Pricing is generally dependent on supply and demand. When there's less or less of an item, experience, or service required to meet demand, prices tend to rise.
Almost every business capitalizes on this fact. Walt Disney (DIS) - Get The Walt Disney Company Report, for example, charges more for theme-park admission during busy periods of the year, like school vacations and the holiday season.
Royal Caribbean International (RCL) - Get the Royal Caribbean Group Report, Carnival Cruise Lines (CCL) - Get the Carnival Corporation Report, Norwegian Cruise Line (NCLH) - Get the Norwegian Cruise Line Report, and Disney's own cruise line does the same thing in real time.
Disney has a set price range for tickets that it applies depending on the time of the year. That's the company's intention to provide better customer experience because it may get more if it uses the No-limit, uncapped system that Live Nation's (LYV) - Get Live Nation Entertainment Inc. Report Ticketmaster used for some of the tickets for Bruce Springsteen's upcoming tour.
Ticketmaster, which has a solid reputation for being unfriendly to customers, has actually done something that most Americans do when given the chance.
Getty Images: David Roark/Disney Parks
Dynamic Pricing Matches Supply to Demand
It's easy to enrage Ticketmaster, a company famous for charging outrageous fees for every ticket you purchase. It's equally acceptable to enrage Springsteen, who isn't exactly living up to his working-class hero credo by getting as much for every ticket.
The truth is that Springsteen has established himself as a major player who is nearing the end of his touring days. Any E-Street Band tour may be the last one. So neither Ticketmaster nor The Boss should think about pricing in a way that encourages return visits, like Disney and the cruise lines do.
TheStreet Recommends Some TheStreet's Recommendations
Carnival Moves Forward with a New Bahamas 'Port Destination'
Stocks are mixed as Q2 earnings continue to rise today 8/1.
4 Reasons to Reconsider I Do Weddings and Taxes
When a young band with decades of touring ahead of it prices tickets, the next tour must be factored in. For legacy acts, a limited ticket supply becomes more valuable simply because there may be no next time.
Dynamic Pricing Creates a Real Value
When you sell your property, you sell it to the highest bidder. You may consider whether or not the seller will be able to close the transaction as quickly as they want, but when you sell your asset, you want to get the most for it.
Dynamic pricing may sound a bit deceiving, but it is actually how practically anyone or any organization prices anything that is only available in limited quantities.
It's also something that can work in your favor. A hotel or a cruise line prices (broadly) depending on demand. You may need to travel in a certain window, but if prices are low due to lack of demand, you're at ease.
Because they don't want to look like Ticketmaster, they don't want to slap every cent from fans. They also want people to come back, which means that pricing fluctuations aren't entirely predictable.
Dynamic pricing drives revenue. That's what a business should be doing, while also considering long-term goals and customer experiences.
When there's a real scarcity (as with Springsteen tickets in some markets), selling to the highest bidder is appropriate for the company and, perhaps, fair to the consumer.
Nobody wants you to sell your house, old collectibles, or anything else at a "fair" price, so why should businesses? Supply and demand, balanced with the need for long-term customer relationships, set prices. That means that some people will be priced out.
Not everyone can afford Springsteen tickets, a cruise, or a Disney visit. That may not be pleasant to hear, but it's a fact of life.