Darien Lake, Elitchs Gardens, Frontier City, and Enchanted Village food and drink pricing.
I rather sell a $4 drink and $7 slice of pizza to 30 people (30 sales per hundred, 3.30 per cap) than a $2 and $4 pizza to 50 people (50 sales per hundred, $3 per cap)
Actual profit becomes higher in the first scenario as well as my costs for soda and pizza were lower.
Of course there is the issue of pissing people off with pricing to the point where you may lose their return business and that's the balancing act that only those with access to the real world numbers can explain. It's pure speculation on the part of all of us armchair CEO's. The good folks at HW will claim free drinks, parking and such have paid off in big ways. Parks like SF point to increased per caps and claim the same success. They're both probably right as each situation requires a different approach.
I'd still rather sell less for more than the other way around. (as I've stated a million and one times) Seems easier to please 100 customers willing to pay $10 each than 1000 willing to pay $1 each. Plus, it reduces my overhead on all fronts to do so - making my profit margins higher.
As long as *enough* people pay $4 for drinks and $7 for a slice of pizza, there's no reason to change the prices. The second it becomes an issue of going too far, the parks will back off.
But it is some yummy and delicious speculation indeed....almost TOO good. Have to hope it's not a sin...LOL! ;)
I do LOVE crossing threads...
I guess where I'm not QUITE as convinced as I might be is that I don't believe parks always KNOW...even WITH those numbers we can't see, there's ALWAYS guess-work involved.
" The second it becomes an issue of going too far, the parks will back off."
But it MIGHT be a tad late to bring back those customers who were lost...
But it MIGHT be a tad late to bring back those customers who were lost...
I still think you overestimate the value, power and sheer number of those guests.
How many people visit the amusement park every day? Every month? Every year? Every other year? Every third? Every fifth? And so on.
How many are going to be so fed up that they'll never come back? Ever?
How many new customers are just around the corner?
How many want what you have so much that even if they're not exactly pleased, they'll still begrudgingly return?
But I do agree that these business don't really *know* which decision is right, but they have access to the numbers that make their guesses much more accurate than ours. And like I said, it's a question with multiple answers. All I know for sure, is that lowering prices may not always be the best answer.
Lord Gonchar said:
Of course there is the issue of pissing people off with pricing to the point where you may lose their return business and that's the balancing act that only those with access to the real world numbers can explain. It's pure speculation on the part of all of us armchair CEO's.
You aspire to get every single penny out of your customers filthy little hands - the trick is to make them not realize it, or not care.
The best way to do that is to charge more but offer a better product in a way that doesn't make your costs spike.
The problem when we talk about food prices is we generally use soda as an example, but it doesn't work very well.
Gonch, Gator, others, come along:
You charge $2 for a crappy slice of pizza, everybody buys, everybody's happy.
You charge $5 for a crappy slice of pizza, less people buy, but your profit margin is higher so you do the same or a bit better on the books.
You charge $6 for a slice of pizza that's been improved by $.50 cost (be it with better ingredients, better labor, ANYTHING to make it tastier).
Slightly fewer people buy than the $5 slice BUT you cash in an extra $.50 and there is....here's the key, better perceived value. This time set off with stars:
*better perceived value*
Now, let's go to soda!
You charge $2 for a Coke, lots of people buy, everybody's happy.
You charge $3 for a Coke, less people buy, not as many happy people.
We fixed the pizza, so let's get to fixing that Coke....but oh wait. There's no way to make soda better. A 20oz. soda from the Coke factory is going to taste the same no matter what, so there's no way to improve the perceived value.
It's the #1 reason why when we talk about what's too pricey at a park, soda is the #1 offender (along with parking, which kinda sort works the same way.) Soda will never get better, and the only thing raising the price will do is increase your profit margin while pissing people off.
The best solution is to drop the price or make it free, where practical. Jack up your admission prices to cover the loss and call it a day.
Summary: Charging an arm and a leg for a great product = awesome. Charging an arm and a leg for a crappy product = lame-o.
*** Edited 4/19/2007 7:55:42 PM UTC by matt.*** *** Edited 4/19/2007 7:57:10 PM UTC by matt.***
There's no way to make soda better. A 20oz. soda from the Coke factory is going to taste the same no matter what, so there's no way to improve the perceived value.It's the #1 reason why when we talk about what's too pricey at a park, soda is the #1 offender (along with parking, which kinda sort works the same way.) Soda will never get better, and the only thing raising the price will do is increase your profit margin while pissing people off.
You could offer more for the higher price. :)
Seriously, (and I don't know the answer to this) how to drinks sizes compare acorss parks and prices?
Like is Park A's $4 drink actually 32oz while Park B's $2 drink is just 16oz? (in which case, the price is technically the same)
Anyone geeky enough to know the drink sizes at the parks? :)
Lord Gonchar said:But I do agree that these business don't really *know* which decision is right, but they have access to the numbers that make their guesses much more accurate than ours.
That's the part that ticks me off, LOL. I don't just *want* those numbers...I really NEED them. Just for my own nefarious armchair CEO-ing. :)
All I know for sure, is that lowering prices may not always be the best answer.
Absolutely correct! In fact, raising prices by *about* 3-5%/year is, in fact, "average", and for VERY good reason. That's about normal for most things, most of the time. Sorry Grandpa, stuff costs more than it used to... ;)
And this takes us back to the Magic Springs "free drinks" thread, LOL. Honestly, is time linear or cyclical? :)
Lord Gonchar said:
You could offer more for the higher price. :)
I know you're half-way joking but I did think of that and it only works to a point. Eventually people can only drink so much soda in a given day. Also, there comes a point when carrying around more than 32oz of liquid becomes impractical.
What you *could* do is charge an ass-load and then offer refills. A lot of parks do this of course but it seems more a ploy to charge whatever and then hope people don't feel like carrying around their huge refill cups around. Not to mention, again, you have to refill like 3 times in a day to make your money back which is kind of a pain. It's a more complicated solution than need be, I think, maybe it works better than I think but it doesn't seem that popular anywhere.
Lord Gonchar said: I rather sell a $4 drink and $7 slice of pizza to 30 people (30 sales per hundred, 3.30 per cap) than a $2 and $4 pizza to 50 people (50 sales per hundred, $3 per cap)Actual profit becomes higher in the first scenario as well as my costs for soda and pizza were lower.
While overall I do agree with your logic, there is one point you aren't taking into account here - if you sell less, your volume discounts won't be as great and therefore your profit margins decrease. With the volume of food and beverage the average park is selling, those discounts can have a huge effect on the bottom line.
In the end you have to make sure the reduced labour and such balances against the increased cost of goods.
Of course, as we all like to point out, they have the numbers and obviously have considered all of this... :)
I know you're half-way joking but I did think of that and it only works to a point.
Kinda. But the point remains. A 32oz Coke for $4 is the same as a 16oz Coke for $2. But obviously, you aren't going to sell 128oz Cokes for $16.
What you *could* do is charge an ass-load and then offer refills.
See, I'm a big fan of the souvenir cup with refills. We almost always go that route.
I suppose 'ass-load' is a subjective term, but $8 seems about average (give or a take a buck or two) at the big parks with refills falling in the $1 to $2 range. Hell, we even hit SFKK late in the season last year and they had a $10 cup with free refills. How can you bitch about unlimited drinks for $10 in exchange for carrying a cup around? I can't. It equates to the $7 ticket raise and $3 parking raise at Magic Springs for free drinks.
Even funnier was that they were offering a lower tier drink deal as well. There was also a $5 cup that had $1.50 refills. (Which leads me to believe that most don't get as far as the 4th refill, thus making those seeing 'free' refills actually drop more than they would have, but I digress.)
...maybe it works better than I think but it doesn't seem that popular anywhere.
Again, a matter of perception perhaps? I've had days at parks where I've seen the stands run out of souvenir cups and was pissed that I had to seek one out elsewhere. (and no, not just at SF parks :) )
Still the thing I'll be interested in keeping an eye on is drink size/cost ratios. I have a funny feeling the 'value' that some many seem to want in lower cost drinks might not be nearly as good as perceived. :)
Then again, maybe I'm totally wrong. Cursed with the mind of a cynic, I suppose.
*** Edited 4/19/2007 9:03:28 PM UTC by Lord Gonchar***
For movies I am the type who wants to buy concessions. I enjoy munching on popcorn and drinking a large soda. However the concession and admission price increases have turned me away. My annual income is higher so I can afford to go, but I choose not to because I feel like I am being ripped off.
For years I did not go to Blockbuster Video. In fact, I hated Blockbuster because of their late fee policy. Nearly all of the movies I saw were in first-run theatres. Now I rent movies two or three times a month and I can count the number of visits to a first run theatre on one hand with a couple fingers to spare.
When I make the rare trip to the movies unless there is a reward from the AMC or Regal moviegoer program I don’t spend a dime on concessions. The $15 is still in my pocket ready to be spent, but not at the posted prices of $5 for a small popcorn and $4 for a small soda. I also don’t care that the small is now the size of the old large. Those bonus calories are unwanted and don’t justify the higher prices.
Back to theme parks. When I visit a park like Knoebels, even Disney to an extent my wallet is wide open. Yet, when I visit Six Flags and even Knott’s my wallet is shut tight. I come with the same amount of money ready to be spent, but I won’t because the price they are asking for the item is just stupid. *** Edited 4/19/2007 9:17:57 PM UTC by egieszl***
When you go from $3.50 to $4.00 for a soda, it takes seven sales to break even for the loss of one sale at the lower price.
That's one way of looking at it, but I see it more as you raised prices by 14%. As long as your drink sales don't fall by more than 14% you're even or better.
But sticking with your approach - on the flip side if you dropped from $3.50 to $3.00 you'd have to make 7 additional sales to make up for one sale before the price drop. (or in my terms, you dropped the price by 14%, so you have to sell 14% more drinks to break even)
What if you simply can't move that volume? Then $3.50 is the best price for you to be selling at.
And that's the point here. There's a balance. Maybe you won't sell enough at a lower price to justify dropping prices and maybe you won't sell enough at a higher price to justify raising prices.
To be really good, you have to find the magic number of sales times price that gives you the highest revenue.
To be the best, you find the magic number of sales times price minus costs that gives you the highest profit.
*** Edited 4/19/2007 9:35:52 PM UTC by Lord Gonchar***
Lord Gonchar said:See, I'm a big fan of the souvenir cup with refills.How can you bitch about unlimited drinks for $10 in exchange for carrying a cup around? I can't. It equates to the $7 ticket raise and $3 parking raise at Magic Springs for free drinks.
I respect your liking of them, but I hate souvenir cups because you have to carry them. They can't go on the rides... they spill... they begin to smell... you get them home and you don't want to throw them away, yet you really don't want to keep them either.
Atleast at Magic Springs you don't have to carry a cup. I'll give them double the value credit for that alone.
you get them home and you don't want to throw them away, yet you really don't want to keep them either.
So just take pictures of them and put them on your website. ;) (still the silliest thing I've tried...so far)
The hassle of carrying them doesn't seem to hit me as hard. I do parks with the family. It's rare that all of us can ride a single ride at the same time where carrying the cup along is a problem. (in my little world it sounds like another example of enthusiasts not thinking like the GP - although that may or may not be true)
Lord Gonchar said:
That's one way of looking at it, but I see it more as you raised prices by 14%. As long as your drink sales don't fall by more than 14% you're even or better.But sticking with your approach - on the flip side if you dropped from $3.50 to $3.00 you'd have to make 7 additional sales to make up for one sale before the price drop. (or in my terms, you dropped the price by 14%, so you have to sell 14% more drinks to break even)
What if you simply can't move that volume? Then $3.50 is the best price for you to be selling at.
-- Edit: Never mind my comment on the equation.... after rereading what I wrote and he wrote we're talking about different factors and yes the equation is equal -- It's an increase vs. decrease thing. We're both right.
The percentage of price change is not equal to the percentage of unit change to equal the same revenue. If you sell drinks at $4.00 and drop the price by 14% then you have to sell 16.28% more units to equal the same revenue.
However, following supply and demand the lower the price the higher the demand and vice versa. Lowering the price should increase your demand. It is a balancing act. Will my unit increase exceed the decrease in revenue per unit to effectively result in more overall revenue?
Yes, you also need to take into consideration your capacity. You may not be able to serve any more drinks then you currently are. You also need to factor in your labor costs. If I suddenly serve more how many more hands will I need and will the added labor be fully utilized? *** Edited 4/19/2007 10:02:48 PM UTC by egieszl*** *** Edited 4/19/2007 10:04:02 PM UTC by egieszl***
egieszl said:
For movies I am the type who wants to buy concessions. I enjoy munching on popcorn and drinking a large soda. However the concession and admission price increases have turned me away. My annual income is higher so I can afford to go, but I choose not to because I feel like I am being ripped off.
Again, though, if movie theaters could make more money charging less wouldn't someone have figured it out by now?
I mean you could say the same about amusement parks, but the theater comparison is fun because the business model is somewhat less complicated. Eh.
Lord Gonchar said:Then again, maybe I'm totally wrong. Cursed with the mind of a cynic, I suppose.
One man's curse is another man's....blessing? :)
Ya know, if I could, the whole forum would be one massive jumble of tied threads and look like a bird's nest.... ;)
Although all your calculations make perfect sense, charging a lower quantity at higher prices may bring in more revenue, don't you think it sorta ruins the guest experience?
I don't know about you, but some fried dough or a cotton candy cheers me up when I'm at a park and puts me in a good mood making me enjoy my time even more. Worrying about spending to much money or that feeling about being "ripped off" I think takes away from the experience.
Spending the day at the park grabbing food between rides at a somewhat higher price (for example $2.25 for a medium Pepsi instead of $1.29) is expected and I don't mind but when the prices are ridiculous it ruins peoples mood when they were otherwise having a great time. Just think, you just got off the park's latest and greatest coaster, you decide to grab some ice cream. $4.99 for a small cone? Isn't that bound to have a psychological effect and ruin the "natural high" that we find all to familiar when we visit parks?
I agree wholeheartedly with what Darien Lake is doing. Lowering the price to moderate levels but not too cheap is exactly what they need to do. If people have a good time when in the park and their experience is not ruined by:
1.Buying food that is way way way overpriced and feeling guilty or angry about it
2.Not buying the food or buy less than you would like and as a result being hungrier than usual
The money a family saves and the better guest experience will cause a much more likely return trip where they will spend $30+ dollars X the number of people to get in. In addition, they will once again have a good time, tell their friends, and the park becomes more and more successful.
Just my two cents.
There are plenty of non-SF parks that do it just fine with high food and drink prices, you just don't hear the beyotching about the other parks because they (in general) sell it better. *** Edited 4/20/2007 2:52:48 AM UTC by matt.***
I'd bet you have fewer guests request to fill the cup up with ice in a day than they have now with people asking for less ice. Having your employees spend less time doing this will allow them more time to serve more customers (no matter where you price point is).
Or how about another favorite. Pre-filled sodas waiting there, ready to go. The only problem is that the sweltering sun has already melted most of the ice and you get one delicious, water downed Coke for $4. Parks (not just SF) can find ways to ruin just about any type of food product.
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