marketing strategies - case study: cinema
Driving growth in the UK cinema industry
Introduction
The UK cinema industry is a mature market that has enjoyed strong recent growth from the opening of multiplexes. What strategies can cinema operators employ to maintain growth?
UK cinema audiences keep rising, but as the market matures chains are turning to alternative content and loyalty schemes to encourage customers to forsake their home entertainment systems.
Cinema admissions in 2002 are expected to be at their highest since 1971, with a full-year projection of 174 million admissions. The growth in 2002 has been driven by a series of high-profile sequels to successful hits such as Lord of The Rings, Men In Black, Star Wars and Harry Potter. Admissions to cinemas are heavily dependent on releases.
Despite rising admissions, the UK still has a relatively low rate of cinema attendance. In 1995, UK customers visited the cinema an average of 1.84 times each. By 2001, this had grown to 2.62 visits (Dodona Research). Compare this to the US, where annual cinema visits per head stood at 4.7 in 1995, and by 2001 had risen to 4.97.
Options for growth
What are the options for encouraging greater consumer attendance at cinemas?
One option is non-film programming, which enables cinemas to make more use of their "downtime" during the week, and encourages non-regulars to visit modern venues with their innovative sound and projection facilities.
A good example of this was UCI’s recent broadcast of a Bon Jovi concert, whilst Odeon cinemas screened England's World Cup matches live in 2002. The chain has also held a computer games tournament, with the action up on the big screen.
A marketing manager at a leading cinema group commented recently:
"The cinema, to us, is an out-of-home big-screen experience. For the majority of people that means - and will continue to mean - films, but if we can put other things on the screen, which are entertaining and benefit from the big-screen format, we will."
The strategy of diversifying away from big-budget films may be a sensible move for cinemas – particularly since consumers have more opportunities to see these films outside of the cinema environment.
For example, digital broadband has the potential to deliver movies to the home, while DVD is proving attractive and driving sales of home cinema systems. Cumulative sales of DVD players in the UK were recently estimated at 4.5 million
While special effects-based movies still attract the crowds, who want to see them on the big screen, films from other genres do not need to be seen in the cinema for full enjoyment.
Building customer loyalty
In another move to increase the frequency of attendance, cinema chains are introducing loyalty schemes. Odeon has launched a trial £25-a-year VIP card at its Kensington site. The card entitles card holders to VIP seating, access to preview screenings and question-and-answer sessions with stars and directors.
UCI has a Gallery package, which gives customers willing to pay twice the normal ticket price free soft drinks, popcorn and hot beverages. It also allows them to bring alcohol into the auditorium.
While the Odeon and UCI initiatives seek to give added value for a higher cost, UGC Cinemas has adopted a different strategy. It is trying to increase attendance by using a discounted price strategy. Its Unlimited Card costs £9.99 a month (£12.99 for cinemas in the West End of London) and allows holders unlimited visits.
One chain that has yet to take up alternative programming or loyalty schemes is Warner Village. The chain is concentrating its resources on improving the film-watching experience and on developing revenue from the business sector. Warner has set up an events unit for corporate conferencing and hospitality, and is focusing on sponsorship packages.
Supply factors
Another factor impacting on cinema attendances is the supply of screens. One way of measuring the extent of supply is to calculate the number of cinema screens available per capita.
Research suggests that there are currently 18,843 people per screen in the UK (down from 1995 when there were 29,232). By comparison, in the US, there is a cinema screen for every 7,547 people, (against one for every 9,452 people in 1995).
This suggests that there is still scope for more screens in the UK, but chains are wary - the US has seen an oversupply, and many chains filed for bankruptcy protection in 2000.
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