Some work, some don’t

We all know that profits in the movie theater business are at the concession stand. We also know that increasing your average concession sale per customer—your per cap, is a critical function for a theater owner or manager, ranking just above food and shelter.

There are multiple methods to achieve this increase. The problem is that some of the methods work, some don’t, and it is not readily apparent which do and which don’t.
Here are nine common strategies to increase profits:

1. Raise prices
2. Increase product offerings
3. Add combos
4. Offer coupons
5. Offer special concession pricing on particular nights
6. Lower concession costs
7. Improve signage
8. Reduce lines at stand
9. Train employees to upsell

Two of above work well, three can work OK, and four don’t work.

Here we go:

1. Raising prices
Works like a charm and here’s a little secret I’ve learned—you can raise prices more than you think you can.  However, some caveats apply:

a. For maximum return with minimal damage, ticket and concession prices are best raised together and before a busy season. But don’t hesitate to raise concession prices alone if ticket prices are static but you feel concessions can be bumped up.

b. Do not raise concession prices too often—more than once a year, or on every single item. The theory is you don’t want to always seem to be raising prices.

c. Keep price increases reasonable; say 5% or 25 to 50 cents.

d. Keep in mind the next whole dollar amount; it’s easier to go from $3.25 to $3.75 than from $3.75 to $4.25.

e. Politely ignore customers who say, “Your prices are too high.” Customers always say your prices are too high and they will say this even as you are struggling to meet expenses. When your per cap goes down after a price increase, your prices are too high.

f. Err on the side of the smaller price increases as bad PR can be created by reaching the point described above.

g. Note your competitor’s prices.
For comparison, the largest theater chain in the country, Regal Cinemas, had a chain-wide average concession per cap of $4.16 for 2015. This figure comes from Regal’s 10-K SEC filing for 2015. Well-run smaller theaters should average maybe 10-20% below the chain.
Do take into account pricing in your area as well; Regal might average $4.90 in expensive markets while lower priced markets might come in at $3.50. Art theater per caps are perhaps 2/3 of commercial per caps. Finally, all these figures have sales tax backed out.

2. Increase product offerings
For small to mid-size straight movie theaters — no bar or restaurant, this doesn’t work. You already know and offer the items that sell well and increasing the number you offer for the sake of a wider selection increases spoilage and complicates inventory.
Note that I’ve italicized small to mid-size movie theaters and no bar or restaurant because adding more product offerings at large or restaurant/bar theaters can increase sales, but these are different beasts; greater capital investments, higher operating expenses, etc.

3. Add combos
Works OK assuming you now only have 1-2 combos. A couple of thoughts:

a. Don’t have more than they say 3-4 combos; you can easily make things too complicated. Here are examples that usually work:
– Medium popcorn & drink or large popcorn & drink.
– Medium popcorn and drink with a candy
– Large popcorn and two medium drinks
– Whatever sells well at your theater

b. Offer a decent discount for buying the combo, at least $1, preferably $2. We’ve already raised the prices from #1, give them a nice break for buying a combo.

4. Offer coupons
Works OK, it can break loose some sales that would otherwise have not occurred. Thoughts on coupons:

a. Offer a good discount for a decent sized sale; larger sales with larger discounts are a winner.
b. Track coupon redemption in your POS, otherwise you have no idea if they’re working.
c. Consider limiting concession coupon to Sun-Thurs, but don’t feel you must limit to off-peak. I personally don’t like limited coupons, but the spreadsheet indicates it makes sense to limit.
d. Most coupons are emailed with a bar code, but you can hand out to your customers as they exit. Print the offer big and bold and have a trash can ten feet down their walk path. If more than, say, 25% are in the trash your offer is not good enough.
e. If customers manage to get hold of the coupon from above on entry, just let it happen and don’t beat them up. It’s still a good sale.

5. Offer special concession pricing on particular nights
Doesn’t work, customers should have to work a little for discounts and this just gives them a discount for no effort. A better strategy is to have a discount ticket night, keep concession prices where they are and offer coupons, combos, etc.

6. Lower concession costs
This would work if you could do it, but you pretty much can’t. I’m assuming you’re already buying at the best price you can, being careful with spoilage on high cost items like baked goods and chocolate and keeping track of inventory. As a guide, your cost of goods for concessions should be 16-20% of sales; major circuits run 12-14%.

7. Improve signage
This can work but only if your current signage stinks. Signage must be easy to read and clear. The clear is where theater operators can miss the boat. They look at their sign every day and they think it’s clear, but then customers ask the same question over and over or spend 20 seconds figuring out what they want. That’s no good. 75% of customers should be able to look and find what they want in 3 seconds or less. So don’t look at your sign to see if it stinks, look and listen to your customers looking at your sign.
Finally, if you do have problems with your signage, consider consulting a sign professional. Signs are a specialty skill and the fact that you have sign software or did your Aunt Tilly’s signs at her organic egg market does not make you a good sign designer.

8. Reduce lines at stand
This paradoxically doesn’t work. You sure would think that having a shorter line would help concession sales, but studies show that it does not help, or increases sales only very minimally. People will wait in line. One theory of food lines even says the opposite; if the line is long, then the product is more desirable—kind of a herd mentality thing. The best advice is to staff according to what feels right and doesn’t create a line that is outrageously long or slow moving.

9. Train employees to upsell
This works. A few caveats.

a. Training. Most employees are not born upsellers and they need training and managers that show by example how to upsell correctly and politely.
b. To start: You need your POS to suggest the upsell; you can’t expect employees to remember that when a customer buys a medium popcorn, they can add a drink for $1.75 more.
c. The upsell has to offer a good value—similar to a coupon, and should not have the customer adding more than, say, $2.
d. You should not program your POS to offer an upsell on every sale. The upsell offer is supposed to make sense and be a little special, no more than half of individual item sales should bring the employee to the upsell screen.
And if the customer just spent $20, then the POS should not go into upsell at all; it makes the employee look like a jerk when they say, “By adding $2 more to that last small popcorn, you can add a drink to go with the other 9 popcorns and 8 drinks.”
e. Most important, managers must lead by example. If you don’t, upselling will simply not happen.

Summary:
Do the following to increase concessions sales:
Raise prices when possible and institute an upselling program.

Consider doing the following to increase concessions sales:
Add combos, offer coupons, and improve signage.

Is your E-mail open rate below 20%? Has most of your family unsubscribed? Do friends say things like, “I can’t get E-mail at work, but please do send me your literature by carrier pigeon.” Well, let’s fix that.

Now you may be saying, “A theater E-mail does not need to do anything other than list shows and times.” Well, yes and no. You only need to send an email that lists shows and times, but you should be selling advertising on your screen, gift cards, specials, etc., and this is best done by E-mail. These selling efforts might be separate from or in conjunction with your weekly E-mail blast. Here is what NOT TO DO:

Nine Things NOT TO DO in a Sales E-Mail

To be effective an E-mail must be opened, read, believed and acted on. In order to do this it must attract attention, warm the interest of the reader, create a desire for your product and cause your prospect to take action. Here are nine crucial mistakes to avoid:

Mistake # 1 — Not having a Subject Line or Title that grabs the prospect’s attention.

The subject line or title is an ad for the rest of the E-mail. If the prospect does not find the subject interesting, they will not read the E-mail and they will not buy. You must grab hold of the prospect’s mind with a startling statement, a provocative question; some volley of words that will make them pay attention. Be careful though; outrageous statements make you look like spam. Stand apart by making a straightforward yet impressive claim.

Mistake # 2 – Assuming that getting your prospect to read is enough.

Simply stated, prospects (even your mom) does not really care about your product. Indifference is the order of the day. Capturing the prospect’s attention with a strong title is half the battle; you must hold onto it. And you do this by focusing on one of the fundamental urges which motivate people — fear, exclusivity, greed, guilt, the desire for love, beauty, health, wealth, etc. And these urges are based in the two prime human motivators; to avoid pain or gain pleasure. Your product must avoid or cure a pain or sate a pleasure.

Mistake # 3 — Writing Your E-Mail For the Thousands of People You Will Be Sending It To Instead of That One Special Person.

Another way to generate an apathetic response is to write for the group you will be sending it to. Approaching your E-mail with a “crowd mentality” instead of focusing in on a single, real, living, breathing prospect will impair the ability of your E-mail to make a genuine connection with the reader; it should read like one person sitting down writing to one other person.

Mistake # 4 — Thinking Your Prospect Won’t Read a Long E-Mail.

It is true that people read less than they used to, but they will read a long E-mail IF they are interested and IF you are selling something that needs explanation. Prospects will not read I-me-we or product oriented material. But offer the right product at the right price to the right audience and if you have enough to say and say it well enough, five-pages will pull more than two.

Mistake # 5 — Not Offering Proof That Your Product or Service Does What You Say It Will Do.

Not only is your typical prospect indifferent, she is skeptical. That’s why you need to offer proof that your product or service will do what you say it will do. This serves to validate your claims and minimize your prospect’s skepticism. Most important, it will establish your salesperson — the E-mail — as a credible source of information. The proof you offer can take several forms. Here are two:

A. Customer Testimonials — A testimonial from a satisfied, well-known and respected customer is some of the most valuable proof you can offer. But make sure that the testimonial speaks to specific and relevant concerns that your prospect is likely to have.

B. Tell A Success Story — We all know that stories sell. That’s because as skeptical as your prospect is, she is human. And humans are interested in other humans. Stories sell, in person and on screen. They sell because they give a prospect proof they can taste that your product will do what you say it will do. Your sales E-mail is the bits-and-bytes version of YOU telling that success story.

Mistake # 6 — Not Being Specific.

General statements of a product’s value slip off a prospect like water off a duck. You must give specific, verifiable figures of your product’s worth.

Mistake # 7 — Not editing your E-Mail sufficiently.

All writing – no matter how good or bad, can be made better by sharper editing. Good writing is good editing. Write as concisely as you can and use short words. Write with nouns and verbs; adjectives and adverbs are fluff. Any word that can be removed should be removed.

Mistake # 8 — Being a Slave to Rules of Grammar.

When writing a sales E-mail you want your work to have a conversational readability to it. That means writing in an informal style. Your objective is to generate a lead or advance or close a sale. Your “grade” will be determined by how well people respond.

Mistake # 9 — Self-Aggrandizing.

Your prospect is not interested in how great you think you are, they are interested in how you can help them avoid a pain or satisfy a pleasure.

Here are some examples of the nine mistakes
(my comments are in red)

MISTAKE #1
Subject Lines:
BAD: Gift Cards Now Available! (So?)
BAD: MOVIE GIFT CARDS ARE THE PERFECT GIFT!! (That is their biased opinion and is tired, tired, tired. Also it looks like spam with the caps and exclamations)
GOOD: An affordable gift that’s right for your quick and easy gift list
BAD: Sell like crazy on the big screen, 10,000 eyeballs a month! (overstated and I guess that means 5,000 people a month since each person has 2 eyes — they’re showing you in the title they’re sketchy)
GOOD: Movie ads play to a captive, engaged audience and they may work for you depending on your product.

MISTAKES #2 and #3
BAD: Reserved seating is the next big thing in movie theaters; it allows both your online and in-theater customers to pick their own seat. It is affordable to install for any theater and your patrons will appreciate it. (Factual, but not speaking to a fundamental human urge – greed and exclusivity, and not speaking person-to-person)
GOOD: Reserved seating is the future of any profitable theater, if you don’t offer it, your competition will. Customers will then have a choice between sitting where they want or being treated like one of the herd. Which theater would you go to?

MISTAKE #4
I hope this article is proof. If you are reading this far you have already read over 1000 words.

MISTAKES #5 & 6
BAD: Offering reserved seating will increase your attendance and make your theater a more desirable venue. (no specifics or proof)
GOOD: When Milford 4 Theater, a 344 seat location in suburban Massachusetts, upgraded to 100% in-theater and online reserved seating, their attendance increased 31% month-to-month over comparable months. Customers no longer had to wonder if the theater would be sold out or they would be stuck sitting apart or with an unappealing seat. The owner, Mr. Steven Friedman, said “Offering reserved seating was not as difficult or expensive as I thought. I should have done it sooner as our theaters are small and the customer’s perception that they might not get a good seat was keeping more of them away than I thought.”

MISTAKE #7.
I’ve edited this piece dozens of times and it could be improved with more editing.

MISTAKE #8
This is hard for myself to show as I seldom make grammar errors.

MISTAKE #9
I don’t think this article is self-aggrandizing, but that’s for the reader to decide.

Suppose someone told you that the tallest mountain in the world, Everest, was 29,000 feet tall? Would that impress you? Probably not. The speaker’s knowledge of mountains sounds vague because the height sounds like an estimate. But what if they said that Everest was 29,002 feet tall? The credibility of the speaker is enhanced because the figure is exact.

The first modern height of Everest was made in 1856 by Andrew Waugh using data from the great Trigonometric Survey of India (1802-1857). Using the best tools of the day, dozens of measurements were averaged together to come up with a final figure of… exactly 29,000 feet.

Realizing that 29,000 feet would sound like an estimate, Mr. Waugh arbitrarily added 2 feet to the final figure. That measurement was the “the exact height” of Everest for 99 years until 1955 when better equipment and methods refined the figure to today’s 29,029 feet. So exact is a relative term, but the concept of being exact is what’s important. And being exact applies to running a theater or any business. Here’s how…

1. Be exact with cash. Your managers should not have mis-counts that are discovered at the bank, be in the habit of rounding to the nearest $1, leave tills for the next manager that are not what they should be, etc. The tills should be say, $200, and the bag drop should be, say, $2,482.75. Exactly. Amounts different from your POS should be explained as best as is possible.

Differences do and SHOULD occur. Any manager who is always, always perfect with their cash must be fudging. And you as owner or general manager should look at how much each manager is off every week or month. Not to accuse, but to know who’s good, who’s too good, and who needs improving. Good cash management should result in a maximum error of one-tenth of one percent vs. what the POS or register says, that’s $10 off per $10,000 of sales.

2. Be exact with inventory. This refers to both ticketing and concession inventory. Ticketing inventory means that if the POS or your reels of tickets show 89 people in the theater, there are 89 people in the theater. A couple off is not unusual due to bathroom breaks, theater hopping, etc., especially in teen movies, but if there are 78 in the theater rather than 89, it’s time to look carefully at the possibilities, 2000 pounds of flesh is not hiding under seats.

Doing a correct concession inventory was the subject of the July 2013 Theater Owner’s Edge here and I will not repeat the boring details. Most important: If a product is not accounted for in your inventory – it didn’t go through the register and is not in the spoil box – it went somewhere. Assuming your inventory counts are correct, in order going up of severity of your problem, the product was:

a. Mis-rung on the register; in this case another product should be over in the inventory
b. Eaten by an employee
c. Given away by an employee
d. Sold by an employee for the full retail price and the cash put in their pocket.

Notice that the product grew legs and walked out the door is not on the list of what could have happened. Over the course of thousands of dollars of concession sales errors do accumulate, but you should be within ½ of one per cent accounted for, that’s $50 off per $10,000 of sales.

3. Be exact with Labor. Your employees should punch in and out on time according to a posted, emailed, or online schedule. Work to the nearest 15 minutes. If your first evening shows on a Saturday are at 6:45, then the three evening employees coming in should punch in at, say, one at 5:45 and two at 6:00. Same with punch outs. Last shows at 9:30 might mean all except your closer clean up and punch out by 10:15. If three non-manager employees Mon-Thu and six non-manager employees Fri-Sun punch in 15 minutes early and leave 15 minutes late, that’s $140 extra spent per week on labor, matching social security, and workmen’s comp. That’s $602 per month. Are you OK with taking six one-hundred dollar bills from your pocket each month and shredding them?

Give employees a little room for error; say 5 minutes, but if they are regularly more than 5 minutes early then they should wait to punch-in and if they are regularly more than 5 minutes late then they should be reminded the purpose of the time clock.

4. Be exact with your accounting. Pretend for a moment that you are a state sales tax auditor and have been sent by your state’s revenue department to audit the theater’s sales tax payments. Standard practice when auditing small business sales tax is to audit for a three year period, but only do a detailed analysis of six months to one year chosen at random. The amount of error is then multiplied by six or three, unless the owner wants the auditor to hunker down and do the whole three years in detail. Guess which option most owners choose!?
You as an auditor will want to work directly from reports that are generated by the point-of-sale computer or a cash register. You will be suspicious of handwritten box reports or Excel spreadsheets that were produced downstream from original sales records.
OK, now stop pretending and start worrying. Will your tax payments match what the POS, cash register or original paper reports generate? Are you correctly backing the tax out** of the round figure that you are charging the customer? The auditor will probably want to glance at your operation in action—especially the cash part. Does everything look and feel right? That means cash doesn’t go anywhere other than the register and, preferably, sales don’t take place other than at the stand or box office. Look at your operation with outside eyes.

** Call me on this if unsure of the detail here.

There are more audit strategies than this, but no worries if everything is on the up-and-up.
Final sales tax thought. Are you paying the use tax (the out-of-state version of sales tax) on items you purchase from small out-of-state vendors that do not file returns in your state? If you aren’t paying the use tax on these purchases on your monthly or quarterly sales tax return, you will be—with penalty and interest—by the end of the audit.

5. Be exact with your picture and sound. The picture should be dead-on in-focus, it should not be striking the masking by more than 1-2” and the port glass should be clean. Easy stuff.
Sound can be trickier; the frequencies should be mixed correctly coming from the audio processor so that voices (especially female) are clear and crisp. Your system should be mixed so that when the voices are “right”, the sounds effects are not way too loud. This can be a challenge with action movies; the effects are meant to be loud.

Getting the sound right requires a person who knows sound and has a real-time audio analyzer. RTA’s are now available from the App stores, but they still require a good sound guy. Call your local guitar shop if you don’t know a person. Ideally, each movie should be mixed according to the specs that come from the studio, but this almost never works. The specs either don’t sound right on your system and/or you justifiably won’t bother to do it. Get a good local sound guy who drops by your theater now and then and uses those two things on the side of his head to make sure your sound sounds good.

6. Be exact in your whole operation. What does that mean? It means you run a tight ship. Your employees look neat and sharp. Your restrooms are clean. Your theaters are regularly swept and mopped. The popcorn kettle is cleaned as per the manufacturer, not when it gets so gunky it won’t turn. Your critical equipment has service numbers attached to the equipment with a label-maker. The website and phone message are always correct. Details, details, details. If you care, your employees will care.

You do this not because you are OCD—though you may be, but because little things add to big things and that gives your theater a tailwind-to-profits. Do things slipshod and you will be fighting a headwind for profits.

And the best part?—unlike the movies you show, this is all within your control.