EPP is proud to announce The Pricing Thesis Award 2011 - 2012

European Best Pricing Master Thesis Award

-     Weak pricing cuts profits by 25 percent, global study reveals that not everyone gets what they deserve  -

                                          November 2011

The European Pricing Platform (EPP) reaches in the academic year 2011-2012 a new ‘European Best Pricing Master Thesis Award’ out to the writer of the best thesis that addresses pricing as the main theme. An experienced jury of pricing experts decides eventually who the winner will be and shall be announced on an ePP event in Autumn 2012.

In Europe experienced pricing professionals are still scarce. Only few organisations have pricing managers today. A global pricing survey with more than 3.900 respondents by global strategy and marketing consultancy Simon-Kucher & Partners  reveals that 65 percent of companies are not able to charge the prices they deserve for the value their products and services deliver. Rather than focusing on profit, 46 percent of the companies fight price wars to gain volume and market share. And when companies finally bring themselves to raises prices, they only get half of what planned. As the need for more talent will seriously increase, students who focus on the pricing subject might be one step ahead of others at the moment they enter the career market. 

The importance of pricing knowledge development at student level - and herewith stimulate a new generation of professionals starting their careers with fundamental and applied knowledge in the pricing area - is the driver behind the European Best Pricing Master Thesis Award.

The winning student will receive an astonishing cash reward, an ePP Pricing Training of choice, and a bundle of pricing books. Any student graduated from a European University or Business School at Master level may enter the competition.

The Pricing Thesis Award 2011 - 2012 is made possible by our sponsors. Interested to become a sponsor of this award or to join the jury, please contact joyce.verfaillie@pricingplatform.eu

Are you currently writing a pricing thesis or do you know somebody? Do not hesitate to contact me directly or complete the application form: http://www.pricingplatform.eu/site/public/thesis_award.asp

The European Pricing Platform (ePP) is the first - independent - European platform focused to support pricing decision makers in a wide variety of industries and sectors.

Sponsors:

Pricing pressures is one of the main concerns for EU companies!

In today’s global economy, organizations are facing unprecedented pricing pressures as they deal with volatility in the commodities markets, currency fluctuations and unyielding international competition. To help mitigate the challenges, a number of world-class companies are turning to pricing software recommended by organizations from McKinsey, to Gartner and KPMG. In fact, both McKinsey and Gartner indicate that raising prices by 1-2% reaps margin increases up to nine percent.

A recent survey by audit, tax and advisory services firm KPMG reflects these findings. In its annual survey of manufacturing executives from global companies, almost 80 percent of respondents indicate they are cautiously optimistic about prospects for growth in the next 12 to 24 months. Almost half of the survey participants believe that price volatility in raw materials and inputs remains the biggest challenge, followed by increased competition, pricing pressure and uncertain demand. EU companies in the survey noted that pricing and competition were at the forefront of their concerns.

To better manage volatility, KPMG respondents indicate they are reshaping their pricing models, with pricing identified as one of the key strategies.

“With recent strike action linked to demands for salary increases above inflation, increases in the price of electricity and other infrastructure, tolls and the slowdown in manufacturing output, this has put severe pressure on company’s margins,” said Gavin Maile, KPMG’s Africa Head of Diversified Industries. “Pricing is a powerful and proven strategy for improving top-line growth and profitability, yet few organizations know how to do pricing well.”

“As organizations navigate the challenges of raw materials and currency volatility, pricing remains at the forefront for many companies as they evaluate new opportunities to increase margins, market share and business agility,” said PROS Europe General Manager Wagner Williams. “The ePP’s Manufacturing PricingFuel Day will provide organizations with a fresh perspective on the power of prescriptive pricing with success stories that uncover its strategic value.”

The European Pricing Platform (ePP) will host its Manufacturing PricingFuel day on Oct. 27 at the Sheraton Munchen Airport Hotel. This event will illuminate how innovative manufacturers can integrate pricing and product strategies to achieve exceptional growth and profitability in this changing environment. An unparalleled group of speakers from some of Europe’s most prestigious organizations will participate: Merck, Novozymes, Schindler Deutschland GmbH, Armacell European Sales GmbH, Spenncon AS, PROS Pricing and Deloitte.

Practical information

Venue : SHERATON MÜNCHEN AIRPORT HOTEL

Date : 27 October 2011, 9.00h. - 17.30h.

Language : English, GermanFurther information or registration: Britt Dejager:  +32 (0) 51 320 372 

Rate : € 595,00 for full day attendance (inclusive 6-month free participation to the Pricing Platform), second person can register for € 495,00. Bulk rates for groups are also available.

britt.dejager@pricingplatform.eu
Website for information : http://www.pricingplatform.eu/site/public/pricingfuel_days_detail.asp?id=7

Pricing of the Apple iPhone 4S

Apple iPhone 4S pricing designed to widen its appeal

Apple concentrates on price rather than innovation to widen customer base; Samsung and HTC premium phones likely gain advantage, but lower prices put pressure on Nokia and RIM, say analysts

Apple’s strategy with the newly unveiled iPhone 4S is all about selling more phones. Rather than putting an innovative but more expensive device in the hands of a smaller audience, it has opted to target the mid-tier consumer and widen its customer base.

The move is being seen as Apple’s attempt to grow its market share in the face of the Android onslaught spearheaded by Samsung, HTC and others.

Apple’s is ranging the iPhone 3GS free on a two-year contract, while the iPhone 4 model will be cut to just the 8GG version, priced at $99. The iPhone 4S 16GB will cost $199, the 32GB $299 and the 64Gb will cost $399.

Francisco Jeronimo, research manager, European mobile devices at analyst IDC, said: ‘Despite the upgrades and the new iPhone 4S released, the announcement is all about price positioning. The new prices announced to the new iPhone 4S and previous iPhone versions allow Apple to compete in the price segments where Android is fiercely growing, the mid-range.

‘Apple will attract first-time smartphone users and users from mid-price Symbian devices looking for an upgrade, but will it attract current iPhone users to replace their current iPhones? Definitely not!

Jeronimo believes this will provide an opportunity for Samsung and HTC’s premium handsets to increase their market share as iPhone 4 users look for an alternative.

‘The Samsung Galaxy S II has been a major hit around the world and a serious competitor to the iPhone. HTC has also been increasing market share in the high-end segment,’ said Jeronimo. ‘Without a significant hardware differentiation there's no strong incentive for a massive replacement, as users can just upgrade their iPhone 4's with the new iOS 5.’

Jeronimo pointed out that Apple will be ‘better positioned to compete in the mid-range segments and increase its presence in the emerging markets, where price is still a major factor on the purchasing decision’.

He went on to say that Nokia and Research in Motion should be the most threatened phone makers. ‘If price was an inhibitor for consumers to move from their Symbian or BlackBerry based devices to the iPhone, now they have the change. Today Apple entered the mass market game, hopefully not leaving the innovation and coolness to their competitors.’

Editor: James Atkinson 

Source: http://www.mobiletoday.co.uk/News

Executive Forum on Pricing for B2B Companies by Vendavo

www.vendavo.com Hear directly from executives of European companies who have implemented Vendavo and are realizing value today. Share information and tips with peers at companies in various stages of advancing their pricing capabilities – from just starting a pricing initiative to pushing the envelope. Plus, see the latest from Vendavo on pricing best practices and cutting-edge product innovations. This highly interactive event will focus on: - Pricing best practices for B2B companies- Customer presentations and panel discussions- Playbooks to implement and execute on pricing strategies- Networking opportunities with peer companies and Vendavo customers - Interactive sessions with peers and pricing experts - Vendavo University Bootcamp. Who should attend? Sales, Marketing, Pricing, and Finance Executives who are involved in pricing functions including:- Analyzing pricing and profitability- Setting prices for products and services- Administering prices and guidance for sales team as well as channel partners- Managing deal profitability and approvalsLearn from pricing professionals and our experts about how you can leverage pricing best practices to drive profits globally. Vendavo University Pricing Bootcamp NEW! Vendavo University is pleased to offer a complimentary pricing bootcamp session as part of the Executive Forum on Pricing agenda. During this bootcamp session, you will learn:- Price waterfall basics- Relevant terminology- Examples of leveraging the price waterfall for analytical purposes Cost Complimentary (Invitation-Only)This event is by invitation only. Please contact britt.dejager@pricingplatform.eu if you are interested in attending this Executive Forum on Pricing.

For the full agenda, please contact Britt.dejager@pricingplatform.eu You can also reach Britt on his phone for further information: +32(0) 51.320.372 

The Complete Guide To Freemium Business Models

Editor’s note: This guest post was written by Uzi Shmilovici, CEO and founder of Future Simple, which creates online software for small businesses. The post is based on a study done with Professor Eric Budish, an economics professor at the University of Chicago Booth School of Business. It also includes ideas and comments from Peter Levine, a Venture Partner at Andreessen-Horowitz and a professor at Stanford GSB

The idea of offering your product or a version of it for free has been a source of much debate.

Pricing is always tricky. Unfortunately, many entrepreneurs don’t give it enough thought. They will often copy the pricing strategy of similar products, base their decisions on pompous statements made by “experts” or rely on broken rationale (we worked hard so we should charge $X).

Free is even trickier and with so many opinions about it, we thought it would be refreshing to take a critical approach and dive deep into why some companies are very successful at employing the model while other companies fail. We’ve looked into economics academic papers, behavioral psychology books and strategies that worked for companies to come up with the key concepts below.

The Law of Marginal Cost

Pricing plays a huge part in competing for customers. Here’s an economic law that holds almost as much truth as the law of gravity: in a perfectly competitive market, the long-term product price (aka “market clearing price”) will be the marginal cost of production.

Guess what? Because of declining hosting and bandwidth costs, for most Internet products the marginal cost today is practically … zero.

In other words, if the cost to serve a customer (support aside) is zero, the long-term price of the product in the market will be zero (because of competitive pressure).

An Experience Good

At the core of the “Free” models are the products or services being offered to the customer. Most Internet products or services fall into the definition of an Experience Good: a product that needs a period of use before the customer can determine the value they can derive from it.

A good example is Dropbox. Consider Drew Houston’s words: “The fact was that Dropbox was offering a product that people didn’t know they needed until they tried.”

There are plenty of academics who looked into the pricing of Experience Goods. In 1983, the Economist Carl Shapiro wrote a fascinating paper about this subject. His conclusion was that since customers tend to underestimate the value of a product, the optimal pricing for an experience good is a low introductory price which is then increased when the customer realizes the value of the product.

In some cases, a customer might overestimate the value of the product. In that case, the optimal pricing strategy is to charge as much in the beginning or to lock in customers with long-term contracts.

This is why customers are reluctant to buy when someone asks them to prepay for a service or product or sign a long-term contract.

Hence, the introductory price is a signaling mechanism. The conclusion?  A low entrance price signals that you are confident that your product will create value for the customer.

The Psychology of Free

Much has been written about the Psychology of Free. Two books that looked specifically into the subject are “Free” by Chris Anderson and “Predictably Irrational” by Dan Ariely. Putting it simply, Free is an emotional hot button that immediately reduces the mental barriers for the customer. Free makes people think that they have “nothing to lose” since many ignore time as an investment.

From this perspective, free is a huge accelerator of adoption. The flip side of this is that after using the product for free, it is very hard to get the customer to start paying for it. This phenomenon was broad enough to get its own name: “The penny gap”—the hardest part is to get your customer to pay you the first penny. This is why it is so critical to choose your premium features wisely.

Decision Factors

If all that is true, it seems like Free (or Freemium) is the answer. Well…. not so fast. The decision is definitely not easy. Here’s a basic framework to help you make a more informed decision. A word of caution though: for every complex problem there’s a simple solution … and it’s wrong. The framework is helpful as a thinking tool but there’s no magic formula.

Here’s a set of questions that you’ll need to ask yourself:

1. How big do I want my company to be? If you are looking to build a lifestyle business that’ll make you $8,000 a month and you have a good product, you can probably do without Freemium. If you want to build a dominant company that has a substantial market share, Freemium can help you accelerate adoption.
2. What is the value of the free users? Across all successful Freemium companies, there is a way of making money or saving money from the free users. Either by saving on marketing costs (Dropbox) or by making money from ads or data (Pandora, Evernote, Mint) or both. If you cannot turn your free users into savings in marketing costs or revenues from third parties—figure out how!
3. What is the cost to serve free users?  This is a critical aspect of the model. If you spend a lot of money and/or time servicing free users, you are going to lose a lot of money. The cost of servicing free users must be lower than the dollar value they provide.
4. How big is my market? “The easiest way to get 1 million people paying is to get 1 billion people using,” says Phil Libin, the CEO of Evernote. Free adds another conversion step on your way to revenues. You need a big market to have enough people who will be paying you at the end of the day.
5. Is there value to one customer from other customers using the product? This will determine how many new users the free users will refer. There are three levels of value:

1. Inherent value – You can use Skype only if the person you talk with also uses Skype. You can share a Dropbox folder only with other Dropbox users. In this case, Freemium can be a powerful strategy.
2. Added value – You wouldn’t want to be the only user of LinkedIn. You derive value from other people using it. In this case, Freemium can help you gain traction if you use an effective invitation mechanism.
3. No value – You don’t care if someone is using Evernote or not. The only reason for one person to tell another about the product or service is if they think it is awesome.

The Types of “Free”

One of the key factors in making Freemium work is the structure of the offering. What is it that you offer for free vs. charge? There are different types of free strategies. Let’s take a look at the popular ones:

1. True Freemium – Give a version of the product for free and charge a fee for the other versions. There are two ways to go about this:

1. Value based – The most successful type of Freemium strategy. The more a customer uses the product, the more value she derives, the higher the switching costs are, and at some point she’ll hit a usage limit and convert to a paying customer. Evernote and Dropbox are beautiful examples of this.
2. Characteristic based – For example offering the product for free for one user (so it is based on company size for instance). Let’s think about a B2B application. If I’m a freelancer, I will use the application forever and I will never have to upgrade. If I’m a 3-person company, I can’t add more users and try the application for real and hence might not get to the point where I see the value in using it.
3. Free Product for a Cross Subsidy  - Give one product for free and charge for complementary products.
4. Time Based Free Trial – Give a free trial for X days and start charging once the trial ends. The issue here is figuring out what X is. On one hand you want to create a sense of urgency, on the other hand you need the customer to see the value in the system.

Open Source as a Free model

Lately I’ve seen many entrepreneurs confuse Open Source with Free so I thought it would be helpful to make the distinction. An open source model can definitely accelerate the distribution of your product and is a viable free model. It has two main advantages. You might get developers to contribute to your product (see WordPress). By doing that you can accelerate the development of your product. The other advantage is that you give customers peace of mind as they have control over the source code. You can then make money from selling pro features or value added services. There’s a critical distinction here and that is that your code is out there and anyone can start a company to commercialize this code. Bear in mind that it is very hard (often impossible) to reverse a decision to open-source.
The Last Bit And The Secret To Success

There are many factors to consider when you are evaluating whether to use the Freemium model or not. However, there’s one last secret that I didn’t share with you. During the study, while looking at the successful Freemium companies, a pattern emerged. They all had phenomenal products. All of these decision factors are useless if the product or service you are offering is nothing short of amazing. If your product is not creating great value for its users, no tactic in the world will make Freemium work for you.S


Source: 

Techcrunch: http://techcrunch.com/

Image credit: Shutterstock/JelenaA

ePP is pleased to announce a new partnership with Pricing Solutions Europe AG

The European pricing Platform (ePP) is pleased to announce that they have added Pricing Solutions Europe AG (PS Europe), a global pricing strategy, pricing management, pricing research and pricing consultancy firm as a new Expert Partner. Our new partner will be an exhibitor, and sponsor of upcoming ePP events throughout Europe. Furthermore they will provide ePP participants with relevant pricing content through state-of-the-art pricing: articles, white papers, research papers, academic papers, surveys, etc.

By delivering content through these resources, PS Europe contributes to improve the pricing knowledge of our Pricing Platform Participants.

“Pricing is right now a hot topic in most CEO’s mind.

Current market dynamics about raw materials rising costs, disruptions on the competitive landscape, mostly driven by BRICS, and some recovering markets niche’s opportunities are evidencing that organizations who have a good level on the Pricing discipline are outperforming the Market.

By their ability to price better their products & services, and be more agile against competitive and market reactions, they are able to manage more efficiently the money spent on Discounts, Rebates and others “Sales Levers”, and translate on their P&L the Value perceived on their products & services, ” said ‘Fernando Ventureira , Managing Director, Pricing Solutions Europe AG. “Partnering with ePP puts us in a position to divulgate better and more extensively the Pricing Discipline, at this time quite exclusive of professionals working on large and multinational organizations.”

Pricing Solutions Europe AG is an expert Consultancy in Pricing, with more than 20 years of experience and quite well known for the high standard deliveries on services related to People & Organizations (i.e. Training & Coaching), Pricing Management (i.e. Pricing Diagnostic & Roadmap for Excellence), Pricing Research & Analytics (i.e.: Value Map and Price Optimizer) and Systems & Tools (RFP Management & Business Intelligence).

“Pricing Solutions Europe AG has been carefully selected to join our group of pricing experts worldwide because of their proven track record, experience, and pricing science methodologies,” said Pol Vanaerde, ePP president. “We are pleased to have Pricing Solutions Europe AG included on our expert list, and look forward to working closely with them to better serve our participants.”

ePP serves as the first ‘Not-for-profit’ network for cross-industrial pricing decision makers in Europe. Through various on- and offline media, ePP is dedicated to develop and share pricing best practices, effective tools, methodologies and populate technological solutions assisting in successful definition and implementation of Strategic Pricing.

About Pricing Solutions Europe AG

Our mission is “To significantly improve our Clients Profitability by helping them achieve a World Class Level of Pricing Competency”

About European Pricing Platform

The ePP offers your company to have the right pricing tactics in place to guarantee customer loyalty and deliver sustained margin growth to your business. Enhance your pricing know-how and be successful in it by joining this dynamic and yet resourceful pricing platform.

The European Pricing Platform is pleased to announce that they have added Navetti AB as a new Expert Partner

The European pricing Platform (ePP) is pleased to announce that they have added Navetti AB, a global expert on pricing know-how and pricing software solutions, as a new Expert Partner. Our new partner will be an exhibitor, and sponsor of upcoming ePP events throughout Europe.

Navetti will offer ePP participants with experience from true customer cases where participants will recognize its own situation and understand the value of implementing a global pricing strategy. Navetti has a strong track record of successful implementations of value based and market driven pricing strategies, methods and processes all supported in the Navetti PricePoint™. The main objectives from previous implementation projects have been;

·        Improved price quality

·        Improved customer trust

·        Improved Profitability

·        Improved efficiency,

all supported in Navetti PricePoint™ to secure sustainability.

“International companies have recognized the importance of implementing a global pricing strategy to secure profit optimization and manage all aspects of the price waterfall in a global business.” said ‘Andreas Westling, Senior Partner, Navetti AB.

“Partnering with ePP puts us in a position to reach a wider audience and provide guidelines to international manufacturing companies on the journey to pricing excellence.”

Navetti is an industry-leading pricing software supplier toward the manufacturing industry. Navetti offers both management consultancy services and license its own developed software solution Navetti PricePoint™.

“Navetti has been carefully selected to join our group of pricing experts worldwide because of their proven track record, experience, and pricing knowledge,” said Pol Vanaerde, ePP president. “We are pleased to have Navetti included on our expert list, and look forward to working closely with them to better serve our participants.”

ePP serves as the first ‘Not-for-profit’ network for cross-industrial pricing decision makers in Europe. Through various on- and offline media, ePP is dedicated to develop and share pricing best practices, effective tools, methodologies and populate technological solutions assisting in successful definition and implementation of Strategic Pricing.

About Navetti

Navetti has received recognition for its domain expertise in the field of pricing for international manufacturing companies, where price optimisation between markets and product families are critical.  Navetti has over the years developed a solid value and- market driven based pricing methodology, that has delivered increased profit and pricing quality to its clients.  The methodology in combination with Navetti PricePoint™, has clearly increased profit, customer trust and sustainability.

About European Pricing Platform

The ePP offers your company to have the right pricing tactics in place to guarantee customer loyalty and deliver sustained margin growth to your business. Enhance your pricing know-how and be successful in it by joining this dynamic and yet resourceful pricing platform.

Source: Britt Dejager - European Pricing Platform & Andreas Westling - Navetti AB

When Advisors Add Value, Pricing Power Follows

As the expression goes, when you settle for less than what you’re worth, you get less than what you settled for. Yet there's reluctance among many financial advisors to raise their prices for the services they offer, particularly after the 2008 crash damaged so many portfolios. Asset-based fees dominate the industry’s revenue stream, accounting for 85 percent of the total, according to the consulting firm FA Insight. Yet median fees as a percentage of assets under management were virtually unchanged between 2009 and 2010, the firm said.

Eliza De Pardo, principal and director of consulting at FA Insight, said just 31 percent of firms review their pricing strategy annually. It’s too bad, since there’s data showing that firms that review their pricing each year tend to have higher profitability per client. She understands the reluctance some advisors have about telling clients they want to charge more. “If the markets are declining, it’s a tough conversation to have with clients, obviously,” she told advisors during a pricing workshop at a recent Pershing Advisor Solutions conference in Manhattan. “The real question is, how do you deliver value, and can you communicate that to the client? If you can communicate it effectively, I don’t think anything’s off the table.”

One of the first places to start when reviewing what you charge is the condition of your local market, and the size of the fees your competitors are levying. De Pardo warns against placing too much weight on the latter, however, since all practices are unique. Advisors need to decide what pricing method is best for their practice—fees based on percentage of assets; flat or variable fees based on the advice needs of the client; hourly fees; or a fee that varies with the value delivered. Many advisors use a combination—an asset-based fee coupled, for example, with a flat fee for producing a financial plan. (Such fees may vary with the level of complexity required to produce the plan.)

Minimum fees help maintain profits; 57 percent of firms use them, FA Insight found. The median minimums range from $2,000 for firms with annual revenue of $75,000 to $500,000, to $5,000 for firms with revenues from over $500,000 to $3 million; firms with revenues greater than $3 million had median minimum fees of $9,000, the consultant said. Value-based pricing strategies are employed by 70 percent of the largest and most successful firms. Under those strategies, an advisor documents the financial savings that a client accrues through, say, lower insurance premiums or a reduction in personal tax liabilities through the advisor’s recommendations. The advisor would keep a percentage of the savings—maybe 20 percent—and add it to the regular fee that’s charged.

When preparing to raise prices, sit down beforehand and outline each argument that an unhappy client is likely to raise, De Pardo said, and prepare your counterarguments that demonstrate the value you’re providing. In addition to clarifying the case for your added value, she said, the exercise will help you feel less nervous when sitting down with particularly difficult clients. And be sure to share your value story with the rest of your staff, so they’re on board.

Advisors who want to charge more for their services have to differentiate themselves from their competitors, she said. Some regularly distribute e-mail newsletters on economic topics of interest to their clients, or organize luncheons for clients at which experts might speak about a particular topic. Investors recognize the value these things provide, De Pardo said. “Very rarely will a client say, ‘You know what? Keep the educational stuff.’ ”

Registered . Rep. The Source for Financial Advisors:  By Jerry Gleeson

Disney pricing strategy: Seeking more profits out of long-term visitors

Six years after Walt Disney World radically redesigned its ticket prices to steer guests toward longer stays, the resort is now aiming to wring more money out of passes once priced as irresistibly cheap.

During the past 10 months, the giant resort has begun increasing the premium it charges for longer ticket options — its five-, six- and seven-day passes — relative to the resort's single-day and shorter-term tickets.

It is a shift from the strategy behind Disney World's "Magic Your Way," the revamped pricing structure that Disney introduced at the start of 2005. That pricing scheme was designed to persuade travelers to make repeat visits to Disney World's four theme parks during their vacations by making the added cost for extra visits negligible — particularly when compared with the price of a one-day ticket charged by competitors Universal Orlando and SeaWorld Orlando.

The effect is subtle but significant. For nearly six years, even as it consistently raised its base ticket prices, Disney kept the added charge for upgrading from a five-day ticket to a six-day ticket — the point at which a traveler may be debating whether to visit a Disney theme park for a second time or visit Universal's Islands of Adventure for the first time — to no more than $3.But last summer, Disney raised that premium to $5. And this month, the resort boosted it further, to $8. That works out to a 167 percent increase in less than a year.The charge to add a seventh day has also jumped from $3 to $8 during the same period.Starting with the first adjustment to Magic Your Way in 2006, the difference between a four-day and a five-day pass also remained relatively constant — at $3 or $4 — until last year.


But it, too, has now jumped to $8.The figures are based on an Orlando Sentinel analysis of historical price data compiled by AllEars.net, a consumer website for Disney vacationers.Disney declined to discuss its pricing strategy. But other experts called the company's changes shrewd.With Magic Your Way prices now well-established, Disney appears to have successfully conditioned customers to seek out longer passes. Four-, five- and seven-day tickets are Disney World's most popular passes, according to industry analysts and former theme-park officials. Concentrating price increases on those ticket options now gives Disney the most revenue bang for its buck.In addition, "you assume that folks who are down [in Orlando] over a longer time frame are both more price elastic and dedicated to Disney," said Michael Nathanson, a stock analyst who follows theWalt Disney Co. for Nomura Securities.Focusing on its longer passes also allows Disney to ease off on the price increases for its basic, single-day tickets, which are rapidly approaching $100 — potentially a psychologically significant threshold. Although single-day tickets account for only a small percentage of Disney's total ticket sales, they are a widely used barometer of the industry's pricing overall and can affect travelers' perception of theme parks' affordability.


Disney World has made seven rounds of price increases since beginning Magic Your Way. During each of the first five, single-day prices rose by an average of 5.7 percent. But during the past two, they have climbed an average of only 3.8 percent. One-day prices are now at $85 before tax.Experts say Disney likely has other motivations for the shift, as well. Company executives are under pressure to boost theme-park profit margins, which shriveled during the global recession as Disney used steep discounts to continue luring travelers to its resorts.Lifting prices for the later days of Magic Your Way passes is an obvious target."If ticket prices are almost giving [the] park away beyond the four- or five-day products, at some point the financial model may not work," said Joseph Couceiro, a former chief marketing officer for SeaWorld Parks & Entertainment.There is a limit to how much Disney can squeeze out of such increases without undermining the overarching goal of Magic Your Way. 


The ticket structure was designed, after all, to make it a no-brainer for guests to add extra days to their Disney passes rather than go somewhere else.Raising prices for those additional days could threaten that consumer calculus — just as Disney faces stiffening competition from other parks, particularly Universal with its year-old Wizarding World of Harry Potter."You have to walk gingerly to see how far you can reasonably push the envelope before you get consumer pushback," Couceiro said.For now, though, $8 for an extra day at Disney remains a tiny fraction of the one-day entry price to Universal or SeaWorld. And it's possible those other parks could face financial pressure of their own if Disney continues concentrating its price increases on its longer passes.Like Disney, both of the smaller parks have reshaped ticket prices in recent years to encourage multiple visits. Universal just last year launched a new price structure modeled after Magic Your Way, while SeaWorld has expanded multi-day ticket options with the opening of Aquatica, its 3-year-old water park.


But sales of single-day tickets remain a far more important revenue source for the smaller parks than for Disney. So if Disney makes only modest increases to its single-day ticket price — or even opts to hold it steady — it could put a disproportionate squeeze on Universal and SeaWorld, which typically match Disney's one-day price.Representatives for Universal and SeaWorld declined to comment on Disney's pricing strategy.

Publisher:  Orlando Sentinel

Ticketmaster Aims to Fill Theaters with Dynamic Pricing

Ticketmaster's CEO Nathan Hubbard knows he's got a major problem. Ticket sales were down by double digits, and 40 percent of seats went unsold last year.

Now, he has a solution, one he unveiled on CNBC's "Power Lunch" today. It's 'dynamic' ticket pricing, a technology developed with a company called MarketShare.

Instead of locking in a single price for tickets, the company is rolling out an approach similar to the airline industry's strategy to make every seat on the plane is full. The new variable pricing system will let artists and sports teams raise and lower ticket prices to reflect demand, while they're being sold.

If this strategy works, more of the seats that have been sitting empty will sell and promoters will be able to drop prices if they're not selling. If ticket prices more accurately represent their value to consumers, that could mean fewer tickets being sold at sky-high prices on the secondary market.

If tickets for a particular sporting event or concert are selling like hotcakes, the band or team can raise ticket prices—preventing them from selling for sky-high prices on Stubhub later.

And perhaps most importantly, it could mean consumers are more satisfied and less frustrated. And since Ticketmaster is a brand consumers love to hate, it could use the help!

Hubbard, a former musician himself, has been working on a number of key initiatives to make consumers happier and drive ticket sales. One tactic is to make ticket-buying social. Hubbard has integrated Ticketmaster into Facebook, so buyers can tell friends they've bought tickets to an event.

This helps spread the word—free marketing—and gets groups of friends to mobilize. Another strategy is interactive seat maps.

Now Ticketmasters gives consumers far more control over choosing seats in an auditorium.

And it's working. The conversion rates—number of people who actually buy seats after looking at them—has grown by over 25 percent.

Consumers will never want to pay fees for tickets, the question is whether Ticketmaster can be upfront about those fees, and make ticket pricing fair enough that it can keep music and sports fans from jumping ship to the competition.

And there's plenty of competition to go around: a range of companies are trying to take a bite out of Ticketmaster's business, from AEG, to Ticketfly, to a new startup Brown Paper Tickets. But Hubbard seems to get the threat these companies pose, and is trying to turn Ticketmaster into a kinder, gentler brand.

Source: 

By: Julia Boorstin

CNBC Correspondent