Is Entertainment Ticketing Being Left Behind?

The arts and entertainment industry needs to create new marketing products for the internet age.

In today’s ever changing world of marketing, one particular trend is emerging that is causing endless controversy for the retail giants of yesterday. Older retail business models are being rapidly superseded by the advantages of the internet, to the point that new successful low-overhead businesses are emerging everyday and slowly eating away at the huge retail markets once dominated by a few happy retailing behemoths.

This trend has actually been happening for quite some time, but only now are the traditional retailers realising the impact to their market share and margins, and for the most part, their reactions are either unsuccessful, or too late to turn the tide.

But what of the entertainment and ticketing sector? The giants like Ticketek and Ticketmaster have utilised online technology for well over a decade and are being joined rapidly by ticket resellers, event managers and event venues themselves, but are they really utilising the change in online behaviour as well as they could?

To answer that we need to look back at the very basics of marketing and how it has evolved. In the old days marketing was simple. You created a product that was profitable to sell; you worked out the best market segments to sell it to and then engaged in a hard sell process. It was a case of build a product, convince people they needed it, and then sell it en masse using broadcast media to gain scale before walking away from the customer once they’d parted with their money.

The internet changed the flow of information when it emerged and effectively fractured the enormous market segments that broadcast media could reach into smaller segments that could now find and access products that actually suited their needs. Marketers could no longer rely on creating false demand, but rather would have to build products that actually met the needs of people.

We’ve come a long way since those days. Successful internet businesses now find the right products for their customers and then support the entire customer journey from the moment they begin to research a product purchase right through to the end of the customers actual use of the product. The product lifecycle has now become an experience lifecycle, with every aspect of the customer interaction and product use considered.

To put this in perspective, consider an online travel agent such as Wotif or Expedia. Fundamentally, they sell the same products as bricks and mortar travel agents, so why are they so successful? The answer is simple – they support the entire journey from start to finish in a way that is as easy as possible for their customers. Want to research a destination? Go and check out that brands travel blog. Want help with insurance? No problem, there are guides and FAQs and even the ability to package that into your booking. Need help overseas to change a booking? No problem, there are live chat agents waiting to help you every step of the way.

They’ve also created new tools to help people make the right product choices. Travel ‘meta sites’ allow comparisons of pricing by different product sellers so consumers can hunt for the best prices. Travel research and review sites give consumers trusted truths from other customers on their potential purchases. They have helped remove the risk from purchases so consumers are happy to part with their money online without ever seeing the product they’re buying.

Apart from the experience itself, online businesses have also finessed the business models to minimise risk and guarantee profitability. The game is all about profitable distribution – find the right people as cheaply as possible, get them to buy the product, and then get them to share that product with their own networks of people that are also likely to want and pay for your product. In online circles they call it ‘Growth Hacking’ – using gamification principles and basic sociological human drivers to get people to do your marketing for you.

There’s also much more thought that goes into yield management. If 50 people are sitting in economy on a Qantas flight, how many of those are sitting next to someone who paid the same price as them? Very few in fact, because airlines and hotels and many businesses utilising online models have yield managed their product so well as to maximise every available piece of inventory.

There are incredible similarities between entertainment, travel, restaurant dining and even fruit and vegetable stores. Why is that? Because they all have a product with a use-by date. Once that date has passed, any products that haven’t been sold are suddenly worthless. This is not your basic retail model where your product can sit unsold on a shelf until it finally sells. Once the use-by date has passed; that’s it.

Let’s look at a concept called price discrimination, where you sell the same product at different prices to different market segments. In a Fruit and Veg store, the owner can sell ‘discount lettuces’ at the front of the store at a cheap price but ‘premium lettuces’ at a higher rate inside the store. Even though the lettuces are the same, each will be bought by the segment that likes to be seen buying either discount or premium lettuces.

In entertainment, price discrimination is utilised by leveraging the government to decide who gets cheaper prices. That happens because concession card holders get the same product at a cheaper rate – a clear case of price discrimination. The only problem is that this doesn’t actually do much to manage the yield and overall profit generated from the product itself.

And then of course there is the issue of scalping. When discussing it with entertainment industry people the usual topics come up – how can you lock out the scalpers and what technology can be used to control ticket reselling. The problem is seen as one created by the evil group of scalpers out there who take advantage of the internet to make very tidy profits for themselves.

And yet no-one seems to want to discuss the real problem here, which is, why aren’t the product creators realising those tidy profits themselves? Why is the pricing model set at a point that instantly creates a black market? The answer is simple – the product has not been yield managed effectively to maximise its return.

This is a case of simple economics. If you have a product where supply is far less than demand, then you can raise prices until the demand/supply equation levels off. You effectively charge as much as you can until the product sells out. If tickets to my favourite pop star sell at $300 and then 5 minutes later are selling on Ebay for $1200, guess what? They should have been $1,200 in the first place.

The online space has lowered technology barriers for new entrants to any industry, so incumbents need to beware of the changing landscape and adapt before it’s too late. There are incredible opportunities to get close to customers, to be involved in all aspects of their decision making and to ensure that you make the right profit margins for your endeavours. It’s time the entertainment industry took advantage of those opportunities.