Taylor Swift is one of the most famous pop stars in the world and one of the most successful female artists of all-time. Her shows and albums hit record sales in the music industry — something her team took note of when pricing her 2018 all-stadium Reputation tour.

For the first time that year, Taylor Swift employed a version of a dynamic pricing strategy in which concert ticket prices changed according to market demand.

Dynamic pricing is a revenue management strategy used by many types of businesses – including leisure and tourism companies – that continuously adjusts prices for admission based on demand, season, day, time of entry, and when customers buy. When implemented correctly, it improves online sales efficiency and maximizes revenue, all while building consumer confidence and trust.

As Rolling Stones explains, a ticket purchased on Ticketmaster for Taylor’s Chicago show in June that year would cost $995 in January and $595 in March for similar seats. The thought was that Taylor would capture the most revenue from fans who were most eager to attend and willing to pay the highest price as soon as tickets were released. Prices would then decrease to ensure that all tickets were sold, even if later tickets were sold at a lower price.

The 2018 shows did not immediately sell out in contrast to her previous 1989 tour. However, some industry stakeholders persisted that this was for the better. The thinking around concert sales had become: If an artist sells out quickly, they probably didn’t price the tickets properly.

Taylor wasn’t the first artist to try this – others including U2, Kenny Chesney, Pink, the Eagles and Shania Twain – employed similar techniques with the intention of pushing out the secondary-ticket market and battling resellers like StubHub.

Theoretically, by adapting prices to demand, these artists would maximize revenue without leaving money on the table. However, it also had the unfortunate side effect of confusing and even eroding trust among the artists’ fans.

While these artists, as well as Taylor Swift’s team, had the right idea in attempting to employ a smarter pricing strategy, they didn’t follow best practices. It is possible to use dynamic pricing to maximize revenue and increase customer loyalty for future shows with the right approach.

Below, the team at Catalate shares a few insights into how dynamic pricing can be properly employed in the live music industry using Taylor Swift as the example. While Catalate’s team members are experts in applying dynamic pricing to tourism and leisure businesses, concert pricing brings other variables that resort and park operators likely don’t encounter.

How Could Taylor Swift Improve Her Pricing Strategy?

The Catalate team made a few assumptions such as the fact that Taylor Swift designed her pricing strategy with the goal of maximizing revenue and volume of tickets sold. In most cities, there was only one concert and so only one opportunity for fans to see her in any particular place. And, finally, it is a safe assumption that Taylor Swift wants to provide her fans with the best possible experience so they walk away after a stunning evening feeling that the money spent on the ticket was money well spent.

While concert promoters may think it’s acceptable to drop ticket prices at the last minute if an artist needs to sell out a show, this is not an effective long-term plan for an artist with the profile of Taylor Swift. She is someone who wants to make an investment in the sale of future tickets and build trust and loyalty among her fans. It is a safe assumption that Taylor Swift fans will attend more than one concert throughout the years so investing in customer confidence is important.

By starting the ticket prices high and then dropping rates, as Taylor did with the 2018 tour, fans who consider buying tickets in the future will probably hold off purchasing their tickets just as they become available. They might have bought tickets as soon as they could only to see prices drop or read about what happened.

As a result, fewer fans will purchase tickets as soon as they go live — at that highest price point — if Taylor continues this strategy for the next tour. Ultimately, this means less predictability in ticket sales and the need to drop prices last minute.

For an example outside the concert industry, think about HotelTonight which sold to Airbnb for $400 million because the hotel industry as a whole made a similar error in their pricing strategy.

If hotels stuck to the sound pricing strategy of starting low and increasing prices as a guest’s stay draws near then they wouldn’t have needed to drop prices at the last minute, which annoys the guests who purchased in advance.

The next time the guest who purchased earlier goes to book a hotel, they’ll wait to buy, which compresses booking windows. Soon, enough consumers are willing to book last minute and a multi-million dollar opportunity like HotelTonight emerges.

Now, while there are dozens or hundreds of hotels in any market making for stiff competition, Taylor Swift doesn’t play by the same constraints. There is only one Taylor Swift.

Following Catalate’s principles of dynamic pricing, Taylor Swift’s team could have maximized revenue and built consumer trust by starting ticket prices low and moving towards a higher price closer to the concert date.

Instead of dropping prices as the concert date drew closer, a best-practice dynamic pricing strategy would start by pricing the tickets low and moving towards a higher price.

Like ticketed attractions, artists benefit from pricing hygiene, skipping the highs and lows of last-minute price drops for a more consistent approach that results in increased customer confidence, repeat purchases, and increased revenue.

This is done by releasing a small quantity of tickets at the lowest possible price the furthest date out from the show; adapting quantity rather than time to determine prices. Using this technique, Taylor would achieve the same average yield as the original strategy— and without the confusion or frustration experienced by customers

In addition to increasing revenue, this quantity-based approach increases advanced purchase commitment, helps operators implement improved data-driven planning, and boosts consumers’ positive perception of the experience.

How to Achieve the Perfect Sellout

A strategic dynamic pricing model works even in the case of a Taylor Swift concert, which only occurs once a year in a particular place by prioritizing quantity-set prices over time.

The best course of action for Taylor’s team would be to lead ticket sales with a marketing message that tells fans, “For my dedicated fans who are ready to commit as soon as sales begin, you can get tickets for as low as $200.” There will only be a set number of tickets at that price. After those are sold out, tickets then increase to $250 or $300. The price incrementally increases as each group of tickets sells out.

With this strategy, Taylor will earn the same as when she started ticket sales at $900 and then worked the price down to $300 but without angering customers.

The start low-go high strategy helps Taylor achieve ‘the perfect sellout’ in which shows sell out without having to drop prices at the last minute. By selecting the right price for the right consumer at the right time and building in quantity-based constraints on the lowest possible price tickets, artists also avoid the situation in which they price a show too low and sell out on the first day of ticket sales.

Additionally, this provides for flexibility as Taylor continues performing. Suppose her next album doesn’t do as well as previous albums so concerts aren’t selling out like they once did. She can maintain her brand strength and achieve maximum revenue by adjusting the pace of price increases depending on demand. If tickets stall then they stall at $800 instead of dropping to $400. All of this is done with maintaining consumer confidence in the fact that tickets purchased earliest will be the most affordable.

An Altruistic Approach to Ticket Pricing for Concerts

Some artists, unlike Taylor Swift, want to keep prices low to ensure that their shows remain accessible to fans. These artists recognize how much concert ticket prices have increased over the years while the artist’s share has remained the same or decreased.

Artists who keep their ticket pricing artificially low leave money on the table, and don’t actually prevent inflated ticket pricing in the end. This is because of the strong secondary sales market in the live music and entertainment industry.
This is an important caveat since removing secondary sales has traditionally been close to impossible in the concert industry.

Without removing secondary sales, an artist can have the best possible intentions but secondary sales would continue, the artists wouldn’t see any of that revenue, and enterprising consumers could buy the ticket at the reduced original cost only to sell it for three times face value.

One way around this would be if artists mandate that the name of the person on the ticket is the person who attends the show – similar to how World Cup tickets work – and forbid resales.

While that might work for some artists, a dynamic pricing strategy is a smart way to increase revenue while building audience confidence and even rewarding the most dedicated fans with the most affordable tickets.

Catalate is a full-service SaaS solution that offers customized pricing strategies, an e-commerce platform, and opportunities for enhanced distribution. It has processed more than $1 billion in transactions and manages 50 million price points for customers. To learn how Catalate can help your business thrive online, get in touch today.