How do you maximize the amount customers spend in your establishment without turning them away? This question has perplexed amusement and theme park operators, cruise line owners, and even movie theater chains.
In attempting to answer the question, operators across numerous entertainment industries have delicately juggled the prices of admissions, rooms, concessions, souvenirs and numerous other extras. Each time, they are left to wonder and worry if they have hit the tipping point.
How much are consumers willing to pay for their end-to-end experience without being turned off by the prices – perhaps never to return?
The goal for operators is to maximize the per capita spend, but not at the expense of losing returning customers, commonly known as the tipping point or Per Capita Cap.
Determining the Per Capita Cap can drive down the general angst of operators and drive up another crucial number, the Total Customer Lifetime Value. The Per Capita Cap can be determined through:
- Customer Segmentation – by segmenting customers, operators can determine which types of customers are most likely to purchase extras regardless of pricing, and which extras they are most likely to buy. They also can predict which customers will only purchase certain combinations, or avoid extras altogether. For example, a segmentation analysis by day of week could reveal that international visitors spike during the week – and those customers were willing to spend more and buy specific combinations than the local visitors who came primarily on weekends. New day of the week pricing can be put in place to reflect that attendance trend and willingness to pay.
- Predictive Analytics – leveraging predictive analytics companies can determine the price sensitivity of their customers on the total spend as well as on individual extras.
- Creative Go-To-Market Strategies – segmentation often shows a relationship between time of purchase and propensity to spend on ancillary items so pulling forward purchases can drive total willingness to pay. Similarly, frequency is not always correlated with declining spend patterns and can often be the opposite for target segments. Incenting frequency or even increasing the value of the experience (ex. free upgrades) can help grow frequency of patronage and total spend per experience.
Determining the Per Capita Cap can help cruise lines examine the relationship between the pricing of cabins, excursions, alcohol and souvenirs. Amusement parks can look at pricing of admissions, cotton candy, food and photos taken as you scream on that scary rollercoaster ride. Movie theaters can use it to determine the best pricing for tickets, popcorn and soda.
The key is to get every department within the organization on the same page. That is, rather than let individual departments create their own data universe, tools and set independent strategies, everyone works in tandem to determine how much customers will pay – their Total Customer Lifetime Value – and then set strategies prices accordingly.