Essay Assignment for Chapter 11:
Santa Fe, New Mexico, is a tourist-destination town with a year-round population of 68,000 and approximately 1 million visitors each year. The median age of its residents is 42 years with 20% of the population over 65. 49% of the residents are college graduates with a median income of $50,000.The Devargas 6 is a small cinema complex near the Devargas Mall. It has six theatres, each with 100 seats. Currently, ticket prices are as follows with an average ticket price of $8.00:
Adult $9.25
Matinee $7.00
Children $6.50
Seniors $6.50
Students $8.25
Military $8.25
Historical ticket-sales data reveal that the theatre-complex averages 50% capacity daily for its three showings (one matinee and two evening) in each theatre with few showings demanding maximum capacity. Theatre management is considering some major changes to their pricing strategy. They are considering charging a flat fee of $7.00 for movies in theatres one, two and three-which show G, PG and PG-13 rated movies. Theatres four and five will adopt a reserved-seating format with matinees at $8.00 and evening showings at $10.00. Theatre six will be re-configured into a private club environment with 50 recliner seats and will be used for first-run, high-demand movies and special cinemas d'art that are especially popular in Santa Fe. This theatre will be luxurious and exclusive and feature a separate gourmet snack/beverage bar for its guests. Each seat will be reserved and tickets will be priced at $25 each.
Answer each of the following questions in as much detail as possible. Each response should be at least two paragraphs in length, to ensure that your have justified your response. Outside references may be used but are not required.
- Do you think the proposed pricing strategy will match the product attributes and perceived consumer benefits?
- Do you think the Devargas 6 market is price sensitive? Why or why not? What could Devargas do to decrease price sensitivity?
- The management believes that their movie theatre in Santa Fe is relatively "recession proof." Do you agree? Why or why not?
- Referring to the four pricing objectives listed in the text, in what ways do you think the new tiered-pricing strategy meets these objectives? (Profitability,Volume,Meeting Competition and Prestige)