How Do Movie Theatres Use Pricing To Drive Traffic?

How Do Movie Theatres Use Pricing To Drive Traffic?

You may have gone to a movie theatre on a weekday afternoon and found very few people there.  You might even ask yourself why they bother to be open.  The answer is simple economics.  Movie theatres have a lot of fixed cost-Rent, utilities, etc.  The cost of being open is small as they only have to pay a few people to let you in, sell you snacks and play the movies.  They also have to pay a fee back to the studio/distributor per guest.  What it comes down to is they will be open if the additional revenue from tickets and snacks is greater than paying a few people for a few hours.  So while they are losing money on a fully allocated basis, they are getting some money beyond their immediate cost to help pay for the overhead.

So how does pricing play a role in all of this?  The potential audience is small for weekday afternoons because so many people are working or in school.  To attract an audience, they often will provide a significant discount.  You probably got a discounted ticket.  Again it they got more revenue than the cost for that show time, it makes sense to do it.  The movie theatre used price to drive traffic at certain times of day.  They also will do this sometimes for the last show on a weekend when demand is also low.

For more information on using pricing to drive customer behavior, click on this link.

Bryan B Mason

Apollo Consulting Group, Providence, RI

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