Pricing case

Question

Been thinking of the following case question and I would appreciate feedback on my structure.

"What price should cinema in country X charge for movie tickets?"
My structure is as follows:

1- Costs (what are possible costs? I thought of labor, electric,...)

2- Customer's wilingness to pay

3- Benchmark with ticket prices in other countries

This is the structure I have in mind and I would appreciate it feedback on it. Is there other things I should consider? Also, what might be other possible costs associated with the cinema? Should we concider movie cost?

Answer 1

Hello!

Indeed the 3 ones that you have mentioned are the "classical" ones for pricing.

Careful with the prhasing, since many times it seems a bit either/or (e.g., we can either take a break-even strategy to ensure that we don´t price below break-even point, or we can benchmark to competitors)

However, those are only data points, like "boundary conditions" that help you find your perfect pricing

Hope it helps!

Cheers,

Clara

Answer 2

Hey,

Have a look at this thread for similar ideas: https://www.preplounge.com/en/consulting-forum/netflix-pricing-strategies-8868

Answer 3

Very basic structure, make sure that 3) includes competitive benchmarks from a similar sample of countries / cinemas.

There should be more details and more creative / outside-the-box thinking or ideas: i.e. even if you pick one of the 3 measures, that cannot be it, there should be subsequent segmentations to use for a more varied pricing approach. I.e. cinemas charge different prices based on row, daytime, popularity of movie (opening weekend vs. 2 months later), special events (e.g. showing all LoR movies in one night) or SneakPeeks etc. Different customer segments should also get priced differently (students / seniors vs families vs cineasts).

Answer 4

Hello,

I would approach any pricing question as narrowing down from certain starting points:

1- Highest price - Customer's willingness to Pay

2- Lowest price - Cost of producing the product

After having this range in mind, we need to further narrow it down. This can be done by:

3- Internal factors:

a. Price of other products in the company's portfolio - there should be an alignment between the company's existing and future intended pricing policy i.e. selling at value vs selling at high markups

b. How much money does the company want to make from this product

4- External factors

a. Competitor's prices

b. Industry price trends

All the best!

Rushabh

Answer 5

Hi there,

Now, in terms of pricing, remember that you have the option to do value-based, benchmarking, or cost-based (in that order of preference).

Question #1: Are there competitors (or is this a new market)?

Q1A: If yes, can I differentiate my product?

If yes, value-based

If no, competitor pricing/benchmarking is eliminated.

Q1B: If no, can I determine the value-add of my product (i.e. if saves x costs or a survey says people will pay x)?

If yes, value-based

If no, cost-based

Summary: If you can, you always want to do value-based. This is the most effective form of pricing. If you have "something" to go off of, you use it, else you use cost-based because you have no other choice.

Value-based occurs if:

1) You are a monopoly

2) You are the first entrant into a market

3) You can differentiate your product from other (I.e. monopolistic competition)

Answer 6

The structure is fine. A few more ideas to consider

To get willingness to pay you need to see what the value of the cinema to the customer is. You can get this by looking at substiture activities that are similar in the same country (think of subsitute entertainment activities for movie watching such as rides, gaming arcades etc.)

If benhcmarking with other countries - look at PPP or other relevant conversion metrics

Another thing to consder is the prices of anciliary items such as snacks etc to counter balance lower ticket prices.

Best.

Udayan