How to Achieve Movie-Popcorn Pricing

How do you get customers to pay a premium for your offering? It's all psychological

Written by Mira Shenker

This story from Smithsonian Mag about why we eat popcorn at the movies explains why theatre-goers are willing to pay $15 for what is essentially air. The experience of going to the movies is, for many people, inextricably linked to the salty, puffy snack. “To a lot of people it has that ritualistic experience,” says Hamid Hashemi, CEO of iPic Theaters.

When you consider how insane the margin is on popcorn—movie theaters make an estimated 85% profit on concession sales—you have to wonder: what else are people willing to way overpay for?

PROFIT columnist Rick Spence wrote this blog back in 2007, urging business owners to raise their prices. Even a small increase in price can pad your margin significantly.

But you can’t boost prices in a vacuum. If you’re charging a higher price for your product or service, the customer needs to feel there’s a reason for it. For theatre-goers, the justification is, “I’m at the movies; I have to get snacks. This is just what it costs.” It’s emotional, not logical.

How do you get to the movie-theatre popcorn scenario?

Behavioural economists will tell you it’s not always about actually improving upon your current offering. People make buying decisions for many other reasons than price. (Read this useful primer on behavioural economics.)

Here are a few ways to raise your prices and win more customers:

1. Price anchoring and premium options. This Shopify story by marketer Gregory Clotti points to research conducted by cognitive and mathematical psychologist Amos Tversky and psychologist Daniel Kahneman. Their work reveals one important thing about buying behaviour: we’re willing to pay higher prices when they are “anchored” by an even higher price. Offer three options, from least expensive to premium, and most people will go for the middle one.

2. Go luxury. While most people will go for that middle option, there are always those who will favour the luxury option. Businesses are afraid customers will abandon them if their product or service suddenly costs more. But pricing well above your competition may actually win you clients. For this story on how to price for profit, John Lorinc spoke with Brynn Winegard, a Toronto marketing consultant and professor at Ryerson University, who pointed out that psychology plays a role in the consumer’s buying decisions. “Pricing often gets overlooked as a tactic for differentiating your product,” says Winegard. “If your price is a little bit more [than the competition], people will believe you’re a little bit better.”

If you’re shooting for this, commit to the luxury image. If you have a product, look at more luxe looking packaging. If you provide a service, consider affordable ways to make your offices look worthy of an elite client.

3. Brand yourself as better than the rest by being better. Spence tells the story of columnist Andy Buyting, then president of Green Village Home & Garden. In spring 2006, Buyting raised the price of his best-selling SKU— a tray of 12 bedding plants—from $4.99 to $5.99. They sold out with no resistance from customers. That single price change boosted profit by $16,000. In 2007, Buyting ordered the same plants in trays bearing the Green Village logo, and raised the price to $6.99. They sold out in no time.

What did Buyting do to justify the price increase? He upped the quality and service of his offering. Buyting invested in staff training, spruced up the facilities and brought in more specialty merchandise, stealing the funds from his advertising budget. You might go a different route and increase your advertising or PR budget to express to customers what’s unique about your brand or offering. (Read: What’s Your Competitive Advantage?)

Some companies are already overdue to boost prices. Many solo consultants have put off raising their fees for years. Retailers worry about losing market share if they pass on their higher costs. What all of these entrepreneurs need to remember is that, in the right contexts, people are willing to pay $15 for corn, salt and air.

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