Martin Haw, Senior Data Analyst at iris Concise, looks at an example of how a particular subscription scheme has turned a business problem on its head.
Famously, cinema chains make most of their profit from popcorn. Or the wider concession stands, at least. Typically, a cinema will take 10-30% of a film’s ticket price1, making these ancillary products, in fact, their main revenue stream. This paradigm led one cinema manager to have supposedly said‘We’re not in the movie business, we’re in the candy business’.
What does this have to do with customer loyalty? The UK’s largest cinema chain, Cineworld, run a subscription service known as ‘Unlimited’. The deal for cinephiles is this: pay a flat monthly fee, and visit an unlimited number of times. Apart from a few restrictions and subsidies, it’s a very simple and compelling proposition. Customers who sign up for the scheme do it for this one, clear reason: if you visit twice in a month, you’re saving money.
In their recent interim results it can be seen that 25% of all Cineworld admissions are from Unlimited members, each visiting an average of 30 times per year. Herein lies the issue for the chain: a large proportion of their customer base (who are already paying discounted entrance rates, presumably coming out of the chain’s already small commission) will, typically, not be frequenters of the concessions stand.
Recently my colleague Claudia wrote a great article [link 2]outlining some good principles for building a loyal customer base: ‘Make it Easy’, ‘Incentivise & Reward’, ‘Be Relevant’, and ‘Engage’.
The Unlimited scheme has recently made conscious movements to reward and delight customers, and in so doing has demonstrated good awareness of such principles. A key part of this is to offer a black ‘Premium’ card when tenure reaches one year, offering additional benefits. The relevant perk here being a heavy discount off all food and drink. (Note: ALL food and drink, automatically discounted at till: making it easy). This price-sensitive group of customers may now be inclined to indulge, occasionally, on a (newly affordable) bag of chocolate or an ice-cream. The chain gets the incremental sales. The customer is delighted.
It seems to be working too, with retail revenue up by 10%, and customer churn down 12%.
They have a way to go to address all of the principles– ‘Be Relevant’ for example. With such a rich data set available, there’s the opportunity to be extremely personalised in their communications. I, for one, would love to get my hands on some of that data.
So, how can other loyalty or subscription schemes learn from this example? The first thing is to emphasise these loyalty pillars again. Born of a need to increase this revenue stream, Cineworld have addressed ‘Make it Easy’ and ‘Incentivising and Rewarding’ really well in this particular case.
The questions to be considered by a company are…
- Who are your most valuable customers & how do they behave?
- What do they want from you?
- What revenue streams do they currently under-contribute to?
So, if your End-of-Season Sale events are not clearing your stock effectively, why not invite regular customers to a sneak preview, or give them an exclusive discount code? This would delight them, create a buzz about the event, and help shift the stock.
If you have a new menu you’re thinking of launching, offer it to these guys first. They feel valued, tell their friends, and could provide you with some valuable feedback.
There is a balancing act between giving your customers great value and squeezing them for every penny they’re worth. However, if it is a genuine benefit, and adheres to the values outlined, it can only be mutually beneficial.
1 The economics at play here are complicated, and would warrant a blog of their own. They often involve a sliding scale, where a cinema takes a higher proportion of the price paid the longer the film has been showing. Apparently, in the USA, Star Wars Episode II: Attack of the Clones took 100% of revenue for the first week of its release, without a cent going to the cinemas showing the film.