heiko rudolph

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twisted views & empty seats....
Watching a movie in an almost empty cinema one day, my thoughts went somewhat along the following lines:

Why is it that only about 5% of the capacity of this cinema being used ? Isn't this what one would call wasteful ?

All this capacity is being wasted, when other people could very easily see this movie with me and the cinema owner would not
lose anything. In fact the owner would gain the goodwill of those people who were able to watch the movie for free or a lower price.

This kind of reasoning was used by airlines in the days when 'standby' rates were available. The argument was that if the plane was going to go half empty, why not sell the empty seats cheaply and at least make some money ?

The flaw in the system both for the movie example and the standby rate system is that some people will assume they will be able to obtain cheap tickets and will not bother to book in advance.
As an aside: In engineering terms: the system is not linear, and it has feedback: the output affects the input which in turn affects the output and so forth… like all systems: there are stable and unstable systems. An unstable business system would lead to bankruptcy.

In the airline example: The rush to cheap tickets has to be balanced with the idea of not being sure that you will be able to get on a plane and the risk that there may not be a seat for you.

Regarding the movie example: Those people who had paid full price would be upset that they had to pay when the others paid less. Next time they might then wait and try to join the cheap queue.
So while the owner would not lose anything by letting others join the movie, the people who had paid the full price would wonder why they had to pay full price ?

The owner I would then have to work out a way of separating those who paid full price from those who did not. In the airline example this is easier to do, many people would not want to accept the risk of not obtaining a seat and having to return home or wait for many hours for the next flight.

Businesses separate customer groups all the time by geography, by age, by privilege etc...

If I was the owner of the movie hosue: I would realize that the 95% spare capacity of my movie house is wasted, it does not bring me anything. However since it would not cost me anything in dollar terms to have the theatre filled to say 25% capacity, how
could I use this capacity to gain some benefit, not necessarily financial) for my business ?

I could hold a lottery, whereby I make sure that enough people win free/cheap tickets to fill my theatre to about 25% to 50% capacity.
What would I gain from this (other than lots of work) ?
The name of my theatre would earn good will !
Those who won the lottery would see it as a bonus at the full value of a regular movie ticket, while the cost to my business is only: the administration of the lottery and some extra wear and tear of the furniture - I might even be able to sell more snacks and junk food and actually earn more in the process !

The process of holding the lottery, could be linked to a discount scheme in local shops. The shops would have something to give away to attract customers and I would obtain 'free' advertising for my movie theatre ! voilà ! Publicity in exchange for my spare capacity !

NB: We have so far assumed that more people would watch movies if the price was lower. - see how well "cheap Mondays" work to gauge the effect of lower prices on attendance…

Melbourne, March 2005, © Heiko Rudolph


© 2003 heiko rudolph

 

'dance me to the children that are asking to be born....'    Leonard Cohen