The Price of Popcorn at Movie Theaters or How To Gouge Your Customers
Why Is Popcorn Expensive at Movie Theaters? You intuitively know the answer. You recognize that popcorn is so expensive because once someone buys a ticket to enter the movie theater he or she is captive. The same is true at theme parks, airports, and anyplace else where, after making one decision, subsequent choices become limited. The price of popcorn at the movies is a wonderful example of a concept very important in pricing: Will I? vs. Which one? When you decide to go to the movies, you probably select the theater that has the movie you want to see at a convenient time. If you have theaters that charge different prices for tickets you may take that into account. This is the "Which One?" decision. You are choosing a movie theater. Once you enter the theater, you ask yourself, "Am I going to have popcorn today?" This is the "Will I?" decision. People tend to be price sensitive when answering "Which One?" and they are less price sensitive answering "Will I?" This means people are more price sensitive when choosing the movie theater and less price sensitive about their snacks. This explains the high prices. The question to you is how can you get your customers to make a "which one?" decision in your favor, and then make even more (and more) money from them in later "will I?" decisions.
Here's another example. I recently needed a Thunderbolt cable to connect two apple computers. I paid $50 for the cable. What a ripoff. But I paid it because I needed it and didn't have a choice. (Apple recently lowered the price to $40. Wow.)
What accessories do you sell? Are your customers locked in to your accessories or not? I wouldn't advise gouging them (like Apple) but you can surely make a handsome margin if you can lock in your customers.Can you sell extended warranties? Do you have a service plan? A tax preparer I work with offers "audit insurance." Look around your industry and see what others are selling. Popcorn and thunderbolt cables are expensive because the customers are captive due to a previous decision. Think hard about this. You can do something similar. You just need to find it. But please don't gouge your customers. Remember you want a long term relationship and some day your customers will be making another "Which One?" decision that you would like to win again. Mark Stiving, Ph.D. – Pricing Expert, Speaker, Author For more insights on pricing, sign up for the Pricing Perspective, a free monthly summary of my blogs and other publications. Photo Credit: Tyello via Compfight cc
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