Houston Symphony Orchestra Problem
A simple exercise to identify incremental costs and revenues and use them for making business decisions. Suitable for an undergraduate, graduate, or executive setting.
Consider the following problem faced by the marketing manager of the Houston Symphony Orchestra1. The orchestra usually performs on two Saturday evenings every month during the season, with a new program for each performance. It incurs the following costs for each performance:
The orchestra's marketing manager has a huge profitability issue. She has currently priced her tickets at $15. If she could sell out her entire 1,200-seat orchestra hall, her total revenues would be $18,000, and total costs would be $16,200 (assuming no guest soloist). She would make a profit of $1,800. On a program with a guest soloist, she would either have to raise prices or lose money.
But it’s even worse than that. The average attendance over the past year has only been about 900 patrons per performance, leaving lots of empty seats. This level of attendance yields total revenues of $13,500 against costs of $15,675, resulting in a loss of $2,175 per regular performance.
To remedy this situation, she is considering four different marketing programs. Each one is designed to try and grow the customer base and increase revenues, with the overarching goal of turning things around and becoming profitable. The four marketing programs are as follows:
A student (almost) half-priced ticket, priced at $8 and sold to college students an hour before the performance on a first-come, first-served basis. The manager estimates she could sell 200 tickets to students who otherwise would not attend. Clearly, the price of these tickets would not cover even half the average cost of the ticket.
A Sunday matinee repeat of the Saturday evening performance, with tickets priced at $10 apiece. The manager expects she could sell 700 matinee tickets, but 150 of these would be to people who would otherwise have attended the higher-priced Saturday performance. Thus, net patronage would increase by 550.
A new series of concerts is to be performed on alternate Saturdays. The tickets would be priced at $10, and the manager expects that she would sell 800 tickets, but that 100 of these tickets would be sold to people who attend the new series instead of the old one. Thus, net patronage would increase by 700, and the price level remains at the previous level for the new concert (i.e., no discounting).
A VIP ticket for the existing Saturday performances, with several additional benefits: an invitation to a post-concert reception with the musicians, a commemorative program, and preferred seating. The VIP ticket would be priced at $25, and the manager expects she could sell 90 of these tickets per performance, with 80 of them going to people who would otherwise buy regular tickets and 10 to new one-percenter patrons. Each VIP ticket would incur additional costs of $8 per patron for the reception, commemorative materials, and staffing.
Which, if any, of these marketing program proposals should the marketing manager adopt to improve the orchestra's financial situation?
©Utpal Dholakia, 2025. This case was prepared by Utpal Dholakia to support the learning and application of pricing strategy concepts. It is not meant to serve as an endorsement, an advertisement, a source of primary data, or an illustration of effective or ineffective management. The case uses fictitious numbers that have been carefully designed to illustrate the value of incremental analysis. Readers of this blog are invited to use the case and the accompanying teaching note for their own and others’ education in academic settings. However, please reach out if you’d like to use this case in a commercial educational program.