Math for Arts Administrators Part III: Heisenberg Uncertainty Principle and Why Boards and Staff Operate in Different but Parallel Universes
Two new plays referencing famous principles in physics are on stage simultaneously in Los Angeles. What can arts administrators learn from them?
Beyond reportedly excellent performances, design, and direction in CTG's Heisenberg and Geffen Playhouse's Constellations, I am nerding out; both plays brings physics to a broader audience. The timing of the "Math for Arts Administrators" series is fortuitous.
The play Heisenberg would seem to be named after the famous Heisenberg uncertainty principle which, in a distilled form that lets me understand it, says that one can't know both the precise location and momentum--let's just call that "speed" though my college physics professor would chastise me for calling them equivalent--of an electron orbiting an atom's nucleus. In other words, you can't know where something is and where (or at what speed) it is headed in any given moment. You must observe it over time and make some assumptions.
For a purely tactical exercise, let's pretend that this "electron" is a ticketed performance and let's further equate "location" with "how well it is selling" and speed with "the pace at which it is selling."
So we have two factors: a kind of "snapshot" of how well the performance has sold in terms of tickets, associated revenue, and percent capacity; and then we also have momentum--essentially the pace at which that particular performance is selling.
If one only uses the "snapshot" to make inventory-management decisions, you're only seeing half the picture. For example, box office managers may "eyeball" seating charts or reports to determine whether or not to discount and at what quantity. Or a marketing manager (or, increasingly, an artificial intelligence or rather unintelligent program in a ticketing system) may be in the happy position to see a performance at 80% or 90% capacity and decide to implement a price increase.
To be fair, if you're only going to look at one of the two kinds of reports, this snapshot is the better of the two... and there are some sophisticated inventory management solutions out there. But relying on this metric alone leads to sub-optimal outcomes. For example, that box office representative may see 50 open seats for next Saturday evening's performance and decide to discount them seven days before. If that decision-maker knew that performance sold an average of 10 tickets/day the prior week, there is no logical reason to discount it this week unless that company experiences the rather uncommon trend of a drop in sales pace leading up to a performance date.
And that smart marketing manager or rather unintelligent automatic price-increase program/software may increase the ticket price at some capacity benchmark, but that doesn't account for the tickets which sold below that threshold and might have yielded a higher return. [I am familiar with pricing programs which apply a dozen or so capacity/pricing thresholds to mitigate this harm.] If you're commanding a significantly higher price for a performance once it has reached 95%, your yield on the remaining 5% of inventory can be rather small--you may have priced the baseline tickets or even a prior price increase a bit too low.
So how does one combine both the "location" and "speed" of a performance? Some more sophisticated ticketing software will do that for you using inventory or revenue management reporting. My consulting experience (where multiple clients use many different types of ticketing software) typically distills down to what I call a "burn report" which compiles the quantity of sold seats, remaining tickets, daily sales pace (usually calculated from the prior 7-14 days) and then calculates a projected demand based on the remaining number of days.
If average pacing and remaining sales days indicates there is more demand for tickets than you have seats, consider a price increase (or ending discounts when you can... or adding more seats!) If the report indicates less demand than you have tickets, consider a discount. This opens up a variety of questions: how much/many and when to discount, through what channels, etc. That is far more case-by-case... but the principle remains. As one records these burn reports, one can then apply broader and standard season-by-season pricing changes like seeing if Friday nights really do sell as well as Saturday nights, etc. Again, there are programs and firms that specialize in these deeper dives but you can probably get 80% (see my prior Pareto's principle post) there by just taking this more DIY approach.
Please contact me if you're interested in a template of this "burn report." I would be pleased to share a redacted one and to spend a few minutes walking through it with whoever manages inventory at your organization.
Expecting a second part of the article? Hah! So was I. But as the second play, Constellations, deals with multiverse theory (basically that every action we do or don't take creates a separate universe for that action) I thought I would just write it next week... since in an alternate universe, I actually did write that second article this week.