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Consider your market - No, REALLY consider your market!

August 3, 2011

Most of you reading this may be tempted to skip over this - After all, the title is suggestive of Marketing 101, right ? Right ? If it is, then why, oh why are so many products and services aimed at people who cannot afford them, use them or need them ?

Todays' article was inspired by a friend who manages a theatre: She was telling me that a local production for a childrens' show was suffering from low turnout and its future was in question. Why does it suffer from low turnout, you ask ? Well, the cost to attend this show is $29.95 per person.

Yes, per person - Young, old, babies, toddlers, families, individuals, it is per person. For a typical North American nuclear family of four, it would be $135.37 ( 4 x $29.95 + 13% GST) to attend this childrens' show.

Now, some of you, especially those who earn a good amount of money, will be saying that a hundred and forty dollars is a good price for a family of four for an evenings' live entertainment.

However: According to www.pembrokeontario.com/economic-development/site-selection/demographics , the average family income for Pembroke is $77,506, before taxes. For the sake of simplicity, let's assume 33% in taxes (According to the Fraser Institute, however, the average Canadian total tax burden is closer to 41.5%) so the family income goes from $77,506 to $51,929.02. To make the next paragraph easier, let's divide that by twelve, to get an idea of monthly money: $4,327.42. Across Ontario, the average monthly housing cost (rent/mortgage alone) is $814.64, according to CMHC. A Nutritious diet for a family of four is $759 ( www.ottawa.ca/residents/health/living/nutrition/services/price_eating_well_en.html )

Pulling a bunch of numbers from www.immigration.ca/primer-ontario.pdf tells us that average monthly expenditure for everything else, including: Household Operation, Household Furnishings, Clothing, Transportation, Health Care, Personal care, Recreation, Reading Materials, Education, Tobacco and Alcohol, Games of Chance and Miscellany works out to between $2000 - $2800, depending on where you live in Ontario: Taking the lower end of that (for the Pembroke example), that's $2,000 for all of the above. Let's be scrupulously fair and remove $425.00 from that number, which is the monthly average entertainment amount. When all is said and done, the average target market in Pembroke, Ontario, will have $1,178.78 left over for the month - You'll note that the categories above do not include things like RRSP or RESP contributions, emergency funds (Car break downs, emergency medical, emergency home repair, etc). Assuming that the average Ontarian doesn't save for trivial things like a retirement, education or unforeseen emergencies (in case you missed it, that last sentence is dripping with sarcasm), this leaves a grand total of $39.29 per day for anything else. Let's be generous and say an even $40.

So back to our original example of the theatre production at $135.37 for the family of four: This means spending 3.38 days worth of 'other' money for one nights' entertainment (Which does not include the cost of getting there, food, beverages and the like) - Let's say four days worth of cash for one evenings' worth of entertainment, or about three hours.

Of course, your average consumer doesn't break down their costs to 'daily allotment of "other" spending money", but more along the lines of "How much is it going to cost and what's in it for me ?" In this case, a children's show will most likely be seen by at least three people (Mother, Father and child or single parent and two children) and often by four people (two parents, two children), which breaks down to $101.53 in the three person scenario and $135.37 for four - For about three hours of entertainment. You can expect to add anywhere between twenty to fifty dollars to that for cost of transportation, food and beverage for the evening, bringing the expense to just under two hundred dollars (or five days worth of 'other' money for the entire family). That is asking a lot for just one evening which, with all due respect to the childrens' show production, isn't exactly the same level of quality as, say, Les Miserables or Phantom of the Opera (Or Phantom Menace, for that matter :) )

In the "Let's call a spade a spade" department, let us also recognize that live theatre does not have the same drawing power as, say, modern movies, theme parks or sports events (Professional or Bantam league) - Yet the pricing suggests that they're top notch in everyones' estimation which they are obviously not.

So what should they have done to increase both attendance and revenues ?

Firstly, the whole pricing scheme should be revamped. You could either take the standard route of higher price for adults and lower tiers for children or - my preference - charge the premium amount for each child under 12, a slightly lower amount for 13-18 and a token cover charge for the adults - After all, it's not like Mom and Dad are attending a live action reproduction of a show designed for the 4-12 market for their own entertainment.

The next - and tied in - strategy would have been to either focus in on concession sales (if applicable - not all venues make this available) and, more likely, sales of show-related merchandise pre-show, during intermission and post-show, with the offer of autographed items from the cast as incentive (Heck, some add a fee for the autographs).

Another creative option would be a ticket sale for a drawing during intermission where the winner would be called on stage for participation in a scene, with photographs provided to the winner (for a (optional) fee). In addition to the purely 'gravy' revenue this would provide, it creates incentive for repeat visits for those members of the audience who particularly crave their 'time in the limelight'.

In all, the major mistake made by this production was the utter failure to consider their market - In Pembroke, $100 for a family outing is pushing it a little. $50 is a lot more palatable, with extras and options being just that: Optional; The basic entertainment is there for an affordable price and the extras (and profit that goes with it) is there for those who can afford it, but not required and therefore not a detriment that keeps people who would have attended away from the show in the first place.

What does this mean to you and your product or service ?

So you think that your product or service is so different from a childrens' live action production that this advice doesn't apply to you ? Think again. Every market is different. There is a reason for the expression "charge what the market will bear" - If your products' cost is $100 and you need to make at least twenty percent profit to justify a sale, selling in a region where the average income is $18,000 a year is financial suicide. Unless you are selling a product or service in the twenty dollar or lower range (and even then, you may fall into the 'too low to be considered valuable' category), even a national, single-message campaign will see tens of thousands of dollars wasted on entire markets that simply cannot afford what you are trying to sell.

All the statistics provided in this article for Pembroke, Ottawa, Toronto, Kitchener and Waterloo, Ontario (the five cities used to make up average numbers) were all easily found from reliable sources using a search engine within a few minutes. I did it just to reinforce the credibility of this article - Shouldn't you be doing the same to increase the sales for your business ?

Marc Bissonnette, Beachburg, Ontario, Canada

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