobody in his right mind would make a big change just before season. Or even in season. No, no, but, so the alternative is you go in and you change prices manually every day. Or, but that often. That, that often is also risky.

Andy Povey: When you get it right. And this is all about experimentation. It’s all about looking at the data, make a change, look at the data, see what that does. Yeah. When you get that right, I think you generate enough incremental revenue or more than enough incremental revenue to justify the effort that you’re putting into changing those prices.

Adriaan van der Hek: Yes, well, the, the extra, what comes out of it is not like 3% or 5%. No, we’re talking double digits. And sometimes. Well, at the Oasis concert, I think it was triple digits multiple times over. But no, no, there is, there’s a lot to gain. There’s a lot to gain.

Andy Povey: Attraction, operators and owners that are listening to this that might be interested in trying some experiments around pricing over the summer. What are the top three things they should do in preparation?

Adriaan van der Hek: Well, first, you need to understand your target audience. If you don’t understand who’s coming. So, so who are they? How do they know your demographics? Where. By the way, the technology can also help you because knowing where they come from, how much they have to spend, how long they stay in your venue, how much they spend in or before. So I, I think knowing your audience is one, knowing the trends from the past is number two. So if you have data on previous. Yeah. On your, on your ticket sales from previous seasons, more is better.

Adriaan van der Hek: I think that should include also the special circumstances, because if you just see a line on a chart, that doesn’t matter that much unless you know exactly when Easter was, because that was the spike or when that thunderstorm hit or when that heat wave was there, because these things matter. So that is the metadata around your data, basically, at least it’s super helpful if you have that. I think every person who is responsible for purchasing or procurement, he needs to rely on something that happens in the, that happened in the past. Right. To learn for the future. And I think maybe the third one is also to know what is coming.

Adriaan van der Hek: So all the special days, all the special weekends, all that data is super relevant because what you don’t want is that you’re discounting on a special day where it should be actually a little bit more expensive. So you need to know what’s coming. And I would say what I’ve learned from different industries, there are so many triggers that you are not aware of or that you didn’t think about. So, for example, in Holland we have, I think it may be everybody gets a holiday allowance, for example. Well, that’s a moment when people have money to spend. So it always spikes spending in all industries. But also at the end of the quarter, at least in Holland, people get some tax money, returns for children, I think child support or something like that is being transferred. Again, that is a moment.

Adriaan van der Hek: But also when Ramadan starts or ends, or there’s so many things that can influence ticket sales. So it is nice to be prepared for what’s coming. Did I mention three?

Andy Povey: I think so. If you didn’t I’m going to add one to it. And for me it would be, you need to work out why you’re doing it. What, what is it you want to achieve? Are you wanting an increase in revenue? Ultimately, we’ll assume everyone wants an increase in revenue and there’s not many people who are going to turn that down. But do you want to increase that reven increasing your average ticket price or do you want to increase revenue by smoothing out attendance so you make every day of the holiday as busy as the next one, rather than having peaks on a Saturday and troughs on a Tuesday.

Adriaan van der Hek: Now you said the peaks. I think one of the side effects of dynamic pricing, which we used a lot during Corona, the pandemic, was that you can use it to spread visitors so you can push the people who are not willing to pay that premium price off to shoulder days or shoulder times or whatever you have, which is I think, super important. And it, and there’s been so much experience from the pandemic that it actually really works really well. You can use price to move people that are, were planning to come on Saturday to Fridays and taking a day off to have an easy day or to certain hours. You can really use dynamic pricing to do that. So if you’re thinking of, okay, why am I doing this?

Adriaan van der Hek: Maybe one of the problems you’re having is that there are like these peaks where way too many people are there and the experience goes down versus, okay, there’s days, there’s nobody’s coming in and my staff is doing nothing.

Andy Povey: Now I’ve always liked the idea of if you’re in an attraction that’s a sort of half day visit, can you do things to attract people who work at home to take the afternoon off and come with their kids on a quieter day? I mean, it’s a market that we don’t tap into. Adriaan, thank you. I really enjoyed reconnecting with you and having this chat.

Adriaan van der Hek: Thank you for having me.

Andy Povey: Well, thank you Adriaan listeners, there’s a simple message here. Different price points make huge sense for your business. It’s not just increased ticket yield or ticket pricing, but also increase sales when you get it right. So don’t be shy, give it a go.

If you’ve enjoyed today’s episode, please like or even recommend on whatever platform you use to get your podcasts. It really helps people to find us and allows us to bring you content like this.

Today’s episode was produced by Emily and Sami from Plaster. Editing was by Steve Folland. Socials and schedules by Wenalyn at Skip the Queue HQ. I’ve been your host, Andy Povey. Until next time, eat and goodbye.