Discounting in cinemas. Good business?
Discounting as a win-win for both the customer and for the cinema
The brief
Like theatres, cinemas need to sell seats to contribute to operating cost, so empty seats are a wasted revenue opportunity. Unlike theatres, cinemas change the product they’re showing regularly. So appealing to the regular cinemagoer is a major opportunity.
So what’s the best approach to selling seats?
Cinemas have become used to running regular promotions to sell seats, from ticket bundles to reduced pricing for different segments. There’s usually discounting to sell tickets, or the cost of offers, or a cost of sale such as a third party commission. So cinemas are interested in activity which can secure ticket sales regularly, at a reasonable margin; and ideally bring people back for more.
Strategy
Studies in psychology have established that we naturally expect to use more of a product than we actually do. This applies in travel, in buying groceries, in using mobile phones, in our pay-TV consumption; and in how often we go to the cinema.
In response to this, studies and tests have established that customers prefer to pay a flat rate rather than to risk not feeling in control of what they’re spending. Psychologists label this behaviour ‘flat rate bias’. So an offer which encourages cinema-goers to buy more, but pay less, will play to this principle.
Actions
For cinemas loyalty programmes have been experiments which have only partly delivered. With some use of discounting, of points award and collection, the right model hasn’t been found.
Until one cinema chain tested a Cinema loyalty card offering your first cinema visit this month at full price, entitling you to a second visit this month at a 20% discount; and a 3rd, providing you visited again within the month, at a 25% discount.
The big difference
The results were surprising. Firstly sales of tickets to customers joining the programme grew by +22%, on a before and after basis. Secondly, for a chain which was already giving up margin through regular offers and discounts, the average ticket price for customers in the programme went up by +11%. Thirdly, and most surprisingly, margin also grew, returning growth in profit from tickets sold through the programme by +37%, again on a before vs after basis.
Why? We naturally expect to use more of a product than we actually do. Cinema going loyalty club members felt that they had a great deal. In reality a small proportion of the total membership actually chose to take up the full benefit in discounted ticket prices.
Happy customers. Happy numbers. Happy cinemas.
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