Getting your prices right: what to think about and why

Putting a price on a loaf of bread, a new pair of shoes, or train ticket is something that everyone is used to doing. We expect prices to be associated with these things; we can compare one loaf of bread to another, understand the value of a pair of trainers compared to a pair of flip-flops, or take a train at a different time. Pricing of less material things, like the experience of being in or going to see a music group, can be trickier to navigate.

To help we’ve put together some guidance on pricing in general. It is intended to be useful in assessing both membership and ticket prices, as well as encouraging a strategic approach to thinking about pricing in general. How exactly you apply it will depend on your group’s situation and aims.

Why is it worth thinking about?

We know that for many groups finance is a real issue but also that, when time is tight, re-evaluating your pricing is one of those things that tends to slip to the bottom of the priority list. We believe pricing is worth thinking about for several reasons:

• Small pricing changes can make big differences in the long run. Think about your pricing regularly and don’t underestimate the power of marginal gains.
• Your membership prices and ticket prices are not just numbers; they communicate the value of your group.
• As well as helping you financially, carefully planned prices can help you to achieve other aims, like recruiting members and attracting new audiences.

This guidance can be applied to any group and any situation – whilst there is no one size fits all answer, if you know your aims and priorities then how you set and communicate your prices can help you achieve them.

Contents

• Pricing and voluntary music making
• What is a ‘good price’?
• What are you saying with your pricing?
• It might be a good price but how do we decide?
• Pricing as part of the bigger picture

Pricing and voluntary music making

All of our member groups are made up of musicians making or promoting music as a leisure time activity – most of them are completely voluntary and many are constituted as not for profit. So how does thinking about pricing strategically fit in?

It might be tempting to think that if you are not for profit then ticket prices must remain low or that it’s wrong to consider making money from your performances or your members. Remember that whilst you may be established as not for profit, there’s nothing wrong with making money to ensure the future stability and development of your group in line with its aims. Ensuring the financial health of an organisation is a vital part of ensuring that the organisation can carry out its work: professional or voluntary, profit making or not.

What is a ‘good price’?

For every person and every choice the answer to that will be different. What we consider to be a good price depends on a huge range of factors and it isn’t always something we are even aware of. What you’d consider a good price for an ice cream on a summers’ day when you’ve just been paid, for example, may be vastly different from what you’d consider a good price for an ice cream in the middle of winter.

What an individual feels happy to pay depends on the value they see in what they are paying for, in the context of their disposable income and available time.  What does this mean for music groups? It means that what is seen as a good price will be different from person to person and situation to situation. This has implications for how to set prices, how to communicate them and how to change them.

Your audience will consist of a range of people in a range of different situations with different amounts of available time and income. Whilst you are not in control of the resources each person has available, you are in control of the value that is visibly available in return for joining or coming to see your group.

A ‘good price’, what someone will pay, and what you should charge will not necessarily be the same thing. Setting prices is about bringing those three aspects together in line with your group’s priorities.

What are you saying with your pricing?

What your prices (membership and ticket) say about your organisation is important. A very low ticket price might be a great way to pull in new audience members but it will also represent low value to them. This could result in low commitment levels, late booking, low expectations and therefore lower value experiences. If you perform contemporary music for one concert out of six then will a lower price pull in more audience members, or will it create the impression that that concert is less valuable?

The same is true of membership prices. Keeping them low year after year may be honourable and helpful to many people but:

• Changing the prices in the future may be more difficult.
• The prices may have been in line with your situation and aims once, but is that still the case?
• Just because they’ve always stayed the same in the past, doesn’t mean they have to in the future.

Forcing people to pay for a full year rather than allowing week by week or term by term payments might make the group seem inaccessible – which could of course be solved by cleverly planned and communicated concession rates. Weekly payments on the other hand, whilst being great for allowing those on low incomes or irregular schedules to be a part of your group, could encourage more members to attend less frequently. This can be countered by the use of loyalty cards, for example: attend nine sessions and get your 10^th free, with a time limit on the use of the card.

The point here is not that one of these options is better, but that you need to structure your prices in line with your aims and values as a group. When setting your membership and ticket prices consider:

• What your group has to offer and if that is the same for every potential member or audience member?
• What are your aims as a group; can you prioritise them and use them to inform pricing decisions?
• You know what you are offering and what you are aiming for as a group, but would an outsider see it too?

It might be a good price, but how do we decide?

If every person spent the time necessary for a reasoned internal argument every time they made a decision, nothing would ever get done. So how do we make decisions? We take shortcuts. How we take those shortcuts has implications for pricing.

The process of decision making has, and continues to be, extensively researched. If you’re interested in finding out more read:

• Thinking fast and slow – Daniel Kahneman – this review is a useful summary of some of the key aspects of the book
• Predictably Irrational - Dan Ariley
• Blink - Malcolm Gladwell

Below are two particularly important aspects of how we make quick decisions which came out of the work of Daniel Kahneman who won the Nobel Prize in 2002 and his research partner Amos Tversky.

a. Making Comparisons: Relativity

Past experience is of course used in making comparisons, but a much easier route for the brain is to use information presented at the same time for context. Your brain uses the information it receives, in the order it receives it, to create a framework for deciding on the best option relative to all the others.

The set of information you are presented with affects how you see each individual component – so if you see one patch of colour in an otherwise grey landscape that colour may seem bright and cheerful, but that same colour in amongst a line of colourful beach huts might seem dull and lifeless.

What does relativity mean for your pricing?

• A range of prices can help to give context and a framework for easy decision making.
• What you see first affects your judgement of what you see next. Present your prices highest to lowest and the low will seem like a good deal.
• Spending history matters – if you attend once and pay £5 for a ticket then are asked to pay £15 the next time, the £15 will seem expensive. If you spend £5 the first time in full knowledge that future tickets will cost £15, you’ll feel lucky to have your £5 ticket and prepared to pay more if you return.
• How you communicate prices visually matters. Highlighting prices in bright colours, focussing on discounts, or using words like ‘Only’ could make them reminiscent of sale prices and low value.
• Could you instead focus your publicity on what your group has to offer - the experience rather than the price?

Next time you buy a coffee, train ticket, or ticket to the theatre, have a look at how the prices are presented.

b. Avoiding loss: Risk aversion

This is the idea that potential losses rank more highly in the decision making process than potential gains. There are a number of experiments by Kahneman and others that illustrate how it takes a very significant potential gain to persuade people to overlook a potential (but smaller) loss.

This helps to explain how low price ticket schemes can work to encourage new audiences or members. In the context of a well communicated benefit of attending or joining, a scheme that is set up to obviously lower the price also lowers the risk to the person parting with money whether that be for a ticket to your concert or membership with your group.

However this comes with its pitfalls:

• How do you create a risk free or low risk option and persuade those who take it to return as regular paying members or audience members?
• How do you create a low price offer without leaving your full price paying members or audience members feeling over charged?
• Does it matter if the low price offer is actually taken up by those who would have attended or joined anyway?

The answers to these questions are in how your prices sit as part of your whole strategy and this includes how they are communicated and to whom.

Examples of low price ticket schemes and how they are communicated that work well:

• Aldworth Philharmonic - Concert Virgins tickets scheme – encouraging first time attendees
• English National Opera  - Secret seats – lowering the price of going to the opera whilst increasing the chance of not being stuck up in the rafters far away from the action.
• Welsh National Opera, not exactly a ticket scheme but a page dedicated to people who are new to Opera and in the FAQs – explicitly making the point that it’s cheaper than going to the cinema or the football.
• Young Vic Two Boroughs Scheme – lowering the cost of attendance for local people, increasing the arts centre’s value amongst those closest to it.

Pricing as part of the bigger picture

We’ve explored how putting a price on something is about defining and communicating its value, and how people make decisions about price. But what does this mean for your group?

It means that when you next set your prices, it should be about more than just balancing the books. Pricing can also help to achieve aims. A carefully planned pricing strategy communicated well can:

• Encourage people to attend more than one of your concerts
• Encourage target audience groups to your events (e.g. young people, local people, or first time attendees)
• Make coming and trying out your group for a few sessions more inviting, and less of a risk
• Encourage members to contribute to the success of the organisation as a whole

If you want to do all these things at once, great, but it all comes down to how you structure your pricing and communicate prices as part of the bigger picture. Here are a few examples:

This is a situation that might sound familiar to many groups. Annual subscription fees are popular because they provide a bulk of income for the group, and are administratively simple. But in the 10 years that the prices have stayed the same could newer choirs and other activities have sprung up in the surrounding areas with more affordable prices or more attractive offers? Is the fact that the price is only offered as an annual fee an issue for prospective younger members?

Here is a group trying to introduce contemporary music into their repertoire – possibly due to the high cost of the music itself they’ve sensibly attached it to an existing concert and thereby reduced the additional cost.

But by making it a free concert – what are they really doing? From the outside this concert will automatically seem less valuable than the evening event. It might do a good job of pulling in new audience members but it’s also given their players an additional reason not to push it and to imagine it will fill up by itself. In this situation – would they be better to tie the two events together and offer a special price for attending both? Or if the concert being free really is the aim, and working as a way to bring in new audience members, how can they maximise the chance that those audience members will come back?

Final thoughts: Price, watch, listen, learn and price again

When you’re next thinking about pricing for your group, go back to your aims and objectives (either as an organisation or for the specific situation you are considering). List your aims in order of priority and work out what that means for your pricing. This isn’t something you can do once and leave the same forever – your priorities and capacity will change over time – so should your prices and pricing strategy.

Your prices and how you communicate them can have a big impact in the long term but there is no one size fits all answer. So:

• Be clear about your aims and situation when you set your prices
• Be prepared to review them regularly
• Communicate them well - your aims, and your prices in that context
• Look out for what works and what doesn’t work
• Learn from what has gone before and adapt

This is part of our series on improving your income.

We hope you find this Making Music resource useful. If you have any comments or suggestions about the guidance please contact us. Whilst every effort is made to ensure that the content of this guidance is accurate and up to date, Making Music do not warrant, nor accept any liability or responsibility for the completeness or accuracy of the content, or for any loss which may arise from reliance on the information contained in it.