My son visited the Walt Disney World complex in Florida and pointed out the methods used to spread demand temporally. Coupons for 30 percent discounts on restaurant food purchased before noon or between 3PM and 4:30PM are available. Merchandise coupons for 20 percent discounts are given for use between 9AM and noon. Both coupons are offered to shift demand rightward at non-peak times.
Why do this? Disney trains its workers extensively, so that to a large extent labor costs become fixed costs. To spread those costs – to maximize labor productivity – it makes sense to reduce the peak demand for labor. Spreading these costs also has the virtue of reducing the negative reputational impacts in the labor market that would accompany layoffs that might occur if demand were more variable. An additional virtue is that spreading customer demand helps the parks’ reputation with consumers and allows them to spend less time in line – and thus have more time to spend more money! (HT: DJH)
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How Disney Does It? or How pretty much every employee intensive business in the US does it?
Papa Johns has coupons that are only good on Monday Tuesday and Wednesday.
Tons of restaurants have early bird specials.
The local oil change place has a guy walk outside with a 20% off sign when they don’t have any customers.
I was hoping for some analysis of how Disney maximizes use s limited ride capacity to serve the most guests. Things like what the fast pass system encourages (time spent walking across the park instead of standing in line), what an efficient resort transportation system would mean (a slower system spreads guests out amongst the resorts), how they adjust park hours to meet demand, or how locals (Florida residents) get different pricing than the rest of us.
Instead, coupons?
Interesting, the same was/is done at Disneyland in California – and I thought it was to control traffic patterns througout the park to reduce demands for the attractions.
Having recently returned from the Magic Kingdom after years of annual experience, I have noticed lines and crowds are noticeably shorter.
But I think the greatest cause of reduced congestion is that park attendance is DOWN severely due to the Great Recession–the Silver lining of a Cloud. Coupons-Schmoo-pons.
Is Disney a genius or just a victim of market forces?
On my last trip to Disneyland I realized that it consisted of a few attractions surrounded by vast warehouses for people awaiting their turn on the rides. Fortunately, my kids are too old to want to go back there, and too young to have provided grandchildren to take.
That is actually a good strategy to spread the demand rightward in times that the parks aren’t so packed or people aren’t consuming as much. This could also distribute the amount of people that are at the same place and same time all together. Maybe, now that costumers have a 30 percent discount before noon and after 3 p.m. until 4:30 in their meals, then from noon to 2 p.m. won’t be as packed as it was before and so the service of the food will have more quality because it won’t be so chaotic. The same might happen with merchandise coupons. So, this could make these services more comfortable and less crowded as well.
But on the other hand, people will still keep spending more money because what happens most of the time when costumers have discounts, is that they see everything is cheaper so they buy more than what they would have bought without the discount. Therefore, people don’t actually save money, they just buy more stuff to spend all their budget, so Disney would definitely be selling much more.
It is not shocking at all to see how Disney manages their flow of customers in an orderly manner. By having coupons only available at what can be considered “inconvenient hours”, makes a portion of the visitors visit at these certain hours. Because of this, there are no peak hours, meaning that labor can be evenly spread out throughout the day. There is no need for hiring extra labor so this organization benefits from having discounts at hours customers wouldn’t consider convenient.
Through this, when Walt Disney World is crowded with visitors in times such as Christmas Break, the consumers leave satisfied, since the parks they expected to be over-crowded did not overwhelm them, but rather left them satisfied.
Walt Disney is such a large organization that in order to keep customers intrigued in their services and products, they must also serve customers with commodities that will make them willing and able to come back again. By having to make less lines at stores or attractions, Walt Disney World has developed a customer reliability, therefore creating a world-known reputation of attending the needs of anyone who goes to Disney World.
Walt Disney World has made customers assured that they enjoyed their stay, so they can spread a good word for their attractions, therefore increasing demand for their goods and services.
Shifting demand rightward? Or merely increasing quantity demanded via price reductions?
Professor Hamermesh’s youthful good looks have apparently prevented him from using senior citizen discounts, which chain restaurants commonly use to shift demand to the dull part of mid-afternoon.
Thrift stores give different discounts on different weekdays to level demand. Many locally owned stores and restaurants in my city have weekday special offers; presumably many of these people then don’t return on the (already more crowded) weekend.
Hotels discount on their “off” days, which is a why weekend vacation traveler looking for a nice suite gets the best deals at hotels that cater to business consultants. Airlines offer cheaper fares in mid-week.
Oddly, however, the most in-demand restaurants locally *don’t* offer any incentives to level traffic. They rely on the invisible hand of the market, as eaters who don’t want to stand in line for two hours learn to show up at 4:30 on Tuesday without additional incentives.