The findings empirically answer the age-old question of whether it's better to charge more for a primary product (in this case, the movie ticket) or a secondary product (the popcorn). Putting the premium on the "frill" items, it turns out, indeed opens up the possibility for price-sensitive people to see films. That means more customers coming to theaters in general and a nice profit from those who are willing to fork it over for the popcorn and Gummy Bears. Indeed, movie theaters rely on concession sales to keep their businesses viable. Although concessions account for only about 20 percent of gross revenues, they represent some 40 percent of theaters' profits. That's because while ticket revenues must be shared with movie distributors, 100 percent of concessions go straight into the movie theater's coffers.
What is the greatest movie musical of all?
Looking at detailed revenue data for a chain of movie theaters in Spain, Wesley Hartmann, associate professor of marketing at the Stanford Graduate School of Business, and Ricard Gil, assistant professor in economics at University of California, Santa Cruz, proved that pricing concessions on the high side in relation to admission tickets makes sense. They compared concession purchases in weeks with low and high movie attendance. The fact that concession sales were proportionately higher during low-attendance periods suggested the presence of "diehard" moviegoers willing to see any kind of film, good or bad--and willing to purchase high-priced popcorn to boot. "The logic is that if they're willing to pay, say, $10 for a bad movie, they would be willing to pay even more for a good movie," said Hartmann. "This is underscored by the fact that they do pay more, even for a bad movie, as is seen in their concession buying. So for the times they're in the theater seeing good or popular movies, they're actually getting more quality than they would have needed to show up. That means that, essentially, you could have charged them a higher price for the ticket."
What are the 10 best movie kisses of all time? Click to find out and then vote for your favorite!
Should theaters flirt with raising their ticket prices then? No, says Hartmann. The diehard group does not represent the average movie viewer. While the film-o-philes might be willing to pay, say, $15 for a movie ticket, a theater that tried such a pricing tactic would soon find itself closing its doors.
Find out how a movie can help you "get in the mood" tonight!
