Premium

In response to: http://davewakeman.com/2018/07/the-problem-with-premium-seating-pricing-etc/

Most of the time, my response to someone trying to up-sell me the "premium" version is:




Everyone wants to be a premium brand, because they've heard that brands are valuable, and they don't really understand how that works so it looks like it's a way of getting free money, and they try to position themselves as "premium" and are baffled when no one cares. Almost all the time, "ordinary powder" is good enough.

Maybe I'm unusual, but what I put a premium on is my time and my convenience - not your advertising spend and your brand positioning. Dave mentions the infamous $16 beer and so here's a little experiment I'd like to propose:

Instead of having a bar that charges $12 for Bud (seriously what the actual fuck?) and $16 for a premium Blue Point Toasted Lager, have a bar that is very clearly split into two, with servers working either one half or the other. On one half of the bar, you sell all your beer for $12, and you have a big signpost to that effect. On the other half, you sell the SAME EXACT BEER for $16, and you have a big sign up saying that, too. (If you're talking about $12 or $16 per can the costs of the actual beer is obviously such a tiny proportion of the amount the buyer pays it's frankly irrelevant whether the beers have slightly different cost prices).

Obviously, people will buy beer from the $12 half. The staff working the $16 half will have very little to do. But at some point, the $12 half is going to get really crowded. There's going to be a long queue. And then someone's going to say "It's worth $4 to me to get my beer NOW and not have to wait for 20 minutes. I want to get back to my seat!". And some people are going to self select to the expensive half, because they're happy to pay the premium to not have to wait.

Now, I like beer, and these numbers seem mental to me. There's no way that any can of beer ever would be worth $16 to me, and I'd rather drink a bottle of piss than a Budweiser. But paying an amount that is massively over the odds to get the beer that isn't horrible would stick in my throat. I wouldn't enjoy it, and I would have a lot of negative feelings towards the people who organised the event. If you give me a choice between $12 piss or $16 drinkable beer, then I will resent you. Whereas if my choice is $12 beer with a queue, or $16 beer without a queue, then I'll think about it. Some times I'll queue, and sometimes I'll value my time more, and if I choose to pay $16 then that's my business and I don't hate you for it any more.



So, tickets. What's this got to do with tickets?

We're all familiar with seating plans with multiple price bands, and in no way am I suggesting that that is a bad idea.

The mistake is to think that "having better sight lines" is the premium for which people are paying. I would suggest that the real value of the premium seat is that they're still available when all the other seats are sold out. There's less competition for them. They're likely to be less crowded. And most importantly - and this is purest snobbery and I'm not saying I agree with it, I just don't think it serves anyone to ignore it - the biggest premium is not having to sit next to a poor person. If you're in the most expensive seats in the house, the chances of having a teenager eating popcorn and physically incapable of turning off their phone as your next door neighbour are much lower.

Those premium benefits - real benefits that people are happy to pay for - are not because the seats are better. They're because the seats are more expensive. They're not in spite of the differential pricing: they are because of the differential pricing. If you have any customers you think are rich enough to value these benefits, you should probably take some of your existing seats and call them "premium". If they don't sell, put them back to normal, and if they do, it's free money.

Creating a culture of innovation

Incentives matter.

I'm not sure how this isn't obvious to everyone already, but one bumps into enough organisations that have got their incentives wrong that I guess it can't be.

Here's a random link that I just googled: Lesson 3: Incentives matter which is presumably from Econ101 somewhere. For now let's just note: "Incentives can be monetary or non-monetary". This applies to staff and to customers equally.

Suppose you want your customers to book tickets online, because it's cheaper for you that way. Don't, whatever you do, apply a booking fee that makes online purchases more expensive than telephone ones. Even if it's also more convenient for your customers, even if they would be prepared to pay for that convenience, don't send them the message "If you want to save money please do the thing that annoys me". Don't make them jump through hoops in some horrible checkout process that's more effort than speaking to a person. Don't make them answer onerous marketing questions online that they can avoid by picking up the phone.

Suppose you want customers to book in advance, so that you get your money earlier and they don't decide they can't be bothered at the last minute. Don't, whatever you do, apply any kind of booking fee or discount structure that means that the cheapest way to buy tickets is on the door, on the night. Don't make booking in advance - the thing you want them to do - more difficult or more irritating or more expensive.

Don't set up multi-buy offers that mean that if the customer splits their purchase into two separate transactions they save money. I keep having to stop people from doing this! I think it points to the problem: it's easy to think "I want to set up a offer to encourage people to book" and it's easy to think "Hang on, I don't want to give too much away, let's just limit it to at most 4 tickets (implicitly: per order)", and somehow it's hard to notice that someone booking 8 tickets is incentivised to book them in two lots of 4, which makes it cheaper for them (discounts on all the tickets) and more expensive for you (some of your transaction processing costs are per transaction, not per ticket). People just don't look for or think about unintended consequences of otherwise sensible seeming ideas. Perhaps I notice them because I've trained my brain to look for them over 20 years of writing code: most bugs that aren't simple mistakes are unintended consequences.

In short: don't punish people for doing what you want them to do, or reward them for doing what you don't want them to do. Debug your incentives.

So.

Suppose you want your staff to come up with new ideas. Ideas that you yourself in your fancy c-suite or your plush managers office can't have, because you're too removed from the daily grind to know where the inefficiencies are.

Then you need to get the incentives right, and in this case it's mostly about the non-monetary incentives. Actually, it's mostly about the non-monetary disincentives for someone to speak up with a new idea. If saying "hey, what if we do things differently?" gets someone punished by a manager yelling at them and calling them stupid, they're not going to do it, are they? If saying "hey, if we did this, we'd waste less paper" gets a response "true, but we can't because that's the procedure and i'm not authorised to think and head office wouldn't like it", then people will eventually give up having ideas.

You can't create innovation. All you need to do is stop suppressing it.

• Don't make them have to fight to get you to listen.
• If it isn't actually a good idea, don't punish them for having it, and don't punish them for suggesting it - by mocking or shouting or any other negative communication. Just gently explain why you think it's not a good idea.
• Don't start by assuming that it won't work. Chesterton's fence is a useful heuristic, but sometimes the reason for the absence of a fence that would have been useful really is simply that no one had thought of it yet.
• Whilst explaining why it won't work, see if instead of saying "that won't work because of X and Y and Z and all my years of experience", you can say "in order to make that work we'd have to solve these problems - X and Y and Z", and then you can talk about whether those problems are worth solving and if so how you would approach them.
• If it really is a good idea, don't punish them for suggesting it by stealing it and claiming it as your own. 
• Try it out. If it works, give them the credit. If it doesn't work, you take the blame. If that doesn't seem fair to you, then you are the wrong person to have a job that includes "creating a culture of innovation" as part of its description.
• Don't hire insecure managers whose lack of confidence in their own abilities leads them to attempt to defend their own positions by suppressing the creativity of their subordinates.
• Don't make it a zero sum game. If something nice happens to someone because they've had a good idea, don't take that out of any communal pot.
• Don't insist on consistency and procedures in any areas where they are not important. If everyone is allowed to do things their own way, then someone's going to find the best way of doing it. Then they can share that. You can't share best practice if you can't find it because all practice is required to be identical.
• If your lack of consistency and procedures occasionally causes problems, forgive them. You can either have a perfect process run by automata that never creates any innovation, or you can have process run by flawed people doing their best, and sometimes they'll drop the ball, and sometimes they'll spot something that a pre-defined process would never have done that saves the day.

Here's John Ruskin putting it a different way in Chapter 6 (The Nature of Gothic) of "The Stones of Venice":

"And observe, you are put to stern choice in this matter. You must either made a tool of the creature, or a man of him. You cannot make both. Men were not intended to work with the accuracy of tools, to be precise and perfect in all their actions. If you will have that precision out of them, and make their fingers measure degrees like cog-wheels, and their arms strike curves like compasses, you must unhumanize them. All the energy of their spirits must be given to make cogs and compasses of themselves. All their attention and strength must go to the accomplishment of the mean act. The eye of the soul must be bent upon the finger-point, and the soul’s force must fill all the invisible nerves that guide it, ten hours a day, that it may not err from its steely precision, and so soul and sight be worn away, and the whole human being be lost at last—a heap of sawdust, so far as its intellectual work in this world is concerned; saved only by its Heart, which cannot go into the form of cogs and compasses, but expands, after the ten hours are over, into fireside humanity. On the other hand, if you will make a man of the working creature, you cannot make a tool. Let him but begin to imagine, to think, to try to do anything worth doing; and the engine-turned precision is lost at once. Out come all his roughness, all his dullness, all his incapability; shame upon shame, failure upon failure, pause after pause: but out comes the whole majesty of him also; and we know the height of it only, when we see the clouds settling upon him. And, whether the clouds be bright or dark, there will be transfiguration behind and within them."