Thursday, March 06, 2014

Disney Ups Prices

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Citing expanding costs and increasing demand, Disney Parks representatives recently released their 2014 single-day admission rates for their Florida-based theme parks. Surprising no one, the prices have gone up to nearly $100 for a single-day ticket.

This announcement set off the standard series of scathing responses and grousing in print, online, and on the web. But Ronn Torossian, CEO of 5WPR, says Disney has nothing to worry about. Torossian said the company long ago established a solid business model for increasing ticket sales. A model that, Torossian says, other parks have followed and that even businesses in other sectors could learn a thing or two from.

Here are four reasons why Torossian says this move will not hurt the Mouse at all.

#1 - The increase is relatively minor
While the thought of a single-day ticket flirting ever closer with triple digits gives some people sticker shock, the reality is that this increase is only a few dollars. Most Disney vacationers plan on spending hundreds, if not thousands, on hotels, travel, food, and souvenirs. An extra couple of bucks per person is easily absorbed when you are budgeting in the four figures.

#2 - Package deals erase the extra cost
In addition to the Principle of Relative Cost, Torossian says the vast majority of Disney visitors are not paying face value in the first place. Most tickets are purchased as packages, or receive other individual or group discounts. Some are sold as multi-park deals or come with hotel stays—or both. Whatever the case, consumers are seeing substantial savings and purchasing ticket prices far below the retail price.

#3 - People understand cost increases, even if they don’t like them
The basic reality of life is that stuff will continue to cost more over time. None of us WANT to pay more for food, fuel, or entertainment, but we understand the basic market principle. Sure movies used to cost a buck. Now they cost ten or fifteen. People still go in droves to see the latest release. In some cases people cut back to conserve cash, but Disney visitors have been budgeting (relatively) big money for theme park vacations for years. Sure, it cost their parents less to take them when they were kids, but everything else cost less too.

#4 – The dynamic of timing-value-perception
One final point Torossian cites is that the cost increases were released shortly after Disney announced several improvements, enhancements, and renovations to their Orlando parks. Given the juxtaposition of these releases, consumers will interpret the increased prices as commensurate with the increased value, realized by the renovations and enhancements. Thus, instead of seeing increased prices as unfair, they will view them as evidence of increased value. 

This placement, Torossian said, is a lesson that ALL businesses should apply any time they plan a price increase. When you show the customer that you are working to give them more value, they understand a slightly increased cost.

This dynamic works in contrast to the lesson of Netflix, where customers were suddenly asked to pay twice as much for the same content.

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