Blockbuster releases, increasing consumer alternatives and seasonal demand patterns have inflicted havoc on the revenue streams of many movie theater operators. With downward pressure on revenue and profits expected to continue unabated, theater chains are desperately searching for innovative ways to grow revenue organically.
The answer can be found through a mix of advanced analytics, pricing science precision and rigorous performance metrics. For example, theater operators can measure the price sensitivity of tickets and concessions at an individual theater level. However, to do this accurately, they must account for the significant impact on demand by such factors as consumer trends, seasonality, day of week, time of day and movie popularity. They also must normalize the data to account for non-price drivers of demand.
Next, they can measure the effectiveness of existing promotions in order to gain quantifiable insights to discern which promotions to modify and which to maintain.
By leveraging predictive analytics, movie theater operators will be rewarded with recommendations on:
- Ticket prices, which can be calibrated by measuring customer response to price changes, aligned with theater quality classification values, and tailored to fit the competitive landscape.
- Concession prices, which can be normalized for non-price driven events, and calibrated by customer response.
- Promotions effectiveness, the impact of fresh promotions can be isolated and measured utilizing new metrics. Additionally, the concession promotions that positively impacted box office revenue can be measured, as can the cannibalization effect of promotions.
For one client, this kind of analysis revealed immediate opportunities related to ticket and concession pricing changes and the elimination of ineffective discounts. Together, the recommendations delivered the client a 2.5 percent revenue uplift. Over 50 percent of the revenue uplift dropped straight to the bottom line.