Meat Pie said:
Cdd - If you honestly think the money from up-selling goes anywhere but the shareholder's pockets, I feel you are sadly mistaken. If you got rid of these 'premium' products, it would not have an effect on standard ticket prices, unless of course Merlin wanted to put their prices so out of reach of their primary customer base that they would lose buisness.
I don't believe it all gets invested into the park again by any stretch. It's just an elaborate method of
market segmentation.
I highly recommend you read the link (and it has more economic relevance to a theme park than you might imagine, mainly because the unit cost to the vendor of both software and theme park entry is approximately zero, and both include significant sunk costs), but to summarise:
- Variable pricing works better than a flat entry fee because it maximises consumer surplus [difference between the price people will pay and the price they are asked to pay] and low-end consumers [those who can't afford the flat entry fee at all] that would be lost out on if they were charging a flat fee.
- Merlin's aim is (or should be) to get people to pay the maximum they are prepared to pay. This maximises revenue.
- Asking people how rich they are and charging them accordingly doesn't tend to go down all that well as a business strategy, so they have to offer something (that doesn't cost them anything, because that would defeat the point) to convince those who are paying the higher rate that they are getting value for money.
- The best way to offer a tangible perk that costs no money, whether you like it or not, is to treat those paying more better than those paying less. Hence: premium parking, queue jumping, etc.
- Making the perks scalable, again, maximises consumer surplus (if you'd be happy paying £30 to get in, you'd get your entry ticket + a £10 fasttrack; if you'd be happy paying £70, you'd get the entry ticket and a £50 fasttrack; and if you'd be happy paying £130, you'd get the entry ticket, unlimited fasttrack and premium parking, and trust me, some people are.
- Most importantly, capturing consumer surplus at the top end also allows them to capture lost revenue at the bottom end by keeping the entry fee low.
If a law were passed saying Merlin could only charge a flat entry fee and no more, I can
assure you it would be greater than £20. Why? Because the revenue lost by those who could afford £20 but can't afford £30 would be made up for by those who would be only too happy to pay £30 (since they were happy to pay £130 beforehand). It's all about finding that sweet spot between cost and ticket sales, and trust me, £20 is NOT the sweet spot. It's only where it is because Merlin have other ways of getting the additional revenue off those who are prepared to pay more.
Let's assume, just for a moment - for the sake of argument, if you will - that the sweet spot is £30. (I would actually guess it's more, since you need coupons to get a £20 entry, but I'm trying to be uncontroversial here). There's no paid discrimination, but everyone has to pay £30 to get in. That's a lot of families who can no longer get into Alton Towers because they can't afford the new,
genuine entry fee that maximises profits. Good?
I'm guessing it hasn't escaped your notice that the price of a Standard Merlin Pass has remained the same, despite inflation having taken place - and the 'value' of a premium pass has increased significantly. Entirely unrelated to a VIP pass taking up the top-end? Or the magic of market segmentation in action?
)
