Price Discrimination | Amusement Parks Essay

Introduction Consider these pleasure greensing lot set scenarios ? six ab pop out Flags Discovery kingdom shops its annual temper pass for $59. 99. consort 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 why would they give away an unlimited admission annual pass for an otiose 25% over the unmarried entry equipment casualty?What is common in these pricing scenarios? All these businesses are practicing what economists call, Metered Price Discrimination, or what marketers discern as, Customer Margin. It all starts with, price favouritism charging divers(prenominal) customers different prices. Customers differ in the value they get from a product/ profit and in how much they are uncoerced to pay for it. For each price point you set, there go forth be different number of customers willing to pay that price. That is your hold curve. The goal is to find the price that maximizes profit. There are many different ways to monetize the customer and fun position offer us a great opportunity to examine some(prenominal) of them.As in the example above, Am consumptionment Parks employ multiple price discrimination strategies when establishing ticket prices in order to summation Six Flags Season Pass Pricing Busch Gardens Fun Card Pricing general attendance but make up for the lost single entry fee revenue from the subset of customers willing to pay set pricing ordered series at approximate range concession stands, gift shops, diners and restaurants. This is Metered Price Discrimination some customers get away with compensable the low entry fee sequence separates pay more by consuming additional services at different prices. Discrimination plunder take several forms and those presently sedulous in the recreation park industry begins with an exploration of spatial disc rimination.spatial Discrimination Amusement put benefit greatly from their ability to single out customers away from competitors for long periods of time. Part of the value proposition for an amusement park is the highly developed themed experience they provide. erstwhile fully immersed in the amusement park experience the level of difficulty and inconvenience in accessing resource providers for staples like food, drink, shopping, and accommodations, grows exponentially. Utilizing spatial discrimination, the put develop several different append, demand and profit opportunities to exploit.?Higher than market food pricing and meshwork establish on proximity and distance to cheaper alternative. Amusement Parks, like many other entertainment businesses can derive extremely high profits from customers on purchases of goods and services once inside the park. ?Zero argument from competitors within park confines. The experience of the park itself requires a good deal of isolation a nd quadruplet so the business can control the imagery, interactions, and exposure to inconsistent inputs. The stead 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 company photos on T-Shirts, Mugs etc. The parks have cameras throughout their facilities and more much than non 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 lift out picture locations. Price discrimination takes place in that they control the supply completely. Calculate the highest price the market is willin g 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 pee park entry in addition to the amusement park entry at a trim bundled price. Water park capacity is seeming to be considerably less than the amusement park so the profit maximization point must take into account the limited capacity constraint.The reduced revenues from the amusement park tickets vs. full price tickets needs to be introduce so supply of the amusement/water park bundles does not, or to the outstrip content 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 free capacity exists at the water park. Bundling will fill the opening move 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 make full periods. Ex. Walt Disney World Florida nonmigratory annual passes with entry restricted during the summer and vacation periods. Amusement Parks have multiple levels and types of annualized memberships based on paying a onetime fee for unlimited entry for a specify period (Typically annually) at specified times.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 Pricingan excess of capacity (or supply0 at the parks and the peak stretch along pricing bring ins park visitors at lower utilization periods of the year. (An argument can be made for inclusion in the Spatial Discrimination year and the overlap is let downd 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, free 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 expend 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 determined on Disney property with access to Di sneys higher 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 change magnitude 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 beach items in the parks. And they use cross marketing strategies to team with hotels, airlines, credit cards, and others to increase de mand 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.