It's all about perceived value, not just price

Many location-based entertainment (LBE) owners think that value is all about price. Their strategy is to discount their prices to survive tough times, thinking that will drive business. Perceived value in the eye of many consumers, however, is not all about price. Perceived value deals with price, the expenditure of leisure time, and the total experience. The issue of time can sometimes be even more important than price. Higher socioeconomic consumers, those from households headed by a college graduate, account for nearly three-quarters of all out-of-home entertainment and arts spending. The cost of attending an LBE, with the possible exception of ones on trips such as Disney World, is not an issue to these consumers. They can afford it.

What is more important is their limited disposable leisure time. These higher socioeconomic consumers care more about value related to their use of their leisure time than they used to. They don't want to make mistakes and waste their precious leisure time. Is the experience good enough to warrant the use of their leisure time? Will it be time well spent?

For example, if admission to a cinema is $10, but there are no good movies playing, $10 is too expensive to see a so-so movie. But if there is a great movie showing, then $13 is considered a decent value (assuming you're not jobless and totally broke). The success of IMAX and blockbuster movies indicates that consumers are willing to trade up to a higher admission price for an even better movie-going experience.

When businesses discount too much, and too consistently, they teach their customers the regular price is too high. Many years ago, the pizza delivery business got in trouble with 50% off coupons. They taught customers that pizzas weren't worth full price, so if you didn't have a 50% off coupon, you didn't buy. Discounting, if not handled properly, can destroy long-term success. Once you teach the consumer your full price is not a good deal, you can never go back.

There's a second problem with discounting for the short term. It can change your customer base and drive away your core loyal customers. Like it or not, we are socioeconomic creatures. We like to be in places with our own tribe. If an LBE that traditionally attracts higher socioeconomic customers suddenly lowers prices, which in turn attracts lower socioeconomic customers, or if an adult-oriented LBE suddenly attracts families, then it drives away its core customers. Such practices can hurt not only sales short term, but long term, as well.

Subscribe to monthly Leisure eNewsletter