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"Stop at the deli
the theatres overpriced
you got a back pak
so stock it up nice"

What the heck! Are we overpriced? Is it true? If cell phones and kids are a real problem: how much of a problem is the cost of concessions?

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Michael Hurley
Impresario

I was wondering if the fact that much of the lyrics in the song deal with getting around buying snacks in the theater and sneaking in their own would bother anybody.

Mike, are your questions rhetorical? Of course many people think theater concessions are overpriced. This certainly concerns me as a cinema owner wanta-be. I know that theaters have to charge high prices in order to make any money, but it kind of goes against my grain to think about paying so much for snacks I know are a fraction of the price somewhere else.

There are ways to create a perception of higher value for your concessions. Like offering super sizes. Like offering combo deals. Like offering hot, fresh, buttered popcorn (which would be hard to sneak in).

Still, I don't normally want a super size drink. And, I as a consumer know that soda and popcorn are cheap for the theater to buy. Heck, the last time I bought a soda at the theater it was all water and carbonation... no flavor. Why on earth did I waste my money? I should have taken it back, but I was already sitting in the auditorium before I realized it, and I didn't want to miss the feature that was about to start.

And you know what they say, once bitten-- twice shy. I think many people feel bitten whenever they buy theater snacks, bitten in the wallet that is. I'll be honest here. I normally don't spend any money at the concession stand. Sorry. I usually prefer to go out to eat before the movie, then show up with a full belly. That usually works for me and my wife, or my date (back when I was dating). They never even ask for anything and usually decline if I offer to get them something. I guess that's why the expression is "dinner and a movie", instead of "a movie and dinner".

Maybe that is why only 30% of theater customers buy anything at the concession stand, if I remember the figure that Large once posted (or was it 10%?). I've also read (another Large post I think) that the people who buy concessions seem to be impervious to higher prices, and the people who don't buy don't buy even with lower prices. I guess that means you can't hope to sell more if you go for volume. It's a tough way to make a buck, that's for sure.

And before someone points out that concessions are also high or even higher at sporting events or some other venue, I'll just say that I often don't buy them there either. As long as I can buy them at the grocery store for cents instead of dollars, then I'm happy. I don't sneak anything in, but I can satisfy my craving someplace else for a Dr. Pepper or a Sprite, or even for popcorn.

Sure restaurants can be high too, but then I'm getting chicken or beef or some such thing, and I know that it's high even at the grocery store. They also had to do more than spend a few seconds at the popper to prepare it.

I am not being critical of theater owners for charging premium prices. I know your overhead is high. But as long as I'm allowed, I'll probably just say no thanks when I pass the concession stand.

You can call me cheap, but it might be better to find a way to convert me and the many others who are probably just like me.

I think there are a minority of my customers who hold similar views. Many of those tend to be older (sorry, lion, I have no idea how old you are and don't mean to offend). That being said, however, we do well with concessions and the majority buy something here. Our tickets are cheap ($3.50) so our concessions are cheap (large popcorn is $3) and I'm sure that has a lot to do with it. Frankly, I think cheaper concessions to entice people to buy is the way to go in general, but it seems like this may be bucking the trend.

I love that line from the Narnia song: "Mr. Pibb and Red Vines is crazy delicious!"

[This message has been edited by leeler (edited January 09, 2006).]

For years theater chains have been trying to justify the inflated cost of concessions. Part of the problem with this business today is the high cost for everything associated with going to a movie. Why are the scales of economy upside down in this business. How is it I can charge $5.00 for an adult ticket but Regal charges $8.50? I charge 1.50 for snowcaps but Regal charges $3.00 . Usually the larger the company the cheaper it can offer its services-think WallMart, Target, Barnes and Noble-not this industry.
I think for too long theaters have been over charging and the customers have long stopped believing the excuses.

I don't know about everyone else, but we often find candy at the supermarket that is being sold cheaper than we can get it wholesale!! Which stinks. We try to keep our prices pretty close to Recommended retail, usually we just round up that .95 cents to a dollar, but people always perceive that because we are a cinema, our prices MUST therefore be expensive, whether thay are or not. there will always be some who complain, but noone forces anyone to buy stuff.
A few years ago we had all our ticket prices $7 (Im in australia, so its only about US$5 or so) , no matter what age, etc, but we found after a few years at that price we were getting complaints, people felt that children should be cheaper, or aged pensioners should be cheaper, or families should get a discount..you just can't win no matter what you try! So..please yourself and do what you think is best!!

We talk about a lot re: movie biz here. So: yes the question is rhetorical but for all we hear it said by the public and pundits I don't recall us actually discussing high prices.

" love that line from the Narnia song: "Mr. Pibb and Red Vines is crazy delicious!" Is that what the hell they were saying!!!!!

Our prices are reasonable, high compared to a supermarket, but low-low-low compared to the plex's in our hood.

A small popcorn at our local plex is 3.95 and my small: 1.50. They're small soda is 3.50 and ours is 1.50. 7.45 vs. 3.00. Either I'm a good guy or stupid.

People from out of state/ touristas/ laugh at our "quaint pricing" "Don't you love it here with the rustics Bab's?"

On the other hand: my mortage payment on 3 screens is like a joke compared to what my plex leases the ground for.

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Michael Hurley
Impresario

I thought I would dig up the post I referenced earlier. I think it's very relevant to this topic.

From a thread in the Lobby forum titled "Concession Pricing", posted November 19, 2000-- Large wrote,

"When we opened the theatre we guessed the concession prices. Then we went to another theatre and learned that we were a dollar under market. We adjusted our prices the next month.

Fact: 30% of your audience buys concessions. There is almost no way to increase that amount. The big boys have tried and failed.

Fact: The 30% who do buy concessions are not price sensitive. If they complain and then pay for the item, they will either not pay or not complain the next time."

###

I have great respect for Large after reading many of his posts on this forum. However, I can't help but be a little discouraged by this one. I'm not sure it makes sense to say that someone is not price sensitive if he says one of the possible outcomes of a customer complaining about paying higher prices is that they won't pay the next time. At the same time he is saying that 30% of customers buy concessions, and that number basically can't be improved. If the customer won't pay the next time, doesn't that mean the figure will shrink below 30%? If so, then maybe these 30% are price sensitive after all.

The more I think about it, the more I don't believe in customers who are not price sensitive. Perhaps they are not sensitive within a certain range, but everyone has their limit.

Now, how can we entice people with lower limits to buy? I suppose we could charge lower prices, but that means less profit per sale. It will only make sense if we make more money on the greater volume of sales. If we accept the 30% figure Large wrote as a probable maximum number of customers, then we soon realize that we can't increase our volume of sales beyond that point.

I guess one way to use this data might be to adjust prices in an attempt to reach the 30% level if you are below that. If you are selling to more than 30%, you are doing great. But, could you make more profit by raising your prices? Hmmm. Setting prices is not so easy.

I think one problem with lowering prices to try and get more people to buy is that many people do not actually check prices before deciding they are too high. They rely on their original perception that theaters have high prices. In this case, it's all about perceived value, not actual prices.

Maybe a good campaign to help increase perceived value is the way to go. Do you think on screen ads or other advertising mediums could be focused more on creating the perception of value for your concessions? Do you already have something that does this? Or do your ads just encourage your customers to grab some tasty snacks?

I think that you are competing with the grocery store and the local restaurants and cafes more than you realize. You might have a chance to win some business from them. Even if it's only to encourage customers to save room for "dessert" (pocorn, candy, or whatever) when coming to the theater. Even better, if you beat Mickey D's out of a combo deal sale. I think many people would rather buy a good hot dog, popcorn, and a drink at the theater for not much more money than a "value meal" with a burger, fries, and a drink some place else. You just have to let them know that you have the better value than the so called value meal. Better value doesn't always mean cheaper, so you can also focus on how much more food they'll get, or how they'll save time, or how they can finally get the best seats (by showing up early enough to visit the concession stand and eat before the show).

As for an upside down scale of economy, movie theaters are not the only businesses that work that way. Think about hotels. Think about a variety of professional services, like law firms or architects or medical facilities. Bigger doesn't always mean cheaper. It often means higher costs and higher prices passed on to the customer. I'm sure there are plenty of exceptions (such as the volume retail businesses you named), but I think you see my point. I believe people see the difference in size and scale of a business and they expect to pay more to these kinds of larger companies. Then there will be bargain hunters who seek out the lower prices of the smaller companies, but many people will still think that bigger is better.

Pieman, there is an old saying you may have heard, "Give them an inch, and they'll take a mile."

I price so I do not encourage sneaking the food in or just skipping the food.

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Michael Hurley
Impresario

Mike, your prices do sound very reasonable. And I know from past postings that others on this forum use the same kind of reasonable prices as you.

I've been wondering how true Large's 30% statistic really is. Can some (or many) of you out there share at least a rough estimate of what percentage of your customers actually buy something from the concession stand?

Well, it's good to be talked about.

The 30% theory is something that my first city manager told us at a meeting 20-years ago. He was explaining the reasons for concession pricing and who bought concessions and why. I'll back it up with 20-years of casual observations. For 5-years I owed a theatre and could look at the numbers as they were generated. Our computer system told us the average sale per customer who came to the concession stand and the average sale per customer who came to the theatre.

I also know many people who don't like Coke, Popcorn or Candy. But they sure like movies. A lot of people like movies who don't see movies as an excuse to snack, for whatever reason. No amount of price cutting will entice these people to buy. Some people don't like buying food outside of their comfort zone.

In spite of hearing that 30% rule 20-years ago, it seems to have held up. I have twice worked in Art Theatres and have experimented with all kinds of different concession foods. I have had experience with Hamburgers, sandwiches, beer, wine, pizza, cake, pasteries, pickles, salads, and organic snacks resembling sawdust. But when it comes right down to it, It's Soda, Popcorn and Candy. Some theatre chains have striped there stand down to just that with Hot dogs and nachos. The best theatre food is that that can be eaten in the dark without thought.

By all means, open your theatre with $1 popcorns, hot dogs and sodas. But with real estate and salaries the way they are, I'm sure that you will be looking at those $5 popcorns and $4 sodas with new respect.

Theatres charge what the do not because they are greedy, but because it costs as much as $1M per screen to build a theatre. Stores sell popcorn, soda and candy at a 20% markup because they can, They make it up in razor blades I swear. Does it really cost $2 for a replacement razor cartridge?

The other day a friend (who should know better) and I had very simple dinner and a nice restaurant in Telluride Colorado. We both had an apetizer with our steak dinners. We had one bottle of wine. We split a desert. The bill was $125 and we had $47 comped! I ended up leaving $47 as the tip.

To make up for that dinner, I ate an egg souffle, some chili, vegitable soup, an omelette, and some chicken livers for the following 5-days.

Last week, I went skiing 4-times. Lift tickets were in the $70 range and ski rental was $30 per day. So I spent $400 to have some fun with friends. By the way, I don't ski for the 8-hours available, I'm good for about 4-hours per day. $25 per hour to slide down hill.

Going out to the movies cost $20 per person, if you spend less, then good for you, you got a deal. If that is too expensive for you, my supermarket rents videos for $2.50 and you can watch it at home. Their selection could be better. It's not the same, but what the heck.

After reading this, I have been doing a little research into our percentages etc, and we generally have about 2 thirds of our customers purchase something at the concessions stand. Average spent is $4 per person...actually that $4 is over all customers whether they purchased or not..so it would be more..Im not very good at maths

Pieman if the average customer spends $4 at concessions, but only 2/3 of your customers spend money at concessions, then your average concessions patron spends $6 a visit at the concession booth. ($6 x 2/3) = $4

In my day job I teach math.

<BLOCKQUOTE><font size="1" face="Verdana, Arial, helvetica">quote:</font><HR>Originally posted by theBigE:
<B>Pieman if the average customer spends $4 at concessions, but only 2/3 of your customers spend money at concessions, then your average concessions patron spends $6 a visit at the concession booth. ($6 x 2/3) = $4

In my day job I teach math.</B><HR></BLOCKQUOTE>

wow, thanks E.. i just get confused when trying to work out stuff like that!! You make it look so easy!! I always hated it when thisngs like that came up in exams.

I haven't watched Narnia yet, but I would be surprised to hear something like that in the movie. Where exactly does the song come up and how does it relate to the scene in which it's playing?

As far as the pricing goes, I can see where people can view the chain theaters as being expensive. Before getting in the theater business, I didn't realize why theaters would charge so much. Now, I realize that theaters make their money on concessions since most of the ticket money goes to the studios, not to mention other expenses that these theaters incurr (including staff, stadium seating/stereo surround sound, and the corporate offices). But I do think their prices are still quite a bit high.

When we took over the 4-screen, we were shocked at how much the concession items were. The former owner said they were in comparison to that of the competing theaters. Even though the prices were probably a little lower then the competitors, they were still pretty high for that area. We ended up reducing the prices a few times to what we thought was more reasonable. Unfortunately, we still get people once in awhile that complain about the prices. Excuse me, but where else can you get a large popcorn for $3? I think some people will complain for no reason.

We are an Independant Cinema and we are also alot cheaper than our competitors but a little bit more expensive than retail.
I feel that the reason why cinemas are more expensive is that they have a captive audience and they feel they can get away with it and (2) Cinemas also have to pay for the cleaning bill and time to clean up after the mess. When they go into a convenience shopping mall they do not leave their wrappers and popcorn in the isle of where they shop. Our cleaning bill for our 5 screen cinema is about $1500 US per week. It is a very busy cinema. The cinema concession stand would probably take in about $35000 US. WHich is an extra 5% more expenses just for cleaning end of night and not during sessions. I feel that 10% mark up is atleast justified but I feel that any more than 30% or so is just going to upset customers. Also we have about 33% of all customers buy something from the candy bar. The good thing is that two of our cinema complexes are located near heaps of restaurants and we are still getting about 30%. I think that the concession bar is price sensitive but putting up the prices by 30% will get you the same turnover with more profit. The reason we don't opt this way is because we feel that our customers are price sensitive and want them to visit us as many times as possible. We feel that good word of mouth & positive experience makes the customer happy and wants to come back.