Rafi Mohammed has a good blog post at HBR about the Rolling Stones and their concert tour pricing strategy. The Stones chose to price their tickets for this tour very high, and numerous reports indicate that they are discovering soft demand for those expensive seats. What should they do now? Should they simply cut their prices? As Mohammed notes, brands often worry about simply slashing prices in the face of weaker-than-anticipated demand. They don't want to tarnish their brand in any way, or anger customers who previously paid full price. How can the Rolling Stones proceed? Mohammed offers numerous ideas, some stronger than others. I found one particular tactic interesting and thought that I would share it. Mohammed explains that companies can choose to add value to their product or service, while maintaining price, as opposed to offering a steep discount. Here's his explanation:
"The most common remedy to this malady is to
maintain price but add value, so customers feel they're getting more for
their money. Guitarist Keith Richards could casually drop in an
interview that this may very well likely be the band's last tour (the
"hedge" in the wording is intentional). Or, as the band did at its opening gig in L.A.,
they could bring in special guests such as Gwen Stefani and Keith
Urban. These additions make the experience more memorable, so customers
value it more."
I don't agree with the point about promoting it as the last tour... music fans have heard that one all too often, only to discover that bands keep coming back. However, the concept of adding value makes good sense, and the example of Stefani and Urban is a good one. The Red Sox have done something quite similar this year, as demand has dropped for tickets at Fenway. Rather than simply slash prices, they have added breaks on concessions to some tickets. The concept applies to products as well. You could add a small complementary product as a free gift to entice people to buy a particular good (think accessories along with an electronics item or a piece of apparel).