Occupancy rates in the theatre have been volatile
The background of the firm has been explained and the nature of the problem is also clear. Batra Theatre has been facing the problem of declining sales and negative profits since the past two quarters. The reason may be attributed to the increase in competition within the film exhibition sector. Movie exhibition is the main business of the company which contributes to the revenues of the company on a consistent basis. But the occupancy rates in the theatre have been volatile and have impacted negatively by reducing sales and also profits of the company. I chose the topic to assess as to how Batra Theatre can increase its profitability and sales. Thus, my research Question is ‘Should Batra Theatre incorporate a flexible pricing strategy and marketing strategies to increase profits?"
I have taken the primary data from market surveys and from the management of the company. The secondary data has been taken from different web sites. The findings through the data collected are then analyzed using business analysis tools like SWOT and Porter’s Generic Strategies besides looking at Variable Pricing as a tool to increase the overall revenues of the company. Finally I would provide recommendations that the firm might decide to employ in order to increase their ticketing sales and improve profitability.
About the company
Batra Theatre was established in 1989 in Chandigarh by the Batra family and began with operations at the same time. The company was established as a pure exhibition house and with an objective of providing the viewers with a great movie watching experience. The company has one theatre in Sector 37 B in Chandigarh. The theatre is fitted with Dolby system in order to provide the audience with a great audio experience as well.
Line of business: The line of business that the company is in is exhibition business. It is the only business segment and an ancillary source of income exists which is Food and Beverages segment which add an insignificant amount to the total revenues earned. Under the Food and Beverages segment, the audience is provided with snacks during the interval of the movie show.
Present Situation: The study of the financials of the company show that the sales of the company have been declining. Also, the no. of ticket sales on peak days has declined whereas the ticket sales that accrue on weekdays have been more or less constant. Further, the high revenue generating tickets, that is, balcony tickets have undergone a 50% dip in sales in terms of number of tickets sold. All this has caused the business to decline overall. Owing to these problems faced by the company, my research question is: “Should ‘Batra Theatre’ incorporate a flexible pricing strategy and marketing strategies to increase profits?"
Research Question: Should ‘Batra Theatre Cinema’ incorporate a flexible pricing strategy and marketing strategies to increase profits?
Theoretical Framework: Batra Theatre is a Chandigarh based movie theatre hall and is one of the oldest cinema halls in Chandigarh. The theatre is run by the Batra family and enjoys customer loyalty where people prefer to go to watch their favorite movies in this hall. I have chosen this topic because the company’s profitability has been on the decline and the company sales have been falling. I seek to analyze the reasons and suggest recommendations in order to bring it back to profitability.
Methodology: The methodology that I will use will be an interview with the management to discuss how a change in pricing strategy can help increase the market share.
Anticipated difficulties: The limitations of my research proposal are the lack of information available from primary sources, i.e., the company management. Whatever information that could be gathered could not be processed further because of unavailability of the concerned personnel of the company to give time for discussion.
Topic proposed and selected.
10th June-19th June 2009
Initial Proposal penned down.
20st June 2009 – 5th July 2009
Surfing the internet to collect secondary data related to project.
6th July 2009 to 4th Aug 2009
Visiting Chandigarh, meeting the management, discussions, collection of primary data, visiting competitor theatres.
5th Aug 2009 – 10th Aug 2009
Completion of draft.
20th August 2009
Revision of draft.
25th August 2009
OBJECTIVES AND METHODOLOGY
To perform a SWOT analysis and identify the prime weaknesses and strength of the firm which will help in a deep analysis of the firm with respect to the causes of attrition.
To perform Porter’s Generic Strategies in order to learn whether the company can gain any competitive advantage.
Using Variable Pricing Strategy, we can see how the company can make the strategy’s use in order to make the top line healthy.
Falling Occupancy rates: The company is witnessing a fall in occupancy rates. Since the exhibition business is the main contributor to the business revenues, the profitability of the firm is on the decline. The company is going into losses due to the fall in occupancy rates.
Increase in Competition: Batra Theatre is amidst a highly competitive environment wherein larger exhibition brands like PVR have come up in the city which is eating into the business of the firm. Customers are shifting to multiplexes thus creating a larger gap of unoccupied seats in the theatre.
Management: The company’s management has been staid and has not taken measures to prevent the downfall by offering discounts to its existing customers or freebie in order to boost the ticket sales.
Old Infrastructure: Batra Theatre is an old hall in the city and needs refurbishment in order to offer a better internal ambience to the audience. There is a canteen that serves eateries to the customers but is nowhere in comparison to the serving outlets in terms of looks or hygiene. The infrastructure needs up gradation with respect to a better looking canteen and nice cushion seats inside the hall.
ANALYSIS & DISCUSSION
Financial & Non Financial Techniques: I analyzed the findings with non financial techniques like SWOT analysis and Porter’s Generic Strategies.
Current Occupancy (in percent)
Lower Stall@ Rs45 per ticket
Upper Stall@Rs65 per ticket
Balcony@Rs125 per ticket
One of the oldest cinema halls in Chandigarh thus the theatre has its own brand equity and customer loyalty.
Management is highly experienced in terms of no. of years of operations.
Located in Sector 37-B in Chandigarh which is right in the center of the city and is a hub of offices and entertainment of the city.
Theatre equipped with high definition audio systems thus technologically sound and appealing to customers.
Commands premium ticket pricing.
Management not proactive enough to adapt to the changes in the local exhibition space.
Pricing of tickets very rigid and without understanding the change in markets and not dynamic enough to lure customers.
Marketing activities near zero as the theatre relies on simply its brand value and location to woo customers.
Brand Equity limited to the local city. It is not a state wide brand even therefore the customer loyalty limited to the city locals.
Indian film industry growing at a brisk pace and a lot of low budget films as well as high budget blockbusters ensure that the theatres have so many options to exhibit and profit.
Hollywood films gaining popularity thus creating an extra avenue of exhibition and thus profits.
Different pricing can target different sets of customers.
The strong economic growth in and around the city creating disposable incomes in the hands of people thus a creation of a spending customer base.
Increase in the no. of film exhibition halls.
Variable pricing by other theatres affecting sales of the theatre.
Multiplexes being opened which provide a holistic experience with better F&B packages and multi film options that entice the film goers.
PORTER’s GENERIC STRATEGIES
Dr. Porter’s generic strategies outline the ways that any business can gain a competitive idea. Therefore, every successful business should have a competitive advantage to prevent profits being eroded by rivals entering the markets.
Cost Leadership: Batra Theatre is certainly not the price leader and which is mainly why its occupancy rates are falling. The other theatres are offering better pricing with respect to the peak times and happy hours. Variable pricing strategy could help the company break the cost leadership of other theatres that are operating on low cost and are taking away the market share of Batra Theatre rendering it uncompetitive.
Differentiation: As of now, the theatre does not offer any differentiation but with the variable pricing model, the theatre could offer some differentiation. Also, it needs to mass market the tickets and create a branding exercise targeting different customer groups. So far, there is nothing that the theatre offers in terms of differentiation.
Focus: Focus occurs when a firm targets a niche segment of the market. As such, the theatre has no focus on any special type of customer. It can focus on the youth as well as the general age group people by offering a good mix of new Hollywood releases along with Indian movies.
CONCLUSIONS & RECOMENDATIONS:
The exhibition business is highly dependent upon the number of films released and the quality of movies. According to reports, almost ninety percent of the revenues are generated by 30 percent of the films. Coupled with this fact, the exhibition business is also bound due to the seasonality in the business. Therefore, theatres should reduce the dependence on just blockbusters in order to generate revenues consistently for the firm.
The following business strategies can be deployed to generate better revenues:
Variable Pricing: Batra Theatre should introduce the concept of variable pricing so as to increase the sales of tickets and should employ different ticketing strategies not only looking at the age group of the consumers but also the timing and the day within the week. For example, for weekdays, the ticket pricing can be reduced and the balcony ticket prices can be reduced by 40% to Rs72per ticket and the lower stall and upper stall tickets should be reduced By Rs 20 each. This will boost the occupancy rates of the theatre. Many consumers in the upper stall category will actually shift to the balcony to enjoy a better view of the movie. This strategy can also help students come to the theatre and enjoy the movie at such low prices. Also, since the lower stall and upper stall tickets will stand reduced to just Rs.25/- and Rs.45/-, the categories would hugely attract and add low income crowds who are not able to watch the movie otherwise.
Food & Beverages: The margins in this segment are very huge and are as high as 60% to 70%. The firm could do well to focus creating a better ambience in the canteen and providing better packaging of popcorns and providing in house made burgers etc which would provide another source of revenue for the theatre.
Tying up with Corporates: Since the theatre enjoys a premium locational advantage, it could tie up with all offices and banks in its vicinity in Sector37 and push its ticket sales.
In theatre promotions: The theatre could also host alternative contents like screening Cricket matches, football matches and hockey tournaments and do corporate screenings as well. This would help boost the revenues of the firm.
The theatre is old and thus enjoys brand loyalty. It is centrally located which is an added advantage. All the management needs to do is to focus on right pricing the tickets and employing variable pricing strategies to increase occupancy. Out of the box thinking and management initiatives like corporate tie ups, screening special events and tying up with corporate and promoting in a right manner will disinter the company out of its present situation of flux and will bring the company back to profitability.