Six Flags Discovery kingdom sells its annual season pass for $49.99. According to its website, “Buy your Season Pass for $49.99, just $5 more than a one-day admission.” Now why would they give away an unlimited entry annual pass for “just $5 more than a one-day admission”. Let us dissect the factors at play here:
- They are anchoring the customers to the highest possible one-day price, the price paid at the ticket booths without any coupons or Pepsi cans with $$ off promotions. Hardly anyone will pay the full price. Their own website sells online specials for $29.99. But anchoring the customers on highest price changes the reference. The real price difference is $20.
- The marginal cost of serving a customer is zero. All their costs are fixed and hence they are not incurring additional costs.
- They have years worth of data on customer visits and clearly know how the distribution of number of times customer visits. Comparing $49.99 and $29.99 we could guess that a majority of them visit fewer than two times, total.
- Since the amusement parks are kid focused, we can say that they are selling at least three season tickets, that is $60 in assured cash, collected now and not sometime in the future.
- They are also looking at customer margin and not just the profit they make from ticket sales. Once a customer is inside the park there are many revenue opportunities from parking, extras, photos and food purchases. All these add up and increase margin per customer despite discounting the season ticket.
The discounted season pass is not about leaving money on the table, it is about upfront value capture.
Iterative Path 