Wednesday, February 6, 2008

Movie Theater Syndrome

popcorn A few nights ago my girlfriend and I went to see National Treasure 2 (which was surprisingly decent). So, we got our tickets and went to get some popcorn and soda. On the wall behind the counter was a menu with combo's of soda, popcorn, and candy...but no prices.


So, we decided to share a popcorn and get a couple of soda's. We asked the cashier, "how much is the #2 combo?" The answer nearly knocked me over, "it's 17 dollars". Wh-wha-what!?


To me this just seams like poor business practice.


Here's how I see it. Somebody in an office at theater HQ decided it would be a great idea to raise the prices a bit on concession at the theater because, well, "people are going to buy it no matter what".


This little plan backfires as more and more people (like me) sneak food in from Walmart because we refuse to pay 5 bucks for a medium soda.


The same guy at HQ panics as profits from concession begin to fall again. In an effort to keep profits up while customers are down, they raise the price again. Less and less people buy their movie eats at the theater itself, and the prices keep rising in an effort to keep profits up.


On, and on and on...Until I now have to fork over $17 for a couple medium sodas and a popcorn. Needless to say, we got a water and moved on.


And they wonder why theater attendance is down...


What does this have to do with credit unions you might ask?

Aside from the fact that we might have to start offering small loans to buy food at the movies, its a great example of a pitfall we want to avoid.


Unfortunately membership growth at most credit unions is pretty stagnant and margins are crunching. Its easy to get caught up in this thinking. If new people aren't coming in, and the people we have aren't making us the money we want, we could just charge people a bit more and get back some of that profit in the form of fees.


In my opinion that is counter productive to the growth you'd like to see. Adding a new fee or raising an existing one is just a temporary patch on a much bigger issue. If anything, raising the cost of having an account is going to drive more people away.


Just like raising the prices of food at the theater, it might hide the symptoms for a bit, but then what? Where do you take it once profit levels off again?


The rise in fees creates an illusion, it tricks the numbers into showing you what you want: an increase in profit. Once they get out of hand (like 17 bucks for a couple sodas) you're in trouble. The people that were making you that profit on fees will start looking for other places to put their money.

3 comments:

Brian Scott said...

Great analogy! I absolutely agree! Finding ways to make it easy for your members to do business with you is critical. I head another story the other day about the guys who invented the Palm handhelds. They had a person on staff whose sole mission was to count the number of taps it took to perform any function. If the number of taps was over a certain number that was deemed as being too many, they re-wrote the programming to make it easier. Seems like a great position for a credit union to have...a Cheif Break Down the Barriers Officer!

Trey Reeme said...

To clarify, you did buy the combo? ;)

Andy said...

@brian

Thats a great way to think about things. We're working on our web site and its hard to think of things from the member's side of things. I tend to get caught up in the function instead of the usability.

@trey

Haha, unless they start giving away a DVD of the feature presentation with my soda they won't get me to buy that combo in a million years :)