Price Discrimination | Amusement Parks Essay

Introduction Consider these frolic honey oil set scenarios ? six few Flags Discovery kingdom mete forbiddens its annual pacify pass for $59. 99. accord to its website, Buy your Season Pass for $59. 99, just $14 more than a one-day admission. ?Bush Gardens Dark Continent. sells its Fun Card for $95. 00. According to its website, Pay for a Day, Get now through 2015 FREE. , Now wherefore would they give away an unlimited founding annual pass for an senseless 25% over the single entry worth?What is common in these pricing scenarios? All these businesses are practicing what economists call, Metered Price Discrimination, or what marketers delineate as, Customer Margin. It all starts with, price favouritism charging diverse customers different prices. Customers differ in the value they get from a product/ utility and in how much they are spontaneous to pay for it. For each price point you set, there leave behind be different number of customers willing to pay that price. That is your want curve. The goal is to find the price that maximizes profit. There are many different ways to monetize the customer and entertainment set offer us a great opportunity to examine some(prenominal) of them.As in the example above, Am recitationment Parks employ tenfold price discrimination strategies when establishing ticket prices in order to attach Six Flags Season Pass Pricing Busch Gardens Fun Card Pricing boilersuit attendance but make up for the lost single entry fee revenue from the subset of customers willing to pay set pricing descale at greensing area concession stands, gift shops, diners and restaurants. This is Metered Price Discrimination some customers get away with nonrecreational the low entry fee bandage early(a)s pay more by consuming additional services at different prices. Discrimination seat take several forms and those presently employ in the fun park industry begins with an exploration of spatial discrimination. spacial Discriminat ion Amusement pose benefit greatly from their ability to impound customers away from competitors for long periods of time. Part of the value proposition for an pleasure park is the highly developed themed experience they provide. once fully immersed in the amusement park experience the level of difficulty and inconvenience in accessing utility(a) providers for staples like food, drink, shopping, and accommodations, grows exponentially. Utilizing spatial discrimination, the pose run through several different release, demand and profit opportunities to exploit.?Higher than market food pricing and dough base on proximity and distance to cheaper alternative. Amusement Parks, like many a nonher(prenominal) entertainment businesses can derive extremely high profits from customers on purchases of goods and services once inside the park. ?Zero contention from competitors within park confines. The experience of the park itself requires a good deal of isolation and infinite so the business can control the imagery, interactions, and exposure to inconsistent inputs. The position and isolation enables the parks to create their own marketplace and exclude other industry actors access to the customers in their park avoiding food, retail, services competition altogether.Once the customer is in the park you control the market and the market offerings and pricing ? Ingress and Egress marketing opportunities for personalized content like meeting photos on T-Shirts, Mugs etc. The parks have cameras throughout their facilities and more frequently than not have a kiosk standing by to sell customers personalized remembrances of the experience the park is providing. Only the park has the photo of your family on the roller coaster together.Since they own the roller coaster, they can restrict access to the scoop out picture locations. Price discrimination takes place in that they control the supply completely. Calculate the highest price the market is willing to pay and sit back, youve eliminated the competition while they are in the park. Bundling One type of rank and file popular with both Bush Gardens and Walt Disney World customers is the add-on (up charge) for water park entry in addition to the amusement park entry at a reduce bundled price. Water park capacity is apt(predicate) to be considerably less than the amusement park so the profit maximisation point must take into account the limited capacity constraint.The reduced revenues from the amusement park tickets vs. full price tickets needs to be bring in so supply of the amusement/water park bundles does not, or to the go around font achievable, negatively impact the supply of the water park single park utilization. Profit maximization can be best achieved by limiting the bundle availability to key periods during the annual calendar when overabundance capacity exists at the water park. Bundling will fill the porta between current utilization and current capacity at the water park while providing added perceived value to the purchase of a amusement park ticket. Peak Load Pricing.The customers of annual passes are further discriminated by those that have the capability to tailor entry dates away from peak weight periods. Ex. Walt Disney World Florida resident physician annual passes with entry restricted during the summer and spend periods. Amusement Parks have multiple levels and types of annualized memberships based on paying a onetime fee for unlimited entry for a contract period (Typically annually) at specified clock.The overall infrastructure footprint of the parks is constant. In the slower months of the year there is Busch Gardens Bundled Pricing Walt Disney World Florida Resident Pricing an excess of capacity (or supply0 at the parks and the peak bill pricing extracts park visitors at lower utilization periods of the year. (An argument can be made for inclusion in the Spatial Discrimination stratum and the overlap is findd here. Florida residents benefit from a price discriminator compared to out of state customers but must use the park facilities at times it benefits the park most. )Air fares, Hotels, etc. Finally, the cross marketing partners the amusement parks team with will employ length of stay discounts, food offerings, allow parking offers, service level upgrades, hotel upgrades and the like.The price discriminators are focused on the ancillary products and services typically required to in order to apply the amusement parks. The parks will appoint official Airlines of the park, or have a preferred credit card, or as in the case of Walt Disney World several tiers of hotels. Disney owns their own hotels, all in the best locations, extensively themed to the park specifications. Disney also leases hotel locations on their land to the major hotel chains.The location is not the best, and the hotels cannot use Disneys Theme in their decorating but they are locate on Disney property with access to Disneys highe r income, more likely to spend money, customers. A third tier exists in the hotels off Disney property. Disney will offer discounted ticket prices to these hotels for their customers. Walt Disney World Package Pricing Closing Amusement Parks have well developed and sophisticated price discrimination strategies in place.They capitalize on several of the methods described in the Harvard note Economics of Product Variety. They use spacial discrimination to boost profits on food, services, and goods once the supply is controlled in the park. They use bundling to attract attendance across the multiple parks they operate in the hopes of increase profits through the generated increase in demand the bundling creates.They use peak load pricing to entice attendees during low utilization periods as well as boost purchase of ancillary high adjustment items in the parks. And they use cross marketing strategies to team with hotels, airlines, credit cards, and others to increase demand from third tier hoteliers near the park. References HIRSCHEY, MARK MANAGERIAL economic science 12TH EDITION, CENGAGE LEARNING, MASON OH, 2009 President and Fellows of Havard College, Price Discrimination, Havard Business Schools Publishing, Boston, MA 02163, 1993.