Cinemas have always tried to balance getting as many people through the door as possible, with making as much money as they can. However, understanding your audience well enough to know what to charge for tickets is a skill – get it wrong and you risk poor attendance, or might not even cover your costs.
But what if you knew how many people would come, and what the right ticket price was for them, at every show?
That’s exactly what a cinema in Germany wanted to find out when they tried Smart Pricer, a tool that boosts occupancy by adjusting seat prices in real time, based on what people are willing to pay. So what happened when they increased their top-tier prices? The results were surprising…
Cinema ticket pricing today
Today cinema ticket prices are fairly fixed. There might be some differences, but they’re based on static criteria – such as weekday vs weekend tickets, afternoons vs evenings, or VIP vs standard seats. That is better than nothing, but it doesn’t allow cinemas to adapt to changing circumstances.
So, what’s the alternative?
The future of cinema ticket pricing
One way to introduce variable pricing is simply to raise prices as it gets closer to show time. But this leads to two problems:
For low-demand shows, tickets that are more expensive close to show time aren’t likely to attract more customers
In high-demand shows, people might have been willing to pay higher prices to secure their seats early. If your system is set to start off at lower prices, you’re missing out on revenue.
Smart Pricer creates a different setup.
The software forecasts the demand for every single show using algorithms which take everything from bookings and weather forecasts, to Google searches into account. Once it has predicted demand, it dynamically changes the price mix (the number of seats available at each price level) over time based on the actual demand.
Three different ticket price levels are created (Super Saver, Saver and Regular for instance) and Smart Pricer uses algorithms originally developed for airline pricing, to calculate the right amount of tickets in each price category.
This can benefit both cinemas and audiences by:
Creating tiers of ticket prices to suit different customers: -Cheap tickets for the price sensitive -Premium seats with last-minute availability for the solvent
Increasing occupancy for lower-demand shows
Increasing revenue at more popular shows
Attracting new customer segments to your cinema
In the example we have created above, in low demand shows, the auditorium is dominated by Super Saver and Saver (blue and yellow) seats to help stimulate demand; whereas with blockbuster shows with high demand, the auditorium can be filled with premium priced seating (in red) that will easily be sold.
So, dynamic pricing not only increases cinemas’ revenues, but also gives customers the options they are already taking advantage of in places like theatres and airlines. When your customers can choose between cost and convenience themselves, they will quickly see that adopting the system will be to their benefit.
How does it work in real life? A Smart Pricer case study
To test whether dynamic pricing works, or whether customers are turned off by higher prices, Smart Pricer trialled the system with a leading cinema in Germany by comparing two sites with similar performances and film schedules (A and B). Site A used Smart Pricer to dynamically change the ticket price mix whereas site B relied on the cinema’s old pricing system.
During the sales life cycle of a show, the pricing layouts were changed automatically to encourage early bookings and later on, to react to actual demand. To see this in action, let's see what dynamic pricing did to the bookings for a screening at our cinema in Germany.
You can see how the size of the seat categories was adjusted throughout the 36 hours to reward early bookers with the best value seats and then capitalise on latecomers. With 90 minutes before the show, as the more expensive red and yellow seats expanded further forward, the crowd started compromising on having seats at the back and settled for the most desirable middle seats in the cheaper price bands. With 5 minutes to go, the least desirable seats at the front are the only cheap seats left in order to draw the price-conscious away from seats others would be willing to pay more for. The best seats all have premium prices so that they will still be available to those last-minute customers willing to pay for them.
At the end of the 6 month trial, the cinema was keen to see whether their experiment with dynamic pricing had been successful. Would customers understand the new system or reject the changing prices? Would there be an increase in revenues? If there was, would it be down to giving customers the right prices or just selling more tickets?
Using the same price differentiation tactics as in the sample screening above, site A achieved an average revenue increase ofover 5%, and of up to 15% on high demand shows versus site B. Over the course of 6 months they didn’t receive one negative response to the new pricing system.
So how was this possible? Did site A sell more tickets using dynamic pricing?
The cinema wasn’t surprised to see that no, it didn’t- the volume of ticket sales at both sites was traditionally similar and changing that in 6 months would have been a challenge to any expert marketer. But crucially, site A was able to sell customers more of the expensive tickets by flexibly increasing the size of the seat tiers correctly according to demand.
All this means that site A achieved a higher average ticket price, which, combined with good customer acceptance that kept demand the same, resulted in an average of over 5% revenue increase compared to site B.