The ‘Price’ of Success

by Peter Thorpe

For some people, dropping prices is the only way they know to combat competition.
But there is a better way - add value!

Some time ago I was booked to give the keynote address at the annual conference of the Cinema Owners Association of Australia (the COAA), a group of smaller, independent cinema owners.

My topic was ‘marketing’ and in the preliminary briefing, I was told that their main problem (collectively), was price competition. To quote the words of Gomer Pile – surprise, surprise!

It’s a funny thing but these days, wherever I go, whether I’m speaking or consulting, the main marketing problem always seems to be price competition.

“You have to understand, Peter”, they tell me, “It’s different in the: tyre, travel, electrical, computer, building products, publishing, plumbing, engineering, strata management, funeral service, (etc.) business. You see, in our business, people mainly buy on price!”

More on that later but meanwhile, back to the COAA assignment.

A little market research

My knowledge of the movie business is largely limited to my infrequent visits to my local cinema so, as usual, I decided to undertake some market research. My findings greatly surprised me.

Firstly, let me ask you a question:

How often do you think the average Australian man, woman or child goes to the movies each year?

The answer is about 3.9 times.

That may or may not surprise you but let me ask you a further question:

How often do you think people went to the movies in the 1930s, when movies were the main form of entertainment?

Before you answer, bear in mind that back then, there was no television, no videos, cable TV, computer games, Internet and no registered clubs. So, the answer will probably surprise you, as much as it surprised me:

Answer: About the same!

Yes, believe it or not, people in Australia today, go to the movies about the same number of times a year, as they did back in the 1930s. In fact, the attendance figures have varied only slightly over the last 60 years. Amazing!

In spite of all the fantastic electronic gadgetry and gizmos man has invented during that time, the good old ‘flicks’ have well and truly held their own.

Of course, the way the product is delivered has changed somewhat. These days, the local cinema has all but disappeared in many suburban and country town locations. It has been replaced by the ‘entertainment complex’, – multiple screen theatres combined with video games, etc.

So, what has happened to the local cinema operator and what does the future hold for them? Well, surprise, surprise once again. While many of them have gone out of business, some of them are doing extremely well.

Take for instance, Harry Waghorn, who is the owner of the Gala cinema in Wollongong, NSW (he’s also the President of the COAA). Harry had been happily operating his theatre for over 17 years when suddenly, his worst nightmare came true. He learned that Hoyts had made an application to open a six screen cinema complex right opposite the Gala. Looked like Harry’s business was deader than the legendary screen idol, Rudolph Valentino!

But guess what?

Not only did Harry’s business survive, it thrived! In the 10 years since the Hoyts complex opened, the Gala has increased both turnover and profits every single year. (Harry doesn’t want me to tell you by how much but it’s substantial!)

How can that be?

Well, for starters, Hoyts spent a lot of money Harry couldn’t normally afford, promoting movies. This has resulted in people in the area generally going to the movies more often.

But that’s not the only reason. Harry is also a smart marketer and he has been continually able to beat the big boys at their own game by adding value.

Space here doesn’t permit me to tell you all of the ways he has done this but let me give you one major example:

At a time when most small business owners would have been reaching for the rusty razor blades, Harry went out and bravely spent $100,000 on a complete refurbishment and a new Dolby sound system for his theatre.

Now, with its huge screen and ‘surround sound’, going to the Gala is no longer just a trip to the movies, it’s a total ‘entertainment experience’.

Titanic battle

When the movie ‘Titanic’ was released, it wasn’t available to Harry until 18 weeks after the Hoyts complex had shown it (another challenge he faces!). But Harry says many of the locals were happy to wait the 18 weeks and ‘experience’ it at the Gala, rather than just ‘see’ it at Hoyts.

He also does partnership marketing deals by offering packages with local restaurants, shopper docket specials and much more. Harry Waghorn’s Gala Cinema is a living testament to the fact that you can overcome the toughest competition by adding value, not just by simply cutting prices.