Mark Ritson: “Reading this on Thursday morning? That’ll be 8p more please. Why dynamic pricing is hot”

Odeon Cinemas is introducing dynamic pricing for film tickets – the most sensible idea I’ve heard since Ryanair introduced its ‘U-shaped temporal pricing profile’.

Ritson featured image

The good wife and I were among the first people to see Gone Girl. We grabbed tickets on an impulse minutes before the 7.30pm showing on opening night and smugly walked into the cinema just as the film was starting.

The smugness did not last long as the first flickers from the big screen revealed that there were only two seats left and they were jammed into the front row, far right corner. I spent two incredibly uncomfortable hours attempting to angle my head in just the right manner to be able to make sense of what was happening on the very large screen directly above me. Two hours of Ben Affleck’s chin was pretty much all I could make out.

The problem, as I pointed out to my long-suffering other half during the equally odd drive home as our sense of depth and perspective slowly returned to normal, was that prices for the opening weekend for such a hot movie were too low. If you run a cinema I’m sure it’s great to see a full house on a Friday night. But I bet its even greater to see it almost full and 40% more profits per showing.

That’s the theory behind Odeon Cinemas’ new policy of dynamic pricing. The film industry blog Film Divider recently discovered that if you booked tickets for Interstellar, the latest episode in the Hunger Games saga or the upcoming Hobbit finale, you’d pay an extra pound versus other films at Odeon Cinemas. It’s blockbuster thinking that should have happened years ago.

The limited supply of seats at Odeon cinemas combined with the mercurial demand surges for hot new films mean anything other than dynamic pricing will leave millions of pounds on the table. And it’s not all about charging more: with a flexible approach to pricing, Odeon could begin to offer lower prices for less popular time slots and films. Indeed Zygi Kamasa, the head of British film production company Lionsgate, has embraced the concept of dynamic pricing for exactly that reason. “A blockbuster can cost $250m and a UK independent film can cost $4m but it’s £10 or more to see both. I think we should see UK films priced at £4 and US films at £10”. I’m not quite sure he gets it, but I admire the attempt.

Of course the biggest advantage of dynamic pricing is it removes the weak link in any pricing strategy – the marketer. Prices might look clever, definitive and scientific when they are printed on a label but most prices are set with a reckless disregard for even the faintest whiff of analytics. Pricing remains an entirely amateur confection in most cases. Equal parts bingo and voodoo.

With true dynamic pricing, companies aren’t just able to variably price different films on different nights, they can charge alternative prices for the same film on the same night. It’s exactly what Ryanair does faced with very similar supply-and-demand constraints to Odeon’s. The Irish airline’s ‘U-shaped temporal pricing profile’ combined with very advanced analytics allows it to promote low prices but sell the last tickets on its routes for up to 40 times the promotional price for exactly the same seat and service. Why not Odeon?

Last December I found myself on the Upper West Side in New York in the worst snow storm I have ever seen. Thank God for Uber and for its ‘surge pricing’ which meant I had to pay six times the usual fare to get me home, but at least there was a car out there. As Uber’s CEO Travis Kalanick tells next month’s Vanity Fair: “You want supply to always be full, and you use price to either bring more supply on or more supply off, or get more demand in the system or get some demand out. It’s classic Econ 101.”

It is indeed. Which prompts the thought that it’s not Odeon Cinemas we should be talking about here but all the other moron cinemas that charge punters the same 14 quid to go see Let’s Be Cops on a wet Wednesday afternoon three weeks after it opened as they did for the opening weekend of Interstellar.

I hope you agree. If you’ve read all the way to this bottom part on or before Friday evening, the cost of your Marketing Week subscription just went up by 8p. That’s Econ 101.

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Comments
  • Caroline Davies 26 Nov 2014 at 1:15 pm

    Interesting idea – but wouldn’t you want to pay less for the crappy seats at the front where you only get to see Ben Affleck’s chin uncomfortably up close? Not more, as you suggest that the last seats would cost more, because technically they’re more desirable? The flaw in your entire argument is, of course, that you are putting the business and commercials first, not the Shopper/Consumer – and for companies who are trying to become more shopper-centric, this model will not work.

  • Al King 26 Nov 2014 at 2:28 pm

    Pricing? That’s so last decade. In the brave new world of free to play we give a premium product away free. Completely FREE with the full feature set. When you make something good enough you can do it because a sufficiently large % of your customer base will then choose to pay for premium add on and services. It forces product quality right to the top. But poseurs beware: It takes balls of steel.

  • David Ward 27 Nov 2014 at 12:09 pm

    i agree with @Caroline Davies that the argument is flawed, but not for the same reason. If the film was being shown only in one cinema, on one day, then there could be an argument for dynamic pricing. However, as the film is on general release, the consumer can merely go to another cinema or wait a few days until the novelty has worn off and the early adopters have been to see it.

    Where dynamic pricing works, – e.g. in the airline industry and for baseball matches – is where there is unique, perishable inventory whose value varies for different consumers.

  • Graham H 28 Nov 2014 at 12:53 pm

    or you can just book 2 for 1 orange wednesday. sorted

  • Xabier Izaguirre 1 Dec 2014 at 1:53 pm

    Dynamic pricing introduces a cognitive tax on consumers who need to deal with more variables to analyse before deciding whether the purchase is a good decision or not. Behavioural studies show that the more things to take into account, the more likely the consumer is going to walk away, paralysed.

    Just something else to think about…

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